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<SEC-DOCUMENT>0001047469-08-002505.txt : 20080311
<SEC-HEADER>0001047469-08-002505.hdr.sgml : 20080311
<ACCEPTANCE-DATETIME>20080311164657
ACCESSION NUMBER:		0001047469-08-002505
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20071230
FILED AS OF DATE:		20080311
DATE AS OF CHANGE:		20080311

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			QUICKLOGIC CORPORATION
		CENTRAL INDEX KEY:			0000882508
		STANDARD INDUSTRIAL CLASSIFICATION:	SEMICONDUCTORS & RELATED DEVICES [3674]
		IRS NUMBER:				770188504
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-22671
		FILM NUMBER:		08681066

	BUSINESS ADDRESS:	
		STREET 1:		1277 ORLEANS DR
		CITY:			SUNNYVALE
		STATE:			CA
		ZIP:			94089-1138
		BUSINESS PHONE:		4089904000

	MAIL ADDRESS:	
		STREET 1:		1277 ORLEANS DRIVE
		CITY:			SUNNYVALE
		STATE:			CA
		ZIP:			94089-1138
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>a2183326z10-k.htm
<DESCRIPTION>FORM 10-K
<TEXT>
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<BR>
<FONT SIZE=3 ><A HREF="#08ZAF18601_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>

<P style="font-family:times;"><FONT SIZE=2>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT> <FONT SIZE=2><I> <hr noshade width=100% align=left size=4>
<hr noshade width=100% align=left size=1>  </I></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=2><B>Washington, D.C. 20549  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>FORM 10-K  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=3><FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="91%" style="font-family:times;"><BR><FONT SIZE=3><B>ANNUAL REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d) OF&nbsp;THE SECURITIES&nbsp;EXCHANGE ACT OF&nbsp;1934</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>FOR THE FISCAL YEAR ENDED DECEMBER 30, 2007</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
OR</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="9%" ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=3><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="91%" style="font-family:times;"><BR><FONT SIZE=3><B>TRANSITION REPORT PURSUANT TO SECTION&nbsp;13 OR 15(d)&nbsp;OF&nbsp;THE SECURITIES&nbsp;EXCHANGE ACT OF&nbsp;1934</B></FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2><B>For the transition period
from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Commission File Number: 000-22671  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>QUICKLOGIC CORPORATION<BR>  </B></FONT><FONT SIZE=2>(Exact name of registrant as specified in its charter) </FONT></P>

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<TD WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>Delaware</B></FONT><FONT SIZE=2><BR>
(State or other jurisdiction of incorporation or organization)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>77-0188504</B></FONT><FONT SIZE=2><BR>
(I.R.S. Employer Identification Number)</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=3 ALIGN="CENTER" VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2><B>1277 Orleans Drive<BR>
Sunnyvale, CA 94089</B></FONT><FONT SIZE=2><BR>
(Address of principal executive offices, including zip code)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Registrant's telephone number, including area code: </FONT><FONT SIZE=2><B>(408)&nbsp;990-4000</B></FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>Securities registered pursuant to Section&nbsp;12(b) of the Act: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Title of Each Class</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Name of Exchange on which Registered</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Common Stock, $0.001 par value</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="49%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The NASDAQ Stock Market&nbsp;LLC</FONT></TD>
</TR>
</TABLE></DIV>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rights
to Purchase Series&nbsp;A Junior Participating Preferred Stock </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Securities
registered pursuant to Section&nbsp;12(g) of the Act: </FONT><FONT SIZE=2><B>None</B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>(Title
of Class) </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule&nbsp;405 of the Securities
Act.&nbsp;Yes&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT> </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is not required to file reports pursuant to Section&nbsp;13 or Section&nbsp;15(d) of the Exchange
Act.&nbsp;Yes&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been subject to such filing requirements for the past
90&nbsp;days.&nbsp;Yes&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if disclosure of delinquent filers pursuant to item&nbsp;405 of Regulation&nbsp;S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form&nbsp;10-K or any amendment to
this Form&nbsp;10-K.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule&nbsp;12b-2 of the Exchange Act. (Check one): </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="22%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Large accelerated filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="23%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Accelerated filer&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Non-accelerated filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT><BR></FONT> <FONT SIZE=1>(Do not check if a smaller reporting company)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="27%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Smaller Reporting Company&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the Exchange Act). </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Yes&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;No&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT>
</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate market value of voting stock held by non-affiliates of the registrant as of July&nbsp;1, 2007, the Registrant's most recently completed
second fiscal quarter, was $68,323,000 based upon the last sales price reported for such
date on the Nasdaq Global Market. For purposes of this disclosure, shares of common stock held by persons who hold more than 5% of the outstanding shares of common stock and shares held by executive
officers and directors of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
February&nbsp;26, 2008, the Registrant had 29,404,309 shares of common stock outstanding. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>DOCUMENTS INCORPORATED BY REFERENCE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Items&nbsp;10, 11, 12, 13 and 14 of Part&nbsp;III of this Form&nbsp;10-K incorporate information by reference from the Proxy Statement for the
Registrant's Annual Meeting of Stockholders to be held on or about April&nbsp;22, 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><hr
noshade width=100% align=left size=1>
<hr noshade width=100% align=left size=4> </FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=821973,FOLIO='blank',FILE='DISK121:[08ZAF1.08ZAF18601]BA18601A.;8',USER='GMEDINA',CD='11-MAR-2008;02:44' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_bg18601_1_2"> </A>


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 </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="bg18601_quicklogic_corporation_table_of_contents"> </A>
<A NAME="toc_bg18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>QUICKLOGIC CORPORATION    <BR>    <BR>    TABLE OF CONTENTS    <BR>    </B></FONT></P>

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<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="75%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><B>PART I</B></FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;1.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Business</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;1A.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Risk Factors</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;1B.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Unresolved Staff Comments</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;2.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Properties</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;3.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Legal Proceedings</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;4.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Submission of Matters to a Vote of Security Holders</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2><B>PART II</B></FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;5.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;6.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Selected Financial Data</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;7.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of Operations</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;7A.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Quantitative and Qualitative Disclosures About Market Risk</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>59</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;8.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Financial Statements and Supplementary Data</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>61</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;9.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Changes in and Disagreements with Accountants on Accounting and Financial Disclosure</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;9A.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Controls and Procedures</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;9B.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Other Information</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>97</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2><B>PART III</B></FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;10.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Directors, Executive Officers and Corporate Governance</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;11.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Executive Compensation</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;12.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;13.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Certain Relationships, Related Transactions and Director Independence</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;14.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Principal Accounting Fees and Services</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2><B>PART IV</B></FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="11%" style="font-family:times;"><FONT SIZE=2>Item&nbsp;15.</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="75%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Exhibits and Financial Statement Schedules</FONT></TD>
<TD WIDTH="3%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>99</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2><BR>
Signatures</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
102</FONT></TD>
</TR>
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<BR></FONT><FONT SIZE=2><B>EXPLANATORY NOTE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This Annual Report on Form&nbsp;10-K contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties, as well as assumptions that, if they do not fully materialize or prove incorrect, could cause the business and results of
operations of QuickLogic Corporation ("QuickLogic," the "Company,""we", "us" or "our") to differ materially from those expressed or implied by such forward-looking statements. Such forward-looking
statements include, without limitation, any projections of earnings, revenue or financial items, any statements of the plans, strategies and objectives of management for future operations, any
statements concerning proposed new products, any statements regarding future economic conditions or performance, any statements relating to our projected capital expenditures, any statements of belief
and any statements of assumptions underlying the foregoing.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such
forward-looking statements include, but are not limited to, those discussed under the heading "Risk Factors" in Item&nbsp;1A hereto and the risks, uncertainties and assumptions discussed from time
to time in our other public filings and public announcements. All forward-looking statements included in this document are based on information available to us as of the date hereof and we assume no
obligation to update these forward-looking statements.</I></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ca18601_part_i"> </A>
<A NAME="toc_ca18601_2"> </A>
<BR></FONT><FONT SIZE=2><B>PART I    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="ca18601_item_1._business"> </A>
<A NAME="toc_ca18601_3"> </A>
ITEM 1.&nbsp;&nbsp;&nbsp;&nbsp;BUSINESS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QuickLogic Corporation was founded in 1988 and reincorporated in Delaware in 1999. We develop and market low power flexible semiconductor platforms that enable
customers to add features to their mobile, consumer and industrial products. We are a fabless semiconductor company that operates in a single industry segment where we design, market and support
Customer Specific Standard Products, or CSSPs, Field Programmable Gate Arrays, or FPGAs, application solutions, associated design software and programming hardware. Our new product family includes
ArcticLink&#153;, PolarPro&reg;, Eclipse&#153; II and QuickPCI&reg; II; our mature product family includes pASIC&reg; 3, QuickRAM&reg;, Eclipse, software
and programming hardware and royalty revenue; our end-of-life product family includes pASIC 1, pASIC 2, QuickMIPS and V3. We develop CSSPs using our ArcticLink and PolarPro
solution platforms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CSSPs
are customer specific complete solutions that include our silicon solution platform, proven system blocks, or PSBs, custom logic and software drivers. Our ArcticLink and PolarPro
solution platforms are standard silicon products and must be programmed to be effective in a system. Our PSBs range from intellectual property, or IP, which improves video images to IP which implement
commonly used mobile system interfaces, such as Secure Digital Input Output, or SDIO, or Universal Serial Bus 2.0 On-The-Go, or USB 2.0 OTG. We provide complete solutions by
selecting the appropriate solution platform and PSBs, providing custom logic, integrating the logic, programming the device and providing software drivers required for the customers' application. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CSSPs,
which we pioneered and introduced in the first quarter of 2007, are developed for specific low power application markets that have similar differentiated IP, intelligent data
processing or connectivity requirements. Target customers value CSSPs for either of two primary reasons. Market leading companies seek to develop product platforms from which several products can be
introduced. For example, multimedia phone companies may plan to introduce products offering mobile TV, WiMAX, Bluetooth 2.1 and USB 2.0 OTG. These manufacturers value our ability to provide a range of
products from a single platform design by incorporating different features in the programmable fabric of our solution platforms. Other manufacturers value the flexibility of programmable fabric to
address specific product requirements. By providing customized solutions for these customers, we increase their ability to meet the time-to-market and
time-in-market pressures associated with their markets. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>3</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer
products are a strong driver for semiconductor sales, and the needs of the consumer market have a unique set of requirements. One important trend in the consumer market is
towards mobile, handheld devices. The market for mobile, handheld devices is large. In 2007, 1.1&nbsp;billion cellular phones,
ranging from multimedia to ultra low cost phones, were sold (data provided by iSuppli Corporation). Important industry trends affecting the large market for mobile devices include the use of platforms
to enable rapid product proliferation, the need for high bandwidth solutions enabling mobile internet and streaming video, miniaturization and the need to increase battery life. Another important
trend is shrinking product life cycles, which drives a need for faster, lower risk product development. There is intense pressure on the total product cost of these devices, including per unit
component costs and non-recurring development costs. As more people experience the advantages of a mobile lifestyle at home, they demand the same advantages in their professional lives.
Therefore, we believe that these trends toward mobile, handheld products which have a small form factor and maximize battery life will also be evident in the industrial, medical and military markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to CSSPs, we sell products to industrial, military and other customers who do their own selection and integration of IP cores and add software drivers to their application.
We market FPGAs, IP cores and software drivers to these customers, who value the low power consumption, reduced development risk through the use of proven IP cores, fast
time-to-market, high IP security, instant-on and reliability of our devices. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
range of offerings allows customers to acquire a solution tailored for their needs. Mobile product original equipment manufacturers, or OEMs, and original design manufacturers, or
ODMs, tend to prefer a complete solution, and purchase CSSPs. Other customers with proprietary IP requirements choose to purchase our FPGAs or ArcticLink solution platforms and utilize our IP cores as
appropriate. Whether a customer uses our CSSPs as a complete solution, or proven IP cores with our FPGAs, we believe our solutions and products enable system manufacturers to improve their
time-to-market, lower total system power consumption, reduce their development risk and total cost of ownership, and add features or performance to their embedded applications. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CSSPs, and the rest of our product offerings, are based on our patented ViaLink&reg; metal-to-metal programmable technology. ViaLink is the foundation
of our competitive advantage in providing flexible energy efficient devices and solutions that deliver the high performance, high reliability, IP security and instant-on features that our
customers value. In 1991, we introduced our first FPGA products based upon our ViaLink technology. Our ViaLink technology allows us to create devices smaller than our competitors' products on
comparable technology, thereby minimizing silicon area and cost. In addition, our ViaLink technology has lower electrical resistance and capacitance than other programmable technologies and therefore
supports higher signal speed and low power consumption. Our architecture uses our ViaLink technology to maximize interconnects at every routing wire intersection, which allows more paths between logic
cells. As a result, system designers are able to use our devices with smaller gate counts to implement their designs than if they had used competing FPGAs. The abundance of interconnect resources also
provides an efficient connection between the Application Specific Standard Product, or ASSP, and the FPGA portions of CSSPs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that the underlying attributes of our ViaLink technology, including low power consumption, high reliability, design security and design efficiency, enable us to deliver
differentiated silicon solutions to our customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CSSPs provide: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Complete Flexible Solutions&#151;</I></FONT><FONT SIZE=2>we partner with customers to bring their differentiated products to market quickly
and to adapt these products to meet changing market conditions; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>4</FONT></P>

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<UL>
</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Platform Design Capability&#151;</I></FONT><FONT SIZE=2>we partner with customers to develop a range of solutions from a single hardware
platform, enabling these manufacturers to bring several products to market quickly and cost effectively through the use of our programmable fabric;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Reduced Design Expense and Risk</I></FONT><FONT SIZE=2>&#151;we provide PSBs addressing a range of video, network, storage and custom logic
requirements, along with software drivers, thereby reducing the time and cost of product development;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Small Form Factor&#151;</I></FONT><FONT SIZE=2>we manufacture single chip solutions in packages as small as 5x5 millimeters, or even in known
good die configurations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Energy Efficiency&#151;</I></FONT><FONT SIZE=2>our ViaLink technology is the lowest power consumption full featured programmable logic
technology on the market today, allowing the time-to-market and time-in-market advantages of programmable logic for differentiated mobile products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Low Total Cost of Ownership&#151;</I></FONT><FONT SIZE=2>CSSPs reduce time-to-market and lower the risk and expense
associated with new product development. In platform designs these savings are leveraged over several products. The flexible nature of CSSPs enables new features in existing designs, which can be used
to extend time-in-market and delay the cost of new product development. In addition, CSSPs often reduce bill of materials, or BOM, costs by combining the function of several
ASSPs into one cost effective device; a simplified BOM also leads to lower PCB costs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Instant-on&#151;</I></FONT><FONT SIZE=2>our products are live at power up because ViaLink based products require no configuration
bit stream;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>High Reliability&#151;</I></FONT><FONT SIZE=2>ViaLink based products do not rely on a SRAM cell that is susceptible to alpha particles, or
brownouts, to define and maintain their functionality; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Unmatched IP Security&#151;</I></FONT><FONT SIZE=2>our ViaLink technology makes it virtually impossible to clone or reverse engineer designs
implemented in our programmable fabric. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer a range of CSSPs built on our ArcticLink and PolarPro solutions platforms. Our PolarPro architecture builds on our low power Eclipse II architecture to provide lower power
consumption and a cost effective device for pure digital applications. CSSPs developed using our PolarPro solution platform implement PSBs and custom logic in programmable fabric. Based on our
engineering analysis of portable media player applications, we believe designers using PolarPro can extend battery life by as much as four times as compared to a standard product implementation,
setting a new standard for low power consumption through the use of programmable logic. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
started shipping CSSPs based on our ArcticLink architecture in 2007. ArcticLink solution platforms combine mixed signal physical layers, hard-wired logic and programmable
fabric on one device. Mixed signal capability supports the trend toward serial connectivity in mobile applications, where designers benefit from lower pin counts, simplified printed circuit board, or
PCB, layout, simplified PCB interconnect and reduced signal noise. Adding hard-wired intellectual property enables us to deliver more logic per die area, while the programmable fabric
allows us to provide CSSPs that can be rapidly customized to differentiate products, add features and reduce system development costs. Market leading companies seek to develop product platforms from
which several products can be introduced. This combination of mixed signal physical layer, hard-wired logic and programmable fabric enables us to deliver low cost, small form factor
solutions that can be customized for particular customer or market requirements. For example, smartphone companies may plan to introduce products offering mobile TV, WiMAX, Bluetooth 2.1 and USB 2.0
OTG. These manufacturers value our solution platforms, since the programmable fabric can be used to introduce a range of products from a single platform design. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
low power consumption, high performance, small form factor and fast time-to-market of our solutions are ideal for power sensitive mobile applications that
need to efficiently integrate video, </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>5</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>storage,
networking and/or graphics capabilities. These products are being designed into applications for markets and customers that are new to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are marketing CSSPs to OEMs&nbsp;and ODMs&nbsp;offering differentiated mobile products. Our target mobile markets include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cellular&#151;</I></FONT><FONT SIZE=2>including multimedia and smartphones;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Consumer Electronics&#151;</I></FONT><FONT SIZE=2>including portable media players, or PMPs, personal navigation devices, or PNDs, and
wireless hard disk drives or wireless storage devices; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Computing</I></FONT><FONT SIZE=2>&#151;including Ultra Mobile PCs, or UMPCs, Mobile Internet Devices, or MIDs, industrial personal digital
assistants, or PDAs, handheld point-of-sales, or POS, terminals and broadband data cards. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Examples
of how existing and potential customers benefit from CSSPs are: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Multimedia Phones&#151;</I></FONT><FONT SIZE=2>we have been marketing our recently announced Visual Enhancement Engine, or VEE&#153;, a
PSB built upon an IP core we licensed, to enable improved video image, color, contrast and resolution with longer battery life;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Smartphones&#151;</I></FONT><FONT SIZE=2>where our solutions enable the simultaneous display of video on the handset and an external display;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Personal Navigation Devices</I></FONT><FONT SIZE=2>&#151;where our solutions allow the incorporation of the latest storage technology, managed
NAND flash memory, and access to the latest high capacity SD cards and SDIO based peripherals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Portable Media Players&#151;</I></FONT><FONT SIZE=2>where our solutions allow a processor to access and efficiently control a micro hard disk
drive;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Wireless Hard Disk Drives&#151;</I></FONT><FONT SIZE=2>where our solutions allow for the intelligent transfer of data, which improves the data
transfer rate, virtually eliminates the CPU cycles associated with data transfer and improves battery life;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Handheld POS Terminals&#151;</I></FONT><FONT SIZE=2>where our solutions enable high speed connectivity to Wi-Fi and BlueTooth
chipsets as well as storage connectivity; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cellular Data Cards&#151;</I></FONT><FONT SIZE=2>where our solutions provide the lowest power interface between a cellular radio and a laptop
card slot. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
new products are also being designed into applications in our traditional markets, such as data communications, instrumentation and test and military-aerospace, where customers value
the low power consumption, instant-on, IP security, reliability and fast time-to-market of our products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to working directly with our customers, we partner with other technology companies to develop additional intellectual property, reference platforms and system software to
provide application solutions. We partner with companies that are experts in certain technologies. For instance, we licensed elements of our Visual Enhancement Engine from Apical Limited, a U.K.
company that sells enhanced video image capability to companies such as Nikon, Olympus and Sony Ericsson. We also work with processor manufacturers, such as Marvell Technology Group&nbsp;Ltd. and
Analog Devices,&nbsp;Inc., and companies that supply storage, networking or graphics components for embedded systems. The depth of these relationships varies depending on the partner and the
dynamics of the end market being targeted, but is typically a co-marketing program that includes joint account calls, promotional activities and/or engineering collaboration, such as
reference designs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
headquarters are located at 1277 Orleans Drive, Sunnyvale, California 94089. We can be reached at (408)&nbsp;990-4000, and our website address is </FONT> <FONT SIZE=2><I>www.quicklogic.com</I></FONT><FONT SIZE=2>. Our common stock trades </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>6</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>on
the Nasdaq Global Market under the symbol "QUIK". Our annual reports on Form&nbsp;10-K, quarterly reports on Form&nbsp;10-Q, current reports on
Form&nbsp;8-K and amendments to such reports are available, free of charge, on our Internet home page as soon as reasonably practicable after we electronically file such material with,
or furnish it to, the Securities and Exchange Commission, or SEC. Copies of the materials filed by the Company with the SEC are also available at the Public Reference Room at 100&nbsp;F Street,
N.E., Washington, D.C., 20549. Information regarding the operation of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. Reports, proxy
and information statements and other information regarding issues that we file electronically with the SEC are available on the SEC's website at </FONT> <FONT SIZE=2><I>www.sec.gov</I></FONT><FONT SIZE=2>. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, information regarding our corporate governance guidelines, code of conduct and ethics guidelines and the charters of our Audit, Compensation and Nominating and Corporate
Governance Committees are available free of charge on our website noted above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Product Technology  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our product technology is based on four major elements. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;First,
our patented ViaLink metal-to-metal programmable technology is the foundation of our competitive advantage in providing flexible, energy efficient devices
and solutions that deliver high performance, high reliability, intellectual property security and instant-on features that our customers value. Unlike other programmable technologies,
ViaLink uses metallurgical changes in amorphous silicon to complete connections. In particular, an unprogrammed ViaLink uses amorphous silicon to separate two conductors. Amorphous silicon is an
excellent insulator, so the leakage current associated with an 'open' ViaLink is very low, which means that the overall 'standby' current of a ViaLink device is very low. When mixed with a metal such
as tungsten or titanium, amorphous silicon can be turned into a silicide, which is a good conductor providing very low resistance in a 'closed' ViaLink. During programming, we use an electrical
voltage to create the silicide and selectively 'close' the desired ViaLink connections. Along with the advantages of low leakage and low resistance, this metallurgical change is permanent with
'instant-on' characteristics that are not susceptible to 'single event upsets' or 'brownout' conditions. Also, the fact that the silicide is low resistance means that only a small amount is required
and, as a result, our ViaLink connections are very small, which translates into reduced silicon area, low parasitic capacitance and excellent routability, all of which contribute to high performance
at low power and low cost relative to SRAM and flash based FPGA technologies. We developed our proprietary PolarPro architecture to take advantage of the unique strengths of the ViaLink technology.
These devices retain the features that have always made our products attractive to the military and industrial markets&#151;high
routability, high performance, instant-on, high reliability and unmatched intellectual property security. The additional features introduced with the PolarPro architecture&#151;such
as our very low power consumption and glitch free clock gating&#151;are critical to the mobile device market, while adding additional value to our traditional markets. The PolarPro architecture
uses a more efficient logic cell than previous architectures. As a result, PolarPro devices have two times the logic per area as our previous generation of products, which results in significant cost
savings. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Second,
our ArcticLink solution platform combines mixed signal physical layers, hard-wired logic and programmable logic on one device. Mixed signal capability supports the
trend toward serial connectivity in mobile applications, where designers benefit from lower pin counts, simplified PCB layout, simplified PCB interconnect and reduced signal noise. Adding
hard-wired intellectual property enables us to deliver more logic at lower cost and lower power; while the programmable logic allows us to provide solutions that can be rapidly customized
to differentiate products, add features and reduce system development costs. This combination of mixed signal, hard-wired logic and programmable logic enables us to deliver low cost, small
form factor solutions that can be customized for particular customer or market requirements while lowering the total cost of ownership. The high routing density </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>7</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>and
flexibility of our ViaLink technology is critical to the efficient interface between the hard-wired logic and the programmable fabric. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Third,
our CSSPs are complete solutions that we develop for target customers who wish to bring differentiated, mobile products to market quickly and cost effectively. CSSPs include our
ViaLink programmable fabric and are based on our PolarPro or ArcticLink solution platforms. We partner with customers to define solutions specific to their requirements, and combine one of our
PolarPro or ArcticLink solution platforms, PSBs, which are proven logic IP cores, custom logic and software drivers. We then work with these customers to integrate and test CSSPs in their systems. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fourth,
we develop and integrate PSBs which are innovative IP cores, intelligent data processing IP cores, or standard interfaces used in mobile products. We offer: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Video PSBs&#151;</I></FONT><FONT SIZE=2>such as the Visual Enhancement Engine or mobile TV tuner interfaces;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Network PSBs&#151;</I></FONT><FONT SIZE=2>such as USB Hub capability or high speed Universal Asynchronous Receiver/Transmitters, or UARTs, to
enable Bluetooth 2.1;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Storage PSBs&#151;</I></FONT><FONT SIZE=2>such as boot from managed NAND and high performance compact flash interfaces;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Other PSBs&#151;</I></FONT><FONT SIZE=2>such as unique ID for digital rights management, or DRM, and general purpose interfaces; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Intelligent Data Processing&#151;</I></FONT><FONT SIZE=2>to move data between peripherals without significant involvement from the application
processor. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>Industry Background  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer products are a strong driver of semiconductor sales, and the needs of the consumer market bring a unique set of requirements as compared to traditional
FPGA markets. One important trend in the consumer market is toward mobile, handheld devices. Important industry trends affecting the large market for mobile devices include the use of platforms to
enable rapid product proliferation, the need for high bandwidth solutions enabling mobile internet and streaming video, miniaturization and the need to increase battery life. Another important trend
is shrinking product life cycles, which drives a need for faster, lower risk product development. There is intense pressure on the total product cost of these devices, including per unit component
costs and non-recurring development costs. As more people experience the advantages of a mobile lifestyle at home, they demand the same advantages in their professional lives. Therefore,
we believe that these trends toward mobile, handheld products which have a small form factor and maximize battery life will also be evident in the industrial, medical and military markets. These
industry trends are shifting the demand among different classes of core silicon. The three main classes of core silicon are: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Application Specific Standard Products, or ASSPs&#151;</I></FONT><FONT SIZE=2>ASSPs, other than processors, are fixed function devices
designed to address a relatively narrow set of applications. These devices typically integrate a number of common peripherals or functions and the functionality of these devices is fixed prior to
wafer fabrication;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Programmable Logic Devices, or PLDs&#151;</I></FONT><FONT SIZE=2>PLDs are general purpose devices, which can be used by a variety of
electronic systems manufacturers and are customized after purchase for a specific application. FPGAs are a subset of this category which are typically used to implement complex system functions; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Application Specific Integrated Circuits, or ASICs&#151;</I></FONT><FONT SIZE=2>ASICs are custom devices designed and fabricated to meet the
needs of one specific application for one end customer. Structured </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>ASICs,
a sub-category of ASICs, provide a limited amount of custom content to broaden the applicability of a device for additional applications. </FONT></P>

</UL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSP
use is largely driven by the adoption of industry standards that have been developed to address increasing system complexity and the need for communication between systems and
system components. These standards include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Mobile Industry Processor Interface Display Serial Interface, or MIPI DSI,</I></FONT><FONT SIZE=2> is an energy efficient, robust interface between
display and application processors developed for the smartphone market;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Universal Serial Bus, or USB,</I></FONT><FONT SIZE=2> is a medium speed connection standard that is used to connect many peripherals, such as
Wi-Fi or DVB-H, to a processor, and is also used to connect two processors for the purpose of downloading or synchronizing information;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Consumer Electronics ATA, or CE-ATA,</I></FONT><FONT SIZE=2> is a storage interface that is optimized for the mobile device market;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Integrated Drive Electronics, or IDE,</I></FONT><FONT SIZE=2> also referred to as ATAPI, which controls storage devices such as micro hard disk
drives, CD-ROMs&nbsp;and DVDs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Secure Digital Input Output, or SDIO</I></FONT><FONT SIZE=2>, which allows the secure exchange of data, enabling usage restrictions to satisfy
copyright holders;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Peripheral Component Interconnect, or PCI, mini-PCI and CardBus,</I></FONT><FONT SIZE=2> which are standards developed to provide a high
performance, reliable and cost effective method of connecting high speed devices within a system; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Ethernet,</I></FONT><FONT SIZE=2> a widely used local area network, or LAN, transport standard that controls the interconnection between systems. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASSPs
offer the system designer proven functionality which reduces development time, risk and cost. However, since these devices are offered broadly to the market, it is challenging for
a system designer to create differentiated products from these devices alone. Furthermore, in many situations the available ASSPs may not directly implement the desired function, which then requires
the system designer to use a combination of ASSPs to achieve the desired result at the expense of increased cost, product size and power consumption. Additionally, as standards evolve or new standards
are developed, ASSPs may not be available to implement desired functions. Therefore, many system designers supplement their ASSPs with customizable components such as PLDs or ASICs. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PLDs
offer the system designer the ability to create custom functions that either provide product differentiation or make up for deficiencies in available ASSPs. Because PLDs are
electrically customized, they can be customized by the designer at his location in minutes and, because blank PLDs are a standard product, lead times are short. PLDs are flexible and can be adapted to
address new market requirements. Compared to ASSPs, PLDs require more designer input, since the designer has to develop the IP to go into the specific PLD and may also have to develop the software to
drive the IP. The additional designer input increases development time, development cost and development risk relative to an ASSP. However, compared to an ASIC, the programmability of a PLD reduces
development time, cost and risk. Also, for any given function, a PLD will have a higher unit cost and consume more power than either an ASSP or an ASIC as the device size required to implement a
function in a PLD is larger than that of an ASSP or ASIC. Consequently PLDs have stratified into small PLDs like Complex Programmable Logic Devices, or CPLDs, that are low cost, low power, lower
performance and simpler to design due to their small number of logic cells, and FPGAs, which are typically larger and have higher performance and power consumption. The small PLDs are typically used
to 'tweak' designs made from a collection of ASSPs, whereas FPGAs are traditionally used to create high value custom designs. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>9</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ASICs
offer the system designer the ability to create custom functions that have exceptionally low unit cost, low power, small size and high performance. The drawback to an ASIC is the
expensive, time consuming and high risk development cycle. As with PLDs, the system designer has to develop the IP and software, and because an ASIC requires its own mask set and production cycle, it
is both expensive and slow to manufacture and debug. Thus ASICs tend to be used for high volume designs where the
development cost can be offset by unit cost savings realized over a very high volume. While driving down the technology curve, also known as following Moore's Law, has resulted in many benefits for
ASICs, it has also created a design challenge. While the dramatic increase in mask costs with each new technology is well known, another factor is that each generation allows us to build far more
complex devices, which take more time to define, to design and to debug. Thus development cost, development time and development risk increase with each generation, with the result that the volume
required to offset the development cost increases. Unfortunately, it is often the case that a large, complex device can only serve a small number of SKUs, which makes it even harder to achieve the
high volumes required to amortize the development costs, and large ASICs cannot be easily adapted to changing market conditions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;System
designers can customize their products using either programmable logic or ASICs, and the competitive dynamic between these classes of core silicon are well understood. The high
development risk and cost and the opportunity cost of an ASIC is incurred to produce custom devices with a very low unit production cost. Suppliers of programmable logic devices, which have lower
development risk, development cost and market risk relative to ASICs, have aggressively reduced the unit cost of their products over time, making programmable logic devices the solution of choice for
custom products unless the volume is very high. These cost reduction efforts have significantly increased the volume needed to justify the total cost of an ASIC. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Industry Future  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consumer market, especially the mobile device market, is not well served by mainstream core silicon. Consumer devices incorporate complex, rapidly changing
technology, require rapid product proliferation, and have short product life cycles and short development cycles, all of which clash with the long development cycles and high volume requirement of
ASICs. Therefore, ASICs are used only in very high volume mainstream consumer products. A military or industrial system designer would traditionally use a conventional FPGA device to implement a high
value custom design because power requirements are not as critical. On the other hand, mobile system designers require very low power consumption to maximize battery life in their applications, which
is incompatible with the high power consumption of conventional FPGAs. Thus, the average mobile system designer is effectively limited to ASSPs and small PLDs, which creates a virtually level playing
field among mobile system designers, and makes product proliferation and differentiation extremely hard to achieve. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
traditional military and industrial markets are well served by existing core silicon. Much of this market uses complex ASSPs since price, power and size are not particularly critical
design considerations. When there is a strong need for a custom solution in high volume applications, designers turn to an ASIC and, in low to medium volume applications, they use FPGAs. QuickLogic
FPGAs have a loyal following in certain segments of these markets, particularly when instant-on, energy efficiency, high reliability or intellectual property security is important. These
markets are expected to continue to grow, but not as significantly as the consumer market. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>QuickLogic's Solutions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We market CSSPs to mobile device OEMs&nbsp;and ODMs.&nbsp;CSSPs are complete solutions incorporating our ArcticLink or PolarPro solution platforms, PSBs,
custom logic and software drivers. We partner with target customers' in our focus markets to design CSSPs, and integrate and test them in our customers' products. A CSSP is based on our programmable
technology, which enables platform </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>10</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>designs,
low power, flexibility, rapid time-to-market, longer time-in-market and lower total cost of ownership. From a mobile system designer's
perspective, a CSSPs function is known and complete, and can consequently be designed into systems with a minimum amount of effort. One of the features of our ViaLink technology is that it is
non-volatile, which means that we can program a CSSP in our factory, and then ship it fully configured to a customer. To that customer, our solution looks exactly like a custom ASSP. We
are capable of providing complete solutions because of our investment in developing the low power PSBs and software required to implement specific functions or to share data between commonly used
interfaces in mobile systems. In some cases, we develop the PSBs and software ourselves and, in other cases, we utilize third parties to develop the mixed signal physical layers, logic and/or
software. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
market CSSPs to customers in trouble mode, where they have an immediate need to address, and to customers in growth mode, where CSSPs are used as a platform to develop differentiated
mobile products. For example, a personal navigation device customer in trouble mode needed an immediate change to their system design. This customer's flash memory supplier was in allocation mode and
we developed a CSSP using PolarPro that enabled this manufacturer to source from multiple suppliers, boot from managed NAND and reduce their bill of material. The flexible features of our programmable
fabric allowed us to develop a complete solution in a matter of weeks and allowed our customer to increase their ability to serve the market for their devices. In a growth mode example, a
smartphone/PDA customer selected ArcticLink for their platform architecture, and they intend to offer two products from this single hardware platform, significantly reducing their
time-to-market and development cost. Our sales cycle for trouble mode opportunities is typically 6 to 12&nbsp;months, and is typically 9 to 18&nbsp;months for growth mode
opportunities. Growth mode opportunities provide us early interaction with system architects about the challenges they face, which gives us better insight into trends and future needs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ViaLink technology is inherently the lowest power programmable technology used to design FPGAs, and FPGAs enable rapid time-to-market and longer
time-in-market for differentiated mobile products. As a result, we have focused our product and marketing efforts on the mobile device market, where battery life is critical.
The fact that we use our programmable technology to implement these CSSPs provides two advantages over conventional ASSPs that are based on ASIC technology. Foremost is the fact that our CSSPs can be
tailored for a specific customer's requirements. Once we have developed proven system blocks, it is easy to combine PSBs and utilize the remaining programmable logic to provide a unique set of
features to a mobile system designer, or to add other functions to the CSSP, such as UARTs, which minimizes system size and cost. We are also able to develop a solution platform, and partner with
system designers to implement a range of solutions, or products, that address different geographic and market
requirements. Finally, by using programmable technology instead of ASIC technology, we reduce the development time, development risk and total cost of ownership and are able to bring solutions to
market quickly. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FPGAs
which are based on SRAM or flash technology are not well suited to implementing ASSPs for the mobile device market. These conventional FPGAs consume more power, especially in
standby mode, which makes them unsuitable for battery powered devices. These FPGAs may also require a separate configuration memory, which increases the total size of the solution. Finally, SRAM based
FPGAs are not 'instant-on', which significantly complicates system design, increases power consumption and typically results in increased development time, risk and cost. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By
using CSSPs, proven system blocks and ViaLink as core technologies, we can deliver energy efficient custom solutions that blend the benefits of traditional ASSPs with the flexibility,
product proliferation, differentiation and low total cost of ownership advantages of programmable logic. </FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also solve problems faced by mobile system designers through our System Solutions Group, or SSG, which provides system architecture and design services. When a mobile system designer
requires a high value, complex solution that is unlike any of the CSSPs that we already offer, he can engage with our SSG to develop a platform or solution that meets his specific needs. For instance,
we are working with a wireless hard disk drive OEM where our CSSP allows for the intelligent transfer of data, which improves the data transfer rate, virtually eliminates the CPU cycles associated
with data transfer and improves battery life. The customer plans to use this platform design to address both the Parallel ATA and CE-ATA markets. In this model, the mobile system designer
is the primary source of application knowledge and we provide the complex logic and low power design knowledge. From the customer's perspective, this is very different from the ASIC model since we
develop their CSSP on our solution platform, which is a standard product with programmable logic, and does not have the high NRE, tooling expense or inventory and development risk associated with ASIC
wafer fabrication, and is easily tailored to address two unique markets. In effect, we produce an energy efficient custom solution with significantly reduced development and debug time, risk and cost. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>The QuickLogic Strategy  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our objective is to empower mobile market leaders to achieve mass customization with innovative CSSPs. Market leading companies need to deliver new products
quickly and cost effectively. We believe that our patented, proprietary ViaLink technology allows us to deliver flexible, programmable solutions with the lowest power consumption and highest IP
security, while meeting system performance requirements. We believe our CSSPs, consisting of our silicon solution platform, proven and custom system blocks and software drivers, enable OEMs&nbsp;and
ODMs&nbsp;to rapidly bring new and differentiated products to market quickly and cost effectively. CSSPs enable energy efficient solutions and enable design platforms from which a range of products
can be introduced. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Extend Technology Leadership  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We introduced CSSPs in the first quarter of 2007. We had CSSP revenue of $0.5&nbsp;million and $2.4&nbsp;million in the third and fourth quarters of 2007,
respectively. We intend to extend our technology leadership by expanding our CSSP capability. Our primary efforts include the introduction of new solution platforms, the development of proven system
blocks with innovative or new functionality and the introduction of small form factor solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CSSPs are based on our ArcticLink and PolarPro solution platforms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
June 2007 we released our ArcticLink solution platform to production. Our first ArcticLink family was developed for the mobile market, where USB and SDIO are common system
requirements. This ArcticLink solution platform combines a mixed signal USB physical layer, USB 2.0 OTG and SD/SDIO/CE-ATA in hard wired logic with ViaLink programmable fabric. Customers
such as a smartphone customer are using ArcticLink as a design platform from which multiple devices can be introduced. We expect to develop additional ArcticLink solution platforms. Our design
strategy is to combine mixed signal physical layers, hard-wired logic and programmable fabric on one device. Mixed signal capability supports the trend toward serial connectivity in mobile
applications, where designers benefit from lower pin counts, simplified PCB layout, simplified PCB interconnect and reduced signal noise. Adding hard-wired intellectual property enables us
to deliver more logic in a given die area, while the programmable fabric allows us to provide CSSPs that can be rapidly customized to differentiate products, add features and reduce system development
costs. Market leading companies seek to develop product platforms from which several products can be introduced. This combination of mixed signal physical layer, hard-wired logic and
programmable fabric enables us to deliver low cost, small form factor solutions that can be customized for particular customer or market requirements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also had our first significant shipment of PolarPro devices in 2007. Our PolarPro solution platform is a family of low power, cost effective programmable platforms that we combine
with proven system blocks, custom logic and software drivers to provide pure digital CSSPs to our customers. During 2007, we engaged with a large OEM serving the personal navigation device market that
had been placed on allocation by a supplier. We enabled this company to utilize alternate suppliers in their design, enabled boot from managed NAND and reduced the BOM for this PND market leader.
PolarPro solution platforms are energy efficient and were designed with an architecture to meet the interconnect and system logic requirements of power sensitive and portable applications. PolarPro
addresses the interconnect and logic requirements of power sensitive, portable applications by including embedded circuitry for implementing high bandwidth bus-to-bus
interfaces, including large arrays of on-chip dual-port SRAM with co-located asynchronous First-In, First-Out, or FIFO, controllers, DDR
interfaces for highly cost effective memory expansion and clock management units. In addition, PolarPro products include a new programmable logic cell architecture, which delivers twice the logic
density of previous product generations, supporting lower costs and higher gross margin. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
low power, high performance ViaLink technology, ArcticLink and PolarPro solution platforms, proven system blocks and software drivers allow us to provide CSSPs to target mobile
customers. CSSPs are tailored for specific customer requirements and enable fast time-to-market, longer time in market, efficient product development through platform designs,
high bandwidth for mobile internet and streaming video applications, small form factor, energy efficiency and low total cost of ownership. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also plan to extend our technology leadership by adding proven system blocks that offer higher value intellectual property for mobile device designs and to expand the range of system
blocks available. Our strategy is to come to market with these PSBs and the related software drivers. Three announcements highlight our trend toward value added IP. During 2007 we introduced our first
ArcticLink solution platform, which integrates USB 2.0 OTG and SDIO proven system blocks alongside programmable fabric. In January 2008, we introduced a PSB that enables simultaneous display on an LCD
screen and an external device such as a VGA projector or television. This energy efficient PSB handles the timing related to the various display rates and implements scan direction conversion to allow
simultaneous display on portrait-mounted LCD panels and landscape-oriented displays of video projectors and televisions. In March 2008, we announced the Visual Enhancement Engine, an innovative PSB
developed for mobile applications that enables a better user experience through video processing technology that sharpens color, contrast and resolution while extending battery life. We licensed
elements of this IP from Apical Limited, who has been providing video enhancement intellectual property for the digital camera and flat panel display markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2007 we announced several PSBs, including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Boot
from managed NAND;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Serial
Peripheral Interconnect, or SPI, which enables a low pin count, high speed connection to wireless modules and other peripheral functions;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>SDIO,
which is used for high speed connection to mobile TV, Wi-Fi or Bluetooth, or as an interface to SD memory cards;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>A
high speed UART which supports the full 3Mbit/sec required for Bluetooth 2.1 and Enhanced Data Rate, or EDR, operation in applications such as voice communication between
mobile handsets and hands-free headsets and the wireless streaming of multimedia files between devices; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>A
suite of digital rights management IP including the Advanced Encryption Standard, or AES, hashing, Data Encryption Standard, or DES, Triple DES and unique hardware ID
capability. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
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<UL>
<UL>
</UL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also develop intelligent data processing proven system blocks and the associated software drivers. Intelligent data processing is the movement of data between peripherals without
significant involvement from the application processor. For instance, we are working with a wireless hard disk drive manufacturer to move data from a USB interface into a buffer memory and through a
Parallel ATA interface to a hard disk drive. Our solution improves the data transfer rate by approximately one level of magnitude compared to managing this data flow with an application processor,
which improves the user experience when downloading video and significantly extends battery life. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Small
form factor is a significant consideration for mobile system designers and we address form factor in three primary ways. </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>First,
our device is a single chip solution. We are often able to reduce the number of chips in a design bill of material by integrating these functions into a CSSP, which
saves PCB space and reduces the cost of component interconnect on the board.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Second,
we have invested in advanced package technology, enabling form factors as small as 5x5 millimeters and reduced pin count, which saves space and reduces the cost of
interconnect on the PCB. We have also developed 5x5 millimeter wafer level chip scale packaging, which enables lower cost small form factor devices. The programmable nature of our devices allows
flexibility in the pin location of chip functions and we work with customers to ensure these are routed cost effectively on their printed circuit board. We had an opportunity with a top tier PND
customer that required a new package and pin out, as well as new PSBs. We were able to deliver the custom package and the PSBs in two months.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Third,
during 2007 we developed the ability to program our solution platforms while they are in wafer form, which allows us to sell programmed, known good die to customers.
These customers can either mount the die on their boards or stack them with other chips during the die assembly process. We are currently working on a design for a portable media device where the OEM
is stacking programmed die purchased from us onto other chips in the system. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to continue our investment in advanced package and programmed die technologies to address the form factor needs of the mobile market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Provide a Range of Offerings  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize that our markets require a range of solutions, and we intend to work with market leading companies to combine silicon solution platforms, PSBs,
packaging technology and software drivers to meet the product proliferation, high bandwidth, time-to-market, time-in-market and form factor requirements
of mobile device manufacturers. We expect CSSPs to range from devices with mixed signal and visual enhancement capability to devices which reduce BOM costs and simplify PCB layout. We intend to
continue to define and implement compelling CSSPs for our target customers. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have a loyal military, industrial and mobile product customer base that prefers to purchase our silicon products, select and integrate IP and develop software drivers to complete
their system designs. We expect to continue to offer silicon devices, IP cores and software design capability to these customers. During 2007, we announced an additional PolarPro programmable
platform, the QL1P1000, which contains one million logic cells and which was developed for the industrial and military markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Market Leading Customers  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a part of our objective to empower mobile market leaders to achieve mass customization with innovative CSSPs, our business model includes a focus customer
strategy in which we target market leading customers, who primarily serve the market for differentiated mobile products. Our belief is that a large majority of our revenue will ultimately come from
less than 100 customers as we transition to this business model. We have identified the customers we want to serve with CSSPs and are in different </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
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<BR>

