QUICKLOGIC CORPORATION, S-1/A, 1997-10-27

QUICKLOGIC CORPORATION
S-1/A, 1997-10-27
SEMICONDUCTORS & RELATED DEVICES

Previous: AMERICAN DISPOSAL SERVICES INC, 424B1, 1997-10-27

Next: NAVISTAR FINANCIAL RETAIL RECEIVABLES CORPORATION, 424B5, 1997-10-27

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1997
REGISTRATION NO. 333-28833
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

--------------

QUICKLOGIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 3674 77-0188504
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD (I.R.S. EMPLOYER
OF INCORPORATION INDUSTRIAL CLASSIFICATION IDENTIFICATION NUMBER)
OR ORGANIZATION) CODE NUMBER)

1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 990-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

--------------

E. THOMAS HART
CHIEF EXECUTIVE OFFICER
QUICKLOGIC CORPORATION
1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 990-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

LARRY W. SONSINI JOSHUA L. GREEN
AARON J. ALTER JEFFREY Y. SUTO
WILSON SONSINI GOODRICH & ROSATI VENTURE LAW GROUP
PROFESSIONAL CORPORATION 2800 SAND HILL ROAD
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (415) 854-4488
(415) 493-9300

--------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.

================================================================================
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED OCTOBER 27, 1997

[LOGO OF QUICKLOGIC]
- --------------------------------------------------------------------------------

3,000,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
Of the 3,000,000 shares of Common Stock, par value $.001 per share ("Common
Stock"), of QuickLogic Corporation ("QuickLogic" or the "Company") offered
hereby, 1,800,000 shares are being offered by the Company and 1,200,000
shares are being offered by a stockholder of the Company (the "Selling
Stockholder"). The Company will not receive any proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."

Prior to this offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering
price. The Company has applied to have the Common Stock approved for listing
on the Nasdaq National Market under the trading symbol "QWIK."

FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER(3)
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total $ $ $ $
</TABLE>

(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of this offering estimated at $750,000, payable
by the Company.
(3) The Selling Stockholder has granted to the Underwriters a 30-day option
to purchase up to an additional 450,000 shares of Common Stock for the
purpose of covering over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Selling Stockholder will be $ , $ and $ , respectively. See
"Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. Delivery of the shares of Common
Stock offered hereby to the Underwriters is expected to be made in New York,
New York on or about , 1997.

DEUTSCHE MORGAN GRENFELL

UBS SECURITIES

COWEN & COMPANY
The date of this Prospectus is , 1997.
<PAGE>

COMPANY ARTWORK

Title: QuickLogic logo, "The High Performance Programmable Logic Solution"

Text underneath title: "QuickLogic's FPGA products are used in complex, high-
performance electronics systems such as video, graphics and imaging,
telecommunications and data communications, instrumentation and test, high-
performance computers and military systems"

Graphic: QuickLogic FPGA device in the middle, surrounded by end market
application products (digital projector, cell phone with satellite dish and
microwave antenna, computer workstation, data networking multiplier, etc.),
with each end market picture accompanied by a title (video, graphics and
imaging, telecommunications and data communications, instrumentation and test,
high-performance computers and military systems).

ViaLink, pASIC, QuickLogic and the QuickLogic logo are registered trademarks of
QuickLogic Corporation. QuickTools and QuickWorks are trademarks of QuickLogic
Corporation. All other trademarks or service marks appearing in this Prospectus
are the property of their respective companies.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

Unless otherwise indicated, the information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) reflects the
conversion of all outstanding preferred stock into Common Stock and the
exercise of all outstanding Common Stock warrants, (iii) reflects a 7-for-1
reverse split of the Company's Common Stock effected through the
reincorporation of the Company in Delaware and (iv) reflects the authorization
of 10,000,000 shares of undesignated preferred stock upon the closing of this
offering.

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus. A glossary of technical terms is
included in this Prospectus in the section entitled "Glossary."

THE COMPANY

QuickLogic develops, markets and supports advanced field programmable gate
array ("FPGA") semiconductors and software design tools. QuickLogic products
enable designers of complex electronic systems to achieve rapid time to market
by optimizing design speed, design flexibility and cost. The Company's products
target complex, high-performance electronics systems in rapidly changing
markets including video, graphics and imaging, telecommunications and data
communications, instrumentation and test, high-performance computers and
military systems. The key components of the QuickLogic solution are the
Company's ViaLink proprietary antifuse technology and pASIC architectures, and
its software design tools. The Company's fabless manufacturing strategy allows
the Company to focus its resources on product design, development and marketing
rather than on manufacturing expenditures. The Company has a foundry
relationship with Cypress Semiconductor Corporation ("Cypress") for its
existing products and has entered into an agreement with Taiwan Semiconductor
Manufacturing Company, Ltd. ("TSMC") for the production of its anticipated 0.35
micron complementary metal oxide silicon ("CMOS") products. QuickLogic sells
its products through independent sales representatives, distributors and a
direct sales force in North America, Europe and Asia. The Company's customers
include Alcatel Alsthom, Compaq, Honeywell, IBM, McDonnell Douglas, NEC,
Northern