<P style="font-family:times;"><FONT SIZE=2>stages
of engagement with these customers. We believe CSSPs, which are customer specific solutions with standard product economics, are resonating with our target customers. These customers value the
platform design capability, rapid time-to-market, longer time-in-market and low total cost of ownership available through the use of CSSPs. We expect to
partner with top customers to define new silicon solution platforms and proven system blocks. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Cost Effective Products  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have changed our product definition and manufacturing strategies to reduce the cost of our silicon solution platforms to enable their use in high volume, mass
customization products. Our PolarPro solution platform includes an innovative logic cell architecture, which enables us to deliver twice the programmable logic in the same die size. Our ArcticLink
solution platform combines mixed signal physical layers and hard-wired logic alongside programmable fabric. Mixed signal capability supports the trend toward serial connectivity in mobile
applications, where designers benefit from lower pin counts, PCB layout, simplified PCB interconnect and reduced signal noise. Hard-wired logic is very cost effective and energy efficient
and we typically implement sophisticated logic blocks in hard-wired logic for these reasons. ArcticLink combines cost effective physical layers and hard-wired logic with the
flexibility, time-to-market and time-in-market advantages of programmable logic. We have developed small form factor packages, which are less expensive
to manufacture and include smaller pin counts. Reduced pin counts result in lower costs associated with our customer's printed circuit board space and routing. Our ability to sell programmed die as
CSSPs greatly reduces our costs, allowing us to participate in high volume opportunities. In addition, we have dramatically reduced the time required to program and test our devices, which has reduced
our costs and lowered the capital equipment required to program and test our devices. We expect to continue to invest in silicon solution platforms and manufacturing technologies which make us cost
effective for high volume applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Strategic Relationships  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We partner with intellectual property suppliers, market leaders and key suppliers to expand our served market and speed our
time-to-market. </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Partnering with Intellectual Property Suppliers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;A key element of our strategy is to provide a range of proven
system blocks to our customers, from new features such as enhanced video processing to interconnect system blocks that are essential to mobile device applications. We seek to license intellectual
property that increases the value we bring to differentiated mobile products or that speeds our time-to-market with CSSPs. In March 2008, we announced the Visual Enhancement
Engine, an innovative PSB developed for mobile applications that enables a better user experience through video processing technology that sharpens color, contrast and resolution while extending
battery life. We licensed key portions of this IP from Apical Limited, who has been providing video enhancement intellectual property for the digital camera and flat panel display markets.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Partnering with Leading Component Suppliers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are developing relationships with top tier suppliers of embedded
processors, companies that support the trends toward mobile TV and streaming video, suppliers of storage components such as micro hard disk drives or flash memory and providers of networking
components such as wireless LAN chipsets. The lowest power consumption, small form factor and high intellectual property security of our solution platforms are compelling for other component
suppliers, who can use our solutions in reference designs or application notes to expand their served markets. We have a strong, informal partnership with Marvell Technology Group&nbsp;Ltd., where
CSSPs are companion devices to their application processors. We recently announced a reference design with Chrontel, a supplier of mobile TV encoder semiconductors that enables simultaneous display on
a handheld LCD screen and a TV or VGA monitor. We expect to engage in relationships with other application </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>processor
and component suppliers during the coming year. The depth of these relationships varies depending on the partner and the dynamics of the end market being targeted, but is typically a
co-marketing program that includes joint account calls, promotional activities and/or engineering collaboration, such as reference designs. </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Partnering with our Key Suppliers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;As a part of our product strategy, we have formed strategic relationships
with Mentor Graphics Corporation, Tower Semiconductor&nbsp;Ltd., Amkor Technology,&nbsp;Inc., Taiwan Semiconductor Manufacturing Company, or TSMC, Unisem (M)&nbsp;Berhard and other companies to
expand the range of technology that we embed in our products. These alliances are an essential element of our product strategy and a source of competitive strength going forward. By leveraging the
expertise of our partners in programmable logic EDA synthesis tools, intellectual property development, wafer fabrication, package engineering and assembly, we can devote our efforts to the
development of targeted, well-defined products and solutions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><I>Create Innovative, Industry Leading System Architecture and Design Services  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide system architecture, design services and development tools to our customers. </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Providing Architecture and Design Services.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;These services extend our CSSP customers' technical capabilities and
shorten their time-to-market by utilizing our experts in system design, programmable logic design, software drivers and embedded systems as part of their design team.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Developing "Beyond the Silicon" Products.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;These value added services for military, industrial and other system
manufacturers include power-aware tools that enable customers to minimize power consumption during the early stages of application design; predefined system functions delivered as IP cores; software
drivers; reference designs; unique intellectual property optimized for use in QuickLogic's programmable devices; and technical support. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
ProChannel web-based system allows our distributors to receive quotations, place orders for our products and view their order status over the Internet. This system
complements the Electronic Data Interchange systems that we have used for the past several years with our largest customers. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>16</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>Customers and Markets  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a representative list of our current customers and the markets in which they do business: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="36%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Market Segment<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="22%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Customer</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="36%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Application</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Instrumentation and Test</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2>Beijing KND<BR>
Honeywell<BR>
Medtronic<BR>
Teradyne<BR>
Tier&nbsp;1 PND OEM</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Industrial control equipment<BR>
Aircraft navigation and flight controls Medical electronics<BR>
Semiconductor test equipment<BR>
Personal navigation device</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
Military&nbsp;&amp; Aerospace Systems</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Aeroflex<BR>
BAE Systems<BR>
DY-4<BR>
L-3 Communications<BR>
Northrop Grumman<BR>
RF Communications<BR>
Rockwell Collins</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
Military and space equipment<BR>
Military flight controls<BR>
VME-based computer systems<BR>
Aircraft data recorders and telemetry<BR>
Military flight controls<BR>
Military communication radios<BR>
Military communications equipment</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
Data Communications and Telecommunications</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
<BR>
Nortel Networks<BR>
Option Wireless</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
<BR>
Telecom switching equipment<BR>
3G data cards for laptop computers</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
Video, Audio and Graphics Imaging</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
DOT System<BR>
Dragon ROC<BR>
Electosystems<BR>
Konami<BR>
Quartics<BR>
Tier&nbsp;1 Smartphone ODM</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2><BR>
Industrial controllers<BR>
Casino gaming<BR>
Casino gaming<BR>
Casino gaming<BR>
Video compression<BR>
Ultra mobile PC / mobile internet device</FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our revenue comes from sales to customers located outside of the United States, distributors and key customers. Our
largest customer represented 10% of revenue in 2007 and a PND customer represented 21% of our revenue in the fourth quarter of 2007. Please see Note&nbsp;13 to our consolidated financial statements
for information on our revenue by geography, market segment and key customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the past, there has not been a predictable seasonal pattern to our business. However, as we increase our engagements with mobile market customers, we may experience seasonal patterns
in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Sales and Technical Support  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our products through a network of sales managers, independent sales representatives and point-of-sale distributors in North
America, Europe, Japan and Asia. In addition to our corporate headquarters in Sunnyvale, we have regional sales operations in Texas, Illinois, Pennsylvania, Massachusetts and New Hampshire. We also
have international sales operations in the United Kingdom, China, Japan, Hong Kong, Taiwan and Korea. Our sales personnel and independent sales representatives are responsible for sales and
application support for a given region of responsibility, focusing on major strategic accounts. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
customers typically order our products through our distributors. Distributors also create demand for our devices and solutions, generally focusing on customers who are not directly
served by our sales managers. Currently, we have two distributors in North America and a network of 17 distributors throughout Europe, Asia and Japan to support our international business. Our
distributors work with our regional sales managers in identifying new opportunities for our devices and solutions and providing technical support, along with other value added services. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>17</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>Backlog  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe that backlog as of any particular date is indicative of future results. A majority of our quarterly shipments are typically booked during the
quarter. Our sales are made primarily pursuant to standard purchase orders issued by OEM and distributor customers. Under our standard terms and conditions, a significant portion of our backlog is
subject to cancellation or reschedule by these customers. Our distributor backlog is also subject to price adjustments upon the resale of the related inventory, as a result the total value of our
backlog is not indicative of the related revenue. We believe that generally only a small portion of our backlog, other than orders received under end-of-life programs, is
non-cancelable and that the dollar amount associated with the non-cancelable portion is not significant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Competition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry is intensely competitive and characterized by: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>erosion
of selling prices over product lives;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>rapid
technological change;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>short
product life cycles;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limited
sources of supply; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>strong
domestic and foreign competition. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that important competitive factors in our market are: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>product
proliferation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>energy
efficiency;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>development
risk, time-to-market and time-in-market for our customers;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>complete
solutions designed for specific applications;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>product
and solution performance, reliability, price and form factor;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>design
services, technical service and support;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>length
of development cycle;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>customer
bill of material costs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>intellectual
property protection;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>ease
of use, functionality and installed base of development system software;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>access
to sources of raw materials, wafer fabrication facilities and assembly capacity; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>market
presence and financial strength of the Company and our competitors. </FONT></DD></DL>
</UL>
<BR>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
number of companies offer products that compete with one or more of our products and solutions. Our existing competitors for CSSPs include: (1)&nbsp;suppliers of ASSPs such as
Cypress Semiconductor, PLX Technology and Oxford Semiconductor; (2)&nbsp;suppliers of embedded processors, such as Qualcomm Corporation; and 3)&nbsp;suppliers of ASICs, such as Winbond and LSI
Logic. Our existing competitors for FPGAs include: (1)&nbsp;suppliers of CPLDs, such as Lattice Semiconductor and Altera; (2)&nbsp;suppliers of FPGAs, particularly Xilinx and Actel; and
(3)&nbsp;and the CSSP competitors noted above. Xilinx and Altera dominate the programmable logic market and have substantially greater revenue, market presence and financial resources than Actel,
Lattice or us. Xilinx dominates the FPGA segment of the market while Altera dominates the CPLD segment of the market. ASSPs offer proven </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>18</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>functionality
which reduces development time, risk and cost, but it is difficult to offer a differentiated product using standard devices, and ASSPs that meet the system design objectives are not
always available. Programmable logic may be used to create custom functions that provide product differentiation or make up for deficiencies in available ASSPs. PLDs require more designer input since
the designer has to develop and integrate the IP and may have to develop the software to drive the IP. PLDs are more expensive and consume more power than ASSPs or ASICs, but they offer fast
time-to-market and are typically reprogrammable. ASICs have a large development cost and risk and a long time to market. As a result ASICs are generally only used for single
designs with very high volumes. CSSPs enable custom functions and system designs with fast time-to-market and longer time-in-market since they contain
programmable logic. In addition, because they are complete solutions, they reduce the system development cost and risk. Finally, CSSPs are very energy efficient as result of our ViaLink technology and
are suitable for OEMs&nbsp;or ODMs&nbsp;offering mobile differentiated products. As we introduce additional solutions, we will also face competition from standard product manufacturers who are
already servicing or who may decide to enter the markets addressed by our solutions. In addition, we expect significant competition in the future from major domestic and international semiconductor
suppliers and from suppliers of products based on new or emerging technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Research and Development  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success will depend to a large extent on our ability to rapidly develop, enhance and introduce devices and CSSPs that meet emerging industry standards
and satisfy changing customer requirements. We have made and expect to continue to make substantial investments in research and development. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, our research and development staff consisted of 45 employees located in Canada, India and California. </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
process engineering group develops our proprietary ViaLink wafer manufacturing process, oversees product manufacturing and process development with our third party
foundries, and is involved in ongoing process improvements to increase yields and optimize device characteristics.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
programmable logic design engineering group develops low power programmable devices and analog circuits targeted for mobile or battery powered embedded systems that can
be used stand alone or combined with standard functions to form solutions.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
ASSP design engineering group develops or integrates standard functions with programmable devices to produce ArcticLink solution platforms.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
software group develops the design libraries, interface routines and place and route software that allow our customers to use third party design environments to develop
designs that are incorporated into our programmable devices.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
system solutions group develops IP blocks and associated software drivers that form the basis of our CSSPs. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>Manufacturing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have close relationships with third party manufacturers for our wafer fabrication, package assembly, testing and programming requirements to help ensure
stability in the supply of our products and to allow us to focus our internal efforts on product and solution design and sales. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently outsource our wafer manufacturing, primarily to TSMC and Tower, and also to Samsung Semiconductor,&nbsp;Inc. and Kawasaki Microelectronics,&nbsp;Inc. TSMC manufactures
our pASIC 3, QuickRAM and certain QuickPCI products using a four-layer metal, 0.35 micron complementary metal oxide semiconductor, or CMOS, process. TSMC also manufactures our Eclipse and
other mature products using a five-layer metal, 0.25 micron CMOS process on eight-inch wafers. Samsung and Kawasaki manufacture our ASSP products. We purchase products from
TSMC, Samsung and Kawasaki on a purchase order basis. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>19</FONT></P>

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tower manufactures our new products and QuickMIPS devices, and will manufacture new products currently under development, using a six-layer metal, 0.18 micron CMOS process
incorporating our ViaLink technology. We have invested $21.3&nbsp;million in Tower as part of Tower's efforts to build and equip their wafer fabrication facility. Our investment guarantees us a
portion of their available wafer fabrication capacity at competitive pricing. Our Tower agreement provides for guaranteed capacity availability through at least 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outsourcing
of wafer manufacturing enables us to take advantage of these suppliers' high volume economies of scale. We may establish additional foundry relationships as such arrangements
become economically useful or technically necessary. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
outsource our product packaging, testing and programming primarily to Amkor Technology, Inc and Unisem (M)&nbsp;Berhard. We have entered into a contractual partnership with Amkor to
provide package design services. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Product Revenue Transition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is in transition and there are two primary factors affecting our future growth; increased revenue through the success of our CSSP strategy, which we
announced in the first quarter of 2007, and an expected decline in revenue from end-of-life products. Our objective is to empower mobile market leaders to achieve mass
customization with innovative CSSPs. To this end, we work with target customers to specify and deliver CSSPs that meet our customers' market requirements. CSSP revenue is included in our new product
revenue. New products contributed revenue of $3.5&nbsp;million, or 33% of total revenue, in the fourth quarter of 2007. One customer, purchasing CSSPs in Asia for use in PND products, accounted for
21% of total revenue in the fourth quarter of 2007. We believe CSSPs will result in significant growth in our new product and total revenue, but we cannot assure investors when this will occur. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also expect a decline in revenue from our end-of-life products. We announced the end-of-life of certain products for two primary
reasons: (1)&nbsp;certain suppliers decided not to renew their agreements to supply us with wafers. For instance, the supplier of wafers for our pASIC 1 and pASIC 2 devices, which were released to
production from 1991 through 1997, decided not to renew our supply agreement, and future sales of these devices are limited
to inventories on hand; (2)&nbsp;we decided to end-of-life QuickMIPS and QuickPCI devices so that we could focus our engineering resources on new products.
End-of-life products contributed revenue of $3.1&nbsp;million, or 28% of total revenue, in the fourth quarter of 2007, and we currently expect these products to contribute
less than 10% of our total revenue by the third quarter of 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to maintain or grow our revenue from its current level, we are dependent upon increased revenue from our existing products, especially CSSPs utilizing our ArcticLink and
PolarPro solution platforms, and the development and marketing of additional new products and solutions. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Employees  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;30, 2007, we had a total of 131 employees worldwide. We believe that our future success will depend in part on our continued ability to
attract, hire and retain qualified personnel. None of our employees are represented by a labor union and we believe our employee relations are favorable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Intellectual Property  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success and competitive position depend upon our ability to obtain and maintain the proprietary technology used in our principal products. We hold 98
U.S. patents and have six pending applications for additional U.S. patents containing claims covering various aspects of programmable integrated circuits, programmable interconnect structures and
programmable metal devices. In Europe </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>20</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>and
Asia, we have been granted a total of six patents and have a total of five patent applications pending. Our issued patents expire between 2010 and 2024. We have nine registered trademarks and two
pending applications for registration with the U.S. Patent and Trademark Office. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, we receive letters alleging patent infringement or inviting us to license other parties' patents. We evaluate these requests on a case-by-case
basis. Offers such as these may lead to litigation if we reject the opportunity to obtain the license or reject the other party's demands. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Executive Officers and Directors  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers are elected by, and serve at the discretion of, our Board of Directors. There are no family relationships among our directors and officers. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth certain information concerning our current executive officers and directors as of February&nbsp;26, 2008: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="52%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>E. Thomas Hart</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Chairman, President and Chief Executive Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Terry L. Barrette</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Vice President, Operations</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Catriona Meney</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Vice President, Human Resources and Development</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Carl M. Mills</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Vice President, Finance and Chief Financial Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Andrew J. Pease</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Vice President, Worldwide Sales</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Timothy Saxe</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>52</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Senior Vice President, Engineering and Chief Technology Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Michael J. Callahan</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>72</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Arturo Krueger</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>68</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Christine Russell</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>58</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Hide L. Tanigami</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>57</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%" style="font-family:times;"><FONT SIZE=2>Gary H. Tauss</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="52%" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>E. Thomas Hart</I></FONT><FONT SIZE=2> has served as our President, Chief Executive Officer and a member of our Board of Directors since June 1994, and as our
Chairman since April 2001. Prior to joining QuickLogic, Mr.&nbsp;Hart was Vice President and General Manager of the Advanced Networks Division at National Semiconductor Corporation, a semiconductor
manufacturing company, where he worked from September 1992 to June 1994. Prior to joining National Semiconductor, Mr.&nbsp;Hart was a private consultant from February 1986 to September 1992 with
Hart Weston International, a technology based management consulting firm. Prior experience includes senior level management responsibilities in semiconductor operations, engineering, sales and
marketing with several companies including Motorola,&nbsp;Inc., an electronics provider, and National Semiconductor. Mr.&nbsp;Hart holds a B.S.E.E. degree from the University of Washington. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Terry L. Barrette</I></FONT><FONT SIZE=2> joined QuickLogic in 1998 and has served as Vice President, Operations since 2001 and Director of Manufacturing and
Product Engineering since 1998. Prior to joining QuickLogic, Ms.&nbsp;Barrette was Director of Product Engineering and Manufacturing at GateField Corporation, a semiconductor manufacturer, from 1996
to 1998. Prior to joining GateField, Ms.&nbsp;Barrette was Manager of Test Engineering and Failure Analysis at LSI Logic from 1989 to 1996. Prior experience includes positions in product
engineering, quality and reliability at GE Intersil, Intel and National Semiconductor. Ms.&nbsp;Barrette holds a B.S.E.E. degree from San Jose State University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Catriona Meney</I></FONT><FONT SIZE=2> joined QuickLogic in September 2003 and has served as our Vice President, Human Resources and Development since October
2006. Prior to joining QuickLogic, Ms.&nbsp;Meney was Vice President International Human Resources at Ocular Sciences,&nbsp;Inc., a global manufacturer of contact lenses, from September 2001 to
June 2002. In October 2000, Ms.&nbsp;Meney relocated to the United States. From May 1984 to October 2000, Ms.&nbsp;Meney held several human resource positions at Standard Life
Assurance&nbsp;Co., an international financial services provider, located in Scotland, most </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>21</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>recently
as their Senior Human Resources Business Partner. Prior experience includes human resource positions at Sun Microsystems&nbsp;BV. Ms.&nbsp;Meney holds a M.A. degree, with honors, from the
University of Glasgow in Scotland. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Carl M. Mills</I></FONT><FONT SIZE=2> has served as our Vice President, Finance and Chief Financial Officer since August 2002. From November 2000 to July 2002,
Mr.&nbsp;Mills was Vice President of Finance and Chief Financial Officer of AltoWeb,&nbsp;Inc., a software company. From November 1987 to September 2000, Mr.&nbsp;Mills held several
positions, most recently Vice President of Finance and Chief Financial Officer, at WaferScale Integration,&nbsp;Inc., a producer of peripheral integrated circuits. Mr.&nbsp;Mills holds a B.S.
degree and an M.B.A. degree from Santa Clara University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Andrew J. Pease</I></FONT><FONT SIZE=2> has served as our Vice President, Worldwide Sales since November 2006. From July 2003 to June 2006, Mr.&nbsp;Pease was
Vice President of Worldwide Sales of Broadcom Corporation, a global leader in semiconductors for wired and wireless communications. From March 2000 to July 2003, Mr.&nbsp;Pease was Vice President of
Sales at Syntricity&nbsp;Inc., a company providing software and services to better manage semiconductor production yields and improve design-to-production processes. From
1984 to 1996, Mr.&nbsp;Pease served in a number of sales positions at Advanced Micro Devices, or AMD, a global semiconductor manufacturer, where his last assignment was Group Director, Worldwide
Headquarters Sales and Operations. Mr.&nbsp;Pease previously held Vice President of Sales positions at Integrated Systems&nbsp;Inc., an embedded software manufacturer (1996-1997), and
Vantis Corporation, a programmable logic subsidiary of AMD (1997-1999). Mr.&nbsp;Pease holds a B.S. degree from the United States Naval Academy and an M.S. in computer science from the
Naval Postgraduate School in Monterey, California. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Timothy Saxe</I></FONT><FONT SIZE=2> joined QuickLogic in May 2001 and has served as our Chief Technology Officer and Senior Vice President, Engineering since
August 2006, and Vice President, Engineering since November 2001. From November 2000 to February 2001, Mr.&nbsp;Saxe was Vice President of FLASH Engineering at Actel Corporation, a semiconductor
manufacturing company. Mr.&nbsp;Saxe joined GateField Corporation, a design verification tools and services company formerly known as Zycad, in June 1983 and was a founder of their semiconductor
manufacturing division in 1993. Mr.&nbsp;Saxe became GateField's Chief Executive Officer in February 1999 and served in that capacity until GateField was acquired by Actel in November 2000.
Mr.&nbsp;Saxe holds a B.S.E.E. degree from North Carolina State University, and an M.S.E.E. degree and a Ph.D. in electrical engineering from Stanford University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Michael J. Callahan</I></FONT><FONT SIZE=2> has served as a member of our Board of Directors since July 1997. From March 1990 through his
semi-retirement in September 2000, Mr.&nbsp;Callahan served as Chairman of the Board, President and Chief Executive Officer of WaferScale Integration,&nbsp;Inc., a producer of
peripheral integrated circuits. From 1978 to March 1990, Mr.&nbsp;Callahan held various positions at Monolithic Memories,&nbsp;Inc., a semiconductor manufacturing company, most recently as its
President. During his tenure as President, Monolithic Memories became a subsidiary of Advanced Micro Devices,&nbsp;Inc., a semiconductor manufacturing company, where Mr.&nbsp;Callahan was Senior
Vice President of Programmable Products. Prior to joining Monolithic Memories, he worked at Motorola Semiconductor for 16&nbsp;years where he was Director of Research and Development as well as
Director of Linear Operations. Mr.&nbsp;Callahan also serves on the board of Micrel, Incorporated, a provider of analog power, mixed-signal and digital semiconductor devices, and
Teknovus,&nbsp;Inc., a privately held company specializing in communications chipsets for subscriber access networks. Mr.&nbsp;Callahan holds a B.S.E.E. degree from the Massachusetts Institute of
Technology. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Arturo Krueger</I></FONT><FONT SIZE=2> has served as a member of our Board of Directors since September 2004. Mr.&nbsp;Krueger has more than 40&nbsp;years of
experience in systems architecture, semiconductor design and development, operations, and marketing as well as general management. Since February 2001, Mr.&nbsp;Krueger has been a consultant to
automobile manufacturers and to semiconductor companies serving the automotive and telecommunication markets. Mr.&nbsp;Krueger was Corporate Vice President and General Manager of Motorola's
Semiconductor Products Sector for Europe, Middle East and Africa </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>22</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>from
January 1998 until February 2001. Mr.&nbsp;Krueger was the Strategic and Technology/Systems advisor to the President of Motorola's Semiconductor Products Sector from 1996 until January 1998. In
addition, Mr.&nbsp;Krueger was the Director of the Advanced Architectural and Design Automation Lab at Motorola. Mr.&nbsp;Krueger is a director of Marvell Technology Group&nbsp;Ltd., a
semiconductor provider of high performance analog, mixed-signal, digital signal processing and embedded microprocessor integrated circuits, and NemeriX&nbsp;S.A., a provider of integrated circuits
specializing in ultra low power RF and baseband chipsets for&nbsp;GPS and wireless applications. He holds an M.S. degree in Electrical Engineering from the Institute of Technology in Switzerland,
and has studied Advanced Computer Science at the University of Minnesota. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Christine Russell</I></FONT><FONT SIZE=2> has served as a member of our Board of Directors since June 2005. Since June 2006, Ms.&nbsp;Russell has been Vice
President and Chief Financial Officer of Virage Logic Corporation, a provider of advanced intellectual property for the design of integrated circuits. Ms.&nbsp;Russell served as Senior Vice
President and Chief Financial Officer of OuterBay Technologies,&nbsp;Inc., a privately held software company enabling information life cycle management for enterprise applications, from May 2005
until February 2006, when OuterBay was acquired by Hewlett-Packard Company. From October 2003 to May 2005, Ms.&nbsp;Russell served as the Chief Financial Officer of Ceva,&nbsp;Inc., a company
specializing in semiconductor intellectual property offering digital signal processing cores and application software. From October 1997 to October 2003, Ms.&nbsp;Russell served as the Chief
Financial Officer of Persistence Software,&nbsp;Inc., a company specializing in enterprise software providing infrastructure for distributed computing. Prior to 1997, Ms.&nbsp;Russell served in
various senior financial management positions with a variety of technology companies for a period of more than twenty years. Ms.&nbsp;Russell is a director of Peak International,&nbsp;Ltd., a
supplier of precision-engineered packaging products for storage, transportation and automated handling of high technology products. Ms.&nbsp;Russell holds a B.A. degree and an M.B.A. degree from the
University of Santa Clara. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Hide L. Tanigami</I></FONT><FONT SIZE=2> has served as a member of our Board of Directors since March 2007. Mr.&nbsp;Tanigami has served as the Chairman and
Chief Executive Officer of Marubun/Arrow USA,&nbsp;LLC, a joint venture between Marubun Corporation, the largest semiconductor distributor in Japan, and Arrow Electronics since 1998. From 1994
through 1998, Mr.&nbsp;Tanigami was President and Chief Executive Officer of Marubun USA Corporation. From 1997 through 2000, Mr.&nbsp;Tanigami was the Chairman of Catalyst
Semiconductor,&nbsp;Inc. and from October 1985 until March 1994, Mr.&nbsp;Tanigami was a co-founder and Vice President of Corporate Development at Catalyst Semiconductor,&nbsp;Inc.
He has previously served on numerous boards in Silicon Valley, Japan and Taiwan. He currently serves on the board of directors of Marubun/Arrow and Ecrio,&nbsp;Inc., a developer of mobile phone
communications and commerce software. Mr.&nbsp;Tanigami holds a B.A. degree from Kansai University of Foreign Studies and a M.A. degree from San Francisco State University. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Gary H. Tauss</I></FONT><FONT SIZE=2> has served as a member of our Board of Directors since June 2002. From October 2006 to February 2008, Mr.&nbsp;Tauss
served as President and Chief Executive Officer of Mobidia Technology,&nbsp;Inc., a provider of performance management software that enables wireless operators to provide users with
high-quality mobile content. From May 2005 until the sale of its assets to Transaction Network Services,&nbsp;Inc. in March 2006, Mr.&nbsp;Tauss served as President, Chief Executive
Officer and director of InfiniRoute Networks,&nbsp;Inc., a provider of software peering services for wireline and wireless carriers. From October 2002 until April 2005, Mr.&nbsp;Tauss served as
President and Chief Executive Officer of LongBoard,&nbsp;Inc., a company specializing in fixed-to-mobile convergence application software for leading carriers and service
providers. From August 1998 until June 2002, Mr.&nbsp;Tauss was President, Chief Executive Officer and a director of TollBridge Technologies,&nbsp;Inc., a developer of
voice-over-broadband products. Prior to co-founding TollBridge, Mr.&nbsp;Tauss was Vice President and General Manager of Ramp Networks,&nbsp;Inc., a provider of
Internet security and broadband access products, with responsibility for engineering, customer support and marketing. Mr.&nbsp;Tauss earned both a B.S. and an M.B.A. degree from the University of
Illinois. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="cg18601_item_1a._risk_factors"> </A>
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ITEM 1A.&nbsp;&nbsp;&nbsp;&nbsp;RISK FACTORS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>If we fail to successfully develop, introduce and sell CSSPs and new products, we may be unable to compete effectively in the future  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have focused the development and marketing of our CSSPs to address the needs of OEMs&nbsp;and ODMs&nbsp;that offer differentiated mobile products such as
personal navigation devices, multimedia phones, portable media players, data cards and wireless hard disk drives. These are new customers and markets for us and we currently have a small customer base
for CSSPs. We believe that this business will provide long-term revenue growth for our Company; however, there is no assurance when this will occur. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for these mobile devices is highly competitive and dynamic, with short end market product life cycles and rapid obsolescence of existing products. To compete successfully, we
must obtain access to advanced fabrication capacity and dedicate significant resources to specify, design, develop, manufacture and sell new or enhanced CSSPs that provide increasingly higher levels
of performance, low power consumption, new features, reliability and/or cost savings to our customers. Due to the short product life cycle of these devices our revenue is subject to fluctuation in a
short period of time and our ability to grow our business depends on accelerating our design win activity. We often make significant investments long before we generate revenue, if any, from these
efforts. These markets typically have higher volumes and greater price pressure than our traditional business; we quote opportunities in anticipation of future cost reductions and may aggressively
price products to gain market share. In order to react quickly to opportunities or to obtain favorable wafer prices, we make significant investments in and commitments to purchase inventories and
capital equipment before we have firm commitments from customers. Our gross margin and valuation of inventories may be affected by these strategies if, for instance, we generate significant revenue
before we are able to reduce our costs or if an opportunity priced to gain market share becomes significant to our quarterly revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
growth of our CSSP business needs to be strong enough to offset revenue declines in other areas of our business. We have announced an end-of-life for several
products, due primarily to certain suppliers' decisions to stop manufacturing these products. End-of-life products contributed $11.5&nbsp;million, or 33% of revenue, in 2007
and $3.1&nbsp;million, or 28% of revenue, in the fourth quarter of 2007. We currently do not expect these devices to contribute significant revenue by the third quarter of 2008. Because the product
life cycle of mobile products is short, we must replace revenue at the end of a product life cycle with sales from new design opportunities. In addition, sales of our mature product family could
decline if competitors replace us in these design opportunities. While we expect revenue and gross profit growth from CSSPs will offset the expected decline in revenue and gross profit from our
end-of-life products, our mature products and the effect of short mobile product life cycles, there is no assurance when this will occur. In order to grow our revenue from its
current level, we are dependent upon increased revenue from our existing products, especially CSSPs based on our ArcticLink and PolarPro solution platforms, and the development of additional new
products and solutions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we are unable to design, produce and sell new CSSPs that meet design specifications, address customer requirements and generate sufficient revenue and gross profit; if market demand
for our CSSPs and other products fails to materialize; if we are unable to obtain adequate capacity on a timely basis; if we are unable to develop CSSPs or solutions in a timely manner; or if our
customers do not successfully introduce products incorporating our devices, our revenue and gross margin will be materially harmed, our liquidity and cash flows will be materially affected, we may be
required to write-off related inventories and long-lived assets or there may be other adverse effects on our business or the price of our common stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>24</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>We will be unable to compete effectively if we fail to anticipate product opportunities based upon emerging technologies and standards or fail to develop products and solutions
that incorporate these technologies and standards in a timely manner  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We spend significant time and money to design and develop silicon solution platforms such as ArcticLink and PolarPro and proven system blocks, such as our Visual
Enhancement Engine, USB and IDE, or emerging technologies, such as low power programmable logic, advanced process technology or small form factor packaging. We intend to develop additional products
and solutions and to adopt new technologies in the future. If system manufacturers adopt alternative standards or technologies, if an industry standard or emerging technology that we have targeted
fails to achieve broad market acceptance, if customers choose low power offerings from our competitors, or if we are unable to bring the technologies or solutions to market in a timely and effective
manner, we may be unable to generate significant revenue from our research and development efforts. As a result, our business would be materially harmed and we may be required to write-off
related inventories and long-lived assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We may not have the liquidity to support our future operations and capital requirements  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cash and cash equivalents balance at the end of 2007 was $20.9&nbsp;million. At the end of 2007, our interest-bearing debt consisted of $3.3&nbsp;million
outstanding from Silicon Valley Bank and $1.7&nbsp;million outstanding under capital leases. In June 2007, we amended our credit facility with Silicon Valley Bank. At the end of 2007, we had
$5.0&nbsp;million available to borrow under our revolving credit facility and $870,000 available to borrow under our equipment line of credit under the amended agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the end of 2007, we held 1,344,543 Tower ordinary shares, valued at approximately $1.9&nbsp;million based upon the market closing price of $1.43 per share at the end of the
reporting period. Our ability to obtain competitive pricing from Tower is tied to our ownership of at least 450,000 of these Tower shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
our primary investment object is the preservation of cash and our portfolio is comprised of securities with active secondary and resale markets, any investment is subject to a
degree of interest rate and liquidity risk. Capital expenditures, which are largely driven by development activities and the introduction and initial manufacturing of new products, could total
$3.0&nbsp;million in the next twelve months. At the end of 2007, we had commitments to purchase $4.3&nbsp;million of wafer inventory. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of potential investments, current revenue and operating expense levels, changes in working capital and interest and debt payments, we will need to generate significantly
higher revenue and gross profit, especially from our ArcticLink and PolarPro solution platforms and products currently under development, to generate positive cash flow. In addition, these new
products have been generating lower gross margin as a percentage of revenue than the rest of our historical business due to the markets that we have targeted and the larger order quantities associated
with these applications. Whether we can achieve cash flow levels sufficient to support our operations cannot be accurately predicted, and our investment portfolio is subject to a degree of interest
rate and liquidity risk. Unless such cash flow levels are achieved and our investment portfolio remains liquid and its capital is preserved, we may borrow additional funds or sell debt or equity
securities, or some combination thereof, to provide funding for our operations. If adequate funds are not available when needed, our financial condition and operating results would be materially and
adversely affected and we may not be able to operate our business without significant changes in our operations, or at all. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We have a limited number of significant customers and limited visibility into the long-term demand for our products from these customers  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A few end customers can represent a significant portion of our total revenue in a given reporting period and the likelihood of this occurring will increase in the
future as we target market leading </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>25</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>manufacturers
of high volume mobile applications. As in the past, future demand from these customers may fluctuate significantly from quarter to quarter. These customers typically order products with
short requested delivery lead times, and do not provide a commitment to purchase product past the period covered by purchase orders, which may be rescheduled or cancelled. In addition, our
manufacturing lead times are longer than the delivery lead times requested by these customers, and we make significant purchases of inventory and capital expenditures in anticipation of future demand.
If revenue from any significant customer were to decline substantially, we may be unable to offset this decline with increased revenue and gross margin from other customers and we may purchase excess
inventories. These factors could severely harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we may make a significant investment in long-lived assets for the production of our products based upon historical and expected demand. If demand for our
products or gross margin generated from our products does not meet our expectations or if we are unable to collect amounts due from significant customers, we may be required to write-off
inventories, provide for uncollectible accounts receivable or incur charges against long-lived assets, which would materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We may be unable to accurately estimate quarterly revenue, which could adversely affect the trading price of our stock  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer our customers a short delivery lead time and a majority of our shipments during a quarter are ordered by customers in that quarter. As a result, we often
have low visibility to the current quarter's revenue and our revenue levels can change significantly in a short period of time. Furthermore, our ability to respond to increased demand is limited to
inventories on hand or on order, the capacity available at our contract manufacturers and our capacity to program products to customer specifications. In addition, a significant portion of our revenue
is deferred until our distributors ship unprogrammed parts to end customers since the price is not fixed or determinable until that time. Therefore, we are highly dependent on the accuracy and
timeliness of resale and inventory reports from our distributors. Inaccurate distributor resale or inventory reports, as well as unanticipated changes in distributor levels of inventory, could
contribute to our difficulty in predicting and reporting our quarterly revenue and results of operations. If we fail to accurately estimate customer demand, record revenue, or if our available
capacity is less than needed to meet customer demand, our results of operations could be harmed and our stock price could materially fluctuate. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>We depend upon third parties to fabricate, assemble, test and program our products, and they may discontinue manufacturing our products, fail to give our products priority, be
unable to successfully manufacture our products to meet performance, volume or cost targets, or inaccurately report inventories to us  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We contract with third parties to fabricate, assemble, test and program our devices. Our devices are generally fabricated, assembled and programmed by single
suppliers, and the loss of a supplier, transfer of manufacturing to a new location, expiration of a supply agreement or the inability of our suppliers to manufacture our products to meet volume,
performance and cost targets could have a material adverse effect on our business. We sell programmers to customers that are supplied by a single source. Programming capacity at our subcontractors is
also dependent on our investment in sufficient programming hardware to meet fluctuating demand. Our relationship with our suppliers could change as a result of a merger or acquisition. If for any
reason these suppliers or any other vendor becomes unable or unwilling to continue to provide services of acceptable quality, at acceptable costs and in a timely manner, our ability to operate our
business or deliver our products to our customers could be severely impaired. We would have to identify and qualify substitute suppliers, which could be time consuming, difficult and result in
unforeseen operational problems, or we could announce an end-of-life program for these products. Alternate suppliers might not be available to fabricate, </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>26</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>assemble,
test and program our devices or, if available, might be unwilling or unable to offer services on acceptable terms. We have announced an end-of-life for several
products, due primarily to certain suppliers' decisions to stop manufacturing these products. End-of-life products contributed $11.5&nbsp;million, or 33% of revenue, in 2007
and $3.1&nbsp;million, or 28% of revenue in the fourth quarter of 2007. We currently do not expect these devices to contribute significant revenue by the third quarter of 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if competition for wafer manufacturing capacity increases, if we need to migrate to more advanced wafer manufacturing technology, or if competition for assembly services
increases, we may be required to pay or invest significant amounts to secure access to this capacity. For example, between 2001 and 2002 we invested $21.3&nbsp;million in equity and prepaid wafer
credits to obtain guaranteed wafer fabrication capacity at Tower Semiconductor. The number of companies that provide these services is limited and some of them have limited operating histories and
financial resources. In the event our current suppliers refuse or are unable to continue to provide these services to us, or if we are unable to secure sufficient capacity from our current suppliers
on commercially reasonable terms, we may be unable to procure services from alternate suppliers in a timely manner, if at all. Moreover, our reliance on a limited number of suppliers subjects us to
reduced control over delivery schedules, quality assurance and costs. This lack of control may cause unforeseen product shortages or may increase our cost to manufacture and test our products, which
would adversely affect our operating results and cash flows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
record a majority of our inventory transactions based on information from our subcontractors. If we do not receive prompt and accurate information from our suppliers, we could
misstate our inventories,
incorrectly record gross profit, be unable to meet our delivery commitments to customers or commit to manufacturing inventories that are not required to meet customer delivery commitments, which could
materially harm our business. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Our future results depend on our relationship with Tower  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have invested approximately $21.3&nbsp;million in Tower. In return for our investment, we received equity, prepaid wafer credits, favorable wafer pricing and
committed production capacity in Tower's foundry facility. We believe that Tower's long-term operation of this fabrication facility depends on its ability to attract sufficient customer
demand, to obtain additional financing, to increase capacity, to obtain the release of grants and approvals for changes in grant programs from the Israeli government's Investment Center and its
ability to remain in compliance with the terms of its grant and credit agreements. The current political uncertainty and security situation in the Middle East where Tower's fabrication facility is
located, the cyclical nature of the market for foundry manufacturing services, Tower's financial condition, or other factors may adversely impact Tower's business prospects and may discourage future
investments in Tower from outside sources. If Tower is unable to obtain adequate financing and increase production output in a timely manner, the value of our investment in Tower may decline
significantly or possibly become worthless, our wafer credit from Tower may decline in value or possibly become worthless, and we would have to identify and qualify a substitute supplier to
manufacture our products. This could require significant development time, cause product shipment delays, impair long-lived assets and the value of our wafer credits, damage our liquidity
and severely harm our business. In addition, Tower is the sole manufacturer of our new products, other new products currently under development and QuickMIPS. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
value of our investment in Tower and its corresponding wafer credits may also be adversely affected by a deterioration of conditions in the market for foundry manufacturing services
and the market for semiconductor products. At the end of 2007, the value of our Tower investment was $1.9&nbsp;million and the value of our wafer credits recorded on our balance sheet was
$2.6&nbsp;million. If the fair value of our Tower investment or our wafer credits is deemed to be impaired, we will record charges to our statement of operations. For instance, we wrote down the
Tower shares due to an "other than temporary" decline in their market value by $13.7&nbsp;million between fiscal 2001 and 2005. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>27</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>Our customers may cancel or change their product plans after we have expended substantial time and resources in the design of their products  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers often evaluate our products for six months or more before designing them into their systems, and they may not commence volume shipments for up to an
additional six to twelve months, if at all. During this lengthy sales cycle, our potential customers may cancel or change their product plans. Customers may also discontinue products incorporating our
devices at any time or they may choose to replace our products with lower cost semiconductors. In addition, we are working with leading customers in our target markets to define our future products.
If customers cancel, reduce or delay product orders from us or choose not to release products that incorporate our devices after we have spent substantial time and resources developing products or
assisting customers with their product design, our revenue levels may be less than anticipated and our business could be materially harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>If we fail to adequately forecast demand for our products, we may incur product shortages or excess product inventories  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our agreements with certain suppliers require us to provide forecasts of our anticipated manufacturing orders, and place binding manufacturing commitments in
advance of receiving purchase orders from our customers. We are limited in our ability to increase or decrease our forecasts under such agreements. Other manufacturers supply us product on a purchase
order basis. The allocation of capacity is determined solely by our suppliers over which we have no direct control. Additionally, we may place orders with our suppliers in advance of customer orders
to allow us to quickly respond to changing customer demand or to obtain favorable product costs. Furthermore, we provide our suppliers with equipment which is used to program our products to customer
specifications. The programming equipment is manufactured to our specifications and has significant order lead times. These factors may result in product shortages or excess product inventories.
Obtaining additional supply in the face of product, programming equipment or capacity shortages may be costly, or not possible, especially in the short term since most of our products and programming
equipment are supplied by a single supplier. For example, in 2007, we reserved $3.9&nbsp;million of inventories due primarily to changes in forecasted demand. Our failure to adequately forecast
demand for our products could materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
distributors or customers may cancel purchase orders at any time with little or no penalty. Contractually, our distributors are generally permitted to return unprogrammed products
worth up to
10%, by value, of the products they purchase from us. If our distributors or customers cancel or defer significant purchase orders or return our products, our accounts receivable collections would
decrease and inventories would increase, which would materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We are expending substantial time and effort to develop solutions with partners that depend on the availability and success of technology owned by the partner  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our approach to developing solutions for potential customers involves: (1)&nbsp;embedded processors developed by companies such as Marvell
Semiconductor,&nbsp;Inc. and Analog Devices,&nbsp;Inc.; (2)&nbsp;peripheral devices developed by other parties such as micro hard disk drives, Wi-Fi devices and NAND flash memory;
(3)&nbsp;proprietary intellectual property such as key elements of our Visual Enhancement Engine; and (4)&nbsp;specific industry standards such as USB 2.0 OTG, Serial Digital High Capacity, or
SDHC, IDE and SDIO. We have entered into informal partnerships with other parties that involve the development of solutions that interface with their devices or standards. These informal partnerships
also may involve joint marketing campaigns and sales calls. If our solutions are not incorporated into customer products, if our partners discontinue production of or integrate our solution into their
product offerings, or if the informal partnerships do not grow as expected or if they are significantly reduced or terminated by acquisition or other means, our revenue and gross margin will be
materially harmed and we may be required to write-off related inventories and long-lived assets. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>28</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>We may be unable to successfully grow our business if we fail to compete effectively with others to attract and retain key personnel  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our future success depends upon our ability to attract and retain highly competent personnel. Our employees are at-will and not subject to
employment contracts. Hiring and retaining qualified sales, technical and financial personnel is difficult due to the limited number of qualified professionals, economic conditions and the size of our
company. Competition for these types of employees is intense. In addition, new hires frequently require extensive training before they achieve desired levels of productivity. Failure to attract, hire,
train and retain personnel could materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Fluctuations in our manufacturing processes, yields and quality, especially for new products, may increase our costs  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Difficulties encountered during the complex semiconductor manufacturing process can render a substantial percentage of semiconductor devices nonfunctional. New
manufacturing techniques or fluctuations in the manufacturing process may change the performance distribution and yield of our products. We have, in the past, experienced manufacturing runs that have
contained substantially reduced or no functioning devices, or that generated devices with below normal performance characteristics. Our reliance on third party suppliers may extend the period of time
required to analyze and correct these problems. Once corrected, our customers may be required to redesign or requalify their products. As a result, we may incur substantially higher manufacturing
costs, shortages of inventories or reduced customer demand. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yield
fluctuations frequently occur in connection with the manufacture of newly introduced products, with changes in product architecture, with manufacturing at new facilities, on new
fabrication processes or in conjunction with new backend manufacturing processes. Newly introduced solutions and products, such as our CSSPs and ArcticLink and PolarPro solution platforms, are often
more complex and more difficult to produce, increasing the risk of manufacturing related defects. New manufacturing facilities or processes are often more complex and take a period of time to achieve
expected quality levels and manufacturing efficiencies. While we test our products, including our software development tools, they may still contain errors or defects that are found after we have
commenced commercial production. Undetected errors or defects may also result from new manufacturing processes or when new intellectual property is incorporated into our products. If our products or
software development tools contain undetected or unresolved defects, we may lose market share, experience delays in or loss of market acceptance, reserve or scrap inventories or be required to issue a
product recall. In addition, we would be at risk of product liability litigation if defects in our products were discovered. Although we attempt to limit our liability to end users through disclaimers
of special, consequential and indirect damages and similar provisions, we cannot assure you that such limitations of liability will be legally enforceable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We have a history of losses and cannot assure you that we will again be profitable in the future  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incurred significant losses in 2007, 2006 and certain years prior to 2005. Our accumulated deficit as of December&nbsp;30, 2007 was $138.7&nbsp;million.
Although we recorded net income of $2.4&nbsp;million in 2005, we recorded a net loss of $11.1&nbsp;million in 2007 and $9.2&nbsp;million in 2006, and we may not return to profitability in any
future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Our future operating results are likely to fluctuate and therefore may fail to meet expectations, which could cause our stock price to decline  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating results have varied widely in the past and are likely to do so in the future. In addition, our past operating results may not be an indicator of
future operating results. Our future operating results will depend on many factors and may fail to meet our expectations for a number of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>29</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>reasons,
including those set forth in these risk factors. Any failure to meet expectations could cause our stock price to significantly fluctuate or decline. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Factors
that could cause our operating results to fluctuate include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
effect of end-of-life programs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a
significant change in sales to, or the collectability of accounts receivable from, our largest customers;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>successful
development and market acceptance of our products and solutions;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to accurately forecast product volumes and mix, and to respond to rapid changes in customer demand;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes
in sales volume or expected sales volume, product mix, average selling prices or production variances that affect gross profit;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to adjust our product features, manufacturing capacity and costs in response to economic and competitive pressures;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
reliance on subcontract manufacturers for product capacity, yield and quality;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
competitors' product portfolio and product pricing policies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>timely
implementation of efficient manufacturing technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>errors
in applying or changes in accounting and corporate governance rules;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
issuance of equity compensation awards or changes in the terms of our stock plan or employee stock purchase plan;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>mergers
or acquisitions;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
impact of import and export laws and regulations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
cyclical nature of the semiconductor industry and general economic, market, political and social conditions in the countries where we sell our products and the related
effect on our customers, distributors and suppliers; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our
ability to obtain capital, debt financing and insurance on commercially reasonable terms. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
certain of these factors are out of our immediate control, unless we can anticipate and be prepared with contingency plans that respond to these factors, our business may be
materially harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
may encounter periods of industry wide semiconductor oversupply, resulting in pricing pressure, as well as undersupply, resulting in a risk that we could be unable to fulfill our
customers' requirements. The semiconductor industry has historically been characterized by wide fluctuations in the demand for, and supply of, its products. These fluctuations have resulted in
circumstances when supply of and demand for semiconductors have been widely out of balance. An industry wide semiconductor oversupply could result in severe downward pricing pressure from customers.
In a market with undersupply of manufacturing capacity, we would have to compete with larger foundry and assembly customers for limited manufacturing resources. In such an environment, we may be
unable to have our products manufactured in a timely manner, at a cost that generates adequate gross profit or in sufficient quantities. Since we outsource all of our manufacturing and generally have
a single source of wafer supply, test, assembly and programming for our products, we are particularly vulnerable to such supply shortages and capacity limitations. As a result, we may be unable to
fulfill orders and may lose customers. Any future industry wide oversupply or undersupply of semiconductors could materially harm our business. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>30</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>Problems associated with international business operations could affect our ability to manufacture and sell our products  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our products are manufactured outside of the United States at manufacturing facilities operated by our suppliers in Taiwan, South Korea, the Philippines,
China and Israel. We expect to manufacture a majority of our new products and the products that we currently have under development in Israel and to assemble these products in South Korea or China. As
a result, these manufacturing operations and new product introductions are subject to risks of political instability, including the risk of conflict between Taiwan and the People's Republic of China,
between South Korea and North Korea, and conflicts involving Israel. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
significant portion of our total revenue comes from sales to customers located outside the United States. We anticipate that sales to customers located outside the United States will
continue to represent a significant portion of our total revenue in future periods. In addition, most of our domestic customers sell their products outside of North America, thereby indirectly
exposing us to risks associated with foreign commerce and economic instability. In addition to overseas sales offices, we have significant research and development activities in Canada and India.
Accordingly, our operations and revenue are subject to a number of risks associated with foreign commerce, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>managing
foreign distributors;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>collecting
amounts due;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>staffing
and managing foreign offices;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>political
and economic instability;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>foreign
currency exchange fluctuations;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes
in tax laws, import and export regulations, tariffs and freight rates;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>timing
and availability of export licenses;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>supplying
products that meet local environmental regulations; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>inadequate
protection of intellectual property rights. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the past, we have denominated sales of our products to foreign countries exclusively in U.S. dollars. As a result, any increase in the value of the U.S. dollar relative to the local
currency of a foreign country will increase the price of our products in that country so that our products become relatively more expensive to customers in their local currency. As a result, sales of
our products in that foreign country may decline. If the local currency of a foreign country in which we conduct business strengthens against the U.S. dollar, our payroll and other local expenses will
be higher, and since sales are transacted in U.S. dollars, would not be offset by any increase in revenue. To the extent any such risks materialize, our business could be materially harmed. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, we incur costs in foreign countries that may be difficult to reduce quickly because of employee related laws and practices in those foreign countries. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Our CSSPs face competition from suppliers of ASSPs such as Cypress Semiconductor, suppliers of integrated application processors such as Qualcomm, and suppliers of ASICs such
as LSI Logic  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face competition from companies that offer ASSPs, such as Cypress Semiconductor and Oxford Semiconductor. While it is difficult to provide a unique solution
through the use of ASSPs, they generally are cost effective standard products and have short lead times. In certain design opportunities, ASSPs can be combined to achieve system design objectives.
Manufacturers of integrated application processors, such as Qualcomm, often integrate new features when they introduce new products. A system designer could elect the use of an integrated processor
that includes the features </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>offered
in our CSSPs. Companies such as LSI Logic supply ASICs, which may be purchased for a lower price at higher volumes and typically have greater logic capacity, additional features and higher
performance than our products. Our inability to successfully compete in any of the following areas could materially harm our business: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
development of new products, CSSPs and advanced manufacturing technologies;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
quality, power characteristics, performance characteristics, price and availability of devices, programming hardware and software development tools;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
ability to engage with companies that provide synergistic products and services;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
incorporation of industry standards in our products and solutions;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
diversity of product offerings available to customers; or
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the
quality and cost effectiveness of design, development, manufacturing and marketing efforts. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><I>Many system manufacturers may be unwilling to switch to our products because of their familiarity with the products offered by our direct competitors, such as
Xilinx,&nbsp;Inc. and Actel Corporation, which compete with us in the sale of FPGAs  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies that compete with our mature product family and end-of-life product family, and certain new product opportunities, include
suppliers of complex programmable logic devices and field programmable gate arrays, such as Xilinx,&nbsp;Inc., Altera Corporation, Actel Corporation and Lattice Semiconductor Corporation. Xilinx and
Altera together have a majority share of the programmable logic market. Many system manufacturers may be unwilling or unable to switch to our products due to their familiarity with competitors'
products or other inhibiting factors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
semiconductor industry is intensely competitive and characterized by: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>erosion
of selling prices over product lives;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>rapid
technological change;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>short
product life cycles; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>strong
domestic and foreign competition. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>If
we are not able to compete successfully in this environment, our business will be materially harmed. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of the companies that compete with CSSPs and our new product, mature and end-of-life families have substantially greater financial, technical, manufacturing,
marketing, sales, distribution, name recognition and other resources than we do. In addition, many of our competitors have well established relationships with our current and potential customers and
have extensive knowledge of system applications. In the past, we have lost potential
customers to competitors for various reasons, including, but not limited to, re-programmability and lower price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We depend upon third party distributors and independent sales representatives to market and sell our products, and they may discontinue sale of our products, fail to give our
products priority or be unable to successfully market, sell and support our products  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We contract with third party distributors and independent sales representatives to market and sell a significant portion of our products. We typically have only a
few distributors and a single representative serving each geographic market and, in the future, we may have a single distributor covering a geographic market. Although we have contracts with our
distributors and representatives, our agreements with them may be terminated on short notice by either party and, if terminated, we may be unable to recruit additional or replacement distributors or
representatives. As a result, our future performance will depend in part on our ability to retain our existing distributors and </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>representatives
and to attract new distributors and representatives that will be able to effectively market, sell and support our products and solutions. The loss of one or more of our principal
distributors or representatives, or our inability to attract new distributors or representatives, could materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of our distributors and representatives, including our principal distributors and representatives, market and sell products for other companies. Many of these products may compete
directly or indirectly with our products and solutions. Also, we generally are not one of the principal suppliers of products to our distributors or representatives. If our distributors or
representatives give higher priority or greater attention to the products of other companies, including products that compete with our products and solutions, our business would be materially harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Individual
distributors and OEMs&nbsp;often represent a significant portion of our accounts receivable. If we are unable to collect funds due from these distributors and customers, our
financial results may be materially harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We may be unable to adequately protect our intellectual property rights and may face significant expenses as a result of future litigation  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Protection of intellectual property rights is crucial to our business, since that is how we keep others from copying the innovations that are central to our
existing and future products. From time to time, we receive letters alleging patent infringement or inviting us to license other parties' patents. We
evaluate these requests on a case-by-case basis. These situations may lead to litigation if we reject the offer to obtain the license. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the past, we have been involved in litigation relating to our alleged infringement of third party patents or other intellectual property rights. This type of litigation is expensive
and consumes large amounts of management time and attention. Additionally, matters that we initially consider not material to our business could become costly. In addition, if the letters we sometimes
receive alleging patent infringement or other similar matters result in litigation that we lose, a court could order us to pay substantial damages and/or royalties, and prohibit us from making, using,
selling or importing essential technologies. For these and other reasons, this type of litigation could materially harm our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although
we may seek to obtain a license under a third party's intellectual property rights in order to bring an end to certain claims or actions asserted against us, we may not be able
to obtain such a license on reasonable terms, or at all. We have entered into technology license agreements with third parties which give those parties the right to use patents and other technology
developed by us and which give us the right to use patents and other technology developed by them. We anticipate that we will continue to enter into these kinds of licensing arrangements in the
future; however, it is possible that desirable licenses will not be available to us on commercially reasonable terms. If we lose existing licenses to key technology, or are unable to enter into new
licenses that we deem important, our business could be materially harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
it is critical to our success that we continue to prevent competitors from copying our innovations, we intend to continue to seek patent and trade secret protection for our
products. The process of seeking patent protection can be long and expensive, and we cannot be certain that any currently pending or future applications will actually result in issued patents or that,
even if patents are issued, they will be of sufficient scope or strength to provide meaningful protection or any commercial advantage to us. Furthermore, others may develop technologies that are
similar or superior to our technology or design around the patents we own. We also rely on trade secret protection for our technology, in part through confidentiality agreements with our employees,
consultants and other third parties. However, these parties may breach these agreements and we may not have adequate remedies for any breach. In any case, others may come to know about or determine
our trade secrets through a </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>33</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>variety
of methods. In addition, the laws of certain territories in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same extent as the laws
of the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We may engage in manufacturing, distribution or technology agreements that involve numerous risks, including the use of cash, diversion of resources and significant
write-offs  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into and, in the future, intend to enter into agreements that involve numerous risks, including the use of significant amounts of our cash;
diversion of resources from other development projects or market opportunities; our ability to incorporate licensed technology in our products and solutions; our ability to introduce related products
in a cost effective and timely manner; our ability to collect amounts due under these contracts; and market acceptance of related products and solutions. If we fail to recover the cost of these or
other assets from the cash flow generated by the related products, our assets will become impaired and our financial results would be harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Our business is subject to the risks of earthquakes, other catastrophic events and business interruptions for which we may maintain limited insurance  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations and the operations of our suppliers are vulnerable to interruption by fire, earthquake, power loss, flood, terrorist acts and other catastrophic
events beyond our control. In particular, our headquarters are located near earthquake fault lines in the San Francisco Bay Area. In addition, we rely on sole suppliers to manufacture our products and
would not be able to qualify an alternate supplier of our products for several quarters. Our suppliers often hold significant quantities of our inventories which, in the event of a disaster, could be
destroyed. In addition, our business processes and systems are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering. Any catastrophic event, such
as an earthquake or other natural disaster, the failure of our computer systems, war or acts of terrorism, could significantly impair our ability to maintain our records, pay our suppliers, or design,
manufacture or ship our products. The occurrence of any of these events could also affect our customers, distributors and suppliers and produce similar disruptive effects upon their business. If there
is an earthquake or other catastrophic event near our headquarters, our customers' facilities, our distributors' facilities or our suppliers' facilities, our business could be seriously harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not have a detailed disaster recovery plan. In addition, we do not maintain sufficient business interruption and other insurance policies to compensate us for all losses that may
occur. Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss could have a material adverse effect on our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Our principal stockholders have significant voting power and may vote for actions that may not be in the best interests of our other stockholders  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our officers, directors and principal stockholders together control a significant portion of our outstanding common stock. As a result, these stockholders, if
they act together, will be able to
significantly influence our operations, affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a change in control and might affect the market price of our common stock. This concentration of ownership may not be in the
best interest of our other stockholders. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>34</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>Our Shareholder Rights Plan, Certificate of Incorporation, Bylaws and Delaware law contain provisions that could discourage a takeover that is beneficial to stockholders  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Shareholder Rights Plan as well as provisions of our Certificate of Incorporation, our Bylaws and Delaware law could make it difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>The market price of our common stock may fluctuate significantly and could lead to securities litigation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock prices for many companies in the technology and emerging growth sectors have experienced wide fluctuations that have often been unrelated to the operating
performance of such companies. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. In the
future, we may be the subject of similar litigation. Securities litigation could result in substantial costs and divert management's attention. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Changes to existing accounting pronouncements or taxation rules or practices may cause adverse revenue fluctuations, affect our reported financial results or how we conduct our
business  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally accepted accounting principles, or GAAP, are promulgated by, and are subject to the interpretation of the Financial Accounting Standards Board, or FASB,
and the SEC. New accounting pronouncements or taxation rules and varying interpretations of accounting pronouncements or taxation practices have occurred and may occur in the future. Any future
changes in accounting pronouncements or taxation rules or practices may have a significant effect on how we report our results and may even affect our reporting of transactions completed before the
change is effective. In addition, a review of existing or prior accounting practices may result in a change in previously reported amounts. This change to existing rules, future changes, if any, or
the questioning of current
practices may adversely affect our reported financial results, our ability to remain listed on the Nasdaq Global Market, or the way we conduct our business and subject us to regulatory inquiries or
litigation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
example, the FASB has issued Statement of Financial Accounting Standards, or SFAS, No.&nbsp;123(R), </FONT><FONT SIZE=2><I>"Share-Based Payment,"</I></FONT><FONT SIZE=2> or
SFAS&nbsp;123(R), which we adopted in the first quarter of 2006. SFAS&nbsp;123(R) requires us to measure compensation costs for all stock-based compensation awards (including our stock options,
stock awards and our employee stock purchase plan, as currently constructed) at fair value and record compensation expense over the vesting period. If this accounting pronouncement had been in effect
during 2005, we would have reported a net loss. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
in July 2006 we initiated a review of our historical stock option practices and related accounting. This review identified accounting and administrative errors that, if
they had been recorded at the time they occurred, would have resulted in total additional charges of approximately $964,000 between October 1999 and December 2005. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Compliance with regulations related to corporate governance and public disclosure may result in additional expenses  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal securities laws, rules and regulations, as well as Nasdaq rules and regulations, require companies to maintain extensive corporate governance measures,
impose comprehensive reporting and disclosure requirements, set strict independence and financial expertise standards for audit and other committee members and impose civil and criminal penalties for
companies and their chief executive officers, chief financial officers and directors for securities law violations. These laws, rules and regulations have increased and will continue to increase the
scope, complexity and cost of our corporate governance, reporting and disclosure practices, which could harm our results of operations and divert management's attention from business operations. We
are committed to maintaining high standards of corporate governance and public disclosure. If our efforts to comply with new or changed laws, regulations and standards differ from the activities
intended by regulatory or governing bodies due </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>35</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>to
ambiguities related to practice, our reputation may be harmed and the market price of our common stock could be affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>While we believe that we currently have adequate internal control procedures in place, we are still exposed to potential risks from legislation requiring companies to evaluate
controls under Section&nbsp;404 of the Sarbanes-Oxley Act of 2002  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting
cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence
and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these
inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December 2007, we have evaluated our internal control systems in order to allow management to report on our internal control over financial reporting, as required by
Section&nbsp;404 of the Sarbanes-Oxley Act. We performed the system and process evaluation and testing required in an effort to comply with the management certification of Section&nbsp;404. While
we believe that our internal control procedures are adequate and we intend to continue to fully comply with the requirements relating to internal control and all other aspects of Section&nbsp;404,
our controls necessary for continued compliance with the Sarbanes-Oxley Act may not operate effectively at all times and may result in a material control disclosure. The identification of a material
weakness in internal control over financial reporting, if any, could indicate a lack of proper controls to generate accurate consolidated financial statements. Furthermore, we cannot be certain as to
the outcome of future evaluations, testing and remediation actions or the impact of the same on our operations. If we are not able to remain in compliance with the requirements of Section&nbsp;404,
we might be subject to sanctions or investigation by regulatory authorities, such as the SEC or the Nasdaq Global Market. Any such action could adversely affect our financial results and the market
price of our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>We have implemented import and export control procedures to comply with United States regulations but we are still exposed to potential risks from import and export activity  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products, solutions, technology and software are subject to import and export control laws and regulations which, in some instances, may impose restrictions
on business activities, or otherwise require licenses or other authorizations from agencies such as the U.S. Department of State, U.S. Department of Commerce and U.S. Department of the Treasury. These
restrictions may impact deliveries to customers or limit development and manufacturing alternatives. We have import and export licensing and compliance procedures in place for purposes of conducting
our business consistent with U.S. and applicable international laws and regulations, and we periodically review these procedures to maintain compliance with the requirements relating to import and
export regulations. If we are not able to remain in compliance with import and export regulations, we might be subject to investigation, sanctions or penalties by regulatory authorities. Such
penalties can include civil, criminal or administrative remedies such as loss of export privileges. We cannot be certain as to the outcome of
an evaluation, investigation, inquiry or other action or the impact of these items on our operations. Any such action could adversely affect our financial results and the market price of our common
stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>36</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>The Company, our directors and management have in the past been named parties to lawsuits and may be subject to future litigation, which could result in an unfavorable outcome
and have a material adverse effect on our business, financial condition, results of operations, cash flows and the trading price for our securities  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company and certain of our directors and officers are named in a lawsuit relating to the initial public offering laddering litigation. We may become the
subject of other private or government actions in the future. Litigation may be time consuming, expensive and disruptive to normal business operations and the outcome of litigation is difficult to
predict. Any expenses associated with litigation or the outcome relating to any such actions could have a material adverse effect on our business, financial condition, results of operations, cash
flows and the trading price for our securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="ci18601_item_1b._unresolved_staff_comments"> </A>
<A NAME="toc_ci18601_1"> </A>
ITEM 1B.&nbsp;&nbsp;&nbsp;&nbsp;UNRESOLVED STAFF COMMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="ci18601_item_2._properties"> </A>
<A NAME="toc_ci18601_2"> </A>
ITEM 2.&nbsp;&nbsp;&nbsp;&nbsp;PROPERTIES    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal administrative, sales, marketing, research and development and final testing facility is located in a building of approximately 42,600 square feet
in Sunnyvale, California. This facility is leased through March 2009 with an option to renew. We have sub-let approximately 8,000 square feet of this facility through March 2009. Our
research and development facility in Toronto, Canada, consisting of approximately 8,400 square feet, is leased through February 2010. We lease a 4,500 square foot facility in Bangalore, India for the
purpose of software development. This facility is leased through November 2009. We also lease office space in Hong Kong, China; Taipei, Taiwan; London, England; and Tokyo, Japan. We believe that our
existing facilities are adequate for our current needs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="ci18601_item_3._legal_proceedings"> </A>
<A NAME="toc_ci18601_3"> </A>
ITEM 3.&nbsp;&nbsp;&nbsp;&nbsp;LEGAL PROCEEDINGS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;26, 2001, a putative securities class action was filed in the U.S. District Court for the Southern District of New York against certain
investment banks that underwrote QuickLogic's initial public offering, QuickLogic and some of QuickLogic's officers and directors. The complaint alleges excessive and undisclosed commissions in
connection with the allocation of shares of common stock in QuickLogic's initial and secondary public offerings and artificially high prices through "tie-in" arrangements which required
the underwriters' customers to buy shares in the aftermarket at pre-determined prices in violation of the federal securities laws. Plaintiffs seek an unspecified amount of damages on
behalf of persons who purchased QuickLogic's stock pursuant to the registration statements between October&nbsp;14, 1999 and December&nbsp;6, 2000. Various plaintiffs have filed similar actions
asserting virtually identical allegations against over 300 other public companies, their underwriters, and their officers and directors arising out of each company's public offering. These actions,
including the action against QuickLogic, have been coordinated for pretrial purposes and captioned </FONT><FONT SIZE=2><I>In re Initial Public Offering Securities Litigation, 21 MC
92</I></FONT><FONT SIZE=2>. In June 2004, a stipulation of settlement and release of claims against the issuer defendants, including QuickLogic, was submitted to the court for approval. On
August&nbsp;31, 2005, the court preliminarily approved the settlement. In December 2006, the appellate court overturned the certification of classes in the six test cases that were selected by the
underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a condition of the settlement, it was unlikely that the settlement would receive final Court
approval. On June&nbsp;25, 2007, the Court entered an order terminating the proposed settlement based upon a stipulation among the parties to the settlement. Plaintiffs have indicated that they will
seek to amend their allegations and file amended complaints. It is uncertain whether there will be any revised or future complaints. If a settlement does not occur and litigation against QuickLogic
continues, the Company intends to defend the case vigorously. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
estimate can be made of the possible loss or possible range of loss associated with the resolution of these contingencies and, accordingly, the Company has not recorded a liability. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>37</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Company is involved in legal actions arising in the ordinary course of business, including but not limited to intellectual property infringement and collection
matters. Absolute assurance cannot be given that third party assertions will be resolved without costly litigation in a manner that is not adverse to the Company's financial position, results of
operations or cash flows or without requiring royalty or other payments in the future which may adversely impact gross profit. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="ci18601_item_4._submission_of___ci102384"> </A>
<A NAME="toc_ci18601_4"> </A>
ITEM 4.&nbsp;&nbsp;&nbsp;&nbsp;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>38</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="da18601_part_ii"> </A>
<A NAME="toc_da18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART II    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="da18601_item_5._market_for_the_registr__ite04822"> </A>
<A NAME="toc_da18601_2"> </A>
ITEM 5.&nbsp;&nbsp;&nbsp;&nbsp;MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Market Information  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock has been traded on the Nasdaq Global Market under the symbol "QUIK" since October&nbsp;15, 1999, the date of our initial public offering. The
following table sets forth, for the periods indicated, the high and low closing sales prices for our common stock, as reported on the Nasdaq Global Market: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>High</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Low</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><B>Fiscal Year Ending December&nbsp;30, 2007:</B></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>First Quarter (through April&nbsp;1, 2007)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.25</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.48</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Second Quarter (through July&nbsp;1, 2007)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.99</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.57</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Third Quarter (through September&nbsp;30, 2007)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.76</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.68</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Fourth Quarter (through December&nbsp;30, 2007)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.21</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.28</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><BR><FONT SIZE=2><B>Fiscal Year Ending December&nbsp;31, 2006:</B></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>First Quarter (through April&nbsp;2, 2006)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.74</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.88</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Second Quarter (through July&nbsp;2, 2006)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.45</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.80</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Third Quarter (through October&nbsp;1, 2006)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.07</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.65</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>Fourth Quarter (through December&nbsp;31, 2006)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.65</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.62</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2><B>Stockholders  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The closing price of our common stock on the Nasdaq Global Market was $3.03 per share on February&nbsp;26, 2008. As of February&nbsp;26, 2008, there were
29,404,309 shares of common stock outstanding that were held of record by approximately 242 stockholders. The actual number of stockholders is greater than this number of holders of record since this
number does not include stockholders whose shares are held in trust by other entities. We estimate that the number of beneficial stockholders of the shares of our common stock as of
February&nbsp;26, 2008 was approximately 5,900. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Dividend Policy  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any dividends on our capital stock. We currently expect to retain future earnings, if any, for use in the operation and expansion
of our business and do not anticipate paying any cash dividends in the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Equity Compensation Plan Information  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item regarding equity compensation plans is incorporated by reference to the information set forth in Part&nbsp;III
Item&nbsp;12 of this Annual Report on Form&nbsp;10-K. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Shelf Registration  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;12, 2005, the Company filed a shelf registration statement on Form&nbsp;S-3, which was declared effective on July&nbsp;26, 2005 by
the SEC. Under the shelf registration statement, the Company has the ability to raise up to $30.0&nbsp;million, in one or more transactions, by selling common stock, preferred stock, depositary
shares, or warrants. The Company had not raised any funds in connection with this filing. The Company may offer and sell securities registered under this shelf registration statement through
November&nbsp;30, 2008. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>39</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=39,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=547385,FOLIO='39',FILE='DISK121:[08ZAF1.08ZAF18601]DA18601A.;10',USER='AGAETZ',CD='11-MAR-2008;14:25' -->
<A NAME="page_da18601_1_40"> </A>

<P style="font-family:times;"><FONT SIZE=2><B>Stock Performance Graph  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following graph compares the cumulative total return to stockholders of our common stock from December&nbsp;31, 2002 to December&nbsp;31, 2007 to the
cumulative total return over such period of (i)&nbsp;the S&amp;P&nbsp;500 Index and (ii)&nbsp;the S&amp;P Semiconductors Index. The graph assumes that $100 was invested on December&nbsp;31, 2002 in
QuickLogic's common stock and in each of the other two indices and the reinvestment of all dividends, if any, through December&nbsp;31, 2007. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information contained in the Performance Graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that QuickLogic specifically incorporates it by reference
into any such filing. The graph is presented in accordance with SEC requirements. Stockholders are cautioned against drawing any conclusions from the data contained therein, as past results are not
necessarily indicative of future performance. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN<BR>  </B></FONT><FONT SIZE=2>Among QuickLogic Corporation, The S&amp;P 500 Index<BR>
And The S&amp;P Semiconductors Index </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g350528.jpg" ALT="GRAPHIC" WIDTH="639" HEIGHT="445">
  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="40%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/02</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/03</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/04</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/05</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/06</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>12/07</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%" style="font-family:times;"><FONT SIZE=2>QuickLogic Corporation</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>468.87</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>268.02</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>372.64</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>280.19</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>311.32</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="40%" style="font-family:times;"><FONT SIZE=2>S&amp;P 500</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>128.68</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>142.69</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>149.70</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>173.34</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>182.87</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="40%" style="font-family:times;"><FONT SIZE=2>S&amp;P Semiconductors</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.00</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>197.49</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>156.23</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>175.23</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>159.61</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>178.74</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>Copyright&copy;
2008, Standard&nbsp;&amp; Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/s&amp;p.htm </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>40</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=40,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=720961,FOLIO='40',FILE='DISK121:[08ZAF1.08ZAF18601]DA18601A.;10',USER='AGAETZ',CD='11-MAR-2008;14:25' -->
<A NAME="page_da18601_1_41"> </A>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="da18601_item_6._selected_financial_data"> </A>
<A NAME="toc_da18601_3"> </A>
ITEM 6.&nbsp;&nbsp;&nbsp;&nbsp;SELECTED FINANCIAL DATA    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2004</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except per share amount)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><B>Statement of Operations:</B></FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Revenue</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,417</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,924</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,259</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>44,612</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,969</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,410</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,739</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,124</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,878</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>21,021</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,007</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,185</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,135</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23,734</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,948</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,517</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,303</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,648</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,885</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,500</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,163</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,062</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,855</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,905</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,769</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Long-lived asset impairment(2)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,201</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) from operations</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,673</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(10,180</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,632</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,257</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,321</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Write-down of marketable securities(3)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,466</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,532</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Gain on sale of investment in Tower Semiconductor&nbsp;Ltd.(4)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>719</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(280</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(329</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(189</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(255</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(178</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest income and other, net</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>894</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,366</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>542</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>212</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) before income taxes</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,059</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,143</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,519</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,832</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,719</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>71</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,832</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,719</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Net income (loss) per share:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.09</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.35</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.35</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Weighted average shares:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,954</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,493</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,110</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,039</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,493</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,110</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="100%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>January&nbsp;1,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>January&nbsp;2,<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;28,<BR>
2003</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2><B>Balance Sheet Data:</B></FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,868</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,621</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,283</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,914</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,443</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>Working capital</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22,279</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,699</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,043</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,386</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,577</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>Total assets</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,424</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,235</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>54,996</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,941</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>58,363</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>Long-term obligations, excluding current portion</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,527</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,618</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,571</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,192</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,723</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,018</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,368</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,237</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36,166</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43,868</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
Company adopted the provisions of SFAS&nbsp;123(R) beginning fiscal year 2006. See Notes&nbsp;2 and 12 in Part&nbsp;II, Item&nbsp;8 of this Form&nbsp;10-K.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Long-lived
asset impairment in 2004 consisted of a $3.2&nbsp;million non-cash charge. Due to a reduction in expected product revenue, we wrote down the
assets associated with our QuickMIPS products to their estimated fair market value.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Write-down
of marketable securities consisted of a non-cash charge of $1.5&nbsp;million and $1.5&nbsp;million in 2005 and 2004, respectively, for the
write-down of our equity investment in Tower Semiconductor&nbsp;Ltd. to market value.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Gain
on sale of investment in Tower Semiconductor&nbsp;Ltd. in 2003 consisted of $719,000 from the sale of 412,825 available-for-sale Tower ordinary shares
which generated total proceeds of approximately $2.1&nbsp;million. </FONT></DD></DL>
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<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="dc18601_item_7._management_s_discussio__ite03668"> </A>
<A NAME="toc_dc18601_1"> </A>
ITEM 7.&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dc18601_explanatory_note"> </A>
<A NAME="toc_dc18601_2"> </A></FONT> <FONT SIZE=2><B>EXPLANATORY NOTE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in
"Risk Factors" in Item&nbsp;1A and elsewhere in this Annual Report on Form&nbsp;10-K, contains "forward-looking statements" within the meaning of Section&nbsp;27A of the Securities
Act of 1933 and Section&nbsp;21E of the Securities Exchange Act of 1934. We intend that these forward-looking statements be subject to the safe harbors created by those provisions. Forward-looking
statements are generally written in the future tense and/or are preceded by words such as "will," "may," "should," "forecast," "could," "expect," "suggest," "believe," "anticipate," "intend," "plan,"
or other similar words. Forward-looking statements include statements regarding (1)&nbsp;our revenue levels, including the commercial success of our CSSPs and new products, and the effect of our
end-of-life products, (2)&nbsp;our gross profit and factors that affect gross profit, (3)&nbsp;our level of operating expenses, (4)&nbsp;our research and development
efforts, (5)&nbsp;our liquidity, (6)&nbsp;our partners and suppliers and (7)&nbsp;industry trends.</I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>The forward-looking statements contained in this Annual Report involve a number of risks and uncertainties, many of which are outside of our control. Factors that
could cause actual results to differ materially from projected results include, but are not limited to, risks associated with (1)&nbsp;the commercial and technical success of our CSSPs and new
products such as ArcticLink and PolarPro (2)&nbsp;our successful introduction of products and CSSPs incorporating emerging technologies or standards, (3)&nbsp;the liquidity required to support our
future operating and capital requirements, (4)&nbsp;limited visibility into demand for our products including demand from significant customers or for new products, (5)&nbsp;our ability to
accurately estimate quarterly revenue and (6)&nbsp;our dependence upon single suppliers to fabricate and assemble our products. Although we believe that the assumptions underlying the
forward-looking statements contained in this Annual Report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate.
The risks, uncertainties and assumptions referred to above that could cause our results to differ materially from the results expressed or implied by such forward-looking statements include, but are
not limited to, those discussed under the heading "Risk Factors" in
Part&nbsp;I, Item&nbsp;1A hereto and the risks, uncertainties and assumptions discussed from time to time in our other public filings and public announcements. All forward-looking statements
included in this document are based on information available to us as of the date hereof. In light of the significant uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be
achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QuickLogic was founded in 1988 and reincorporated in Delaware in 1999. We develop and market low power flexible semiconductor platforms that enable customers to
add features to their mobile, consumer and industrial products. We are a fabless semiconductor company that operates in a single industry segment where we design, market and support CSSPs, FPGAs,
application solutions, associated design software and programming hardware. Our new product family includes ArcticLink, PolarPro, Eclipse II and QuickPCI II; our mature product family includes pASIC
3, QuickRAM, Eclipse, software and programming hardware and royalty revenue; our end-of-life product family includes pASIC 1, pASIC 2, QuickMIPS and V3. We develop CSSPs using
our ArcticLink and PolarPro solution platforms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CSSPs
are customer specific complete solutions that include our silicon solution platform, PSBs, custom logic and software drivers. Our ArcticLink and PolarPro solution platforms are
standard silicon </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>42</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>products
and must be programmed to be effective in a system. Our proven system blocks range from intellectual property which improves video images to IP which implement commonly used mobile system
interfaces, such as SDIO or USB 2.0 OTG. We provide complete solutions by selecting the appropriate solution platform and PSBs, providing custom logic, integrating logic, programming the device and
providing software drivers required for the customers' application. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CSSPs,
which we pioneered and introduced in the first quarter of 2007, are developed for specific low power application markets that have similar differentiated IP, intelligent data
processing or connectivity requirements. Target customers value CSSPs for either of two primary reasons. Market leading companies seek to develop product platforms from which several products can be
introduced. For example, multimedia phone companies may plan to introduce products offering mobile TV, WiMAX, Bluetooth 2.1 and USB 2.0 OTG. These manufacturers value our ability to provide a range of
products from a single platform design by incorporating different features in the programmable fabric of our solution platforms. Other customers value the flexibility of programmable fabric to address
specific product requirements. By providing customized solutions for these customers we increase their ability to meet the time-to-market and
time-in-market pressures associated with their markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer
products are a strong driver for semiconductor sales, and the needs of the consumer market have a unique set of requirements. One important trend in the consumer market is
towards mobile, handheld devices. The market for mobile, handheld devices is large. In 2007, 1.1&nbsp;billion cellular phones, ranging from multimedia to ultra low cost phones, were sold. Important
industry trends affecting the large market for mobile devices include the use of platforms to enable rapid product proliferation, the need for high bandwidth solutions enabling mobile internet and
streaming video, miniaturization and the need to increase battery life. Another important trend is shrinking product life cycles, which drives a need for faster, lower risk product development. There
is intense pressure on the total product cost of these devices, including per unit component costs and non-recurring development costs. As more people experience the advantages of a mobile
lifestyle at home, they demand the same advantages in their professional lives. Therefore, we believe that these trends toward mobile, handheld products which have a small form factor and maximize
battery life will also be evident in the industrial, medical and military markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to CSSPs, we sell products to industrial, military and other customers who do their own selection and integration of IP cores and add software drivers to their application.
We market FPGAs, IP cores and software drivers to these customers, who value the low power consumption, reduced development risk through the use of proven IP cores, fast
time-to-market, high IP security, instant-on and reliability of our devices. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
range of offerings allows customers to acquire a solution tailored for their needs. Mobile product OEMs&nbsp;and ODMs&nbsp;tend to prefer a complete solution, and purchase
CSSPs. Other customers with proprietary IP requirements, choose to purchase our FPGAs or ArcticLink solution platforms and utilize our IP cores as appropriate. Whether a customer uses our CSSPs as a
complete solution, or proven IP cores with our FPGAs, we believe our solutions and products enable system manufacturers to improve their time-to-market, lower total system
power consumption, reduce their development risk and total cost of ownership, and add features or performance to their embedded applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CSSPs and the rest of our product offerings are based on our patented ViaLink metal-to-metal programmable technology. ViaLink is the foundation of our
competitive advantage in providing energy efficient devices and solutions that deliver the high performance, high reliability, IP security and instant-on features that our customers value.
In 1991, we introduced our first FPGA products based upon our ViaLink technology. Our ViaLink technology allows us to create devices smaller than competitors' products on comparable technology,
thereby minimizing silicon area and cost. In addition, our ViaLink technology has lower electrical resistance and capacitance than other programmable technologies and therefore supports higher signal
speed and low power consumption. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>43</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Our
architecture uses our ViaLink technology to maximize interconnects at every routing wire intersection, which allows more paths between logic cells. As a result, system designers are able to use
our devices with smaller gate counts to implement their designs than if they had used competing FPGAs. The abundance of interconnect resources also provides an efficient connection between the
Application Specific Standard Product, or ASSP, and the FPGA portions of CSSPs. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that the underlying attributes of our ViaLink Technology, including low power consumption, high reliability, design security and design efficiency, enable us to deliver
differentiated silicon solutions to our customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
CSSPs provide: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Complete Flexible Solutions&#151;</I></FONT><FONT SIZE=2>we partner with customers to bring their differentiated products to market quickly
and to adapt these products to meet changing market conditions;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Platform Design Capability&#151;</I></FONT><FONT SIZE=2>we partner with customers to develop a range of solutions from a single hardware
platform, enabling these manufacturers to bring several products to market quickly and cost effectively through the use of our programmable fabric;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Reduced Design Expense and Risk&#151;</I></FONT><FONT SIZE=2>we provide PSBs addressing a range of video, network, storage and custom logic
requirements, along with software drivers, thereby reducing the time and cost of product development;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Small Form Factor&#151;</I></FONT><FONT SIZE=2>we manufacture single chip solutions in packages as small as 5x5 millimeters, or even in known
good die configuration;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Energy Efficiency&#151;</I></FONT><FONT SIZE=2>our ViaLink technology is the lowest power consumption full featured programmable logic
technology on the market today, allowing the time-to-market and time-in-market advantages of programmable logic for differentiated mobile products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Low Total Cost of Ownership&#151;</I></FONT><FONT SIZE=2>CSSPs reduce time-to-market and lower the risk and expense
associated with new product development. In platform designs these savings are leveraged over several products. The flexible nature of CSSPs enables new features in existing designs, which can be used
to extend time-in-market and delay the cost of new product development. In
addition, CSSPs often reduce BOM costs by combining the function of several ASSPs into one cost effective device; a simplified BOM also leads to lower PCB costs;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Instant-on&#151;</I></FONT><FONT SIZE=2>our products are live at power up because ViaLink based products require no configuration
bit stream;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>High Reliability&#151;</I></FONT><FONT SIZE=2>ViaLink based products do not rely on a SRAM cell that is susceptible to alpha particles, or
brownouts, to define and maintain their functionality; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Unmatched IP Security&#151;</I></FONT><FONT SIZE=2>our ViaLink technology makes it virtually impossible to clone or reverse engineer designs
implemented in our programmable fabric. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer a range of CSSPs built on our PolarPro and ArcticLink solutions platforms. Our PolarPro architecture provides low power consumption and a cost effective device for pure digital
applications. CSSPs developed using our PolarPro solution implement PSBs and custom logic in programmable fabric. Based on our engineering analysis of portable media player applications, we believe
designers using PolarPro can extend battery life by as much as four times as compared to a standard product implementation, setting a new standard for low power consumption through the use of
programmable logic. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
started shipping CSSPs based on our ArcticLink architecture in 2007. ArcticLink solution platforms combine mixed signal physical layers, hard-wired logic and programmable
fabric on one device. Mixed signal capability supports the trend toward serial connectivity in mobile applications, </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>where
designers benefit from lower pin counts, simplified printed circuit board, or PCB, layout, simplified PCB interconnect and reduced signal noise. Adding hard-wired intellectual
property enables us to deliver more logic per die area, while the programmable fabric allows us to provide CSSPs that can be rapidly customized to differentiate products, add features and reduce
system development costs. Market leading companies seek to develop product platforms from which several products can be introduced. This combination of mixed signal physical layer,
hard-wired logic and programmable fabric enables us to deliver low cost, small form factor solutions that can be customized for particular customer or market requirements. For example,
smartphone companies may plan to introduce products offering mobile TV, WiMAX, Bluetooth 2.1 and USB 2.0 OTG. These customers value our solution platforms, since the programmable fabric can be used to
introduce a range of products from a single platform design. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
low power consumption, high performance, small form factor and fast time-to-market of our solutions are ideal for power sensitive mobile applications that
need to efficiently integrate video, storage, networking and/or graphics capabilities. These products are being designed into applications for markets and customers that are new to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are marketing CSSPs to OEMs&nbsp;and ODMs&nbsp;offering differentiated mobile products. Our target mobile markets include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cellular&#151;</I></FONT><FONT SIZE=2>including multimedia and smartphones;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Consumer Electronics&#151;</I></FONT><FONT SIZE=2>including PMPs, PNDs, and wireless hard disk drives or wireless storage devices; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Computing&#151;</I></FONT><FONT SIZE=2>UMPCs, MIDS, industrial PDAs, handheld POS terminals and broadband data cards. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Examples
of how existing and potential customers benefit from CSSPs are: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Multimedia Phones&#151;</I></FONT><FONT SIZE=2>we have been marketing our recently announced Visual Enhancement Engine, or VEE, a proven
system block built upon an IP core we licensed, to enable improved video image, color, contrast and resolution with longer battery life;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Smartphones&#151;</I></FONT><FONT SIZE=2>where our solutions enable the simultaneous display of video on the handset and an external display;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Personal Navigation Devices&#151;</I></FONT><FONT SIZE=2>where our solutions allow the incorporation of the latest storage technology, managed
NAND, and access to the latest high capacity SD cards and SDIO based peripherals;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Portable Media Players&#151;</I></FONT><FONT SIZE=2>where our solutions allow a processor to access and efficiently control a micro hard disk
drive;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Wireless Hard Disk Drives&#151;</I></FONT><FONT SIZE=2>where our solutions allow for the intelligent transfer of data, which improves the data
transfer rate, virtually eliminates the CPU cycles associated with data transfer and improves battery life;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Handheld POS Terminals&#151;</I></FONT><FONT SIZE=2>where our solutions enable high speed connectivity to Wi-Fi and BlueTooth
chipsets as well as storage connectivity; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Cellular Data Cards&#151;</I></FONT><FONT SIZE=2>where our solutions provide the lowest power interface between a cellular radio and a laptop
card slot. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
new products are also being designed into applications in our traditional markets, such as data communications, instrumentation and test and military-aerospace, where customers value
the low power consumption, instant-on, IP security, reliability and fast time-to-market of our products. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>45</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to working directly with our customers, we partner with other technology companies to develop additional intellectual property, reference platforms and system software to
provide application solutions. We partner with companies that are experts in certain technologies. For instance, we licensed elements of our Visual Enhancement Engine from Apical Limited, a U.K.
company that markets enhanced video image capability to companies such as Nikon, Olympus and Sony Ericsson. We also work with processor manufacturers, such as Marvell Technology Group&nbsp;Ltd. and
Analog Devices,&nbsp;Inc., and companies that supply storage, networking or graphics components for embedded systems. The depth of these relationships varies depending on the partner and the
dynamics of the end market being targeted, but is typically a co-marketing program that includes joint account calls, promotional activities and/or engineering collaboration, such as
reference designs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Critical Accounting Policies and Estimates  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The methods, estimates and judgments we use in applying our most critical accounting policies have a significant impact on the results we report in our
consolidated financial statements. The SEC has defined critical accounting policies as those that are most important to the portrayal of our financial condition and results of operations and require
us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our critical policies
include revenue recognition including sales returns and allowances, valuation of inventories including identification of excess quantities and product obsolescence, allowance for doubtful accounts,
valuation of investments, valuation of long-lived assets, measurement of stock-based compensation, accounting for income taxes, and estimating accrued liabilities. We believe that we apply
judgments and estimates in a consistent manner and that such consistent application results in consolidated financial statements and accompanying notes that fairly represent all periods presented.
However, any factual errors or errors in these judgments and estimates may have a material impact on our statement of operations and financial condition. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Revenue Recognition  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We supply standard products which must be programmed before they can be used in an application. Our products may be programmed by the Company, distributors, end
customers or third parties. Once programmed, our parts cannot be erased and, therefore, programmed parts are only useful to a specific customer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
generally recognize revenue as products are shipped if evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, collection of the resulting
receivable is reasonably assured and product returns are reasonably estimable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
is recognized upon shipment of both programmed and unprogrammed parts to OEM customers, provided that legal title and risk of ownership have transferred. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also sell to distributors under agreements that allow for price adjustments and, in the case of unprogrammed parts, certain rights of return on unsold inventories. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
programmed parts can only be used by a specific customer, it is our practice to agree upon any price adjustments with a distributor prior to shipment. Furthermore, distributors
are not allowed any future price adjustments and have no rights of return on programmed parts. We also sell certain unprogrammed end-of-life products to distributors at a fixed
price, and distributors are not allowed any future price adjustments and have no rights of return on these
unprogrammed end-of-life parts. Accordingly, revenue is recognized upon shipment to a distributor since title and risk of ownership have transferred to the distributor, the
price is fixed, no right of return exists and collection of the resulting receivable is reasonably assured. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unprogrammed
parts shipped to distributors may be used by multiple end customers and distributors may have certain return and price adjustment privileges on unsold inventories.
Accordingly, revenue associated with unprogrammed parts, other than the end-of-life products described above, is deferred until resale to the end customer. Deferred income on
shipments to distributors reflects the amount of gross margin expected to be realized when distributors sell through these products purchased from us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
from sales to distributor represents a significant portion of our revenue. The percentage of sales derived through distributors was 57%, 52% and 65% in 2007, 2006 and 2005,
respectively. Two distributors accounted for more than 10% of our revenue in 2007, 2006 and 2005. Avnet,&nbsp;Inc. accounted for 23%, 26% and 22% of our revenue in 2007, 2006 and 2005, respectively.
Future Electronics accounted for 15%, 11% and 19% of our revenue in 2007, 2006 and 2005, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
recognition depends on notification from the distributor that product has been sold to the distributor's end customer. Also reported by the distributor are product resale price,
quantity and end customer shipment information, as well as inventories on hand. Reported distributor inventories on hand are reconciled to deferred revenue balances monthly. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Software
revenue from sales of design tools is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, no significant Company obligations with
regard to implementation or integration remain, the fee is fixed or determinable and collection is reasonably assured. Software revenue amounted to less than one percent of the Company's revenue for
fiscal years 2007, 2006 and 2005. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Valuation of Inventories  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of standard cost or net realizable value. Standard cost approximates actual cost on a first-in,
first-out basis. We routinely evaluate quantities and values of our inventories in light of current market conditions and market trends and record reserves for quantities in excess of
demand and product obsolescence. The evaluation may take into consideration historic usage, expected demand, anticipated sales price, the stage in the product life
cycle of our customers' products, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer design activity, customer
concentrations, product merchantability and other factors. Market conditions are subject to change. Actual consumption of inventories could differ from forecasted demand and this difference could have
a material impact on our gross margin and inventory balances based on additional provisions for excess or obsolete inventories or a benefit from inventories previously written down. During 2007, we
recorded inventory related charges totaling $3.9&nbsp;million, or 11.5% of revenue, primarily for excess quantities due to a reduction in expected demand for inventories on hand, and the cost of
revenue was reduced by $1.3&nbsp;million, or 3.8% of revenue, through the sale of previously reserved inventories. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
semiconductor products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories. However, as we
pursue opportunities in the mobile market and continue to develop new products, we believe our product life cycle will be shorter and increase the potential for obsolescence. We also regularly review
the cost of inventories against estimated market value and record a lower of cost or market reserve for inventories that have a cost in excess of estimated market value, which could have a material
impact on our gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from inventories previously written down. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Estimating Allowance for Doubtful Accounts  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate uncollectible accounts receivable at each reporting period, which could have a material effect on our reported accounts receivable balance and
operating expenses. Specifically, we </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>47</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>analyze
our aging of accounts receivable taking into consideration our bad debt history, customer payment history, customer concentration, customer credit-worthiness and current economic trends when
evaluating the adequacy of the allowance for doubtful accounts. Our accounts receivable balance was $2.6&nbsp;million, net of the allowance for doubtful accounts of $194,000, as of the end of 2007. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Valuation of Investments  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;30, 2007, we held 1,344,543 available-for-sale Tower ordinary shares valued at approximately $1.9&nbsp;million, of
which approximately $1.3&nbsp;million was recorded as a short-term investment. These Tower shares had an unrealized gain of $350,000 recorded in accumulated other comprehensive income,
representing the difference between their carrying value per share and $1.43 per share, their market value on the last trading day of the reporting period. Our investment is marked to market on our
balance sheet at the end of each reporting period with the change in unrealized market value reflected in our consolidated statement of comprehensive income. If the market value of the
available-for-sale shares changes during a reporting period, we
increase or decrease the value of the shares and record a corresponding accumulated other comprehensive gain or loss in the equity section of the balance sheets. If the market value of the shares were
to decline below the carrying value and if the decline is determined to be "other than temporary," we would record a write-down of marketable securities as a charge to our statement of
operations and reduce the carrying value of the shares. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Tower shares which we purchased in 2001 and 2002 were obtained at an average price of $12.84 per share and $5.46 per share, respectively. We wrote down the cost of these shares due
to declines in their market value that we determined to be "other than temporary" by $13.7&nbsp;million between 2001 and 2005. This determination included factors such as market value and the period
of time that the market value had been below the carrying value. After these write-downs, the carrying value of the Tower shares was $1.17 per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
10% decline in the market value of the Tower shares would have approximately a $190,000 effect on the market value of the shares and would reduce accumulated other comprehensive income
by this amount. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Valuation of Long-Lived Assets  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We assess whether the value of identifiable intangibles and long-lived assets, including property and equipment and prepaid wafer credits, has been
impaired annually and whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Factors we consider important which could trigger
an impairment review include the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
under-performance relative to historical or projected future revenue and operating results;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
changes in expected demand for the related products;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
changes in the manner of our use of or the expected cash flow from the assets;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
changes in the strategy for our overall business; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>significant
negative economic events or trends affecting our business. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
assessment of possible impairment is based on our ability to recover the carrying value of an asset or asset group from their expected future pre-tax cash flows,
undiscounted and without interest charges, of the related operations. If these cash flows are less than the carrying value of the asset or asset group, we recognize an impairment loss for the
difference between estimated fair value and carrying value, and the carrying value of the related assets is reduced by this difference. The measurement of impairment requires management to estimate
future cash flows and the fair value of long-lived assets. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>48</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2007, 2006 and 2005, we wrote-off equipment with a net book value of $168,000, $34,000 and $66,000, respectively, related to assets identified as having no future
value to our operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Stock-Based Compensation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for stock-based compensation under the provisions of SFAS&nbsp;123(R) and related interpretations which requires the measurement and recognition of
expense related to the fair value of stock-based compensation awards. The fair value of stock-based compensation awards is measured at the grant date and re-measured upon modification, as
appropriate. Determining the appropriate fair value model and calculating the fair value of stock-based awards at the date of grant require judgment. We use the Black-Scholes option pricing model, or
Black-Scholes, to estimate the fair value of employee stock options and rights to purchase shares under the Company's 1999 Employee Stock Purchase Plan, or ESPP, consistent with the provisions of
SFAS&nbsp;123(R). This fair value is expensed on a straight-line basis over the requisite service period of the award. Using the Black-Scholes pricing model requires us to develop highly
subjective assumptions including the expected term of awards, expected volatility of our stock, expected risk-free interest rate and expected dividend rate over the term of the award. Our
expected term of awards is based primarily on our historical experience with similar grants. Our expected stock price volatility for both stock options and ESPP shares is based on the historic
volatility of our stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected life. The risk-free interest rate
assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected term of the
stock option or ESPP shares. In addition to the assumptions used in the Black-Scholes pricing model, SFAS&nbsp;123(R) requires that we recognize expense for awards ultimately expected to vest;
therefore we are required to develop an estimate of the historical pre-vest forfeiture experience and apply this to all stock-based awards. The fair value of restricted stock awards, or
RSAs, and restricted stock units, or RSUs is based on the closing price of our common stock on the date of grant. RSA and RSU awards which vest with service are expensed over the requisite service
period. RSA and RSU awards which are expected to vest based on the achievement of a performance goal are expensed over the estimated vesting period. We regularly review the assumptions used to compute
the fair value of our stock-based awards and we revise our assumptions as appropriate. In the event that assumptions used to compute the fair value of our stock-based awards are later determined to be
inaccurate or if we change our assumptions significantly in future periods, stock-based compensation expense and our results of operations could be materially impacted. See Note&nbsp;12 of our
consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Accounting for Income Taxes  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This
process involves estimating our actual current tax exposure together with assessing temporary differences resulting from different tax and accounting treatment of items, such as deferred revenue,
allowance for doubtful accounts, the impact of equity awards under SFAS&nbsp;123(R), depreciation and amortization and employee related accruals. These differences result in deferred tax assets and
liabilities, which are included on our balance sheets. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that
recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax
provision in the statement of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant
management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. Our deferred tax assets, consisting primarily of net operating loss carryforwards, amounted to $51.4&nbsp;million as of the end of 2007. We have also recorded a valuation
allowance of $51.4&nbsp;million as of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>49</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>the
end of 2007 due to uncertainties related to our ability to utilize our deferred tax assets before they expire. The valuation allowance is based on the uncertainty of our estimates of taxable
income and the period over which we expect to recover our deferred tax assets. These carryforwards, if not utilized to offset future taxable income and income taxes payable, will expire beginning in
2008 for federal and state purposes. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;1, 2007, we adopted the provisions of FASB Interpretation No.&nbsp;48, </FONT><FONT SIZE=2><I>"Accounting for Uncertainty in Income Taxes&#151;an
Interpretation of FASB No.&nbsp;109,"</I></FONT><FONT SIZE=2> or FIN&nbsp;48. We did not recognize material additional liability for unrecognized income tax benefits as a result of the
implementation of FIN&nbsp;48. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Estimating Accrued Liabilities  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We review our accounts payable and accrued liabilities at the end of each reporting period, and accrue liabilities as appropriate. During this analysis we
consider items such as manufacturing activity, commitments made to or the level of activity with vendors, payroll and other employee related commitments, historic spending, budgeted spending and
anticipated changes in the cost of services. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>50</FONT></P>

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 </FONT> <FONT SIZE=2><B>Results of Operations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the percentage of revenue for certain items in our statements of operations for the periods indicated: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>56.4</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50.8</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37.6</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>43.6</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>49.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>62.4</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Operating expenses:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27.7</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26.7</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>49.9</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>51.7</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34.9</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) from operations</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34.0</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(29.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7.5</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Write-down of marketable securities</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.8</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.9</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.4</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest income and other, net</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.6</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.9</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) before income taxes</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(32.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(26.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.2</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.3</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(32.4</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(26.4</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.9</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="100%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><I>Revenue by product family(1) (in&nbsp;thousands):</I></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>New products</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,347</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,547</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,942</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Mature products</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,585</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,460</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,175</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>End-of-life products</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,485</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,917</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,142</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,417</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,924</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,259</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
fiscal 2007, we changed the classification and definition of our product families and have restated prior periods to conform to the new definitions. New products include
ArcticLink, PolarPro, Eclipse&nbsp;II and QuickPCI&nbsp;II products. Mature products include pASIC&nbsp;3, QuickRAM, Eclipse, QuickDSP and QuickFC products, as well as royalty revenue,
programming hardware and design software. End-of-life products include pASIC&nbsp;1, pASIC&nbsp;2, V3, QuickMIPS and QuickPCI products. In prior periods, revenue was
reported in the following categories: mature products, embedded standard products, advanced embedded standard products and royalty. The mature products included pASIC&nbsp;1, pASIC&nbsp;2 and
pASIC&nbsp;3 products. Embedded standard products included QuickRAM, QuickPCI, QuickDSP, QuickFC and V3 products. Advanced embedded standard products included Eclipse, PolarPro, Eclipse&nbsp;II,
QuickPCI&nbsp;II and QuickMIPS products, as well as programming hardware and software. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2><B>Comparison of Fiscal Years 2007 and 2006  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our revenue for 2007 was $34.4&nbsp;million, representing a decline of approximately $510,000, or 1%, from revenue
of $34.9&nbsp;million in 2006. Our mature product revenue declined by $880,000 due primarily to lower customer demand for our pASIC&nbsp;3 products. Our new product revenue declined by $200,000.
We had a significant decline in revenue from one new product customer due to the late stage of its product life cycle. This European customer, purchasing Eclipse&nbsp;II product for use in cellular
data cards, accounted for 1% and 14% of revenue in 2007 and 2006, respectively. Growth in </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>51</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_de18601_1_52"> </A>

<P style="font-family:times;"><FONT SIZE=2>revenue
from other new product customers nearly offset this decline. Our end-of-life product revenue increased by $570,000 due to higher demand for our V3 and QuickPCI products
as a result of their announced end-of-life in 2007. This increase was offset by lower demand for our pASIC&nbsp;1 and pASIC&nbsp;2 products. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
decision to end-of-life our pASIC&nbsp;1, pASIC&nbsp;2 and V3 products has been driven by our suppliers. Our foundry agreement with the supplier that
fabricated our pASIC&nbsp;1 and pASIC&nbsp;2 products expired at the end of 2005, and we announced an end-of-life for these products in 2004. In January 2007, we announced
the end-of-life for our V3 products, primarily due to the loss of manufacturing capacity for these products, and asked our customers to take delivery of lifetime buy orders
before the end of 2007. We announced additional end-of-life products in 2007 as a result of our decision to focus on customers in the handheld mobile and military markets. In
the second quarter of 2007, we announced the end-of-life of our QuickPCI products, due to assembly capacity considerations and asked customers to take delivery of lifetime buy
orders before the end of 2007. In the fourth quarter of 2007, we announced the end-of-life of our QuickMIPS products, due to a small customer base and asked customers to take
delivery of these products between now and the first half of 2008. Due to the nature of end-of-life purchases, revenue levels from these products could fluctuate significantly
on a sequential basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently expect that revenue from end-of-life products, which was $3.1&nbsp;million, or 28% of revenue, in the fourth quarter of 2007, will be less than 10%
of our revenue by the third quarter of 2008. We had high demand for end-of-life products in the fourth quarter of 2007. However, based in part on supply constraints and in part
on customer feedback regarding the required timing of end-of-life shipments, approximately $2.4&nbsp;million of this demand will be met in the first or second quarter of
2008. We expect to receive additional orders for these products in 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a breakdown of end-of-life product revenue (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>pASIC&nbsp;1 and pASIC&nbsp;2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,028</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,755</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>V3</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,214</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,212</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>QuickPCI</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,150</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,380</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>QuickMIPS</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,093</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>570</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="66%" style="font-family:times;"><FONT SIZE=2>Total end-of-life revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,485</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,917</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to maintain or grow our revenue from its current level, we are dependent upon increased revenue from our existing products, especially revenue from CSSPs designed using our
ArcticLink and PolarPro solution platforms and the development of additional new products and CSSPs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
continue to seek to expand our revenue, including the pursuit of high volume sales opportunities in the consumer market segment, by providing CSSPs incorporating intellectual property
such as boot from managed NAND or industry standard interfaces such as USB&nbsp;2.0 OTG, SDIO and IDE. Our industry is characterized by intense price competition and by lower prices as order volumes
increase. While winning large volume sales opportunities will increase our revenue, we believe these opportunities may decrease our average selling price and gross profit as a percentage of revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross profit was $15.0&nbsp;million and $17.2&nbsp;million in 2007 and 2006, respectively, which was 43.6%
and 49.2% of revenue for those periods. The $2.2&nbsp;million decline in gross profit in 2007 was primarily due to increased inventory related charges of $1.1&nbsp;million, primarily for excess
quantities and lower of cost or market, and higher unabsorbed overhead of approximately $900,000. The sale of previously reserved inventories reduced our cost of revenue by $1.3&nbsp;million and
$820,000 in </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>52</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>2007
and 2006, respectively. The larger benefit from the sale of previously reserved inventories was offset by higher other charges. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and Development Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense was $9.5&nbsp;million and $9.3&nbsp;million in 2007
and 2006, respectively, which represented 27.7% and 26.7% of revenue for those periods. The increase in expense of approximately $210,000 was primarily due to higher project specific expenses, rather
than compensation or other charges. We believe that continued or increased investments in product development and process technology are essential for us to remain competitive in the markets we serve.
We expect that these development efforts will allow us to expand our product offering and provide additional value to our customers and stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, General and Administrative Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative, or SG&amp;A, expense was $17.2&nbsp;million
and $18.1&nbsp;million in 2007 and 2006, respectively, which represented 49.9% and 51.7% of revenue for those periods. The decrease of $900,000 in SG&amp;A expense was primarily due to a
$1.1&nbsp;million decrease in administrative expenses, primarily in legal and consulting expenses. Expenses incurred in 2006 included higher charges associated with our internal review of stock
option granting and related accounting practices and expenses for the defense of our intellectual property. The decrease in administrative expenses was partially offset by a $200,000 increase in
marketing expenses primarily due to an increase in compensation expenses for new personnel. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense decreased to $280,000 in 2007 as compared to $329,000 in 2006. This $49,000 decrease was
primarily due to lower average outstanding debt and capital lease balances and lower interest rates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income and Other, Net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income and other, net, consists primarily of interest income, foreign exchange gains
and losses, and other tax expense. Interest income and other, net, decreased to income of $894,000 in 2007 as compared to income of $1.4&nbsp;million in 2006. The $472,000 decrease in interest
income and other, net is primarily due to lower interest income received as a result of lower average cash balances and lower interest rates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We recorded a provision for income taxes of $75,000 and $71,000 in 2007 and 2006, respectively.
The provision for income taxes in both years consists primarily of income taxes on foreign operations due to our reported net loss in the United States. Our ability to utilize our income tax loss
carryforwards in future periods is uncertain and, accordingly, we recorded a full valuation allowance against the related tax benefit. We will continue to assess the realizability of
deferred tax assets in future periods. Effective January&nbsp;1, 2007, we adopted FIN&nbsp;48. We did not recognize material additional liability for unrecognized income tax benefits as a result
of the implementation of FIN&nbsp;48. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, we had net operating loss carryforwards for federal and state tax purposes of approximately $91.5&nbsp;million and $30.9&nbsp;million, respectively. These
carryforwards, if not utilized to offset future taxable income and income taxes payable, will expire beginning in 2008 for federal and state purposes. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>53</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-Based Compensation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For 2007 and 2006, stock-based compensation totaled $1.7&nbsp;million and $1.4&nbsp;million,
respectively, and was included in the statement of operations as follows (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>183</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>376</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>368</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,099</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>894</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="69%" style="font-family:times;"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,445</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of stock-based compensation included in inventories at the end of 2007 and 2006 was not material. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Comparison of Fiscal Years 2006 and 2005  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our revenue for 2006 was $34.9&nbsp;million, representing a decline of $13.3&nbsp;million, or 27.6%, from
revenue of $48.3&nbsp;million in 2005. Our end-of-life product revenue declined by $16.2&nbsp;million, primarily as a result of a $15.3&nbsp;million decline in
pASIC&nbsp;1 and pASIC&nbsp;2 product revenue due to their end-of-life and a $1.4&nbsp;million decline in V3 product revenue due to the life cycle of the applications
that use these devices. These declines were partially offset by a $450,000 increase in QuickMIPs and QuickPCI product revenue. Our mature product revenue declined by $1.7&nbsp;million, primarily due
to lower demand for our QuickRAM and Eclipse products, which were partially offset by an increase in royalty revenue of $654,000 and an increase in pASIC&nbsp;3 revenue due to higher demand and
customers migrating designs from pASIC&nbsp;2 products to pASIC&nbsp;3 products. These declines were partially offset by an increase in our new product revenue of $4.6&nbsp;million, primarily
due to higher demand for our Eclipse&nbsp;II products from a European telecommunications customer purchasing our devices through a contract manufacturer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross Profit.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross profit was $17.2&nbsp;million and $30.1&nbsp;million in 2006 and 2005, respectively, which was 49.2%
and 62.4% of revenue for those periods. The $13.0&nbsp;million decline in gross profit in 2006 was primarily due to: (1)&nbsp;lower revenue and change in product mix, which contributed
approximately $11.2&nbsp;million of this decline; (2)&nbsp;increased inventory reserves of $2.4&nbsp;million, primarily for excess quantities; and (3)&nbsp;higher unabsorbed overhead of
approximately $220,000, as a result of lower production volumes. These effects were partially offset by royalty revenue, lower variances and lower other cost of revenue. The sale of previously
reserved inventories reduced our cost of revenue by $820,000 and $1.0&nbsp;million in 2006 and 2005, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and Development Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense was $9.3&nbsp;million and $9.6&nbsp;million in 2006
and 2005, respectively, which represented 26.7% and 20.0% of revenue for those periods. The decrease of approximately $350,000 in 2006 was primarily due to: 1)&nbsp;$400,000 of lower expenses
associated with product design and development activities; and 2)&nbsp;$300,000 of lower cash compensation to employees, as a result of lower headcount and incentives due to our 2006 performance
under our incentive compensation plan. These decreases were partially offset by $368,000 of stock-based compensation charges in accordance with SFAS&nbsp;123(R). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, General and Administrative Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense was $18.1&nbsp;million and
$16.9&nbsp;million in 2006 and 2005, respectively, which represented 51.7% and 34.9% of revenue for those periods. The increase of $1.2&nbsp;million in 2006 was primarily due to:
1)&nbsp;$894,000 of stock-based compensation charges in accordance with SFAS&nbsp;123(R); 2)&nbsp;$540,000 of expenses associated with our review of stock option granting and related accounting
practices; 3)&nbsp;$480,000 of higher legal expenses incurred to defend our intellectual property; and 4)&nbsp;$270,000 of higher bad debt expense in 2006 as compared to 2005. These increases were
partially offset by: 1)&nbsp;$690,000 of lower cash </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>54</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>compensation
expenses, primarily as a result of lower incentives due to our 2006 performance under our incentive compensation plan; and 2)&nbsp;$350,000 of lower commissions to independent
representatives as a result of lower revenues. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Write-down of Marketable Securities.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;In the second quarter of 2005, we determined that our investment in Tower
stock had suffered a decline in value that was determined to be "other than temporary" and recorded impairment charges of $1.5&nbsp;million. The impairment charge was recorded for the difference
between our carrying value and the quoted market price of the stock on the last trading day of the reporting period. There was no impairment charge on Tower stock in 2006 as the market value of our
investment was higher than the carrying value during this period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Expense.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense increased to $329,000 in 2006 as compared to $189,000 in 2005. This $140,000 increase was
primarily due to higher average outstanding debt and capital lease balances and higher interest rates. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income and Other, Net.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest income and other, net, consists primarily of interest income, foreign exchange gains
and losses, and other tax expense. Interest income and other, net, increased to income of $1.4&nbsp;million in 2006 as compared to income of $542,000 in 2005. The $824,000 increase in interest
income and other, net is primarily due to increased interest income received as a result of higher interest rates, lower foreign exchange rate losses and lower other tax expenses. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for Income Taxes.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We recorded a provision for income taxes of $71,000 and $169,000 in 2006 and 2005, respectively.
The provision for income taxes in both years consists primarily of income taxes on foreign operations due to the reported net loss in the United States. Our ability to utilize our income tax loss
carryforwards in future periods is uncertain and, accordingly, we recorded a full valuation allowance against the related tax benefit. We will continue to assess the realizability of deferred tax
assets in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-Based Compensation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;For 2006 and 2005, stock-based compensation totaled $1.4&nbsp;million and zero, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Liquidity and Capital Resources  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have financed our operating losses and capital investments through sales of common stock, private equity investments, capital and operating leases, bank lines
of credit and cash flow from operations. As of the end of fiscal 2007, our principal sources of liquidity consisted of our cash and cash equivalents of $20.9&nbsp;million, available credit under our
revolving line of credit with Silicon Valley Bank of approximately $5.0&nbsp;million, available credit under our equipment line of credit of approximately $870,000, and our investment in Tower with
a market value of approximately $1.9&nbsp;million. We intend to hold 450,000 of these shares, valued at $640,000 as of the end of fiscal 2007, in order to obtain favorable wafer pricing from Tower.
The fair value of cash equivalents is based on the market price of investment funds with active secondary and resale markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of fiscal 2007, our interest-bearing debt consisted of $3.3&nbsp;million outstanding from Silicon Valley Bank and $1.7&nbsp;million outstanding under capital leases.
Our accumulated deficit was $138.7&nbsp;million as of the end of 2007. Capital expenditures, which are largely driven by the development of new products and manufacturing levels, could be up to
$3.0&nbsp;million in the next twelve months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
June 2006, we entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank. Terms of the agreement included a $5.0&nbsp;million revolving line of
credit that is available through June 2008 and an additional $2.0&nbsp;million of borrowing capacity under an equipment line of credit that is available to be drawn against through June 2007.
Advances under the equipment line of credit are repaid in either 30 or 36 equal monthly installments, depending upon the nature of the items financed. The agreement was amended in June 2007 to include
an additional $2.5&nbsp;million of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>55</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>borrowing
capacity under the equipment line of credit that is available to be drawn against through June 2008. Future advances against the equipment line of credit will be repaid in 36 equal monthly
installments. As of the end of 2007, we had no balances outstanding under the revolving line of credit, $3.3&nbsp;million outstanding under the current and previous equipment lines of credit and
$870,000 available to be drawn against future equipment purchases. The bank has a first priority security interest on substantially all of our tangible and intangible assets to secure any outstanding
amounts under the agreement. Under the terms of the agreement, we must maintain a minimum tangible net worth and an adjusted quick ratio. The agreement also has certain restrictions including, among
others, the incurrence of other indebtedness, the maintenance of depository accounts, the disposition of assets, mergers, acquisitions, the granting of liens and the payment of dividends. We were in
compliance with all loan covenants as of the end of 2007. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Net Cash from Operating Activities  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, net cash used for operating activities was $2.7&nbsp;million and resulted from a net loss of $11.1&nbsp;million, which included $10.0&nbsp;million
of non-cash charges. These non-cash charges included reserves for inventories, primarily for excess quantities, in the amount of $3.9&nbsp;million, depreciation and
amortization of $2.9&nbsp;million, stock-based compensation of $1.7&nbsp;million and a decrease in wafer credits of $1.1&nbsp;million. In addition, changes in working capital accounts used cash
of $1.6&nbsp;million as a result of a decrease in deferred income and royalty revenue of $1.2&nbsp;million, increased inventories of $647,000 due to the purchase of new product wafers for future
orders at potentially high volume customers, a decrease in accrued liabilities of $234,000 and a decrease in accounts payable of $233,000 due to the timing of expenditures and purchase of inventories
at the end of 2007. These cash uses were partially offset by a decrease in other assets of $753,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2006, net cash used for operating activities was $4.1&nbsp;million and resulted from a net loss of $9.2&nbsp;million, which included $8.2&nbsp;million of non-cash
charges. These non-cash charges included depreciation and amortization of $3.1&nbsp;million, reserves for excess and obsolete inventories in the amount of $2.8&nbsp;million,
stock-based compensation of $1.4&nbsp;million and the utilization of wafer credits of $593,000. In addition, changes in working capital accounts used cash of $3.1&nbsp;million as a result of
increased inventories of $4.1&nbsp;million due to the purchase of new product wafers at favorable prices in anticipation of future orders at potentially high volume customers, a decrease in accrued
liabilities of $972,000 due primarily to employee related accruals, a decrease in deferred income and royalty revenue of $922,000 and an increase in other assets of $687,000 due to payments under an
agreement to secure back-end manufacturing capacity. These cash uses were partially offset by a decrease in accounts receivable of $2.5&nbsp;million due to lower shipments during the
last quarter of 2006 as compared to the last quarter of 2005 and an increase in accounts payable of $1.0&nbsp;million due to the timing of expenditures at the end of each period and purchases of new
product wafers at the end of 2006. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2005, net cash provided by operating activities was $5.7&nbsp;million and resulted from net income of $2.4&nbsp;million, which included $5.0&nbsp;million of non-cash
charges. These non-cash charges included depreciation and amortization of $2.6&nbsp;million, a $1.5&nbsp;million write-down of marketable securities related to the decline
in market value of our Tower shares, and reserves for excess and obsolete inventories in the amount of $406,000. In addition, changes in working capital accounts used cash of $1.7&nbsp;million as a
result of increased inventories of $1.5&nbsp;million due to the purchase of new product die and an increase in work-in-process inventory to fulfill customer demand, a
$889,000 increase in accounts receivable due to a higher proportion of OEM shipments during the last quarter of 2005 and a decrease in accounts payable of $781,000 due to the timing of expenditures
and purchases of inventories at the at the end of each period. These cash uses were partially offset by higher accrued liabilities of $923,000 due primarily to employee related accruals, lower other
assets of $376,000 due primarily to lower prepaid maintenance and insurance expenses, and higher deferred income and royalty revenue of $211,000. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>56</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I>Net Cash from Investing Activities  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, 2006 and 2005, net cash used for investing activities was $2.2&nbsp;million, $2.2&nbsp;million and $1.8&nbsp;million, respectively, and resulted
primarily from capital expenditures for software and equipment to develop and produce our new products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Net Cash from Financing Activities  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, net cash provided by financing activities was $1.2&nbsp;million. The primary source of these funds was $2.1&nbsp;million in proceeds from borrowings
under our equipment line of credit and $1.5&nbsp;million of proceeds related to the issuance of common shares to employees under our equity plans, partially offset by scheduled repayments of
$2.4&nbsp;million under the terms of our debt and capital lease obligations. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2006, net cash provided by financing activities was $2.6&nbsp;million. The primary source of these funds was $2.6&nbsp;million of proceeds related to the issuance of common shares
to employees under our equity plans and $2.5&nbsp;million in proceeds from borrowings under our equipment line of credit, partially offset by scheduled repayments of $2.4&nbsp;million under the
terms of our debt and capital lease obligations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2005, net cash used for financing activities was $535,000. The primary use of these funds was to reduce our long-term and revolving debt, net of new borrowings, by
$3.9&nbsp;million. This was partially offset by $3.3&nbsp;million of proceeds related to the issuance of common shares to employees under our equity plans. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
require substantial cash to fund our business, particularly to finance our operations, to acquire property and equipment, the repayment of debt and for working capital requirements.
Our future liquidity will depend on many factors such as these, as well as our level of revenue and gross profit, market acceptance of our existing and new products, the decline in revenue under
end-of-life programs, wafer purchase commitments, the amount and timing of research and development expenditures, the timing of new product introductions, production volumes,
the quality of our products, sales and marketing efforts, the capital preservation and liquidity of our investment portfolio, our ability to obtain debt financing and to remain in compliance with the
terms of our credit facilities, our ability to raise funds from the sale of Tower shares and equity in the Company, the exercise of employee stock options and participation in our employee stock
purchase
plan, and other factors related to the uncertainties of the industry and global economics. However, we believe that our existing cash resources will be sufficient to fund operations, capital
expenditures of up to $3.0&nbsp;million, and provide adequate working capital for at least the next twelve months. As our liquidity is affected by many factors as mentioned above and as discussed in
our "Risk Factors" section, there can be no assurance that we will not seek additional capital during the next twelve months or that such capital will be available on terms acceptable to us. After the
next twelve months, our cash requirements will depend on many factors, including our level of revenue and gross profit, the market acceptance of our new products, the levels at which we maintain
inventories and accounts receivable, costs of securing access to adequate manufacturing capacity, new product development efforts, capital expenditures and the level of our operating expenses. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>57</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B>Contractual Obligations and Commercial Commitments  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes our contractual obligations and commercial commitments as of the end of 2007 and the effect such obligations and commitments are
expected to have on our liquidity and cash flows in future fiscal periods (in&nbsp;thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Payments Due by Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Total</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Less than<BR>
1 Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>1-3<BR>
Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>More than<BR>
3 Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><I>Contractual cash obligations:</I></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Operating leases</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,163</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>822</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>341</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Wafer purchases(1)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,330</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,330</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Other purchase commitments</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,359</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,359</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="46%" style="font-family:times;"><FONT SIZE=2><I>Total contractual cash obligations</I></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,852</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,511</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>341</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><I>Other commercial commitments</I></FONT><FONT SIZE=2>(2):</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Notes payable to bank</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,278</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,504</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,774</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Capital lease obligations</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,746</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>993</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>753</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="46%" style="font-family:times;"><FONT SIZE=2><I>Total commercial commitments</I></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,024</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,497</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,527</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Total contractual obligations and commercial commitments(3)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,876</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,008</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,868</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Certain
of our wafer manufacturers require us to forecast wafer starts several months in advance. We are committed to take delivery of and pay for a portion of forecasted wafer
volume. Wafer purchase commitments of $4.3&nbsp;million include both firm purchase commitments and a portion of our forecasted wafer starts as of the end of 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Other
commercial commitments are included as liabilities on our balance sheets as of the end of 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Does
not include unrecognized tax benefits of $54,000 as of the end of 2007. </FONT></DD></DL>
<BR>

<P style="font-family:times;"><FONT SIZE=2><B>Off-Balance Sheet Arrangements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not maintain any off-balance sheet partnerships, arrangements or other relationships with unconsolidated entities or others, often referred to
as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Recently Issued Accounting Pronouncements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2007, the FASB issued SFAS No.&nbsp;141(R), </FONT><FONT SIZE=2><I>"Business Combinations,"</I></FONT><FONT SIZE=2> or SFAS&nbsp;141(R).
SFAS&nbsp;141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed,
contractual contingencies, and contingent consideration at their fair value on the acquisition date, any controlling interest in the acquiree and the goodwill acquired. SFAS&nbsp;141(R) also
establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS&nbsp;141(R) is effective for fiscal years beginning after
December&nbsp;15, 2008. We are currently evaluating the impact SFAS&nbsp;141(R) will have on our consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
June 2007, the FASB ratified Emerging Issues Task Force, or EITF, Issue No.&nbsp;07-3, </FONT><FONT SIZE=2><I>"Accounting for Nonrefundable Advance Payments for Goods
or Services to Be Used in Future Research and Development Activities,"</I></FONT><FONT SIZE=2> or EITF&nbsp;07-3. EITF&nbsp;07-3 requires non-refundable advance
payments for goods and services to be used in future research and development activities to be recorded as assets and the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>58</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>payments
to be expensed when the research and development activities are performed. EITF&nbsp;07-3 applies prospectively for new contractual arrangements entered and is effective for
fiscal years beginning after December&nbsp;15, 2007. Prior to adoption, we recognized these non-refundable advance payments as an expense upon payment. We are currently evaluating the
impact that EITF&nbsp;07-3 will have on our consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2007, the FASB issued SFAS No.&nbsp;159, </FONT><FONT SIZE=2><I>"The Fair Value Option for Financial Assets and Financial Liabilities,</I></FONT><FONT SIZE=2>" or
SFAS&nbsp;159. SFAS&nbsp;159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on
items for which the fair value option has been elected be reported in earnings. SFAS&nbsp;159 is effective for fiscal years beginning after November&nbsp;15, 2007, although earlier adoption is
permitted. We are currently evaluating the impact that SFAS&nbsp;159 will have on our consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, FASB SFAS No.&nbsp;157, </FONT><FONT SIZE=2><I>"Fair Value Measurements,"</I></FONT><FONT SIZE=2> or SFAS&nbsp;157. SFAS&nbsp;157 establishes a framework for
measuring fair value, and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS&nbsp;157 relate to the definition of fair value,
the methods used to measure fair value and expanded disclosures about fair value measurements. SFAS&nbsp;157 is effective for fiscal years beginning after November&nbsp;15, 2007 and interim
periods within those fiscal years. We are currently evaluating the impact that SFAS&nbsp;157 will have on our consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="dg18601_item_7a._quantitative_and_qual__ite02669"> </A>
<A NAME="toc_dg18601_1"> </A>
ITEM 7A.&nbsp;&nbsp;&nbsp;&nbsp;QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Interest Rate Risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to market rate risk for changes in interest rates relates primarily to our investment portfolio and variable rate debt. We do not use derivative
financial instruments to manage our interest rate risk. We are adverse to principal loss and ensure the safety and preservation of invested funds by limiting default, market risk and reinvestment
risk. Our investment portfolio is generally comprised of investments that meet high credit quality standards and have active secondary and resale markets. Since these securities are subject to
interest rate risk, they could decline in value if interest rates fluctuate or if the liquidity of the investment portfolio were to change. Due to the short duration and conservative nature of our
investment portfolio, we do not anticipate any material loss with respect to our investment portfolio. A 10% move in interest rates as of the end of 2007 would have an immaterial effect on our
financial position, results of operations and cash flows. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Foreign Currency Exchange Rate Risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our sales and cost of manufacturing are transacted in U.S. dollars. We conduct a portion of our research and development activities in Canada and India and
have sales and marketing offices in several locations outside of the United States. We use the U.S. dollar as our functional currency. Most of the costs incurred at these international locations are
in local currency. If these local currencies strengthen against the U.S. dollar, our payroll and other local expenses will be higher than we currently anticipate. Since our sales are transacted in
U.S. dollars, this negative impact on expenses would not be offset by any positive effect on revenue. Operating expenses denominated in foreign currencies were approximately 25%, 22% and 25% of total
operating expenses in 2007, 2006 and 2005, respectively. A majority of these foreign expenses were incurred in Canada. A currency exchange rate fluctuation of 10% would have caused our operating
expenses to change by approximately $740,000 in 2007. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Equity Price Risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to equity price risk for changes in market value relates primarily to our investment in Tower Semiconductor&nbsp;Ltd., or Tower. Tower's ordinary
shares trade on the Nasdaq Global Market under the symbol "TSEM". Since these securities are publicly traded on the open market, they are </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>59</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>subject
to market fluctuations. Temporary market fluctuations are reflected by increasing or decreasing the presented value of the related securities and recording "accumulated other comprehensive
income (loss)" in the equity section of the balance sheet. An "other than temporary" decline in market value is reflected by decreasing the carrying value of the related securities and recording a
charge to operating expenses in the income statement. We wrote down the value of the Tower shares due to an "other than temporary" decline in their market value by $13.7&nbsp;million between 2001
and 2005. The determination that the decline in market value was "other than temporary" included factors such as the then current market value and the period of time that the market value had been
below the carrying value in each of the respective periods. A market value fluctuation of 10% would have a $190,000 impact on accumulated other comprehensive income as December&nbsp;30, 2007. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>60</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fa18601_item_8._financial_statements_and_supplementary_data"> </A>
<A NAME="toc_fa18601_1"> </A>
ITEM 8.&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fa18601_index_to_consolidated_financial_statements"> </A>
<A NAME="toc_fa18601_2"> </A></FONT> <FONT SIZE=2><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="92%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Page</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Report of Independent Registered Public Accounting Firm</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>62</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Consolidated Statements of Operations for the Fiscal Years 2007, 2006 and 2005</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>63</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Consolidated Balance Sheets as of December&nbsp;30, 2007 and December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>64</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Consolidated Statements of Stockholders' Equity for the Fiscal Years 2007, 2006 and 2005</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>65</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Consolidated Statements of Cash Flows for the Fiscal Years 2007, 2006 and 2005</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years 2007, 2006 and 2005</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>67</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="92%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Notes to Consolidated Financial Statements</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>68</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>61</FONT></P>

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 </FONT> <FONT SIZE=2><B>Report of Independent Registered Public Accounting Firm  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To
the Board of Directors and Shareholders of QuickLogic Corporation: </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of QuickLogic Corporation and its
subsidiaries at December&nbsp;30, 2007 and December&nbsp;31, 2006 and the results of their operations and their cash flows for each of the three years in the period ended December&nbsp;30, 2007
in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed under Item&nbsp;15(a)(2) presents
fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December&nbsp;30, 2007, based on criteria established in </FONT><FONT SIZE=2><I>Internal Control&#151;Integrated
Framework</I></FONT><FONT SIZE=2> issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements and
financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management's Report on Internal Control over Financial Reporting appearing under Item&nbsp;9A. Our responsibility is to express opinions on these financial statements, on the financial statement
schedule, and on the Company's internal control over financial reporting based on our integrated audit. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Notes&nbsp;2 and 12 to the consolidated financial statements, the Company changed the manner in which it accounts for share-based compensation in fiscal 2006. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i)&nbsp;pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii)&nbsp;provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii)&nbsp;provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>PricewaterhouseCoopers&nbsp;LLP  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>San Jose, California<BR>
March&nbsp;11, 2008 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>62</FONT></P>

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<A NAME="fd18601_quicklogic_corporation__fd102549"> </A>
<A NAME="toc_fd18601_1"> </A>
<P ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> CONSOLIDATED STATEMENTS OF OPERATIONS  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands, except per share amounts)  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Revenue</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,417</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,924</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,259</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,410</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,739</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,124</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,007</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,185</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,135</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,517</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,303</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,648</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,163</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,062</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,855</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) from operations</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,673</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(10,180</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,632</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Write-down of marketable securities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,466</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest expense</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(280</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(329</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(189</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest income and other, net</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>894</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,366</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>542</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) before income taxes</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,059</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,143</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,519</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>71</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>169</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Net income (loss) per share:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.09</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Weighted average shares:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,954</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,039</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The
accompanying notes form an integral part of these Consolidated Financial Statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>63</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=63,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=884819,FOLIO='63',FILE='DISK121:[08ZAF1.08ZAF18601]FD18601A.;8',USER='ALOEW',CD='11-MAR-2008;07:35' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fe18601_1_64"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT></P>

<!-- TOC_END -->
<A NAME="fe18601_quicklogic_corporation_consolidated_balance_sheets"> </A>
<A NAME="toc_fe18601_1"> </A>
<P ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> CONSOLIDATED BALANCE SHEETS  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands, except par value amount)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Current assets:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,868</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,621</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Short-term investment in Tower Semiconductor&nbsp;Ltd.&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,279</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,530</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Accounts receivable, net of allowances for doubtful accounts of $194 and $861, respectively</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,634</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,839</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,770</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,064</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Other current assets</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,607</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,894</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Total current assets</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>32,158</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>39,948</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Property and equipment, net</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,877</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,480</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Investment in Tower Semiconductor&nbsp;Ltd.&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>644</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>769</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,745</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,038</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>TOTAL ASSETS</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,424</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,235</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2><B>LIABILITIES AND STOCKHOLDERS' EQUITY</B></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Current liabilities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Trade payables</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,207</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,383</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,228</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,462</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Deferred income on shipments to distributors</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>516</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,152</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Deferred royalty revenue</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>431</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>960</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Current portion of debt and capital lease obligations</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,497</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,292</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,879</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,249</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Long-term liabilities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Debt and capital lease obligations, less current portion</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,527</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,618</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Total liabilities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,406</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,867</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2><BR>
Commitments and contingencies (see Notes&nbsp;15 and 16)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2><BR>
Stockholders' equity:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Common stock, $0.001 par value; 100,000 shares authorized; 29,390 and 28,680 shares issued and outstanding, respectively</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>167,298</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>164,138</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Accumulated other comprehensive income</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>350</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>726</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(138,659</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(127,525</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,018</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,368</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>41,424</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,235</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The
accompanying notes form an integral part of these Consolidated Financial Statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>64</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=64,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=654556,FOLIO='64',FILE='DISK121:[08ZAF1.08ZAF18601]FE18601A.;6',USER='ALOEW',CD='11-MAR-2008;07:35' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fg18601_1_65"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT></P>

<!-- TOC_END -->
<A NAME="fg18601_quicklogic_corporation_consoli__qui02938"> </A>
<A NAME="toc_fg18601_1"> </A>
<P ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ROWSPAN=3 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Common Stock<BR>
at&nbsp;Par&nbsp;Value</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Accumulated<BR>
Other<BR>
Comprehensive<BR>
Income (Loss)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Additional<BR>
Paid-In<BR>
Capital</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Accumulated<BR>
Deficit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Total<BR>
Stockholders'<BR>
Equity</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Balance at January&nbsp;2, 2005</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,313</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>155,837</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(119,697</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36,166</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Common stock issued under stock plans and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,583</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,342</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,344</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Unrealized gain on available-for-sale securities</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>377</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>377</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Net income</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Balance at January&nbsp;1, 2006</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,896</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>159,179</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>377</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(117,347</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,237</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>SAB&nbsp;108 adjustment (see Note&nbsp;3)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>964</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(964</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Balance at January&nbsp;2, 2006</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,896</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>160,143</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>377</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(118,311</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,237</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Common stock issued under stock plans and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>784</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,550</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,551</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Unrealized gain on available-for-sale securities</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>349</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>349</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,445</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,445</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Balance at December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,680</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>164,138</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>726</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(127,525</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,368</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Common stock issued under stock plans and employee stock purchase plans</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>710</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,456</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,456</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Unrealized loss on available-for-sale securities</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(376</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(376</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>Balance at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,390</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>167,298</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(138,659</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,018</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="28%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The
accompanying notes form an integral part of these Consolidated Financial Statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=65,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=644951,FOLIO='65',FILE='DISK121:[08ZAF1.08ZAF18601]FG18601A.;8',USER='ALOEW',CD='11-MAR-2008;07:35' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fi18601_1_66"> </A>


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<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT></P>

<!-- TOC_END -->
<A NAME="fi18601_quicklogic_corporation__fi102527"> </A>
<A NAME="toc_fi18601_1"> </A>
<P ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> CONSOLIDATED STATEMENTS OF CASH FLOWS  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>Cash flows from operating activities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Adjustments to reconcile net income (loss) to net cash provided by operating activities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,946</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,122</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,637</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>(Gain) loss on disposal of property and equipment</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(95</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(63</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,445</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Decrease in wafer credits from Tower Semiconductor&nbsp;Ltd.&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,083</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>593</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>274</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Write-down of inventories</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,941</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,847</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>406</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Write-down of marketable securities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,466</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Write-off of equipment</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>168</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>66</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Bad debt expense</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>235</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>246</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>119</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>Changes in assets and liabilities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(30</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,471</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(889</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Inventories</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(647</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,081</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,495</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Other assets</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>753</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(687</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>376</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Trade payables</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(233</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,045</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(781</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Accrued liabilities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(234</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(972</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>923</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Deferred income and royalty revenue</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,165</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(922</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>211</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>Net cash provided by (used for) operating activities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,708</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,136</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,670</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2><BR>
Cash flows from investing activities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Capital expenditures for property and equipment</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,290</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,261</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,766</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Proceeds from sale of equipment</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>95</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>95</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>Net cash used for investing activities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,195</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,166</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,766</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2><BR>
Cash flows from financing activities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Payment of debt and capital lease obligations</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,378</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,401</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,429</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Proceeds from debt obligations</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,072</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,490</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>550</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net change in revolving line of credit</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,000</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Proceeds from issuance of common stock</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,456</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,551</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,344</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>Net cash provided by (used for) financing activities</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,150</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,640</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(535</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2><BR>
Net increase (decrease) in cash and cash equivalents</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(3,753</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(3,662</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3,369</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Cash and cash equivalents at beginning of period</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,621</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,283</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,914</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Cash and cash equivalents at end of period</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>20,868</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,621</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,283</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2><BR>
Supplemental disclosures of cash flow information:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Interest paid</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>288</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>302</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>196</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Income taxes paid</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>175</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>32</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>Supplemental schedule of non-cash investing and financing activities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Capital lease obligation to finance capital expenditures and related maintenance</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,420</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>868</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,510</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The
accompanying notes form an integral part of these Consolidated Financial Statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>66</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="fk18601_quicklogic_corporation_consoli__qui03074"> </A>
<A NAME="toc_fk18601_1"> </A>
<P ALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Net income (loss)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Other comprehensive gain (loss), net of tax:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="60%" style="font-family:times;"><FONT SIZE=2>Unrealized gain (loss) on available-for-sale investments</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(376</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>349</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>377</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Total comprehensive income (loss)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,510</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,865</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,727</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>The
accompanying notes form an integral part of these Consolidated Financial Statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>67</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fm18601_quicklogic_corporation_notes_t__qui02694"> </A>
<A NAME="toc_fm18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>QUICKLOGIC CORPORATION    <BR>    <BR>    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 1&#151;THE COMPANY AND BASIS OF PRESENTATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QuickLogic Corporation ("QuickLogic" or the "Company") was founded in 1988 and reincorporated in Delaware in 1999. The Company develops and markets low power
programmable solutions that enable customers to add features to their mobile, consumer and industrial products. The Company is a fabless semiconductor company that operates in a single industry
segment where it designs, markets and supports Customer Specific Standard Products ("CSSPs"), Field Programmable Gate Arrays ("FPGAs"), application solutions, associated design software and
programming hardware. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QuickLogic
Corporation's fiscal year ends on the Sunday closest to December&nbsp;31. The fiscal years 2007, 2006 and 2005 ended on December&nbsp;30, 2007, December&nbsp;31, 2006
and January&nbsp;1, 2006, respectively. Beginning with fiscal year 2006, the Company changed its reporting convention to utilize the actual closing dates for all periods presented in its
consolidated financial statements and accompanying notes. This change had no impact on the Company's financial position, results of operation or cash flows for any of the periods presented. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Liquidity  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company anticipates that its existing cash resources will fund operations, finance purchases of capital equipment and provide adequate working capital for the
next twelve months. The Company's liquidity is affected by many factors including, among others, the level of revenue and gross profit, market acceptance of existing and new products including
ArcticLink&#153; and PolarPro&reg; solution platforms, fluctuations in revenue as a result of product end-of-life, fluctuations in revenue as a result of the
stage in the product life cycle of its customers' products, costs of securing access to and availability of adequate manufacturing capacity, levels of inventories, wafer purchase commitments, customer
credit terms, the amount and timing of research and development expenditures, the timing of new product introductions, production volumes, product quality, sales and marketing efforts, the value and
liquidity of its investment portfolio, the amount and financing arrangements for purchases of capital equipment, changes in operating assets and liabilities, the ability to obtain or renew debt
financing and to remain in compliance with the terms of existing credit facilities, the ability to raise funds from the sale of shares of Tower Semiconductor&nbsp;Ltd. ("Tower") and equity in the
Company, the issuance and exercise of stock options, the terms of and participation in the Company's employee stock purchase plan, and other factors related to the uncertainties of the industry and
global economics. Accordingly, there can be no assurance that events in the future will not require the Company to seek additional capital or, if so required, that such capital will be available on
terms acceptable to the Company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Principles of Consolidation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consolidated financial statements include the accounts of QuickLogic Corporation and its wholly owned subsidiaries, QuickLogic International,&nbsp;Inc.,
QuickLogic Canada Company, QuickLogic Kabushiki Kaisha, QuickLogic Software (India) Private&nbsp;Ltd. and QuickLogic&nbsp;GmbH. The Company and its subsidiaries use the U.S. dollar as its
functional currency. All intercompany accounts and transactions are eliminated in consolidation. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Use of Estimates  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The preparation of these consolidated financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>68</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fm18601_1_69"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>the
reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities and the reported amounts of revenue and expenses during the period. Actual results could differ
from those estimates, particularly in relation to revenue recognition, the allowance for doubtful accounts, sales returns, valuation of investments, valuation of long-lived assets,
valuation of inventories including identification of excess quantities, market value and obsolescence, measurement of stock-based compensation awards, accounting for income taxes and estimating
accrued liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Reclassifications  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For presentation purposes, certain amounts in prior period financial statements, referred to in these financial statements, have been reclassified to conform to
the reporting in current period financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 2&#151;SIGNIFICANT ACCOUNTING POLICIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Cash Equivalents and Short-Term Investments  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All highly liquid investments purchased with a remaining maturity of ninety days or less are considered cash equivalents. The Company's investment portfolio
included in cash equivalents is generally comprised of investments that meet high credit quality standards. The Company's investment portfolio consists of money market funds, which are precluded from
investing in auction rate securities. These funds invest in U.S. government obligations and repurchase agreements secured by U.S. Treasury obligations and U.S. government agency obligations. The fair
value of this portfolio is based on market prices for securities with active secondary and resale markets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Fair Value of Financial Instruments  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The estimated fair value of financial instruments as of the end of 2007 and 2006, including cash and cash equivalents, accounts receivable and accounts payable,
approximate fair value due to the short term nature of these financial instruments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Foreign Currency Transactions  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the Company's sales and cost of manufacturing are transacted in U.S. dollars. The Company conducts a portion of its research and development activities in
Canada and India and has sales and marketing activities in various countries outside of the United States. Most of these international expenses are incurred in local currency. Foreign currency
transaction gains and losses are included in interest income and other, net, as they occur. Operating expenses denominated in foreign currencies were approximately 25%, 22% and 25% of total operating
expenses in 2007, 2006 and 2005, respectively. The Company incurred a majority of these foreign currency expenses in Canada. The Company has not used derivative financial instruments to hedge its
exposure to fluctuations in foreign currency and, therefore, is susceptible to fluctuations in foreign exchange gains or losses in its results of operations in future reporting periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Inventories  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of standard cost or net realizable value. Standard cost approximates actual cost on a first-in,
first-out basis. The Company routinely evaluates quantities and values of its inventories in light of current market conditions and market trends and records reserves for quantities in
excess of demand and product obsolescence. The evaluation may take into consideration historic usage, expected demand, anticipated sales price, the stage in the product life </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>69</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fm18601_1_70"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>cycle
of its customers' products, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, customer design activity, customer
concentrations, product merchantability and other factors. Market conditions are subject to change. Actual consumption of inventories could differ from forecasted demand, and this difference could
have a material impact on the Company's gross margin and inventory balances based on additional provisions for excess or obsolete inventories or a benefit from inventories previously written down.
During 2007, the Company recorded inventory related charges totaling $3.9&nbsp;million, or 11.5% of revenue, primarily for excess quantities due to a reduction in expected demand for inventories on
hand, and cost of revenue was reduced by $1.3&nbsp;million, or 3.8% of revenue, through the sale of previously reserved inventories. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company's semiconductor products have historically had an unusually long product life cycle and obsolescence has not been a significant factor in the valuation of inventories.
However, as the Company pursues opportunities in the mobile market and continues to develop new CSSPs and products, the Company believes its product life cycle will be shorter and increase the
potential for obsolescence. The Company also regularly reviews the cost of inventories against estimated market value and records a lower of cost or market reserve for inventories that have a cost in
excess of estimated market value, which could have a material impact on the Company's gross margin and inventory balances based on additional write-downs to net realizable value or a benefit from
inventories previously written down. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Property and Equipment  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets, generally three to seven years. Amortization of leasehold improvements and capital leases is computed on a straight-line basis over the shorter of the
lease term or the estimated useful lives of the assets, generally two to seven years. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Long-Lived Assets  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company reviews the recoverability of its long-lived assets, such as property and equipment, prepaid wafer credits and investments, annually and
when events or changes in circumstances occur that indicate that the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on the Company's
ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows, undiscounted and without interest charges, of the related operations. If
these cash flows are less than the carrying value of the asset or asset group, an impairment loss is recognized for the difference between the estimated fair value and the carrying value, and the
carrying value of the related assets is reduced by this difference. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Licensed Intellectual Property  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company licenses intellectual property that is incorporated into its products. Costs incurred under license agreements prior to the establishment of
technological feasibility are included in research and development expense as incurred. Costs incurred for intellectual property once technological feasibility has been established and that can be
used in multiple products are capitalized as a long-term asset. Once a product incorporating licensed intellectual property has production sales, the amount is amortized over the estimated
useful life of the asset, generally five years. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>70</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>Revenue Recognition  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company supplies standard products which must be programmed before they can be used in an application. The Company's products may be programmed by the
Company, distributors, end customers or third parties. Once programmed, the Company's parts cannot be erased and, therefore, programmed parts are only useful to a specific customer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company generally recognizes revenue as products are shipped if evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, collection of the
resulting receivable is reasonably assured and product returns are reasonably estimable. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
is recognized upon shipment of both programmed and unprogrammed parts to original equipment manufacturer ("OEM") customers, provided that legal title and risk of ownership have
transferred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company also sells to distributors under agreements that allow for price adjustments and, in the case of unprogrammed parts, certain rights of return on unsold inventories. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
programmed parts can only be used by a specific customer, it is the Company's practice to agree upon any price adjustments with a distributor prior to shipment. Furthermore,
distributors are not allowed any future price adjustments and have no rights of return on programmed parts. The Company also sells certain unprogrammed end-of-life products to
distributors at a fixed price, and distributors are not allowed any future price adjustments and have no rights of return on these unprogrammed end-of-life parts. Accordingly,
revenue is recognized upon shipment to a distributor since title and risk of ownership have transferred to the distributor, the price is fixed, no right of return exists and collection of the
resulting receivable is reasonably assured. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unprogrammed
parts shipped to distributors may be used by multiple end customers and distributors may have certain return and price adjustment privileges on unsold inventories.
Accordingly, revenue associated with unprogrammed parts, other than the end-of-life products described above, is deferred until resale to the end customer. Deferred income on
shipments to distributors reflects the amount of gross margin expected to be realized when distributors sell through these products purchased from the Company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue
recognition depends on notification from the distributor that product has been sold to the distributor's end customer. Also reported by the distributor are product resale price,
quantity and end customer shipment information, as well as inventories on hand. Reported distributor inventories on hand are reconciled to deferred revenue balances monthly. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Software
revenue from sales of design tools is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, no significant Company obligations with
regard to implementation or integration remain, the fee is fixed or determinable and collection is reasonably assured. Software revenue amounted to less than one percent of the Company's revenue for
fiscal years 2007, 2006 and 2005. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Warranty Costs  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company generally warrants finished goods against defects in material and workmanship under normal use for twelve months from the date of shipment. The
Company does not have significant product warranty related costs or liabilities. The one-time programmable nature of QuickLogic's products minimizes warranty costs. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>71</FONT></P>

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 </FONT> <FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Advertising  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Costs related to advertising and promotion expenditures are charged to "Selling, general and administrative" expense as incurred. To date, costs related to
advertising and promotion expenditures have not been material. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Stock-Based Compensation  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company accounts for stock-based compensation under the provisions of Statement of Financial Accounting Standards ("SFAS") No.&nbsp;123 (revised 2004),
"</FONT><FONT SIZE=2><I>Share-Based Payment</I></FONT><FONT SIZE=2>," ("SFAS&nbsp;123(R)") and related interpretations which requires the measurement and recognition of expense related to the fair
value of stock-based compensation awards. The fair value of stock-based compensation awards is measured at the grant date and re-measured upon modification, as appropriate. The Company
uses the Black-Scholes option pricing model ("Black-Scholes"), to estimate the fair value of employee stock options and rights to purchase shares under the Company's 1999 Employee Stock
Purchase Plan ("ESPP"), consistent with the provisions of SFAS&nbsp;123(R). The fair value of restricted stock awards ("RSAs") and restricted stock units ("RSUs") is based on the closing price of
the Company's common stock on the date of grant, Equity compensation awards which vest with service are expensed on a straight-line basis over the requisite service period. Performance
based awards that are expected to vest are expensed on a straight-line basis over the vesting period. The Company regularly reviews the assumptions used to compute the fair value of its
stock-based awards and it will revise its assumptions as appropriate. In the event that assumptions used to compute the fair value of its stock-based awards are later determined to be inaccurate or if
the Company changes its assumptions significantly in future periods, stock-based compensation expense and the results of operations could be materially impacted. See Note&nbsp;12. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Concentration of Credit and Equity Risk and Suppliers  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are maintained with high quality institutions. The Company's accounts receivable are denominated in U.S. dollars and are derived primarily from sales to customers
located in North America, Europe and Asia Pacific. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. See Note&nbsp;13 for information
regarding concentrations associated with accounts receivable. The Company's investment in Tower is subject to equity risk. See Note&nbsp;5 for information regarding the Company's investment in
Tower. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company depends on a limited number of contract manufacturers, subcontractors, and suppliers for wafer fabrication, assembly, programming and test of its devices, and for the supply
of programming equipment, and these services are typically provided by one supplier for each of the Company's devices. The Company generally purchases these single or limited source services through
standard purchase orders or under its agreement with Tower. Because the Company relies on independent subcontractors to perform these services, it cannot directly control its product delivery
schedules, costs or quality levels. The Company's future success also depends on the financial viability of its independent subcontractors. These subcontract manufacturers produce products for other
companies and the Company must place orders in advance of expected delivery. As a result, the Company has only a limited ability to react to fluctuations in demand for its products, which could cause
it to have an excess or a shortage of inventories of a particular product, and its ability to respond to changes in demand is limited by these suppliers' ability to provide products with the quantity,
quality, cost and timeliness that it requires. The decision not to provide these services to the Company </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>72</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fo18601_1_73"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>or
the inability to supply these services to the Company, such as in the case of a natural or financial disaster, would have a significant impact on the Company's business. Increased demand from other
companies could result in these subcontract manufacturers allocating available capacity to customers that are larger or have long-term supply contracts in place and the Company may be
unable to obtain adequate foundry and other capacity at acceptable prices, or experience delays or interruption in supply. Additionally, volatility of economic, market, social and political conditions
in countries where these suppliers operate may be unpredictable and could result in a reduction in product revenue or increase the Company's cost of revenue and could adversely affect its business,
financial condition and results of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Comprehensive Income (Loss)  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income (loss) includes all changes in equity (net assets) during a period from non-owner sources. Comprehensive income (loss) for the
Company has included realized and unrealized holding gains or losses on its holdings of Tower ordinary shares. See Note&nbsp;5. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>New Accounting Pronouncements  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No.&nbsp;141(R), </FONT><FONT SIZE=2><I>"Business
Combinations,"</I></FONT><FONT SIZE=2> ("SFAS&nbsp;141(R)"). SFAS&nbsp;141(R) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date, any controlling interest in the acquiree and
the goodwill acquired. SFAS&nbsp;141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS&nbsp;141(R) is
effective for fiscal years beginning after December&nbsp;15, 2008. The Company is currently evaluating the impact SFAS&nbsp;141(R) will have on its consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
June 2007, the FASB ratified Emerging Issues Task Force ("EITF"), Issue No.&nbsp;07-3, </FONT><FONT SIZE=2><I>"Accounting for Nonrefundable Advance Payments for Goods
or Services to Be Used in Future Research and Development Activities,"</I></FONT><FONT SIZE=2> ("EITF&nbsp;07-3"). EITF&nbsp;07-3 requires non-refundable
advance payments for goods and services to be used in future research and development activities to be recorded as assets and the payments to be expensed when the research and development activities
are performed. EITF&nbsp;07-3 applies prospectively for new contractual arrangements entered and is effective for fiscal years beginning after December&nbsp;15, 2007. Prior to
adoption, the Company recognized these non-refundable advance payments as an expense upon payment. The Company is currently evaluating the impact that EITF&nbsp;07-3 will
have on its consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
February 2007, the FASB issued SFAS No.&nbsp;159, </FONT><FONT SIZE=2><I>"The Fair Value Option for Financial Assets and Financial Liabilities,</I></FONT><FONT SIZE=2>"
("SFAS&nbsp;159"). SFAS&nbsp;159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses
on items for which the fair value option has been elected be reported in earnings. SFAS&nbsp;159 is effective for fiscal years beginning after November&nbsp;15, 2007, although earlier adoption is
permitted. The Company is currently evaluating the impact that SFAS&nbsp;159 will have on its consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
September 2006, the FASB issued SFAS No.&nbsp;157, </FONT><FONT SIZE=2><I>"Fair Value Measurements,"</I></FONT><FONT SIZE=2> ("SFAS&nbsp;157"). SFAS&nbsp;157 establishes a
framework for measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of SFAS&nbsp;157 relate to the definition of
fair value, the methods used to measure fair value and expanded disclosures about fair </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>73</FONT></P>

<HR NOSHADE>
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<A NAME="page_fo18601_1_74"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>value
measurements. SFAS&nbsp;157 is effective for fiscal years beginning after November&nbsp;15, 2007 and interim periods within those fiscal years. The Company is currently evaluating the impact
that SFAS&nbsp;157 will have on its consolidated financial statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 3&#151;CUMULATIVE EFFECT ADJUSTMENT UNDER SAB&nbsp;108  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, under the direction of the Audit Committee of the Board of Directors, the Company voluntarily conducted an internal review of its historical stock option
granting practices and related accounting for the period from October&nbsp;15, 1999, the date of the Company's initial public offering, through July&nbsp;28, 2006. The review was initiated by the
Audit Committee in response to media attention about stock option practices at other companies. The Company did not find any systematic or pervasive practices to account for stock options in a manner
inconsistent with GAAP or its stated policies and procedures. However, based on the results of the review and analysis of the facts, the Company determined that there were certain errors committed in
the process of documenting grants and accounting for stock options associated with measurement dates, grants prior to meeting the definition of an employee under GAAP, non-employee grants,
modification of options and
previously reported deferred stock compensation charges. A total pre-tax stock-based compensation charge of $964,000 is associated with these identified errors that should have been
reported in previously issued consolidated financial statements for fiscal 2005 and earlier had they been identified in the proper period. Effective with the Company's second quarter of 2006
consolidated financial statements, the Company elected early adoption of Staff Accounting Bulletin No.&nbsp;108, </FONT><FONT SIZE=2><I>"Considering the Effects of Prior Year Misstatements when
Quantifying Misstatements in Current Year Financial Statements,"</I></FONT><FONT SIZE=2> ("SAB&nbsp;108"). SAB&nbsp;108 was effective for fiscal years ending after November&nbsp;15, 2006, and
adoption was encouraged for interim periods in the year of adoption. SAB&nbsp;108 was issued in order to eliminate the diversity of practice surrounding how public companies quantify financial
statement misstatements. This accounting literature provides guidance on how to quantify the effects of prior year misstatements. The Company had quantified the errors identified as a result of its
stock option review and determined these errors to be individually and in the aggregate immaterial, considering all the quantitative and qualitative factors, to all fiscal years prior to fiscal 2006
under the rollover method, the method which was historically used by the Company. However, given that the effect of correcting these errors in 2006 would cause the 2006 consolidated financial
statements to be materially misstated, the Company concluded that the cumulative effect adjustment method of initially applying the guidance of SAB&nbsp;108 was appropriate. The Company elected
early adoption of SAB&nbsp;108 in relation to the results of its internal review of stock option granting practices and related accounting, and recorded the effects of applying SAB&nbsp;108 using
the cumulative effect transition method in the quarterly report on Form&nbsp;10-Q for the second quarter of 2006. Accordingly, the Company recorded an increase to the carrying amount of
the opening balance of additional paid-in capital and an offsetting entry to accumulated deficit to correct these errors. The cumulative adjustment is not recorded in the statements of
operations. The impact on the previously reported accounts as of January&nbsp;1, 2006, adjusted effective January&nbsp;2, 2006, is as follows (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="47%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>January&nbsp;1, 2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>SAB&nbsp;108<BR>
Cumulative&nbsp;Effect<BR>
Adjustment</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>January&nbsp;2, 2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>159,179</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>964</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>160,143</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(117,347</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(964</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(118,311</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>Total stockholders' equity</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,237</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42,237</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>74</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
impact of the errors if they had been appropriately recorded in the Company's previously issued statements of operations is as follows (in&nbsp;thousands): </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="49%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Net Income (Loss)<BR>
(as previously<BR>
reported)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Adjustment</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Net Income<BR>
(Loss)<BR>
(if adjusted)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>1999</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,161</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,206</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2000</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,630</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(233</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,397</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2001</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(26,478</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(195</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(26,673</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2002</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(31,287</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(148</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(31,435</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2003</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,719</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(118</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,837</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2004</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,832</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(230</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,062</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>2005</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(85</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,265</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(964</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="49%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
tax effect of the identified adjustments is not significant since the Company has a deferred tax asset with a full valuation allowance due to the Company's net operating loss
carryforwards. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 4&#151;NET INCOME (LOSS) PER SHARE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic net income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share was computed using the weighted average number of common shares outstanding during the period plus potentially dilutive common shares
outstanding during the period under the treasury stock method. In computing diluted net income (loss) per share, the average stock price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options. A reconciliation of the basic and diluted per share computations is as follows (in thousands, except per share amounts): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=7 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="19%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Net&nbsp;Loss</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Per<BR>
Share<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Net&nbsp;Loss</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Per<BR>
Share<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Net<BR>
Income</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Per<BR>
Share<BR>
Amount</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="19%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,954</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.09</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="19%" style="font-family:times;"><FONT SIZE=2>Effect of stock options</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,085</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.01</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="19%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,134</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,041</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.38</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,214</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,485</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.32</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,039</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="19%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
2007, 8.7&nbsp;million shares associated with equity awards outstanding and the estimated number of shares to be purchased under the current offering period of the 1999 Employee
Stock Purchase Plan were not included in the calculation of diluted net loss per share, as they were considered antidilutive due to the net loss the Company experienced during this period. For 2006,
7.5&nbsp;million shares associated with equity awards outstanding were not included in the calculation of diluted net loss per share, as they were considered antidilutive due to the net loss the
Company experienced during this period. For 2005, 4.3&nbsp;million shares of common stock subject to outstanding options were antidilutive and, therefore, were not included in the calculation of
diluted net income per share, as the per share exercise price for such options exceeded the average trading price of the Company's common stock during the respective period. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>75</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=75,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=796566,FOLIO='75',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_76"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>NOTE 5&#151;INVESTMENT IN TOWER SEMICONDUCTOR&nbsp;LTD.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;12, 2000, the Company entered into several agreements with Tower, as amended, under which the Company agreed to make a strategic investment in
Tower of up to $25&nbsp;million as part of Tower's plan to build and equip a new wafer fabrication facility. During 2001 and 2002, the Company paid a total of $21.3&nbsp;million to Tower to
fulfill its investment requirements under the agreement. In partial consideration for the investment, the Company received 1,757,368 Tower ordinary shares with an original cost of
$16.6&nbsp;million. Due to write-downs in prior periods as a result of "other than temporary" declines in market value, the carrying value of the Company's Tower ordinary shares is $1.17 per share.
The Company sold a portion of the Tower ordinary shares in fiscal 2003. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;30, 2007, the Company held 1,344,543 available-for-sale Tower ordinary shares with an unrealized gain of $350,000 recorded in accumulated other comprehensive income
on the balance sheet, representing the difference between the carrying value per share and $1.43 per share, their market value on the last trading day of the reporting period. The Company plans to
continue to hold 450,000 of the Tower ordinary shares in order to receive competitive product pricing under the agreements with Tower and has recorded these shares as a long-term
investment on the balance sheets. The remaining 894,543 shares are classified as a short-term investment on the balance sheets. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company also received $4.7&nbsp;million in prepaid wafer credits in partial consideration for the investment. As of December&nbsp;30, 2007, the prepaid wafer credits balance was
$2.6&nbsp;million. The Company has guaranteed capacity at Tower through at least 2010. These credits are recorded within long-term other assets on the balance sheets and can be applied
toward wafer purchases from Tower at 15% of the value of purchases made through 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>76</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=76,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=417113,FOLIO='76',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_77"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 6&#151;BALANCE SHEET COMPONENTS  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Inventories:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Raw materials</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>199</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>791</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Work-in-process</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,714</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,845</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Finished goods</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>857</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>428</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,770</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,064</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Other current assets:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,371</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,566</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>236</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>328</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,607</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,894</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Property and equipment:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Equipment</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,979</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,477</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Software</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,303</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,370</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Furniture and fixtures</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>823</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>824</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Leasehold improvements</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>803</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>803</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25,908</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,474</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Accumulated depreciation and amortization</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(20,031</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18,994</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,877</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,480</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Other assets:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Prepaid wafer credits</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,551</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,634</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>194</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>404</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,745</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,038</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Accrued liabilities:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Employee related accruals</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,452</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,150</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Other</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>776</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,312</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,228</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,462</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assets
acquired under capital leases and included in property and equipment were $2.0&nbsp;million and $2.1&nbsp;million at the end of 2007 and 2006, respectively. During 2007, the
Company retired $1.2&nbsp;million of assets, with a net book value of zero, acquired under a capital lease and acquired $1.2&nbsp;million of assets under a capital lease. The Company recorded
accumulated depreciation on leased assets of $570,000 and $940,000 as of the end of 2007 and 2006, respectively. As of December&nbsp;30, 2007 and December&nbsp;31, 2006, the capital lease
obligation relating to these assets was $1.7&nbsp;million and $1.4&nbsp;million, respectively. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>77</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=77,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=209174,FOLIO='77',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_78"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 7&#151;OBLIGATIONS  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Debt and capital lease obligations:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Notes payable to bank</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,278</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,526</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Capital leases</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,746</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,384</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,024</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,910</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Current portion of debt and capital lease obligations</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,497</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,292</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,527</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,618</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;30, 2007, future payments under the Company's obligations are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Notes Payable<BR>
to Bank</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Capital Lease<BR>
Obligations</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><I>Fiscal Years</I></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,504</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>993</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,132</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>753</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>2010</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>642</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,278</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,746</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2><I>Revolving Line of Credit and Notes Payable to Bank  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective June 2006, the Company entered into a Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank. Terms of the agreement included
a $5.0&nbsp;million revolving line of credit that is available through June 2008 and an additional $2.0&nbsp;million of borrowing capacity under the equipment line of credit that was available to
be drawn against through June 2007. Advances under the equipment line of credit must be repaid in either 30 or 36 equal monthly installments, depending upon the nature of the items financed. The
agreement was amended in June 2007 to include an additional $2.5&nbsp;million of borrowing capacity under the equipment line of credit that is available to be drawn against through June 2008 and
provides that future advances under the equipment line of credit be repaid in 36 equal monthly installments. Upon each draw the Company can elect an interest </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>78</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=78,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=318920,FOLIO='78',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_79"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>rate
that is fixed at the U.S. treasury yield to maturity plus four percent or that floats at the prime rate plus one percent. Terms of the various advances under the agreement are as follows (in
thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Original<BR>
Balance</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Balance at<BR>
December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Available<BR>
Credit</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Interest&nbsp;Rate</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Maturity&nbsp;Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Revolving Line of Credit:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2>Non-formula advances</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,000</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Greater of Prime&nbsp;+&nbsp;0.50% or 8.50%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>June&nbsp;28, 2008</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Equipment Line of Credit:</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,409</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Prime&nbsp;+&nbsp;2.00%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
Multiple draws<BR>
maturing on or before<BR>
April 2008</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
932</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
384</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Prime&nbsp;+&nbsp;1.75%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
Multiple draws<BR>
maturing on or before<BR>
April 2009</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,558</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
898</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Prime&nbsp;+&nbsp;1.00%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
Multiple draws<BR>
maturing on or before<BR>
September 2009</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
442</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
356</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Prime&nbsp;+&nbsp;1.00%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
Multiple draws<BR>
maturing on or before<BR>
May 2010</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,630</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,630</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Treasury<BR>
+4.00%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
Multiple draws<BR>
maturing on or before<BR>
December 2010</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="22%" style="font-family:times;"><FONT SIZE=2><BR>
Notes payable</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
n/a</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
870</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Prime&nbsp;+&nbsp;1.00%<BR>
or Treasury<BR>
+4.00%</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
36&nbsp;months from<BR>
date of advance</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,278</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
bank has a first priority security interest in substantially all of the Company's tangible and intangible assets to secure any outstanding amounts under the agreement. Under the
terms of the agreement, the Company must maintain a minimum tangible net worth and adjusted quick ratio. The agreement also has certain restrictions including, among others, on the incurrence of other
indebtedness, the maintenance of depository accounts, the disposition of assets, mergers, acquisitions, investments, the granting of liens and the payment of dividends. The Company was in compliance
with the financial covenants of the agreement as of the end of 2007. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
December&nbsp;30, 2007, the prime rate under the credit facility was 7.25%. The treasury rate was 3.09% at the time of the $1.6&nbsp;million advance noted above. As of the end of
2007 and 2006, $1.8&nbsp;million and $1.3&nbsp;million, respectively, of amounts outstanding under the equipment line of credit were classified as long-term obligations. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>79</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=79,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=578732,FOLIO='79',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_80"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Capital Leases  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2007, the Company leased design software and related maintenance under a two year capital lease at an imputed interest rate of 7.1% per annum. Terms
of the agreement require the Company to make quarterly payments of approximately $190,000 through November 2009. The Company recorded a capital asset of $1.2&nbsp;million that is being depreciated
over the term of the agreement, prepaid maintenance of $256,000 that is being amortized over the term of the agreement and a capital lease obligation of $1.4&nbsp;million. As of the end of 2007,
$1.4&nbsp;million was outstanding under the capital lease, $727,000 of which was classified as a long-term obligation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the fourth quarter of 2006, the Company entered into a capital lease obligation in the amount of $77,000 to finance design software. The capital lease obligation has an imputed
interest rate of 9.25% per annum and is being repaid in annual amounts of $28,000 through January 2009. As of the end of
2007, $49,000 was outstanding under the capital lease, $26,000 of which was classified as a long-term obligation. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January 2006, the Company leased design software tools and related maintenance under a three year capital lease at an imputed interest rate of 9.0% per annum. Terms of the agreement
require the Company to make semi-annual payments of approximately $148,000 through July 2008. The Company recorded a capital asset of $633,000 that is being depreciated over the term of
the agreement, prepaid maintenance of $158,000 that is being amortized over the term of the agreement and a capital lease obligation of $791,000. As of the end of 2007, $277,000 was outstanding under
the capital lease, zero of which was classified as a long-term obligation. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>NOTE 8&#151;DEFERRED ROYALTY REVENUE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October 2000, the Company entered into a technology license and wafer supply agreement with Aeroflex Incorporated ("Aeroflex"). Under the terms of the
agreement, the Company received $750,000 of prepaid royalties. In addition, Aeroflex receives a prepaid royalty credit for a portion of the amounts paid for wafers purchased from the Company under the
agreement. Prepaid royalties are recognized as revenue when Aeroflex reports the sale of products incorporating the licensed technology. As of the end of 2007 and 2006, the Company had classified as a
current liability approximately $431,000 and $960,000, respectively, of deferred royalty revenue under this agreement. The Company recognized $636,000 and $654,000 of royalty revenue under the
agreement in 2007 and 2006, respectively. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>80</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=80,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=641381,FOLIO='80',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_81"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>NOTE 9&#151;INCOME TAXES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the U.S. and foreign components of consolidated income (loss) before income taxes and the provision for income taxes (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) before income taxes:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>U.S.&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,206</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,303</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,470</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>147</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>160</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>49</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Income (loss) before income taxes</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(11,059</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,143</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,519</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Current:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Federal</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>State</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>105</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Subtotal</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>106</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>96</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Deferred:</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Federal</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>State</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="61%" style="font-family:times;"><FONT SIZE=2>Foreign</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(35</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>73</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Subtotal</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(35</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>73</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>75</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>71</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>169</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, cumulative unremitted foreign earnings of $3.4&nbsp;million are considered to be permanently invested outside the United States. Accordingly, no U.S. taxes have
been provided that might be payable upon remittance of such earnings, nor is it practical to determine the amount of this liability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
rate reconciliation between income tax provisions at the U.S. federal statutory rate and the effective rate reflected in the consolidated statement of operations is as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="64%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="64%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>Provision at statutory rate</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34.0</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34.0</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>Foreign taxes</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.7</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.8</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.7</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>Future benefit of deferred tax assets not recognized</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34.0</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34.0</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.7</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.8</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.7</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="64%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>81</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=10,SEQ=81,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=244640,FOLIO='81',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fo18601_1_82"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
tax balances are comprised of the following (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="76%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Net operating loss carryforward</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31,071</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,572</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Accruals and reserves</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,030</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,949</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Credit carryforward</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,560</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,503</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Unrealized loss on marketable securities</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,154</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,154</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,277</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,720</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="54%" style="font-family:times;"><FONT SIZE=2>Stock-based compensation</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>333</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>383</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>51,425</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,281</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Valuation allowances</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(51,425</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(48,281</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Deferred tax asset</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Deferred tax liability</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(75</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(23</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due
to the uncertainties surrounding the realization of the deferred tax assets resulting from the Company's accumulated deficit and net tax losses in prior years, the Company has
provided a full valuation allowance against the associated deferred tax assets. Accordingly, no income tax benefit was recorded in 2007, 2006 and 2005 related to net operating loss carryforwards. The
Company will continue to assess the realizability of the deferred tax assets in future periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $91.5&nbsp;million and $30.9&nbsp;million,
respectively. These carryforwards, if not utilized to offset future taxable income and income taxes payable, will expire beginning in 2008 for federal and state purposes. Included in the net operating
loss carryforward amount is $4.8&nbsp;million and $3.6&nbsp;million for federal and state income tax purposes, respectively, of stock option deductions that, when recognized, will result in a
credit to stockholders' equity. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, the Company has research credit carryforwards of approximately $3.3&nbsp;million for federal and $3.1&nbsp;million for state income tax purposes. If not
utilized, the federal carryforward will expire in various amounts beginning in 2008. The California credit can be carried forward indefinitely. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the Tax Reform Act of 1986, the amount of and the benefit from net operating losses that can be carried forward may be impaired in certain circumstances. Events which may cause
changes in the Company's tax carryforwards include, but are not limited to, a cumulative ownership change of more than 50% over a three year period. Since inception, the Company has had cumulative
changes in ownership which will limit the loss carryforward deduction under IRC Section&nbsp;382. However, the Company believes that such limitations will not have a material effect on the future
utilization of losses. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
January&nbsp;1, 2007, the Company adopted the provisions of FASB Interpretation No.&nbsp;48, </FONT><FONT SIZE=2><I>"Accounting for Uncertainty in Income Taxes&#151;an
Interpretation of FASB Statement No.&nbsp;109"</I></FONT><FONT SIZE=2> ("FIN&nbsp;48"). As a result of the implementation of FIN&nbsp;48, the Company did not recognize material additional
liability for unrecognized income tax benefits. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>82</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=11,SEQ=82,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=649372,FOLIO='82',FILE='DISK121:[08ZAF1.08ZAF18601]FO18601A.;17',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fq18601_1_83"> </A>


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<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT> <FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="67%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>Unrecognized tax benefits balance at January&nbsp;1, 2007</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>Gross increases for tax positions of prior years</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>Gross decreases for tax positions of prior year</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(48</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>Settlements</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>Unrecognized tax benefits balance at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="86%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total
amount of unrecognized tax benefits that would affect our effective tax rate if recognized is $54,000 as of December&nbsp;30, 2007. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December&nbsp;30, 2007 and January&nbsp;1, 2007, the Company had
approximately $24,000 and $9,000 of accrued interest related to uncertain tax positions, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company is no longer subject to U.S. federal, state and non-U.S. income tax audits by taxing authorities for fiscal years through 1992. The Company estimates that its
unrecognized tax benefits will not change significantly within the next twelve months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 10&#151;STOCKHOLDERS' EQUITY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Common and Preferred Stock  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has authorized 100&nbsp;million shares of common stock and has authorized, but not issued, ten million shares of undesignated preferred stock.
Without any further vote or action by the Company's stockholders, the Board of Directors has the authority to determine the powers, preferences, rights, qualifications, limitations or restrictions
granted to or imposed upon any wholly unissued shares of undesignated preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Rights Plan  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2001, the Board of Directors adopted a Rights Agreement which provides for a dividend of one Preferred Stock Purchase Right (each a "Right" and
collectively, the "Rights") for each share of common stock of the Company. Each Right will entitle stockholders to buy one ten-thousandth of a share of Series&nbsp;A Junior Participating
Preferred Stock of QuickLogic at an exercise price of $32.50, subject to adjustment. The Rights will become exercisable only if a person or group becomes the beneficial owner of 15% or more of the
common stock, or commences a tender or exchange offer which would result in the offeror beneficially owning 15% or more of
common stock, without the approval of the Board of Directors. The Company is entitled to redeem the Rights at $0.001 per Right up to ten days after the public announcement of a 15% holder. If not
earlier terminated or redeemed, the Rights will expire on November&nbsp;27, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 11&#151;EMPLOYEE STOCK PLANS  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I>1989 Stock Option Plan  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1989 Stock Option Plan (the "1989 Plan") provided for the issuance of incentive and nonqualified options for the purchase of up to 4.6&nbsp;million shares
of common stock. Options granted under the 1989 Plan have a term of up to ten years, and typically vest at a rate of 25% of the total </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>83</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=83,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=242380,FOLIO='83',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<A NAME="page_fq18601_1_84"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>grant
per year over a four year period. In September 1999, the Company adopted the 1999 Stock Plan and no further stock option grants were made under the 1989 Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>1999 Stock Plan  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1999 Stock Plan (the "1999 Plan") was adopted by the Board of Directors in August 1999 and was approved by the Company's stockholders in September 1999. As of
the end of 2007, approximately 14.8&nbsp;million shares were reserved for issuance under the 1999 Plan. In addition, each January an annual increase is added to the 1999 Plan equal to the lesser of
(i)&nbsp;5,000,000 shares, (ii)&nbsp;5% of the Company's outstanding shares on such date, or (iii)&nbsp;a lesser amount determined by the Board of Directors. Equity awards that are cancelled,
forfeited or repurchased under the 1989 Plan also become available for grant under the 1999 Plan. Equity awards granted under the 1999 Plan have a term of up to ten years. Options typically vest at a
rate of 25% one year after the vesting commencement date, and one forty-eighth for each month of service thereafter. During 2007, the Company granted performance based RSUs which will vest following
achievement of a 2008 quarterly revenue goal. The Company has implemented a different vesting schedule in the past and may implement different vesting schedules in the future with respect to any new
equity awards. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Employee Stock Purchase Plan  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 1999 Employee Stock Purchase Plan ("ESPP") was adopted by the Board of Directors in August 1999 and was approved by the Company's stockholders in September
1999. As of the end of 2007, approximately 6.1&nbsp;million shares were reserved for issuance under the ESPP. In addition, each August an annual increase is added to the ESPP equal to the lesser of
(i)&nbsp;1,500,000 shares, (ii)&nbsp;4% of the Company's outstanding shares on such date, or (iii)&nbsp;a lesser amount determined by the Board of Directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through
the purchase period ending November 2005, the ESPP contained consecutive, overlapping, twenty-four month offering periods. Each offering period included four six
month purchase periods. The ESPP permitted participants to purchase shares through payroll deductions at 85% of the lower of the fair market value of the common stock at the beginning of an offering
period or the end of a purchase period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Board of Directors amended the ESPP in November 2005 to provide for six month offering periods. Participants purchase shares through payroll deductions of up to 20% of an employee's
total compensation (maximum of 20,000 shares per offering period). The amended ESPP permits the Board of Directors to determine, prior to each offering period, whether participants purchase shares at:
(i)&nbsp;85% of the fair market value of the common stock at the end of the offering period; or (ii)&nbsp;85% of the lower of the fair market value of the common stock at the beginning or the end
of an offering period. The Board of Directors has determined that, until further notice, future offering periods will be made at 85% of the lower of the fair market value of the common stock at the
beginning or the end of an offering period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 12&#151;STOCK-BASED COMPENSATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;2, 2006, the Company adopted the provisions of SFAS&nbsp;123(R), using the modified prospective transition method, which requires the
measurement and recognition of expense related to the fair value of stock-based compensation awards made to employees and directors, over the requisite service period. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>84</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=84,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=32798,FOLIO='84',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<A NAME="page_fq18601_1_85"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Period Prior to Adoption of SFAS&nbsp;123(R)  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to the adoption of SFAS&nbsp;123(R) in 2006, the Company applied Accounting Principles Board Opinion No.&nbsp;25, </FONT><FONT SIZE=2><I>"Accounting
for Stock Issued to Employees,"</I></FONT><FONT SIZE=2> ("APB&nbsp;25") and related interpretations and provided the required pro forma disclosures of SFAS No.&nbsp;123,
"</FONT><FONT SIZE=2><I>Accounting for Stock-Based Compensation"</I></FONT><FONT SIZE=2>, ("SFAS&nbsp;123") as amended by SFAS No.&nbsp;148, </FONT><FONT SIZE=2><I>"Accounting for Stock-Based
Compensation&#151;Transition and Disclosures."</I></FONT><FONT SIZE=2> The pro forma information in the following table illustrates the effect on net income (loss) and net income (loss) per
share for 2005 as if the Company had applied the fair value recognition provisions of SFAS&nbsp;123 (in thousands, except per share amounts): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="71%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="67%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal&nbsp;Year<BR>
2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net income&#151;as reported</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,350</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>Less:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>Stock-based compensation expense related to stock option plans determined under the fair value based method, net of tax</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,073</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>Less:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>Stock-based compensation expense related to the stock purchase plan determined under the fair value based method, net of tax</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(582</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net loss&#151;as adjusted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,305</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net income per share&#151;as reported:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> Basic</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.09</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> Diluted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.08</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=4 style="font-family:times;"><FONT SIZE=2>Net loss per share&#151;as adjusted:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> Basic</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> Diluted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="67%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the pro forma information required under SFAS&nbsp;123 for the periods prior to 2006, the Company used the Black-Scholes option pricing model to value stock-based compensation
awards and accounted for forfeitures as they occurred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Impact of the Adoption of SFAS&nbsp;123(R)  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under SFAS&nbsp;123(R), stock-based compensation expense is recognized in the Company's consolidated statements of operations and includes:
(i)&nbsp;compensation expense for stock-based compensation awards granted prior to, but not yet vested as of January&nbsp;1, 2006, based on the grant date fair value estimated and
re-measured upon modification in accordance with the pro forma provisions of SFAS&nbsp;123, and (ii)&nbsp;compensation expense for the stock-based compensation awards granted or
modified subsequent to January&nbsp;1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS&nbsp;123(R). The impact of SFAS&nbsp;123(R) on the Company's
consolidated financial statements for 2007 and 2006 was as follows (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>229</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>183</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>376</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>368</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,099</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>894</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Total costs and expenses</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,704</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,445</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>85</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=85,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=419073,FOLIO='85',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<A NAME="page_fq18601_1_86"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
amount of stock-based compensation included in inventories at the end of 2007 and 2006 was not material. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
required by SFAS&nbsp;123(R), the Company has made an estimate of expected forfeitures and is recognizing compensation costs only for those equity awards expected to vest. The
cumulative effect of forfeitures upon adoption of SFAS&nbsp;123(R) was not material. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Valuation Assumptions  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS&nbsp;123(R) requires companies to estimate the fair value of stock-based compensation awards. The fair value of stock-based compensation awards is measured
at the grant date and re-measured upon modification, as appropriate. The Company uses the Black-Scholes option pricing model ("Black-Scholes"), to estimate the fair value of employee stock
options and rights to purchase shares under the Company's ESPP, consistent with the provisions of SFAS&nbsp;123(R). Using the Black-Scholes pricing model requires the Company to develop highly
subjective assumptions including the expected term of awards, expected volatility of its stock, expected risk-free interest rate and expected dividend rate over the term of the award. The
Company's expected term of awards assumption is based primarily on its historical experience with similar grants. The Company's expected stock price volatility assumption for both stock options and
ESPP shares is based on the historical volatility of the Company's stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected
life. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected
term of the stock option or ESPP shares. This fair value is expensed over the requisite service period of the award. The fair value of RSAs and RSUs is based on the closing price of the Company's
common stock on the date of grant. Equity compensation awards which vest with service are expensed using the straight-line attribution method over the requisite service period. RSU awards
which are expected to vest based on the achievement of a performance goal are expensed over the estimated vesting period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the assumptions used in the Black-Scholes pricing model, SFAS&nbsp;123(R) requires that the Company recognize expense for awards ultimately expected to vest; therefore
we are required to develop an estimate of the number of awards expected to be forfeited prior to vesting ("forfeiture rate"). The forfeiture rate is estimated based on historical pre-vest
cancellation experience and is applied to all share-based awards. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November 2005, the FASB issued FASB Staff Position ("FSP") No. FAS&nbsp;123(R)-3 </FONT><FONT SIZE=2><I>"Transition Election Related to Accounting for Tax Effects of
Share-Based Payment Awards."</I></FONT><FONT SIZE=2> The Company has elected to adopt the alternative transition method provided in the FSP for calculating the tax effects of stock-based compensation
pursuant to SFAS&nbsp;123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool ("APIC pool")
related to the tax effects of stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statement of cash flows of the tax effects of stock-based compensation
awards that are outstanding upon adoption of SFAS&nbsp;123(R). </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>86</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=86,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=522187,FOLIO='86',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<A NAME="page_fq18601_1_87"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following weighted average assumptions are included in the estimated fair value calculations for stock option grants: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="69%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="68%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="4%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%" style="font-family:times;"><FONT SIZE=2>Expected term (years)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.5</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.6</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.9</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%" style="font-family:times;"><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.05</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.48</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.89</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="68%" style="font-family:times;"><FONT SIZE=2>Expected volatility</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>80</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>93</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="68%" style="font-family:times;"><FONT SIZE=2>Expected dividend</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="4%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
methodologies for determining the above values were as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected term:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The expected term represents the period that the Company's stock-based awards are expected to be
outstanding and is estimated based on historical experience.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Risk-free interest rate:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The risk-free interest rate assumption is based upon the
risk-free rate of a Treasury Constant Maturity bond with a maturity appropriate for the expected term of the Company's employee stock options.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected volatility:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The Company determines expected volatility based on historical volatility of the Company's
common stock.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected dividend:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The expected dividend assumption is based on the Company's intent not to issue a dividend
under its dividend policy. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted average estimated fair value for options granted during 2007, 2006 and 2005 was $2.15, $2.27 and $2.44 per option, respectively. As of the end of 2007, the fair value of
unvested stock options, net of expected forfeitures, was approximately $4.7&nbsp;million. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period
of approximately 3.3&nbsp;years. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Stock-Based Compensation Award Activity  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the shares available for grant under the 1989 Plan and the 1999 Plan for 2007: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="24%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Shares<BR>
Available for Grant</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="72%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="24%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Balance at December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,625</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Authorized</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,434</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Options granted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,568</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Options forfeited or expired</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,074</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>RSAs granted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(40</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>RSUs granted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(954</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>RSUs forfeited or expired</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>Balance at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,588</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="72%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="24%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>87</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=87,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=30982,FOLIO='87',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<A NAME="page_fq18601_1_88"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Stock Options  </I></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes stock options outstanding and stock option activity under the 1989 Plan and the 1999 Plan, and the related weighted average
exercise price, for 2007, 2006 and 2005: </FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Number&nbsp;of<BR>
Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise&nbsp;Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining&nbsp;Term</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Aggregate<BR>
Intrinsic Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="35%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in years)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Balance outstanding at January&nbsp;2, 2005</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,888</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.48</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>207</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.77</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Forfeited or expired</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,539</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7.45</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(821</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.20</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Balance outstanding at January&nbsp;1, 2006</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,735</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.37</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,711</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.25</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Forfeited or expired</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(284</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9.02</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(698</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.07</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Balance outstanding at December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,464</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.97</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,568</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.84</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Forfeited or expired</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,074</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.17</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Exercised</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(364</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.93</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Balance outstanding at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,594</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.72</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.14</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,267</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Exercisable at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,028</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.31</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.50</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,811</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>Vested and expected to vest at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,025</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.82</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.87</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="13%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,158</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="35%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $3.34 as of the end of the Company's current
reporting period, which would have been received by the option holders had all option holders exercised their options as of that date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total intrinsic value of options exercised during 2007, 2006 and 2005 was $440,000, $1.6&nbsp;million and $1.3&nbsp;million, respectively. Total cash received from employees as a
result of employee stock option exercises during 2007, 2006 and 2005 was approximately $690,000, $2.1&nbsp;million and $1.8&nbsp;million, respectively. The Company settles employee stock option
exercises with newly issued common shares. In connection with these exercises, there was no tax benefit realized by the Company due to the Company's current loss position. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>88</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=88,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=531579,FOLIO='88',FILE='DISK121:[08ZAF1.08ZAF18601]FQ18601A.;19',USER='CBENSON',CD='11-MAR-2008;13:30' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fs18601_1_89"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT> <FONT SIZE=2><B>QUICKLOGIC CORPORATION  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Significant exercise price ranges of options outstanding, related weighted average exercise prices and contractual life information at the end of 2007 were as
follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=6 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Options Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Options Exercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Range of Exercise Prices</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Options<BR>
Outstanding</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Options<BR>
Vested and<BR>
Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="32%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in&nbsp;thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in&nbsp;years)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in&nbsp;thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>$1.08 - $&nbsp;&nbsp;2.83</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,608</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.79</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.32</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,402</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;2.85 -&nbsp;&nbsp;&nbsp;&nbsp;3.02</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,722</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.19</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.99</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>808</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.99</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;3.04 -&nbsp;&nbsp;&nbsp;&nbsp;4.17</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,958</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8.21</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.98</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>571</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.93</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;4.25 -&nbsp;&nbsp;&nbsp;&nbsp;7.00</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,594</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.42</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.15</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,535</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.15</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;7.78 -&nbsp;&nbsp;34.56</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>712</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.26</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15.41</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>712</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15.41</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>$1.08 - $34.56</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,594</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.13</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.72</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,028</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.31</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="32%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;21, 2005, the Compensation Committee of the Company's Board of Directors approved the vesting acceleration of unvested,
"out-of-the-money" stock options awarded under its 1999 Stock Plan. The purpose of the accelerated vesting was to reduce future compensation expense associated with
the accelerated stock options upon adoption of SFAS&nbsp;123(R) by approximately $380,000 and because the outstanding options were not fully achieving their original objective of incentive
compensation and employee retention due to exercise prices which were in excess of the current market value. A total of 187,703 shares with exercise prices ranging from $4.08 to $8.70 were accelerated
under the program. The accelerated stock options had a weighted average exercise price of $5.45. On average, the accelerated options would otherwise have completed vesting over 1.6&nbsp;years from
the date of acceleration. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the third and fourth quarters of 2006, the Company modified certain vested options held by individuals that terminated their employment with the Company during those periods. The
modifications extended the post-termination exercise period of the modified options. The purpose of the modification was to offer the former employees an opportunity to exercise their
vested options that otherwise would have been cancelled as a result of the black-out period imposed by the Company during its stock option review. A total of 433,301 shares with exercise
prices ranging from $0.97 to $4.66 were modified, resulting in a charge of $70,000 being recorded in the consolidated statement of operations. The charges recorded in 2007 for stock-based awards that
were modified were insignificant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enacted
in October 2004, Section&nbsp;409A of the Internal Revenue Code significantly changed the rules for nonqualified deferred compensation plans. Section&nbsp;409A imposes
certain restrictions on stock awards that constitute deferred compensation. As a result of the stock option review, the Board of Directors modified in 2006 and 2007 options granted to two executive
officers and 30 employees that resulted in an increase to their exercise price in order to eliminate any additional tax exposure under Section&nbsp;409A and thereby maintain the incentive value of
the options. The Company believes that the implications of Section&nbsp;409A on grants with intrinsic value that vested after December&nbsp;31, 2004 and modifications made to existing grants after
October&nbsp;3, 2004, along with potential remedial actions, is not material to its consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>89</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=89,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=654731,FOLIO='89',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fs18601_1_90"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Restricted Stock Awards and Restricted Stock Units  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company began issuing RSAs in the second quarter of 2007 and RSUs in the third quarter of 2007. RSAs entitle the holder to purchase shares of common stock at
par value during a short period of time, and purchased shares are held in escrow until they vest. RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit as it
vests. A summary of the Company's RSA and RSU activity and related information are as follows: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="63%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>RSAs and RSUs Outstanding</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Number of Shares</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Weighted Average Grant Date Fair Value</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="56%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)<BR> </B></FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Nonvested at December&nbsp;31, 2006</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Granted</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>994</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.58</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Vested</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(40</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Forfeited</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(17</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.60</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>Nonvested at December&nbsp;30, 2007</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>937</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="18%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.60</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="56%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, the unrecognized stock-based compensation expense related to outstanding performance based RSUs, which are not currently expected to vest, was $3.4&nbsp;million.
The Company will recognize this expense to the extent it determines these performance based RSUs are likely to vest. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I>Employee Stock Purchase Plan  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through the purchase period ending November 2005, the ESPP contained consecutive, overlapping, twenty-four month offering periods, and each offering
period included four six month purchase periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
offering period ending May 2006 under the ESPP provided that shares were purchased at 85% of the fair market value of the common stock at the end of the offering period. Accordingly,
the fair value of stock-based compensation awards under the ESPP was recognized based upon employee deductions and the purchase discount, rather than using a pricing model. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company cancelled the offering period ended November 2006 due to its internal review of stock option granting practices and related accounting. The offering period ending
May&nbsp;14, 2007 commenced on January&nbsp;24, 2007, once the Company had completed its stock option review and was current with its filings as required by the Securities and Exchange Commission
("SEC") and Nasdaq. Offering periods beginning May&nbsp;15, 2007 or later are standard six month offering periods. Employees participating in these offering periods purchase common stock at 85% of
the lower of the fair market value of the common stock at the beginning or the end of the offering period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
weighted average estimated fair value, as defined by SFAS&nbsp;123(R), of rights issued pursuant to the Company's ESPP during 2007 was $0.97 per right. The purchase discount of
rights issued pursuant to the Company's ESPP during 2006 was $0.84 per right. The weighted average estimated fair value, as defined by SFAS&nbsp;123, of rights issued during 2005 was $0.89 per
right. Sales under the ESPP were 306,000 shares of common stock at an average price of $2.49 for 2007, 86,000 shares of common stock at an average price of $4.73 per share for 2006, and 762,000 shares
of common stock at an average price of $2.02 per share for 2005. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>90</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=90,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=969561,FOLIO='90',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fs18601_1_91"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following weighted average assumptions are included in the estimated fair value calculations for rights to purchase stock under the ESPP as of the grant date: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="83%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="74%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%" style="font-family:times;"><FONT SIZE=2>Expected life (months)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.5</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%" style="font-family:times;"><FONT SIZE=2>Risk-free interest rate</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4.53</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.57</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="74%" style="font-family:times;"><FONT SIZE=2>Volatility</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="74%" style="font-family:times;"><FONT SIZE=2>Dividend yield</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
methodologies for determining the above values were as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected term:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The expected term represents the length of the purchase period contained in the ESPP.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Risk-free interest rate:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The risk-free interest rate assumption is based upon the
risk-free rate of a Treasury Constant Maturity bond with a maturity appropriate for the term of the purchase period.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected volatility:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The Company determines expected volatility based on historical volatility of the Company's
common stock for the term of the purchase period.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expected dividend:</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The expected dividend assumption is based on the Company's intent not to issue a dividend
under its dividend policy. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, the unrecognized stock-based compensation expense relating to the Company's ESPP is $160,000 and is expected to be recognized over a weighted average period of
approximately 5&nbsp;months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 13&#151;INFORMATION CONCERNING PRODUCT LINES, GEOGRAPHIC INFORMATION AND REVENUE CONCENTRATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company identifies its business segments based on business activities, management responsibility and geographic location. For all periods presented, the
Company operated in a single reportable business segment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a breakdown of revenue by product family (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><I>Revenue by product family(1):</I></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>New products</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,347</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,547</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,942</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Mature products</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,585</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,460</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,175</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>End-of-life products</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,485</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,917</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,142</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="50%" style="font-family:times;"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,417</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,924</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,259</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
fiscal 2007, the Company changed the classification and definition of its product families and has restated prior periods to conform to the new definitions. New products include
ArcticLink, PolarPro, Eclipse&#153; II and QuickPCI&reg; II products. Mature products include pASIC&reg; 3, QuickRAM&reg;, Eclipse, QuickDSP and QuickFC products, as
well as royalty revenue, programming </FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>91</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=91,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=525931,FOLIO='91',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fs18601_1_92"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>hardware
and design software. End-of-life products include pASIC 1, pASIC 2, V3, QuickMIPS and QuickPCI products. In prior periods, revenue was reported in the following
categories: mature products, embedded standard products, advanced embedded standard products and royalty. The mature products included pASIC 1, pASIC 2, and pASIC 3 products. Embedded standard
products included QuickRAM, QuickPCI, QuickDSP, QuickFC and V3 products. Advanced embedded standard products included Eclipse, PolarPro, Eclipse II, QuickPCI II and QuickMIPS products, as well as
programming hardware and software. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following is a breakdown of revenue by shipment destination (in thousands): </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="74%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2><I>Revenue by geography:</I></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>United States</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,096</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,969</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>24,050</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Europe</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,250</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,309</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,913</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Taiwan</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,710</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>340</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>334</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Japan</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,260</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,177</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,852</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>China</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,979</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,057</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,949</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Rest of North America</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,956</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,442</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,182</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Rest of Asia Pacific</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,166</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>630</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>979</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="50%" style="font-family:times;"><FONT SIZE=2>Total revenue</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,417</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>34,924</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>48,259</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following distributors and customers accounted for 10% or more of the Company's revenue for the periods presented: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="70%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="70%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Fiscal Years</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="70%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="7%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>2005</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="70%" style="font-family:times;"><FONT SIZE=2>Distributor "A"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="70%" style="font-family:times;"><FONT SIZE=2>Distributor "B"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="70%" style="font-family:times;"><FONT SIZE=2>Customer "A"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="70%" style="font-family:times;"><FONT SIZE=2>Customer "B"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Represents
less than 10% of revenue for the period presented. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following distributors and customers accounted for 10% or more of the Company's accounts receivable as of the dates presented: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="59%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="17%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>December&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%" style="font-family:times;"><FONT SIZE=2>Distributor "A"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="59%" style="font-family:times;"><FONT SIZE=2>Customer "B"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%" style="font-family:times;"><FONT SIZE=2>Customer "C"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="59%" style="font-family:times;"><FONT SIZE=2>Customer "D"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="59%" style="font-family:times;"><FONT SIZE=2>Customer "E"</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Represents
less than 10% of accounts receivable as of the date presented. </FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the end of 2007, less than 10% of the Company's long-lived assets, including property and equipment and other assets, were located outside the United States. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>92</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=92,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=611470,FOLIO='92',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fs18601_1_93"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 14&#151;SHELF REGISTRATION STATEMENT  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;12, 2005, the Company filed a shelf registration statement on Form&nbsp;S-3, which was declared effective on July&nbsp;26, 2005 by
the SEC. Under the shelf registration statement, the Company has the ability to raise up to $30.0&nbsp;million, in one or more transactions, by selling common stock, preferred stock, depositary
shares, or warrants. The Company has not raised any funds in connection with this filing. Under the Securities Offering Reform of 2005, the Company may offer and sell securities registered under this
shelf registration statement through November&nbsp;30, 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>NOTE 15&#151;COMMITMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of the Company's wafer manufacturers require the Company to forecast wafer starts several months in advance. The Company is committed to take delivery of
and pay for a portion of forecasted wafer volume. As of the end of 2007 and 2006, the Company had $4.3&nbsp;million and $2.1&nbsp;million, respectively, of outstanding commitments for the purchase
of wafer inventory. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company leases, with an option to renew, its primary facility under a non-cancelable operating lease that expires in 2009. The Company has subleased a portion of its
primary facilities to a tenant until March 2009. In addition, the Company rents development facilities in Canada and India as well as sales offices in Europe and Asia. Total rent expense, net of
sublease income, during 2007, 2006 and 2005 was approximately $880,000, $850,000 and $830,000, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future
minimum lease commitments under the Company's operating leases, net of sublease income and excluding property taxes and insurance are as follows: </FONT></P>

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<DIV ALIGN="CENTER"><TABLE WIDTH="65%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Operating Leases</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(In thousands)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><U>Fiscal Years</U></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>2008</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>822</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>2009</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>322</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>2010</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="77%" style="font-family:times;"><FONT SIZE=2>2011 and thereafter</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,163</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
</TR>
</TABLE></DIV>
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<P style="font-family:times;"><FONT SIZE=2><B>NOTE 16&#151;LITIGATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;26, 2001, a putative securities class action was filed in the U.S. District Court for the Southern District of New York against certain
investment banks that underwrote QuickLogic's initial public offering, QuickLogic and some of QuickLogic's officers and directors. The complaint alleges excessive and undisclosed commissions in
connection with the allocation of shares of common stock in QuickLogic's initial and secondary public offerings and artificially high prices through "tie-in" arrangements which required
the underwriters' customers to buy shares in the aftermarket at pre-determined prices in violation of the federal securities laws. Plaintiffs seek an unspecified amount of damages on
behalf of persons who purchased QuickLogic's stock pursuant to the registration statements between October&nbsp;14, 1999 and December&nbsp;6, 2000. Various plaintiffs have filed similar actions
asserting virtually identical allegations against over 300 other public companies, their underwriters, and their officers and directors arising out of each company's public offering. These actions,
including the action against QuickLogic, have been coordinated for pretrial purposes and </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>93</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=93,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=35722,FOLIO='93',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
<A NAME="page_fs18601_1_94"> </A>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>captioned
</FONT><FONT SIZE=2><I>In re Initial Public Offering Securities Litigation, 21 MC 92</I></FONT><FONT SIZE=2>. In June 2004, a stipulation of settlement and release of claims against the
issuer defendants, including QuickLogic, was submitted to the court for approval. On August&nbsp;31, 2005, the court preliminarily approved the settlement. In December 2006, the appellate court
overturned the certification of classes in the six test cases that were selected by the underwriter defendants and plaintiffs in the coordinated proceedings. Because class certification was a
condition of the settlement, it was unlikely that the settlement would receive final Court approval. On June&nbsp;25, 2007, the Court entered an order terminating the proposed settlement based upon
a stipulation among the parties to the settlement. Plaintiffs have filed amended master allegations and amend complaints in the six test cases for class certification. If a settlement does not occur
and litigation against QuickLogic continues, the Company intends to defend the case vigorously. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
estimate can be made of the possible loss or possible range of loss associated with the resolution of these contingencies and, accordingly, the Company has not recorded a liability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
time to time, the Company is involved in legal actions arising in the ordinary course of business, including but not limited to intellectual property infringement and collection
matters. Absolute assurance cannot be given that third party assertions will be resolved without costly litigation in a manner that is not adverse to the Company's financial position, results of
operations or cash flows or without requiring royalty or other payments in the future which may adversely impact gross profit. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>94</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=94,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=444976,FOLIO='94',FILE='DISK121:[08ZAF1.08ZAF18601]FS18601A.;10',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fu18601_1_95"> </A>


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 </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fu18601_supplementary_financia__fu102181"> </A>
<A NAME="toc_fu18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>SUPPLEMENTARY FINANCIAL DATA    <BR>    <BR>    QUARTERLY DATA (UNAUDITED)    <BR>    </B></FONT></P>

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<TABLE BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Quarters Ended</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Dec.&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Sept.&nbsp;30,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>July&nbsp;1,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>April&nbsp;1,<BR>
2007</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Dec.&nbsp;31,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Oct.&nbsp;1,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>July&nbsp;2,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>April&nbsp;2,<BR>
2006</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=23 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except per share data)<BR> </B></FONT><BR></TH>
<TH WIDTH="1%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><B>Statement of Operations</B></FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Revenue</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,745</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,025</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,405</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,242</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,744</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,598</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,249</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,333</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Cost of revenue(1)</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,720</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,314</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,975</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,401</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,387</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,371</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,221</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,760</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Gross profit</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,025</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,711</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,430</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>841</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,357</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,227</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,028</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,573</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Operating expenses:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Research and development</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,549</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,342</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,339</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,287</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,117</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,429</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,357</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,400</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,230</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,953</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,387</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,593</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,857</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,994</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,594</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,617</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Loss from operations</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,754</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,584</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,296</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(6,039</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,617</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,196</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,923</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,444</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Interest income (expense) and other, net</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>88</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>120</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>245</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>161</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>306</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>268</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>245</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>218</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Loss before income taxes</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,666</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,464</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,051</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,878</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,311</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,928</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,678</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,226</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Provision for income taxes</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>21</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Net loss</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,670</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,493</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,078</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,893</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,336</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,951</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,699</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,228</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Net loss per share:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="24%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.07</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.12</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.10</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.04</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="24%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.05</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.07</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.20</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.12</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.10</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.06</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.04</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><BR>
Weighted average shares:</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="7%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="24%" style="font-family:times;"><FONT SIZE=2>Basic</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,267</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,116</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,966</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,814</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,680</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,678</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,519</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,059</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="24%" style="font-family:times;"><FONT SIZE=2>Diluted</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,267</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>29,116</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,966</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,814</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,680</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,678</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,519</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,059</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT" style="font-family:times;"><HR NOSHADE SIZE=4></TD>
<TD WIDTH="1%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Charges
for excess inventory and other inventory reserves exceeded $1.0&nbsp;million in three of the quarters presented. These charges were $2.5&nbsp;million, or 39.5% of revenue
for the quarter ended April&nbsp;1, 2007; $1.2&nbsp;million, or 15.0% of revenue for the quarter ended December&nbsp;31, 2006; $1.2&nbsp;million, or 14.1% of revenue for the quarter ended
October&nbsp;1, 2006. Total 2007 and 2006 charges for excess inventory and other inventory reserves totaled $3.9&nbsp;million and $2.8&nbsp;million, respectively, which represented 11.5% and
8.2% of revenue, respectively. </FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>95</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=95,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=306580,FOLIO='95',FILE='DISK121:[08ZAF1.08ZAF18601]FU18601A.;5',USER='GMEDINA',CD='11-MAR-2008;02:45' -->
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<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fw18601_1_96"> </A>


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 </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fw18601_item_9._changes_in_and_disagre__ite03576"> </A>
<A NAME="toc_fw18601_1"> </A>
ITEM 9.&nbsp;&nbsp;&nbsp;&nbsp;CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fw18601_item_9a._controls_and_procedures"> </A>
<A NAME="toc_fw18601_2"> </A>
ITEM 9A.&nbsp;&nbsp;&nbsp;&nbsp;CONTROLS AND PROCEDURES    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>Evaluation of Disclosure Controls and Procedures  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the
Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and
that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management,
with the participation of the Chief Executive Officer and Chief Financial Officer, has performed an evaluation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December&nbsp;30, 2007, our disclosure controls and procedures were effective. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>Management's Report on Internal Control over Financial Reporting  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules&nbsp;13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is the process designed by, or under the supervision of, our Chief Executive Officer and
Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
consolidated financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that: (i)&nbsp;pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets; (ii)&nbsp;provide reasonable assurance that transactions are recorded as
necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorizations of management and directors of the Company; and (iii)&nbsp;provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the consolidated financial statements. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of its inherent limitations, cost effective internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on
a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions or that the degree of compliance with established policies or procedures may deteriorate. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of
our internal control over financial reporting as of the end of the period covered by this Annual Report on Form&nbsp;10-K. In making this assessment, we used the criteria based on the framework set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in "Internal Control&#151;Integrated Framework." Based on the results of this assessment, management (including our
Chief Executive </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>96</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>

<!-- ZEQ.=1,SEQ=96,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=386149,FOLIO='96',FILE='DISK121:[08ZAF1.08ZAF18601]FW18601A.;10',USER='CBENSON',CD='11-MAR-2008;13:35' -->
<A NAME="page_fw18601_1_97"> </A>
<BR>

<P style="font-family:times;"><FONT SIZE=2>Officer
and our Chief Financial Officer) has concluded that, as of December&nbsp;30, 2007, our internal control over financial reporting was effective. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
effectiveness of the Company's internal control over financial reporting as of December&nbsp;30, 2007 has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated on their report appearing on page&nbsp;62 of this Annual Report on Form&nbsp;10-K. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fw18601_item_9b._other_information"> </A>
<A NAME="toc_fw18601_3"> </A>
ITEM 9B.&nbsp;&nbsp;&nbsp;&nbsp;OTHER INFORMATION    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>97</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=97,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=1003693,FOLIO='97',FILE='DISK121:[08ZAF1.08ZAF18601]FW18601A.;10',USER='CBENSON',CD='11-MAR-2008;13:35' -->
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fx18601_1_98"> </A>


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<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fx18601_part_iii"> </A>
<A NAME="toc_fx18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART III    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain information required by Part&nbsp;III is incorporated by reference from the definitive Proxy Statement regarding our 2008 Annual Meeting of Stockholders
and will be filed not later than 120&nbsp;days after the end of the fiscal year covered by this Report. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fx18601_item_10._directors,_executive___ite02336"> </A>
<A NAME="toc_fx18601_2"> </A>
ITEM 10.&nbsp;&nbsp;&nbsp;&nbsp;DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information regarding the backgrounds of our directors and officers is contained herein under Item&nbsp;1, "Executive Officers and Directors." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
regarding our Audit Committee, our Audit Committee financial expert, the procedures by which security holders may recommend nominees to our Board and our Code of Conduct and
Ethics is hereby incorporated herein by reference from the section entitled "Board Meetings, Committees and Corporate Governance" in the Proxy Statement. A copy of our Code of Conduct and Ethics is
posted on our website at </FONT><FONT SIZE=2><I>www.quicklogic.com/investors</I></FONT><FONT SIZE=2>. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
regarding compliance with Section&nbsp;16(a) of the Securities Exchange Act of 1934, as amended, is incorporated herein by reference from the section entitled
"Section&nbsp;16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fx18601_item_11._executive_compensation"> </A>
<A NAME="toc_fx18601_3"> </A>
ITEM 11.&nbsp;&nbsp;&nbsp;&nbsp;EXECUTIVE COMPENSATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by Item&nbsp;11 is set forth under the captions "Executive Compensation," "Compensation Discussion and Analysis," "Compensation of
Non-Employee Directors" and "Compensation Committee Interlocks and Insider Participation" in our Proxy Statement, which information is incorporated herein by reference. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fx18601_item_12._security_ownership_of__ite04004"> </A>
<A NAME="toc_fx18601_4"> </A>
ITEM 12.&nbsp;&nbsp;&nbsp;&nbsp;SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by Item&nbsp;12 is set forth under the captions "Equity Compensation Plan Summary" and "Security Ownership" in our Proxy Statement,
which information is incorporated herein by reference. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fx18601_item_13._certain_relationships__ite02925"> </A>
<A NAME="toc_fx18601_5"> </A>
ITEM 13.&nbsp;&nbsp;&nbsp;&nbsp;CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by Item&nbsp;13 is set forth under the captions "Transactions with Related Persons" and "Board Meetings, Committees and Corporate
Governance" in our Proxy Statement, which information is incorporated herein by reference. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fx18601_item_14._principal_accounting_fees_and_services"> </A>
<A NAME="toc_fx18601_6"> </A>
ITEM 14.&nbsp;&nbsp;&nbsp;&nbsp;PRINCIPAL ACCOUNTING FEES AND SERVICES    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by Item&nbsp;14 is set forth under the caption "Fees Billed to QuickLogic by PricewaterhouseCoopers&nbsp;LLP during Fiscal 2007" in
our Proxy Statement, which information is incorporated herein by reference. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>98</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=98,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=506417,FOLIO='98',FILE='DISK121:[08ZAF1.08ZAF18601]FX18601A.;8',USER='JJORGE',CD='11-MAR-2008;04:24' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="page_fy18601_1_99"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->


 </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fy18601_part_iv"> </A>
<A NAME="toc_fy18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>PART IV    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> <A NAME="fy18601_item_15._exhibits_and_financial_statement_schedules"> </A>
<A NAME="toc_fy18601_2"> </A>
ITEM 15.&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS AND FINANCIAL STATEMENT SCHEDULES    <BR>    </B></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1. </FONT> <FONT SIZE=2><I>Financial Statements</I></FONT></DD></DL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>Reference
is made to page&nbsp;61 for a list of all financial statements and schedules filed as a part of this Report. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>2.
</FONT><FONT SIZE=2><I>Financial Statement Schedules</I></FONT></P>

<A NAME="fy18601_quicklogic_corporation__fy102387"> </A>
<A NAME="toc_fy18601_3"> </A>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>QuickLogic Corporation<BR>
Valuation and Qualifying Accounts<BR>
(in thousands)  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="96%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Balance at<BR>
Beginning of<BR>
Period</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Charged to<BR>
Costs and<BR>
Expenses</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Deductions</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Balance at<BR>
End of<BR>
Period</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><I>Allowance for Doubtful Accounts:</I></FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%" style="font-family:times;"><FONT SIZE=2>Fiscal year 2007</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>861</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>235</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(902</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>194</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%" style="font-family:times;"><FONT SIZE=2>Fiscal year 2006</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,042</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>246</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(427</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>861</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD WIDTH="41%" style="font-family:times;"><FONT SIZE=2>Fiscal year 2005</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,088</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>119</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(165</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD WIDTH="2%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,042</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
other schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes hereto. </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>3.
</FONT><FONT SIZE=2><I>Exhibits</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>The
exhibits listed under Item&nbsp;15(b) hereof are filed as part of this Annual Report on Form&nbsp;10-K. </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Exhibits</I></FONT></DD></DL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following exhibits are filed with or incorporated by reference into this Report: </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="15%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Exhibit<BR>
Number</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="82%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.1(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2>Amended and Restated Certificate of Incorporation of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3.2(9)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Bylaws of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4.1(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Specimen Common Stock certificate of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4.2(4)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Rights Agreement, dated as of November&nbsp;28, 2001, between QuickLogic Corporation and American Stock Transfer&nbsp;&amp; Trust Company, as Rights Agent.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.1(8,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Form of Indemnification Agreement for directors and executive officers.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.2(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.3(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.4(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Stock Options and Stock Option Award Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.5(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Stock Purchase Right and Restricted Stock Purchase Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.6(12,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
1999 Employee Stock Purchase Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.7(1,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
1989 Stock Option Plan.</FONT></TD>
</TR>
</TABLE>
<!-- insert table folio -->
<BR>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>99</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=99,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=860234,FOLIO='99',FILE='DISK121:[08ZAF1.08ZAF18601]FY18601A.;14',USER='ALOEW',CD='11-MAR-2008;07:45' -->
<A NAME="page_fy18601_1_100"> </A>
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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.8(1,7)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Lease dated June&nbsp;17, 1996, as amended, between Kairos,&nbsp;LLC and Moffet Orchard Investors as Landlord and the Registrant for the Registrant's facility located in Sunnyvale, California.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.9(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Patent Cross License Agreement dated August&nbsp;25, 1998 between the Registrant and Actel Corporation.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.10(2)&#134;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Share Purchase Agreement dated December&nbsp;11, 2000 between the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.11(2,3)&#134;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Foundry Agreement dated December&nbsp;11, 2000 as amended on September&nbsp;17, 2001 between the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.12(2)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Registration Rights Agreement dated January&nbsp;18, 2001 among, inter alia, the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.13(15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Form of Change of Control Severance Agreement.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.14(15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Form of Change of Control Severance Agreement for E. Thomas Hart.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.15(11,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
2005 Executive Bonus Plan, as amended.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.16(6)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Amendment dated May&nbsp;28, 2002 to Share Purchase Agreement between QuickLogic Corporation and Tower Semiconductor&nbsp;Ltd. dated December&nbsp;11, 2000.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.17(10)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the registrant effective June&nbsp;30, 2006.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.18(13)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
First Amendment to Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the registrant effective June&nbsp;27, 2007.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
21.1(5)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Subsidiaries of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Consent of Independent Registered Public Accounting Firm.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
24.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
Power of Attorney (See page&nbsp;102).</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
31.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
CEO Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
31.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
CFO Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
32</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" style="font-family:times;"><FONT SIZE=2><BR>
CEO and CFO Certifications pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Registration Statement on Form&nbsp;S-1 declared effective October&nbsp;14, 1999 (Commission File
No.&nbsp;333-28833).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;28, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on November&nbsp;2, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Registration Statement on Form&nbsp;8-A filed on December&nbsp;10, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;14, 2002 (Commission File No.&nbsp;000-22671). </FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>100</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fy18601_1_101"> </A>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on August&nbsp;14, 2002 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on November&nbsp;13, 2002 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;17, 2005 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;5.03) filed on May&nbsp;2, 2005.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on December&nbsp;22, 2006 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;1.01) filed on March&nbsp;12, 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(12)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;15, 2007 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(13)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on August&nbsp;10, 2007 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(14)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;1.01 and Item&nbsp;5.03) filed on September&nbsp;4, 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(15)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>This
exhibit is a management contract or compensatory plan or arrangement.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
Company has requested confidential treatment pursuant to Rule&nbsp;406 for a portion of the referenced exhibit and has separately filed such exhibit with the
Commission. </FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>101</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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NAME="ja18601_signatures"> </A>
<A NAME="toc_ja18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>SIGNATURES    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on this 11<SUP>th</SUP>&nbsp;day of March 2008. </FONT></P>

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<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2><B>QUICKLOGIC CORPORATION</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2><B><BR>
&nbsp;</B></FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><B><BR>&nbsp;</B></FONT></TD>
<TD WIDTH="5%" style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="45%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>E. THOMAS HART</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> E. Thomas Hart<BR></FONT> <FONT SIZE=2><I>Chairman, President and Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ja18601_power_of_attorney"> </A>
<A NAME="toc_ja18601_2"> </A>
<BR></FONT><FONT SIZE=2><B>POWER OF ATTORNEY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints E. Thomas Hart and Carl M. Mills and each of them
singly, as true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities
to sign this Annual Report on Form&nbsp;10-K filed herewith and any or all amendments to said report, and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said attorneys-in-fact
and agents the full power and authority to do and perform each and every act and the thing requisite and necessary to be done in and about the foregoing, as to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his substitute, may lawfully do or cause to be done
by virtue hereof. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated below. </FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Signature</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="36%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Title</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Date</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>E. THOMAS HART</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> E. Thomas Hart</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Chairman, President and Chief Executive Officer<BR></FONT> <FONT SIZE=2><I>(Principal Executive Officer)</I></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>CARL M. MILLS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Carl M. Mills</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Vice President, Finance, Chief Financial Officer and Secretary </FONT><FONT SIZE=2><I>(Principal Financial Officer and Principal Accounting Officer)</I></FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>MICHAEL J. CALLAHAN</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Michael J. Callahan</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>ARTURO KRUEGER</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Arturo Krueger</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>CHRISTINE RUSSELL</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Christine Russell</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>HIDE L. TANIGAMI</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Hide L. Tanigami</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="39%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>GARY H. TAUSS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Gary H. Tauss</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="36%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
Director</FONT></TD>
<TD WIDTH="3%" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
March&nbsp;11, 2008</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>102</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=102,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=384995,FOLIO='102',FILE='DISK121:[08ZAF1.08ZAF18601]JA18601A.;7',USER='JJORGE',CD='11-MAR-2008;04:24' -->
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NAME="page_jc18601_1_103"> </A>


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 </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="jc18601_exhibit_index"> </A>
<A NAME="toc_jc18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT INDEX    <BR>    </B></FONT></P>

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<TR VALIGN="BOTTOM">
<TH WIDTH="15%" ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1><B>Exhibit Number<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="82%" ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Description</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3.1(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Amended and Restated Certificate of Incorporation of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3.2(9)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Bylaws of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4.1(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Specimen Common Stock certificate of the Registrant.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4.2(4)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Rights Agreement, dated as of November&nbsp;28, 2001, between QuickLogic Corporation and American Stock Transfer&nbsp;&amp; Trust Company, as Rights Agent.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.1(8,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Form of Indemnification Agreement for directors and executive officers.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.2(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.3(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Restricted Stock Units and Restricted Stock Unit Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.4(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Stock Options and Stock Option Award Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.5(14,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Notice of Grant of Stock Purchase Right and Restricted Stock Purchase Agreement under the 1999 Stock Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.6(12,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
1999 Employee Stock Purchase Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.7(1,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
1989 Stock Option Plan.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.8(1,7)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Lease dated June&nbsp;17, 1996, as amended, between Kairos,&nbsp;LLC and Moffet Orchard Investors as Landlord and the Registrant for the Registrant's facility located in Sunnyvale, California.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.9(1)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Patent Cross License Agreement dated August&nbsp;25, 1998 between the Registrant and Actel Corporation.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.10(2)&#134;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Share Purchase Agreement dated December&nbsp;11, 2000 between the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.11(2,3)&#134;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Foundry Agreement dated December&nbsp;11, 2000 as amended on September&nbsp;17, 2001 between the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.12(2)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Registration Rights Agreement dated January&nbsp;18, 2001 among, inter alia, the Company and Tower Semiconductor&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.13(15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Form of Change of Control Severance Agreement.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.14(15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Form of Change of Control Severance Agreement for E. Thomas Hart.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.15(11,15)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
2005 Executive Bonus Plan, as restated.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.16(6)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Amendment dated May&nbsp;28, 2002 to Share Purchase Agreement between QuickLogic Corporation and Tower Semiconductor&nbsp;Ltd. dated December&nbsp;11, 2000.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.17(10)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the registrant effective June&nbsp;30, 2006.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10.18(13)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
First Amendment to Second Amended and Restated Loan and Security Agreement between Silicon Valley Bank and the registrant effective June&nbsp;27, 2007.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
21.1(5)</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Subsidiaries of the Registrant.</FONT></TD>
</TR>
</TABLE>
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<BR>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>103</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=103,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="1",CHK=852855,FOLIO='103',FILE='DISK121:[08ZAF1.08ZAF18601]JC18601A.;13',USER='JJORGE',CD='11-MAR-2008;04:24' -->
<A NAME="page_jc18601_1_104"> </A>
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<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
23.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Consent of Independent Registered Public Accounting Firm.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
24.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Power of Attorney (See page&nbsp;102).</FONT></TD>
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<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
31.1</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
CEO Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
31.2</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
CFO Certification pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
32</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="82%" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
CEO and CFO Certifications pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Registration Statement on Form&nbsp;S-1 declared effective October&nbsp;14, 1999 (Commission File
No.&nbsp;333-28833).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;28, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on November&nbsp;2, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Registration Statement on Form&nbsp;8-A filed on December&nbsp;10, 2001 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;14, 2002 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on August&nbsp;14, 2002 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on November&nbsp;13, 2002 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;17, 2005 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(9)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;5.03) filed on May&nbsp;2, 2005.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(10)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on December&nbsp;22, 2006 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(11)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;1.01) filed on March&nbsp;12, 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(12)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Annual Report on Form&nbsp;10-K filed on March&nbsp;15, 2007 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(13)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to the Company's Quarterly Report on Form&nbsp;10-Q filed on August&nbsp;10, 2007 (Commission File No.&nbsp;000-22671).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(14)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Incorporated
by reference to QuickLogic's Current Report on Form&nbsp;8-K (Item&nbsp;1.01 and Item&nbsp;5.03) filed on September&nbsp;4, 2007.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(15)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>This
exhibit is a management contract or compensatory plan or arrangement.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
Company has requested confidential treatment pursuant to Rule&nbsp;406 for a portion of the referenced exhibit and has separately filed such exhibit with the
Commission. </FONT></DD></DL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>104</FONT></P>

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<BR>
<P><br><A NAME="08ZAF18601_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_bg18601_1">QUICKLOGIC CORPORATION TABLE OF CONTENTS</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ca18601_1">EXPLANATORY NOTE</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ca18601_2">PART I</A></FONT><BR>
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ca18601_3">ITEM 1. BUSINESS</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_cg18601_1">ITEM 1A. RISK FACTORS</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ci18601_1">ITEM 1B. UNRESOLVED STAFF COMMENTS</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ci18601_2">ITEM 2. PROPERTIES</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ci18601_3">ITEM 3. LEGAL PROCEEDINGS</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ci18601_4">ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_da18601_1">PART II</A></FONT><BR>
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_da18601_2">ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_da18601_3">ITEM 6. SELECTED FINANCIAL DATA</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_dc18601_1">ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></FONT><BR>
</UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_dc18601_2">EXPLANATORY NOTE</A></FONT><BR>

<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_dg18601_1">ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fa18601_1">ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA</A></FONT><BR>
</UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fa18601_2">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fd18601_1">QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fe18601_1">QUICKLOGIC CORPORATION CONSOLIDATED BALANCE SHEETS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fg18601_1">QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fi18601_1">QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fk18601_1">QUICKLOGIC CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fm18601_1">QUICKLOGIC CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fu18601_1">SUPPLEMENTARY FINANCIAL DATA QUARTERLY DATA (UNAUDITED)</A></FONT><BR>

<!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fw18601_1">ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fw18601_2">ITEM 9A. CONTROLS AND PROCEDURES</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fw18601_3">ITEM 9B. OTHER INFORMATION</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_1">PART III</A></FONT><BR>
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_2">ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_3">ITEM 11. EXECUTIVE COMPENSATION</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_4">ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_5">ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fx18601_6">ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES</A></FONT><BR>
</UL>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fy18601_1">PART IV</A></FONT><BR>
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fy18601_2">ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES</A></FONT><BR>
</UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_fy18601_3">QuickLogic Corporation Valuation and Qualifying Accounts</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ja18601_1">SIGNATURES</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ja18601_2">POWER OF ATTORNEY</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_jc18601_1">EXHIBIT INDEX</A></FONT><BR>
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<TYPE>EX-10.13
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<FILENAME>a2183326zex-10_13.htm
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit&nbsp;10.13</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">QUICKLOGIC CORPORATION</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">CHANGE OF CONTROL SEVERANCE AGREEMENT</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Change of Control
Severance Agreement (the &#147;Agreement&#148;) is made and entered into effective as of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>,
200<u>&nbsp;&nbsp;&nbsp;</u> (the &#147;Effective Date&#148;), by and between [Executive
Officer] (the &#147;Employee&#148;) and QuickLogic Corporation, a Delaware corporation
(the &#147;Company&#148;).&#160; Certain capitalized
terms used in this Agreement are defined in Section&nbsp;1 below.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">R E C I T A L S</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; It is expected that the Company from time to time will consider
the possibility of a Change of Control.&#160;
The Board of Directors of the Company (the &#147;Board&#148;) recognizes that such
consideration can be a distraction to the Employee and can cause the Employee
to consider alternative employment opportunities.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">B.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The Board believes that it is in the best interests of
the Company and its stockholders to provide the Employee with an incentive to
continue his employment and to maximize the value of the Company upon a Change
of Control for the benefit of its stockholders.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">C.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; In order to provide the Employee with enhanced financial
security and sufficient encouragement to remain with the Company
notwithstanding the possibility of a Change of Control, the Board believes that
it is imperative to provide the Employee with certain severance benefits upon
the Employee&#146;s termination of employment following a Change of Control.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AGREEMENT</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In consideration of the
mutual covenants herein contained and the continued employment of Employee by
the Company, the parties agree as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Definition of Terms</u>.&#160; The following terms referred to in this
Agreement shall have the following meanings:</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Cause</u>.&#160; &#147;Cause&#148; shall mean (i)&nbsp;any act of
personal dishonesty taken by the Employee in connection with his
responsibilities as an employee which is intended to result in substantial
personal enrichment of the Employee, (ii)&nbsp;Employee&#146;s conviction of a
felony which the Board reasonably believes has had or will have a material
detrimental effect on the Company&#146;s reputation or business, (iii)&nbsp;a willful
act by the Employee which constitutes misconduct and is injurious to the
Company, or (iv)&nbsp;continued willful violations by the Employee of the
Employee&#146;s obligations to the Company after there has been delivered to the
Employee a written demand for performance from the Company which describes the
basis for the Company&#146;s belief that the Employee has not substantially
performed his duties, and a period of thirty (30) days following the date of
delivery of such written demand for the Employee to cure such violations.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">

<hr size="3" width="100%" noshade color="#010101" align="left">

</font></h2>

</div>
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<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Change of Control</u>.&#160; &#147;Change of Control&#148; shall mean the occurrence
of any of the following events:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160; the approval by stockholders of the
Company of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160; the approval by the stockholders of the
Company of a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company&#146;s assets;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160; any &#147;person&#148; (as such term is used in
Sections&nbsp;13(d)&nbsp;and 14(d)&nbsp;of the Securities Exchange Act of 1934,
as amended) becoming the &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3
under said Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by the Company&#146;s
then outstanding voting securities; or</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160;&#160;&#160;&#160; a change in the composition of the Board,
as a result of which fewer than a majority of the directors are Incumbent
Directors.&#160; &#147;Incumbent Directors&#148; shall
mean directors who either (A)&nbsp;are directors of the Company as of the date
hereof, or (B)&nbsp;are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of those directors whose election
or nomination was not in connection with any transactions described in
subsections&nbsp;(i), (ii), or (iii)&nbsp;or in connection with an actual or
threatened proxy contest relating to the election of directors of the Company.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Involuntary Termination</u>.&#160; &#147;Involuntary Termination&#148; shall mean (i)&nbsp;without
the Employee&#146;s express written consent, a significant reduction of the Employee&#146;s
duties, position or responsibilities relative to the Employee&#146;s duties,
position or responsibilities in effect immediately prior to such reduction, or
the removal of the Employee from such position, duties and responsibilities,
unless the Employee is provided with comparable duties, position and
responsibilities; (ii)&nbsp;without the Employee&#146;s express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii)&nbsp;without the Employee&#146;s express
written consent, a reduction by the Company of the Employee&#146;s base or target
incentive cash compensation as in effect immediately prior to such reduction; (iv)&nbsp;without
the Employee&#146;s express written consent, a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee&#146;s overall
benefits package is significantly reduced; (v)&nbsp;without the Employee&#146;s
express written consent, the relocation of the Employee to a facility or a
location more than fifty (50) miles from his current location; (vi)&nbsp;any
purported termination of the Employee by the Company which is not effected for
Cause or for which the grounds relied upon are not valid; or (vii)&nbsp;the
failure of the Company to obtain the assumption of this Agreement by any
successors contemplated in Section&nbsp;6 below</font><font size="2" style="font-size:10.0pt;"> ; provided, however, that
such events shall not constitute grounds for an Involuntary Termination </font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

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</div>
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<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">unless
the Employee has provided notice to the Company of the existence of the one or
more of the above conditions within 90 days of its initial existence and the
Company has been provided at least 30 days to remedy the condition</font><font size="2" style="font-size:10.0pt;">.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severance Benefits Period</u>.&#160; &#147;Severance Benefits Period&#148; shall mean a
period of twelve (12) months following the Termination Date.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Date</u>.&#160; &#147;Termination Date&#148; shall mean the effective
date of any notice of termination delivered by one party to the other hereunder
(so long as such date coincides with or is subsequent to the delivery date of
such notice).</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Term of Agreement</u>.&#160; This Agreement shall terminate upon the date
that all obligations of the parties hereto under this Agreement have been
satisfied or, if earlier, on the date, prior to a Change of Control, Employee
is no longer employed by the Company.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>At-Will Employment</u>.&#160; The Company and the Employee acknowledge that
the Employee&#146;s employment is and shall continue to be at-will, as defined under
applicable law.&#160; If the Employee&#146;s
employment terminates for any reason, the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by
this Agreement, or as may otherwise be established under the Company&#146;s then
existing employee benefit plans or policies at the time of termination.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severance Benefits</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Following A Change of
Control</u>.&#160; If the Employee&#146;s
employment with the Company terminates as a result of an Involuntary
Termination at any time three (3)&nbsp;months prior to, or twelve (12) months
after, a Change of Control, Employee shall be entitled to the following
severance benefits provided that Employee enters into and does not revoke a
general release of claims with the Company in substantially the form attached
hereto as Exhibit&nbsp;A within two and one-half months from the date of such
termination of employment:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160; Employee&#146;s base salary for the Severance
Benefits Period as in effect as of the date of such termination (or if greater,
as in effect immediately prior to the Change of Control), less applicable
withholding, payable in a lump sum within thirty (30) days of the Involuntary
Termination;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160; Employee&#146;s incentive cash compensation
computed at 100% of target for the Severance Benefits Period as in effect as of
the date of such termination (or if greater, as in effect immediately prior to
the Change of Control), less applicable withholding, payable in a lump sum
within thirty (30) days of the Involuntary Termination;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160; One hundred percent (100%) of any incentive
cash compensation or bonus declared prior to the date of any such termination
for the Employee but not yet paid, if any;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160;&#160;&#160;&#160; All stock options, restricted stock units,
restricted stock and other equity compensation awards granted by the Company to
the Employee prior to the Change of Control shall become fully vested and
exercisable as of the date of the termination and, with respect </font></h3>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

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</div>
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<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">to stock options, will
remain exercisable for the lesser of three (3) months following the Termination
Date or the original full stock option term, notwithstanding any shorter period
stated in the stock option agreements and;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(v)&#160;&#160;&#160;&#160;&#160; If Employee elects to continue his benefits
under the Company&#146;s group health, dental, and/or vision plans through COBRA,
the Company shall reimburse the cost of COBRA continuation coverage for
Employee (and, where applicable, Employee&#146;s dependents) over the Severance
Benefit Period (the &#147;COBRA Continuation Payments&#148;).&#160; Employee will continue to pay the same
portion of the cost of such benefits as he currently pays as of the last day of
his employment with the Company, or, if lesser, the same portion of the cost of
such benefits as he paid immediately prior to the Change of Control.&#160; The COBRA Continuation Payments will cease,
and the Company will have no further obligations with respect to the payment of
any premiums for continuation coverage to Employee, as of the earlier of (a)&nbsp;the
conclusion of the Severance Benefit Period; or (b)&nbsp;the cessation of
Employee&#146;s COBRA eligibility.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Apart from a Change of
Control</u>.&#160; If the Employee&#146;s
employment with the Company terminates other than as a result of an Involuntary
Termination at any time three (3)&nbsp;months prior or twelve (12) months
following a Change of Control, then the Employee shall not be entitled to
receive severance or other benefits hereunder, but may be eligible for those
benefits (if any) as may then be established under the Company&#146;s then existing
severance and benefits plans and policies at the time of such termination.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Accrued Wages and Vacation;
Expenses</u>.&#160; Without regard to the
reason for, or the timing of, Employee&#146;s termination of employment:&#160; (i)&nbsp;the Company shall pay the Employee
any unpaid base salary and incentive cash compensation due for periods prior to
the Termination Date; (ii)&nbsp;the Company shall pay the Employee all of the
Employee&#146;s accrued and unused vacation through the Termination Date; and (iii)&nbsp;following
submission of proper expense reports by the Employee, the Company shall
reimburse the Employee for all expenses reasonably and necessarily incurred by
the Employee in connection with the business of the Company prior to the
Termination Date.&#160; These payments shall
be made promptly upon termination and within the period of time mandated by
law.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Internal Revenue Code Section&nbsp;409A</u>.
Notwithstanding any other provision of this Agreement, if the Employee is a &#147;specified
employee&#148; under Internal Revenue Code Section&nbsp;409A and a delay in making
any payment or providing any benefit under this Agreement is required by Code Section&nbsp;409A
and any Treasury Regulations, and IRS guidance thereunder, or necessary in the
good faith judgment of the Company, to avoid the Employee incurring additional
tax under Section&nbsp;409A, such payments or benefits shall not be paid or
provided until the end of six (6)&nbsp;months following the date of the
Employee&#146;s separation from service in accordance with Code Section&nbsp;409A.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Limitation on Payments</u>.&#160; In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)&nbsp;constitute
&#147;parachute payments&#148; within the meaning of Section&nbsp;280G of the Code, and (ii)&nbsp;would
be subject to the excise tax imposed by Section&nbsp;4999 of the Code (the &#147;Excise
Tax&#148;), then Employee&#146;s benefits under this Agreement shall be either delivered
in full, or delivered as to such lesser extent which would result in no portion
of such benefits being subject to the Excise Tax, whichever of the foregoing
amounts, taking into </font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

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</div>
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<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">account the applicable
federal, state and local income taxes and the Excise Tax, results in the
receipt by Employee on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be taxable under Section&nbsp;4999
of the Code.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Unless the Company and
the Employee otherwise agree in writing, any determination required under this Section&nbsp;shall
be made in writing by a &#147;Big Four&#148; national accounting firm selected by the
Company (the &#147;Accountants&#148;), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes.&#160; For purposes of making the calculations
required by this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Section&nbsp;280G and 4999
of the Code.&#160; The Company and the
Employee shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.&#160; The Company shall bear all costs
the Accountants may reasonably incur in connection with any calculations
contemplated by this Section.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Successors</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Company&#146;s Successors</u>.&#160; Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company&#146;s business and/or
assets shall assume the Company&#146;s obligations under this Agreement and agree
expressly to perform the Company&#146;s obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession.&#160;
For all purposes under this Agreement, the term &#147;Company&#148; shall include
any successor to the Company&#146;s business and/or assets which executes and
delivers the assumption agreement described in this subsection&nbsp;(a)&nbsp;or
which becomes bound by the terms of this Agreement by operation of law.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Employee&#146;s Successors</u>.&#160; Without the written consent of the Company,
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity.&#160; Notwithstanding the foregoing, the terms of
this Agreement and all rights of Employee hereunder shall inure to the benefit
of, and be enforceable by, Employee&#146;s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notices</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>General</u>.&#160; Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid.&#160; In the case of the Employee, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing.&#160;
In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to the attention of
its Secretary.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notice of Termination</u>.&#160; Any termination or resignation of the
Employee shall be communicated by a notice of termination to the other party
hereto given in accordance with this </font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

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</div>
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<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section.&#160; Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated,
and shall specify the Termination Date (which shall be not more than 30 days
after the giving of such notice).&#160; The
failure by the Employee to include in the notice any fact or circumstance which
contributes to a showing of Involuntary Termination shall not waive any right
of the Employee hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing his rights hereunder.</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Arbitration</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Any dispute or controversy arising
out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination
thereof, shall be settled by binding arbitration to be held in Santa Clara
County, California, in accordance with the National Rules&nbsp;for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the &#147;Rules&#148;).&#160; The
arbitrator may grant injunctions or other relief in such dispute or
controversy.&#160; The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration.&#160; Judgment may be entered on
the arbitrator&#146;s decision in any court having jurisdiction.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The arbitrator(s)&nbsp;shall apply
California law to the merits of any dispute or claim, without reference to
conflicts of law rules.&#160; The arbitration
proceedings shall be governed by federal arbitration law and by the Rules, without
reference to state arbitration law.&#160;
Employee hereby consents to the personal jurisdiction of the state and
federal courts located in California for any action or proceeding arising from
or relating to this Agreement or relating to any arbitration in which the
parties are participants.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee understands that nothing in
this Section&nbsp;modifies Employee&#146;s at-will employment status.&#160; Either Employee or the Company can terminate
the employment relationship at any time, with or without Cause.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; EMPLOYEE HAS READ AND UNDERSTANDS
THIS SECTION, WHICH DISCUSSES ARBITRATION.&#160;
EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE&#146;S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE
OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE
COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL </font></h3>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
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<div>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL, STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO,
TITLE&nbsp;VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991,
THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR
EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION&nbsp;201, <i>et</i>  <i>seq</i>;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Miscellaneous Provisions</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Duty to Mitigate</u>.&#160; The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall
any such payment be reduced by any earnings that the Employee may receive from
any other source.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Waiver</u>.&#160; No provision of this Agreement may be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee).&#160;
No waiver by either party of any breach of, or of compliance with, any
condition or provision of this Agreement by the other party shall be considered
a waiver of any other condition or provision or of the same condition or
provision at another time.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Integration</u>.&#160; This Agreement and any outstanding equity
award agreements referenced herein represent the entire agreement and
understanding between the parties as to the subject matter herein and supersede
all prior or contemporaneous agreements, whether written or oral, with respect
to this Agreement and any equity award agreement.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Choice of Law</u>.&#160; The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of California.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Employment Taxes</u>.&#160; All payments made pursuant to this Agreement
shall be subject to withholding of applicable income and employment taxes.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Counterparts</u>.&#160; This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.</font></h2>

<h2 align="center" style="font-weight:normal;margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=7,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=758934,FOLIO='7',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, each
of the parties has executed this Agreement, in the case of the Company by its
duly authorized officer, as of the day and year first above written.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<div align="center">

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">COMPANY:</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">QUICKLOGIC CORPORATION</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.36%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="45%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:45.56%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:4.46%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="44%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:44.46%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">EMPLOYEE:</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="51%" valign="top" style="padding:0in .7pt 0in .7pt;width:51.08%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="48%" colspan="3" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:48.92%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[Executive Officer]</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="382" style="border:none;"></td>
  <td width="25" style="border:none;"></td>
  <td width="8" style="border:none;"></td>
  <td width="333" style="border:none;"></td>
 </tr>
</table>

</div>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>

<div style="margin:0in 0in .0001pt;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=8,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=463163,FOLIO='8',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<div>

<p style="margin:0in 0in .0001pt .5in;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;text-decoration:underline;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">EXHIBIT A</font></u></b></p>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">SETTLEMENT AGREEMENT AND RELEASE</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Settlement Agreement
and Release (&#147;Agreement&#148;) is made by and between QuickLogic Corporation (the &#147;Company&#148;),
and <b>[EMPLOYEE]</b> (&#147;Employee&#148;).</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, Employee was
employed by the Company;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Company and
Employee have entered into a Change of Control Severance Agreement (the &#147;Severance
Agreement&#148;);</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOW THEREFORE, in
consideration of the mutual promises made herein, the Company and Employee
(collectively referred to as &#147;the Parties&#148;) hereby agree as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination</u>.&#160; Employee&#146;s employment from the Company
terminated on <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consideration</u>.&#160; The Company agrees to pay Employee the
severance benefits set forth in Section&nbsp;4 of the Severance Agreement under
the terms and conditions of the Severance Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Confidential Information</u>.&#160; Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between Employee and the Company.&#160; Employee shall return all Company property
and confidential and proprietary information in his possession to the Company
on the Effective Date of this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Payment of Salary</u>.&#160; Employee acknowledges and represents that the
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Employee.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Release of Claims</u>.&#160; Employee agrees that the foregoing
consideration represents settlement in full of all outstanding obligations owed
to Employee by the Company.&#160; Employee, on
behalf of himself and his respective heirs, family members, executors and
assigns, hereby fully and forever releases the Company and its past, present
and future officers, agents, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations, and assigns, from, and agrees not to sue or otherwise
institute or cause to be instituted any legal or administrative proceedings
concerning any claim, duty, obligation or cause of action relating to any
matters of any kind, whether presently known or unknown, suspected or
unsuspected, that he may possess arising from any omissions, acts or facts that
have occurred up until and including the Effective Date of this Agreement
including, without limitation,</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims relating to or
arising from Employee&#146;s employment relationship with the Company and the
termination of that relationship;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-1</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=9,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=464351,FOLIO='A-1',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<div>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims relating to, or
arising from, Employee&#146;s right to vest in equity awards, right to purchase or
actual purchase of shares of stock of the Company, including, without
limitation, any claims for fraud, misrepresentation, breach of fiduciary duty,
breach of duty under applicable state corporate law, and securities fraud under
any state or federal law;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for wrongful
discharge of employment; termination in violation of public policy;
discrimination; breach of contract, both express and implied; breach of a
covenant of good faith and fair dealing, both express and implied; promissory
estoppel; negligent or intentional infliction of emotional distress; negligent
or intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">d.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for violation of
any federal, state or municipal statute, including, but not limited to,
Title&nbsp;VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act of 1967, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement
Income Security Act of 1974, the Worker Adjustment and Retraining Notification
Act, the California Fair Employment and Housing Act, and Labor Code
section&nbsp;201, <i>et</i>  <i>seq</i>.
and section&nbsp;970, <i>et</i>  <i>seq</i>. and all amendments to each such Act as well as the regulations
issued thereunder;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">e.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for violation of
the federal, or any state, constitution;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">f.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims arising out of
any other laws and regulations relating to employment or employment
discrimination;&#160; and</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">g.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for attorneys&#146;
fees and costs.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee agrees that the release
set forth in this section shall be and remain in effect in all respects as a
complete general release as to the matters released.&#160; This release does not extend to any
obligations incurred under this Agreement.&#160;
Employee acknowledges and agrees that any breach of this paragraph shall
constitute a material breach of the Agreement and in the case of a breach by
Employee, shall entitle the Company immediately to recover the monetary
consideration discussed in paragraph&nbsp;two (2) above.&#160; Employee shall also be responsible to the
Company for all costs, attorneys&#146; fees and any and all damages incurred by the
Company (a)&nbsp;enforcing the obligation, including the bringing of any suit
to recover the monetary consideration, and (b)&nbsp;defending against a claim
or suit brought or pursued by Employee in violation of this provision.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Acknowledgment of Waiver of
Claims under ADEA</u>.&#160; Employee
acknowledges that he is waiving and releasing any rights he may have under the
Age Discrimination in Employment Act of 1967 (&#147;ADEA&#148;) and that this waiver and
release is knowing and voluntary.&#160;
Employee and the Company agree that this waiver and release does not
apply to any rights or claims that may arise under the ADEA after the Effective
Date of this Agreement.&#160; Employee
acknowledges that the consideration given for this waiver and release Agreement
is in addition to anything of value to which Employee was already entitled.&#160; Employee further acknowledges that he has
been advised by this writing that (a)&nbsp;he should consult with an attorney <u>prior</u>
to executing this Agreement; (b)&nbsp;he has </font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-2</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=10,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=516387,FOLIO='A-2',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">twenty-one (21) days
within which to consider this Agreement; (c)&nbsp;he has seven (7)&nbsp;days following
the execution of this Agreement by the parties to revoke the Agreement; and (d)&nbsp;this
Agreement shall not be effective until the revocation period has expired.&#160; Any revocation should be in writing and
delivered to the Secretary of QuickLogic Corporation at 1277 Orleans Drive,
Sunnyvale, CA 94089 by close of business on the seventh day from the date that
Employee signs this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Civil Code Section&nbsp;1542</u>.&#160; Employee represents that he is not aware of
any claims against the Company other than the claims that are released by this
Agreement.&#160; Employee acknowledges that he
has been advised by legal counsel and is familiar with the provisions of
California Civil Code Section&nbsp;1542, which provides as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.</font></b></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee, being aware of said code
section, agrees to expressly waive any rights he may have thereunder, as well
as under any other statute or common law principles of similar effect.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Pending or Future Lawsuits</u>.&#160; Employee represents that he has no lawsuits,
claims, or actions pending in his name, or on behalf of any other person or
entity, against the Company or any other person or entity referred to
herein.&#160; Employee also represents that he
does not intend to bring any claims on his own behalf or on behalf of any other
person or entity against the Company or any other person or entity referred to
herein.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Application for Employment</u>.&#160; Employee understands and agrees that, as a
condition of this Agreement, he shall not be entitled to any employment with
the Company, its subsidiaries, or any successor, and he hereby waives any
right, or alleged right, of employment or re-employment with the Company.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Confidentiality</u>.&#160; Employee agrees to use his best efforts to
maintain in confidence the existence of this Agreement, the contents and terms
of this Agreement, and the consideration for this Agreement (hereinafter
collectively referred to as &#147;Settlement Information&#148;).&#160; Employee agrees to take every reasonable
precaution to prevent disclosure of any Settlement Information to third
parties, and agrees that there will be no publicity, directly or indirectly,
concerning any Settlement Information.&#160;
Employee agrees to take every precaution to disclose Settlement
Information only to those attorneys, accountants, governmental entities, and
family members who have a reasonable need to know of such Settlement
Information.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Cooperation</u>.&#160; Employee agrees he will not act in any manner
that might damage the business of the Company.&#160;
Employee agrees that he will not counsel or assist any attorneys or
their clients in the presentation or prosecution of any disputes, differences,
grievances, claims, charges, or complaints by any third party against the
Company and/or any officer, director, employee, agent, representative,
shareholder or attorney of the Company, unless under a subpoena or other court
order to do so.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-3</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=11,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=637442,FOLIO='A-3',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Non-Disparagement</u>.&#160; Employee agrees to refrain from any
defamation, libel or slander of the Company and its respective officers,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns or
tortious interference with the contracts and relationships of the Company and
its respective officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Admission of Liability</u>.&#160; Employee understands and acknowledges that
this Agreement constitutes a compromise and settlement of disputed claims.&#160; No action taken by the Company, either
previously or in connection with this Agreement shall be deemed or construed to
be (a)&nbsp;an admission of the truth or falsity of any claims heretofore made
or (b)&nbsp;an acknowledgment or admission by the Company of any fault or
liability whatsoever to the Employee or to any third party.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Costs</u>.&#160; The Parties shall each bear their own costs,
expert fees, attorneys&#146; fees and other fees incurred in connection with this
Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Arbitration</u>.&#160; The Parties agree that any and all disputes
arising out of the terms of this Agreement, their interpretation, and any of
the matters herein released, including any potential claims of harassment,
discrimination or wrongful termination shall be subject to binding arbitration,
to the extent permitted by law, in Santa Clara County, California, before the
American Arbitration Association under its National Rules&nbsp;for the
Resolution of Employment Disputes.&#160; <b>Employee agrees and hereby waives his right to jury trial as to matters
arising out of the terms of this Agreement and any matters herein released to
the extent permitted by law.</b>&#160;
The Parties agree that the prevailing party in any arbitration shall be
entitled to injunctive relief in any court of competent jurisdiction to enforce
the arbitration award.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Authority</u>.&#160; Employee represents and warrants that <b>[he/she]</b> has the capacity to act on <b>[his/her]</b>
own behalf and on behalf of all who might claim through <b>[him/her]</b>
to bind them to the terms and conditions of this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Representations</u>.&#160; Employee represents that he has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement.&#160; Neither party has relied upon any representations
or statements made by the other party hereto which are not specifically set
forth in this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; In the event that any provision hereof
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Entire Agreement</u>.&#160; This Agreement, the Change of Control
Severance Agreement, the equity award agreements and the Confidentiality
Agreement represent the entire agreement and understanding between the Company
and Employee concerning Employee&#146;s separation from the Company, and supersede
and replace any and all prior agreements and understandings concerning Employee&#146;s
relationship with the Company and his compensation by the Company.</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-4</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=12,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="2",CHK=693027,FOLIO='A-4',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KO_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:33 2008' -->


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<div style="font-family:Times New Roman;">

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Oral Modification</u>.&#160; This Agreement may only be amended in writing
signed by Employee and the President of the Company.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">23.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Governing Law</u>.&#160; This Agreement shall be governed by the
internal substantive laws, but not the choice of law rules, of the State of
California.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">24.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Effective Date</u>.&#160; This Agreement is effective eight (8) days
after it has been signed by both Parties.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">25.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Counterparts</u>.&#160; This Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Voluntary Execution of Agreement</u>.&#160; This Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the Parties
hereto, with the full intent of releasing all claims.&#160; The Parties acknowledge that:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They have read this Agreement;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They have been represented in the
preparation, negotiation, and execution of this Agreement by legal counsel of
their own choice or that they have voluntarily declined to seek such counsel;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They understand the terms and
consequences of this Agreement and of the releases it contains; and</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">d.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They are fully aware of the legal
and binding effect of this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, the
Parties have executed this Agreement on the respective dates set forth below.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<div align="center">

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
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  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[THE COMPANY]</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated: <b>[DATE]</b></font></p>
  </td>
  <td width="3%" valign="top" style="padding:0in .7pt 0in .7pt;width:3.6%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="46%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:46.4%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[EMPLOYEE NAME]</font></b><font size="2" style="font-size:10.0pt;">, an individual</font></p>
  </td>
 </tr>
 <tr>
  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
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  <td width="50%" valign="top" style="padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated: <b>[DATE]</b></font></p>
  </td>
  <td width="50%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:50.0%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

</div>

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<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-5</font></p>

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<TYPE>EX-10.14
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<FILENAME>a2183326zex-10_14.htm
<DESCRIPTION>EXHIBIT 10.14
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<p align="right" style="margin:0in 0in .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit&nbsp;10.14</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">QUICKLOGIC CORPORATION</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">CHANGE OF CONTROL SEVERANCE AGREEMENT</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Change of Control
Severance Agreement (the &#147;Agreement&#148;) is made and entered into effective as of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>,
200<u>&nbsp;&nbsp;</u> (the &#147;Effective Date&#148;), by and between [CEO] (the &#147;Employee&#148;)
and QuickLogic Corporation, a Delaware corporation (the &#147;Company&#148;).&#160; Certain capitalized terms used in this
Agreement are defined in Section&nbsp;1 below.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">R E C I T A L S</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; It is expected that the Company from
time to time will consider the possibility of a Change of Control.&#160; The Board of Directors of the Company (the &#147;Board&#148;)
recognizes that such consideration can be a distraction to the Employee and can
cause the Employee to consider alternative employment opportunities.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">B.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The Board believes that it is in the
best interests of the Company and its stockholders to provide the Employee with
an incentive to continue his employment and to maximize the value of the
Company upon a Change of Control for the benefit of its stockholders.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">C.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; In order to provide the Employee with
enhanced financial security and sufficient encouragement to remain with the
Company notwithstanding the possibility of a Change of Control, the Board
believes that it is imperative to provide the Employee with certain severance
benefits upon the Employee&#146;s termination of employment following a Change of
Control.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">AGREEMENT</font></p>

<p style="margin:0in 0in .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">In consideration of the
mutual covenants herein contained and the continued employment of Employee by
the Company, the parties agree as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Definition of Terms</u>.&#160; The following terms referred to in this
Agreement shall have the following meanings:</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Cause</u>.&#160; &#147;Cause&#148; shall mean (i)&nbsp;any act of
personal dishonesty taken by the Employee in connection with his
responsibilities as an employee which is intended to result in substantial
personal enrichment of the Employee, (ii)&nbsp;Employee&#146;s conviction of a
felony which the Board reasonably believes has had or will have a material
detrimental effect on the Company&#146;s reputation or business, (iii)&nbsp;a
willful act by the Employee which constitutes misconduct and is injurious to
the Company, or (iv)&nbsp;continued willful violations by the Employee of the
Employee&#146;s obligations to the Company after there has been delivered to the
Employee a written demand for performance from the Company which describes the
basis for the Company&#146;s belief that the Employee has not substantially
performed his duties, and a period of thirty (30) days following the date of
delivery of such written demand for the Employee to cure such violations.</font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

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</div>
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<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Change of Control</u>.&#160; &#147;Change of Control&#148; shall mean the occurrence
of any of the following events:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the approval by stockholders of the
Company of a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the total
voting power represented by the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the approval by the stockholders of the
Company of a plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially all of the
Company&#146;s assets;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160; any &#147;person&#148; (as such term is used in
Sections&nbsp;13(d)&nbsp;and 14(d)&nbsp;of the Securities Exchange Act of 1934,
as amended) becoming the &#147;beneficial owner&#148; (as defined in Rule&nbsp;13d-3
under said Act), directly or indirectly, of securities of the Company
representing 50% or more of the total voting power represented by the Company&#146;s
then outstanding voting securities; or</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160;&#160;&#160;&#160;&#160;&#160; a change in the composition of the Board,
as a result of which fewer than a majority of the directors are Incumbent
Directors.&#160; &#147;Incumbent Directors&#148; shall
mean directors who either (A)&nbsp;are directors of the Company as of the date
hereof, or (B)&nbsp;are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of those directors whose election
or nomination was not in connection with any transactions described in
subsections&nbsp;(i), (ii), or (iii)&nbsp;or in connection with an actual or
threatened proxy contest relating to the election of directors of the Company.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Involuntary Termination</u>.&#160; &#147;Involuntary Termination&#148; shall mean (i)&nbsp;without
the Employee&#146;s express written consent, a significant reduction of the Employee&#146;s
duties, position or responsibilities relative to the Employee&#146;s duties,
position or responsibilities in effect immediately prior to such reduction, or
the removal of the Employee from such position, duties and responsibilities,
unless the Employee is provided with comparable duties, position and
responsibilities; (ii)&nbsp;without the Employee&#146;s express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii)&nbsp;without the Employee&#146;s express
written consent, a reduction by the Company of the Employee&#146;s base or target
incentive cash compensation as in effect immediately prior to such reduction; (iv)&nbsp;without
the Employee&#146;s express written consent, a material reduction by the Company in
the kind or level of employee benefits to which the Employee is entitled
immediately prior to such reduction with the result that the Employee&#146;s overall
benefits package is significantly reduced; (v)&nbsp;without the Employee&#146;s
express written consent, the relocation of the Employee to a facility or a
location more than fifty (50) miles from his current location; (vi)&nbsp;any
purported termination of the Employee by the Company which is not effected for
Cause or for which the grounds relied upon are not valid; or (vii)&nbsp;the
failure of the Company to obtain the assumption of this Agreement by any
successors contemplated in Section&nbsp;6 below</font><font size="2" style="font-size:10.0pt;"> ; provided, however, that
such events shall not constitute grounds for an Involuntary Termination </font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2</font></p>

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<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">unless
the Employee has provided notice to the Company of the existence of the one or
more of the above conditions within 90 days of its initial existence and the
Company has been provided at least 30 days to remedy the condition</font><font size="2" style="font-size:10.0pt;">.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severance Benefits Period</u>.&#160; &#147;Severance Benefits Period&#148; shall mean a
period of twenty-four (24) months following the Termination Date.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Date</u>.&#160; &#147;Termination Date&#148; shall mean the effective
date of any notice of termination delivered by one party to the other hereunder
(so long as such date coincides with or is subsequent to the delivery date of
such notice).</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Term of Agreement</u>.&#160; This Agreement shall terminate upon the date
that all obligations of the parties hereto under this Agreement have been
satisfied or, if earlier, on the date, prior to a Change of Control, Employee
is no longer employed by the Company.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>At-Will Employment</u>.&#160; The Company and the Employee acknowledge that
the Employee&#146;s employment is and shall continue to be at-will, as defined under
applicable law.&#160; If the Employee&#146;s
employment terminates for any reason, the Employee shall not be entitled to any
payments, benefits, damages, awards or compensation other than as provided by
this Agreement, or as may otherwise be established under the Company&#146;s then
existing employee benefit plans or policies at the time of termination.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severance Benefits</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Following A Change of
Control</u>.&#160; If the Employee&#146;s
employment with the Company terminates as a result of an Involuntary
Termination at any time three (3)&nbsp;months prior to, or twelve (12) months
after, a Change of Control, Employee shall be entitled to the following
severance benefits provided that Employee enters into and does not revoke a
general release of claims with the Company in substantially the form attached
hereto as Exhibit&nbsp;A within two and one-half months from the date of such
termination of employment:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee&#146;s base salary for the Severance
Benefits Period as in effect as of the date of such termination (or if greater,
as in effect immediately prior to the Change of Control), less applicable
withholding, payable in a lump sum within thirty (30) days of the Involuntary
Termination;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee&#146;s incentive cash compensation
computed at 100% of target for the Severance Benefits Period as in effect as of
the date of such termination (or if greater, as in effect immediately prior to
the Change of Control), less applicable withholding, payable in a lump sum
within thirty (30) days of the Involuntary Termination;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160; One hundred percent (100%) of any
incentive cash compensation or bonus declared prior to the date of any such
termination for the Employee but not yet paid, if any;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iv)&#160;&#160;&#160;&#160;&#160;&#160; All stock options, restricted stock
units, restricted stock and other equity compensation awards granted by the
Company to the Employee prior to the Change of Control shall become fully
vested and exercisable as of the date of the termination and, with respect </font></h3>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3</font></p>

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<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">to stock options, will
remain exercisable for the lesser of three (3) months following the Termination
Date or the original full stock option term, notwithstanding any shorter period
stated in the stock option agreements and;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(v)&#160;&#160;&#160;&#160;&#160;&#160;&#160; If Employee elects to continue his benefits
under the Company&#146;s group health, dental, and/or vision plans through COBRA,
the Company shall reimburse the cost of COBRA continuation coverage for
Employee (and, where applicable, Employee&#146;s dependents) over the Severance
Benefit Period (the &#147;COBRA Continuation Payments&#148;).&#160; Employee will continue to pay the same
portion of the cost of such benefits as he currently pays as of the last day of
his employment with the Company, or, if lesser, the same portion of the cost of
such benefits as he paid immediately prior to the Change of Control.&#160; The COBRA Continuation Payments will cease,
and the Company will have no further obligations with respect to the payment of
any premiums for continuation coverage to Employee, as of the earlier of (a)&nbsp;the
conclusion of the Severance Benefit Period; or (b)&nbsp;the cessation of
Employee&#146;s COBRA eligibility.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination Apart from a Change of
Control</u>.&#160; If the Employee&#146;s
employment with the Company terminates other than as a result of an Involuntary
Termination at any time three (3)&nbsp;months prior or twelve (12) months
following a Change of Control, then the Employee shall not be entitled to
receive severance or other benefits hereunder, but may be eligible for those
benefits (if any) as may then be established under the Company&#146;s then existing
severance and benefits plans and policies at the time of such termination.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Accrued Wages and Vacation; Expenses</u>.&#160; Without regard to the reason for, or the
timing of, Employee&#146;s termination of employment:&#160; (i)&nbsp;the Company shall pay the Employee
any unpaid base salary and incentive cash compensation due for periods prior to
the Termination Date; (ii)&nbsp;the Company shall pay the Employee all of the
Employee&#146;s accrued and unused vacation through the Termination Date; and (iii)&nbsp;following
submission of proper expense reports by the Employee, the Company shall
reimburse the Employee for all expenses reasonably and necessarily incurred by
the Employee in connection with the business of the Company prior to the
Termination Date.&#160; These payments shall
be made promptly upon termination and within the period of time mandated by
law.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Internal Revenue Code Section&nbsp;409A</u>.
Notwithstanding any other provision of this Agreement, if the Employee is a &#147;specified
employee&#148; under Internal Revenue Code Section&nbsp;409A and a delay in making
any payment or providing any benefit under this Agreement is required by Code Section&nbsp;409A
and any Treasury Regulations, and IRS guidance thereunder, or necessary in the
good faith judgment of the Company, to avoid the Employee incurring additional
tax under Section&nbsp;409A, such payments or benefits shall not be paid or
provided until the end of six (6)&nbsp;months following the date of the
Employee&#146;s separation from service in accordance with Code Section&nbsp;409A.</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Limitation on Payments</u>.&#160; In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Employee (i)&nbsp;constitute
&#147;parachute payments&#148; within the meaning of Section&nbsp;280G of the Code, and (ii)&nbsp;would
be subject to the excise tax imposed by Section&nbsp;4999 of the Code (the &#147;Excise
Tax&#148;), then Employee&#146;s benefits under this Agreement shall be either delivered
in full, or delivered as to such lesser extent which would result in no portion
of such benefits being subject to the Excise Tax, whichever of the foregoing
amounts, taking into </font></h1>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4</font></p>

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</div>
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<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">account the applicable
federal, state and local income taxes and the Excise Tax, results in the
receipt by Employee on an after-tax basis, of the greatest amount of benefits,
notwithstanding that all or some portion of such benefits may be taxable under Section&nbsp;4999
of the Code.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Unless the Company and
the Employee otherwise agree in writing, any determination required under this Section&nbsp;shall
be made in writing by a &#147;Big Four&#148; national accounting firm selected by the
Company (the &#147;Accountants&#148;), whose determination shall be conclusive and
binding upon the Employee and the Company for all purposes.&#160; For purposes of making the calculations
required by this Section, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Section&nbsp;280G and 4999
of the Code.&#160; The Company and the
Employee shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.&#160; The Company shall bear all costs
the Accountants may reasonably incur in connection with any calculations
contemplated by this Section.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Successors</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Company&#146;s Successors</u>.&#160; Any successor to the Company (whether direct
or indirect and whether by purchase, lease, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company&#146;s business and/or
assets shall assume the Company&#146;s obligations under this Agreement and agree
expressly to perform the Company&#146;s obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession.&#160;
For all purposes under this Agreement, the term &#147;Company&#148; shall include
any successor to the Company&#146;s business and/or assets which executes and
delivers the assumption agreement described in this subsection&nbsp;(a)&nbsp;or
which becomes bound by the terms of this Agreement by operation of law.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Employee&#146;s Successors</u>.&#160; Without the written consent of the Company,
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity.&#160; Notwithstanding the foregoing, the terms of
this Agreement and all rights of Employee hereunder shall inure to the benefit
of, and be enforceable by, Employee&#146;s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notices</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>General</u>.&#160; Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid.&#160; In the case of the Employee, mailed notices
shall be addressed to him at the home address which he most recently
communicated to the Company in writing.&#160;
In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to the attention of
its Secretary.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notice of Termination</u>.&#160; Any termination or resignation of the
Employee shall be communicated by a notice of termination to the other party
hereto given in accordance with this </font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5</font></p>

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</div>
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<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section.&#160; Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 30 days after the giving of such
notice).&#160; The failure by the Employee to
include in the notice any fact or circumstance which contributes to a showing
of Involuntary Termination shall not waive any right of the Employee hereunder
or preclude the Employee from asserting such fact or circumstance in enforcing
his rights hereunder.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Arbitration</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Any dispute or controversy arising out
of, relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall be
settled by binding arbitration to be held in Santa Clara County, California, in
accordance with the National Rules&nbsp;for the Resolution of Employment
Disputes then in effect of the American Arbitration Association (the &#147;Rules&#148;).&#160; The arbitrator may grant injunctions or other
relief in such dispute or controversy.&#160;
The decision of the arbitrator shall be final, conclusive and binding on
the parties to the arbitration.&#160; Judgment
may be entered on the arbitrator&#146;s decision in any court having jurisdiction.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; The arbitrator(s)&nbsp;shall apply
California law to the merits of any dispute or claim, without reference to
conflicts of law rules.&#160; The arbitration
proceedings shall be governed by federal arbitration law and by the Rules, without
reference to state arbitration law.&#160;
Employee hereby consents to the personal jurisdiction of the state and
federal courts located in California for any action or proceeding arising from
or relating to this Agreement or relating to any arbitration in which the
parties are participants.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee understands that nothing in
this Section&nbsp;modifies Employee&#146;s at-will employment status.&#160; Either Employee or the Company can terminate
the employment relationship at any time, with or without Cause.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160; EMPLOYEE HAS READ AND UNDERSTANDS THIS
SECTION, WHICH DISCUSSES ARBITRATION.&#160;
EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, CONSTITUTES A WAIVER OF EMPLOYEE&#146;S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE
EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS FOR WRONGFUL
DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH
OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED;
NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR
INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL </font></h3>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6</font></p>

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</div>
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<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">INTERFERENCE WITH
CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(ii)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL, STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO,
TITLE&nbsp;VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991,
THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR
EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION&nbsp;201, <i>et</i>  <i>seq</i>;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:96.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(iii)&#160;&#160;&#160;&#160;&#160;&#160;&#160; ANY AND ALL CLAIMS ARISING OUT OF ANY
OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.</font></h3>

<h3 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.75in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h3>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Miscellaneous Provisions</u>.</font></h1>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h1>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Duty to Mitigate</u>.&#160; The Employee shall not be required to
mitigate the amount of any payment contemplated by this Agreement, nor shall
any such payment be reduced by any earnings that the Employee may receive from
any other source.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Waiver</u>.&#160; No provision of this Agreement may be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee).&#160;
No waiver by either party of any breach of, or of compliance with, any
condition or provision of this Agreement by the other party shall be considered
a waiver of any other condition or provision or of the same condition or
provision at another time.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Integration</u>.&#160; This Agreement and any outstanding equity
award agreements referenced herein represent the entire agreement and
understanding between the parties as to the subject matter herein and supersede
all prior or contemporaneous agreements, whether written or oral, with respect
to this Agreement and any equity award agreement.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Choice of Law</u>.&#160; The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, of the State of California.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Employment Taxes</u>.&#160; All payments made pursuant to this Agreement
shall be subject to withholding of applicable income and employment taxes.</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></h2>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Counterparts</u>.&#160; This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.</font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=7,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="3",CHK=821265,FOLIO='7',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KQ_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:22 2008' -->


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<div>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, each
of the parties has executed this Agreement, in the case of the Company by its
duly authorized officer, as of the day and year first above written.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.1%;">
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">COMPANY:</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">QUICKLOGIC CORPORATION</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.52%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:&nbsp;</font></p>
  </td>
  <td width="43%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:43.32%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="5%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:5.78%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:&nbsp;</font></p>
  </td>
  <td width="42%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:42.06%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">EMPLOYEE:</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.16%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="3" valign="top" style="border:none;padding:0in .7pt 0in .7pt;width:47.84%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">[CEO]</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="390" style="border:none;"></td>
  <td width="34" style="border:none;"></td>
  <td width="9" style="border:none;"></td>
  <td width="315" style="border:none;"></td>
 </tr>
</table>

<p style="margin:0in 0in .0001pt;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=8,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="3",CHK=1010058,FOLIO='8',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KQ_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:22 2008' -->


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<div>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;text-decoration:underline;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">EXHIBIT A</font></u></b></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">SETTLEMENT AGREEMENT AND RELEASE</font></b></p>

<p style="font-weight:bold;margin:0in 0in .0001pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></b></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This Settlement Agreement
and Release (&#147;Agreement&#148;) is made by and between QuickLogic Corporation (the &#147;Company&#148;),
and <b>[EMPLOYEE]</b> (&#147;Employee&#148;).</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, Employee was
employed by the Company;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WHEREAS, the Company and
Employee have entered into a Change of Control Severance Agreement (the &#147;Severance
Agreement&#148;);</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NOW THEREFORE, in
consideration of the mutual promises made herein, the Company and Employee
(collectively referred to as &#147;the Parties&#148;) hereby agree as follows:</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Termination</u>.&#160; Employee&#146;s employment from the Company
terminated on <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u>.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Consideration</u>.&#160; The Company agrees to pay Employee the
severance benefits set forth in Section&nbsp;4 of the Severance Agreement under
the terms and conditions of the Severance Agreement.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Confidential Information</u>.&#160; Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between Employee and the Company.&#160; Employee shall return all Company property
and confidential and proprietary information in his possession to the Company
on the Effective Date of this Agreement.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Payment of Salary</u>.&#160; Employee acknowledges and represents that the
Company has paid all salary, wages, bonuses, accrued vacation, commissions and
any and all other benefits due to Employee.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Release of Claims</u>.&#160; Employee agrees that the foregoing
consideration represents settlement in full of all outstanding obligations owed
to Employee by the Company.&#160; Employee, on
behalf of himself and his respective heirs, family members, executors and
assigns, hereby fully and forever releases the Company and its past, present
and future officers, agents, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations, and assigns, from, and agrees not to sue or otherwise
institute or cause to be instituted any legal or administrative proceedings
concerning any claim, duty, obligation or cause of action relating to any
matters of any kind, whether presently known or unknown, suspected or
unsuspected, that he may possess arising from any omissions, acts or facts that
have occurred up until and including the Effective Date of this Agreement
including, without limitation,</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims relating to or
arising from Employee&#146;s employment relationship with the Company and the
termination of that relationship;</font></h2>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-1</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=9,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="3",CHK=685667,FOLIO='A-1',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KQ_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:22 2008' -->


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<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims relating to, or
arising from, Employee&#146;s right to vest in equity awards, right to purchase or
actual purchase of shares of stock of the Company, including, without
limitation, any claims for fraud, misrepresentation, breach of fiduciary duty,
breach of duty under applicable state corporate law, and securities fraud under
any state or federal law;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for wrongful
discharge of employment; termination in violation of public policy;
discrimination; breach of contract, both express and implied; breach of a
covenant of good faith and fair dealing, both express and implied; promissory
estoppel; negligent or intentional infliction of emotional distress; negligent
or intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">d.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for violation of
any federal, state or municipal statute, including, but not limited to,
Title&nbsp;VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Age Discrimination in Employment Act of 1967, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the Employee Retirement
Income Security Act of 1974, the Worker Adjustment and Retraining Notification
Act, the California Fair Employment and Housing Act, and Labor Code
section&nbsp;201, <i>et</i>  <i>seq</i>.
and section&nbsp;970, <i>et</i>  <i>seq</i>. and all amendments to each such Act as well as the
regulations issued thereunder;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">e.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for violation of
the federal, or any state, constitution;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">f.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims arising out of any
other laws and regulations relating to employment or employment
discrimination;&#160; and</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">g.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; any and all claims for attorneys&#146; fees
and costs.</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee agrees that the release set
forth in this section shall be and remain in effect in all respects as a
complete general release as to the matters released.&#160; This release does not extend to any
obligations incurred under this Agreement.&#160;
Employee acknowledges and agrees that any breach of this paragraph shall
constitute a material breach of the Agreement and in the case of a breach by
Employee, shall entitle the Company immediately to recover the monetary
consideration discussed in paragraph&nbsp;two (2) above.&#160; Employee shall also be responsible to the
Company for all costs, attorneys&#146; fees and any and all damages incurred by the
Company (a)&nbsp;enforcing the obligation, including the bringing of any suit
to recover the monetary consideration, and (b)&nbsp;defending against a claim
or suit brought or pursued by Employee in violation of this provision.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Acknowledgment of Waiver of Claims
under ADEA</u>.&#160; Employee acknowledges
that he is waiving and releasing any rights he may have under the Age Discrimination
in Employment Act of 1967 (&#147;ADEA&#148;) and that this waiver and release is knowing
and voluntary.&#160; Employee and the Company
agree that this waiver and release does not apply to any rights or claims that
may arise under the ADEA after the Effective Date of this Agreement.&#160; Employee acknowledges that the consideration
given for this waiver and release Agreement is in addition to anything of value
to which Employee was already entitled.&#160;
Employee further acknowledges that he has been advised by this writing
that (a)&nbsp;he should consult with an attorney <u>prior</u> to executing this
Agreement; (b)&nbsp;he has </font></h1>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-2</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
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<div>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">twenty-one (21) days
within which to consider this Agreement; (c)&nbsp;he has seven (7)&nbsp;days
following the execution of this Agreement by the parties to revoke the
Agreement; and (d)&nbsp;this Agreement shall not be effective until the
revocation period has expired.&#160; Any
revocation should be in writing and delivered to the Secretary of QuickLogic
Corporation at 1277 Orleans Drive, Sunnyvale, CA 94089 by close of business on
the seventh day from the date that Employee signs this Agreement.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Civil Code Section&nbsp;1542</u>.&#160; Employee represents that he is not aware of
any claims against the Company other than the claims that are released by this
Agreement.&#160; Employee acknowledges that he
has been advised by legal counsel and is familiar with the provisions of
California Civil Code Section&nbsp;1542, which provides as follows:</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:0in;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">A GENERAL
RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT
TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY
HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.</font></b></p>

<p style="margin:0in 0in .0001pt 1.0in;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Employee, being aware of said code
section, agrees to expressly waive any rights he may have thereunder, as well
as under any other statute or common law principles of similar effect.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">10.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Pending or Future Lawsuits</u>.&#160; Employee represents that he has no lawsuits,
claims, or actions pending in his name, or on behalf of any other person or
entity, against the Company or any other person or entity referred to
herein.&#160; Employee also represents that he
does not intend to bring any claims on his own behalf or on behalf of any other
person or entity against the Company or any other person or entity referred to
herein.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Application for Employment</u>.&#160; Employee understands and agrees that, as a
condition of this Agreement, he shall not be entitled to any employment with
the Company, its subsidiaries, or any successor, and he hereby waives any
right, or alleged right, of employment or re-employment with the Company.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">12.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Confidentiality</u>.&#160; Employee agrees to use his best efforts to
maintain in confidence the existence of this Agreement, the contents and terms
of this Agreement, and the consideration for this Agreement (hereinafter
collectively referred to as &#147;Settlement Information&#148;).&#160; Employee agrees to take every reasonable
precaution to prevent disclosure of any Settlement Information to third
parties, and agrees that there will be no publicity, directly or indirectly,
concerning any Settlement Information.&#160;
Employee agrees to take every precaution to disclose Settlement
Information only to those attorneys, accountants, governmental entities, and family
members who have a reasonable need to know of such Settlement Information.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">13.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Cooperation</u>.&#160; Employee agrees he will not act in any manner
that might damage the business of the Company.&#160;
Employee agrees that he will not counsel or assist any attorneys or
their clients in the presentation or prosecution of any disputes, differences,
grievances, claims, charges, or complaints by any third party against the
Company and/or any officer, director, employee, agent, representative,
shareholder or attorney of the Company, unless under a subpoena or other court
order to do so.</font></h1>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-3</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
<!-- ZEQ.=1,SEQ=11,EFW="2183326",CP="QUICKLOGIC CORPORATION",DN="3",CHK=394220,FOLIO='A-3',FILE="DISK125:[08ZAF2.08ZAF18602]2586-2-KQ_ZAF18602.CHC",USER="DNICHOL",CD='Mar 10 22:22 2008' -->


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<div>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">14.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Non-Disparagement</u>.&#160; Employee agrees to refrain from any
defamation, libel or slander of the Company and its respective officers,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns or
tortious interference with the contracts and relationships of the Company and
its respective officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">15.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Admission of Liability</u>.&#160; Employee understands and acknowledges that
this Agreement constitutes a compromise and settlement of disputed claims.&#160; No action taken by the Company, either
previously or in connection with this Agreement shall be deemed or construed to
be (a)&nbsp;an admission of the truth or falsity of any claims heretofore made
or (b)&nbsp;an acknowledgment or admission by the Company of any fault or
liability whatsoever to the Employee or to any third party.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">16.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Costs</u>.&#160; The Parties shall each bear their own costs,
expert fees, attorneys&#146; fees and other fees incurred in connection with this
Agreement.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">17.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Arbitration</u>.&#160; The Parties agree that any and all disputes
arising out of the terms of this Agreement, their interpretation, and any of
the matters herein released, including any potential claims of harassment,
discrimination or wrongful termination shall be subject to binding arbitration,
to the extent permitted by law, in Santa Clara County, California, before the
American Arbitration Association under its National Rules&nbsp;for the
Resolution of Employment Disputes.&#160; <b>Employee agrees and hereby waives his right to jury trial as to matters
arising out of the terms of this Agreement and any matters herein released to
the extent permitted by law.</b>&#160;
The Parties agree that the prevailing party in any arbitration shall be
entitled to injunctive relief in any court of competent jurisdiction to enforce
the arbitration award.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">18.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Authority</u>.&#160; Employee represents and warrants that <b>[he/she]</b> has the capacity to act on <b>[his/her]</b>
own behalf and on behalf of all who might claim through <b>[him/her]</b>
to bind them to the terms and conditions of this Agreement.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">19.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Representations</u>.&#160; Employee represents that he has had the
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement.&#160; Neither party has relied upon any
representations or statements made by the other party hereto which are not
specifically set forth in this Agreement.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">20.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Severability</u>.&#160; In the event that any provision hereof
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">21.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Entire Agreement</u>.&#160; This Agreement, the Change of Control
Severance Agreement, the equity award agreements and the Confidentiality
Agreement represent the entire agreement and understanding between the Company
and Employee concerning Employee&#146;s separation from the Company, and supersede
and replace any and all prior agreements and understandings concerning Employee&#146;s
relationship with the Company and his compensation by the Company.</font></h1>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-4</font></p>

<div style="margin:0in 0in .0001pt;text-indent:0in;"><hr size="3" width="100%" noshade color="#010101" align="left"></div>

</div>
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<div style="font-family:Times New Roman;">

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">22.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Oral Modification</u>.&#160; This Agreement may only be amended in writing
signed by Employee and an approved executive officer of the Company.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">23.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Governing Law</u>.&#160; This Agreement shall be governed by the
internal substantive laws, but not the choice of law rules, of the State of
California.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">24.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Effective Date</u>.&#160; This Agreement is effective eight (8) days
after it has been signed by both Parties.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">25.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Counterparts</u>.&#160; This Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h1 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">26.&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Voluntary Execution of Agreement</u>.&#160; This Agreement is executed voluntarily and
without any duress or undue influence on the part or behalf of the Parties
hereto, with the full intent of releasing all claims.&#160; The Parties acknowledge that:</font></h1>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They have read this Agreement;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">b.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They have been represented in the
preparation, negotiation, and execution of this Agreement by legal counsel of
their own choice or that they have voluntarily declined to seek such counsel;</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">c.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They understand the terms and
consequences of this Agreement and of the releases it contains; and</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<h2 style="font-weight:normal;margin:0in 0in .0001pt;text-indent:66.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">d.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; They are fully aware of the legal and
binding effect of this Agreement.</font></h2>

<p style="margin:0in 0in .0001pt;text-indent:1.0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, the
Parties have executed this Agreement on the respective dates set forth below.</font></p>

<p style="margin:0in 0in .0001pt;text-indent:.5in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[THE COMPANY]</font></b></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated: <b>[DATE]</b></font></p>
  </td>
  <td width="4%" valign="top" style="padding:0in .7pt 0in .7pt;width:4.54%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:&nbsp;</font></p>
  </td>
  <td width="43%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:43.24%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:1.0pt;font-weight:bold;">&nbsp;</font></b></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">[EMPLOYEE NAME]</font></b><font size="2" style="font-size:10.0pt;">, an individual</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width="52%" valign="top" style="padding:0in .7pt 0in .7pt;width:52.22%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dated: <b>[DATE]</b></font></p>
  </td>
  <td width="47%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0in .7pt 0in .7pt;width:47.78%;">
  <p style="margin:0in 0in .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0in 0in .0001pt;text-align:center;text-indent:0in;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A-5</font></p>

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<TYPE>EX-23.1
<SEQUENCE>4
<FILENAME>a2183326zex-23_1.htm
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><A
NAME="ka18601_exhibit_23.1"> </A>
<A NAME="toc_ka18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 23.1    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ka18601_consent_of_independent__ka102312"> </A>
<A NAME="toc_ka18601_2"> </A>
<BR></FONT><FONT SIZE=2><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hereby consent to the incorporation by reference in the Registration Statements on Form&nbsp;S-8 (No.&nbsp;333-123515,
No.&nbsp;333-76002, No.&nbsp;333-34898, No.&nbsp;333-34900 and No.&nbsp;333-34902) and Form&nbsp;S-3
(No.&nbsp;333-126528) of QuickLogic Corporation of our report dated March&nbsp;11, 2008, relating to the consolidated financial statements, financial statement schedule and the
effectiveness of internal control over financial reporting, which appears in this Form&nbsp;10-K. </FONT></P>

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<TD WIDTH="50%" style="font-family:times;"><FONT SIZE=2>/s/ PricewaterhouseCoopers&nbsp;LLP<BR>
San Jose, California<BR>
March&nbsp;11, 2008</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ka18601_1">EXHIBIT 23.1</A></FONT><BR>
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<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ka18601_2">CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</A></FONT><BR>

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<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>a2183326zex-31_1.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><A
NAME="kc18601_exhibit_31.1"> </A>
<A NAME="toc_kc18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 31.1    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="kc18601_certifications"> </A>
<A NAME="toc_kc18601_2"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATIONS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>I,
E. Thomas Hart, certify that: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>I
have reviewed this annual report on Form&nbsp;10-K of QuickLogic Corporation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>4.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f))
for the registrant and have:
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(d)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
<BR><BR></FONT></DD></DL>
</DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>5.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing the equivalent functions):
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. </FONT></DD></DL>
</DD></DL>
<BR>

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<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>Date: March&nbsp;11, 2008</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="47%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="50%" style="font-family:times;"><FONT SIZE=2>/s/ E. Thomas Hart</FONT><HR NOSHADE><FONT SIZE=2> E. Thomas Hart<BR></FONT> <FONT SIZE=2><I>Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE>
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<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_kc18601_1">EXHIBIT 31.1</A></FONT><BR>
</UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_kc18601_2">CERTIFICATIONS</A></FONT><BR>
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<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>a2183326zex-31_2.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><A
NAME="ke18601_exhibit_31.2"> </A>
<A NAME="toc_ke18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 31.2    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>I,
Carl M. Mills, certify that: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>1.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>I
have reviewed this annual report on Form&nbsp;10-K of QuickLogic Corporation;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>2.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>3.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this report;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>4.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f))
for the registrant and have:
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Evaluated
the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(d)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Disclosed
in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
<BR><BR></FONT></DD></DL>
</DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>5.</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing the equivalent functions):
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. </FONT></DD></DL>
</DD></DL>
<BR>

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<TD WIDTH="40%" style="font-family:times;"><FONT SIZE=2>Date: March&nbsp;11, 2008</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="40%" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="58%" style="font-family:times;"><FONT SIZE=2><BR>
/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>CARL M. MILLS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE><FONT SIZE=2> Carl M. Mills<BR></FONT> <FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE>
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<P><br><A NAME="08ZAF18601_6">QuickLinks</A><br></P><!-- TOC_BEGIN -->
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<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_ke18601_1">EXHIBIT 31.2</A></FONT><BR>
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<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>a2183326zex-32.htm
<DESCRIPTION>EXHIBIT 32
<TEXT>
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 </FONT></P>

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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><A
NAME="kg18601_exhibit_32"> </A>
<A NAME="toc_kg18601_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXHIBIT 32    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="kg18601_certification_of_chief_executi__cer05925"> </A>
<A NAME="toc_kg18601_2"> </A>
<BR></FONT><FONT SIZE=2><B>CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER<BR>  PURSUANT TO<BR>  18 U.S.C. SECTION&nbsp;1350,<BR>  AS ADOPTED PURSUANT TO<BR>  SECTION&nbsp;906 OF THE SARBANES-OXLEY ACT OF&nbsp;2002    <BR>
</B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I, E. Thomas Hart, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report of QuickLogic Corporation on Form&nbsp;10-K for the fiscal year ended December&nbsp;30, 2007, fully complies with the requirements of Section&nbsp;13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Annual Report on Form&nbsp;10-K fairly presents in all material respects the financial condition and results of
operations of QuickLogic Corporation. </FONT></P>

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<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>E. THOMAS HART</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Date:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>E. Thomas Hart</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2><I>Chairman, President and Chief Executive Officer</I></FONT></TD>
</TR>
</TABLE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I,
Carl M. Mills, certify, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of QuickLogic
Corporation on Form&nbsp;10-K for the fiscal year ended December&nbsp;30, 2007, fully complies with the requirements of Section&nbsp;13(a) or 15(d) of the Securities Exchange Act of
1934 and that information
contained in such Annual Report on Form&nbsp;10-K fairly presents in all material respects the financial condition and results of operations of QuickLogic Corporation. </FONT></P>

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<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>By:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;&nbsp;</FONT><FONT SIZE=2>CARL M. MILLS</FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Date:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>March&nbsp;11, 2008</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Name:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2>Carl M. Mills</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="36%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%" style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD WIDTH="3%" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="51%" style="font-family:times;"><FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
</TR>
</TABLE>
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<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_kg18601_1">EXHIBIT 32</A></FONT><BR>
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<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_kg18601_2">CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</A></FONT><BR>

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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
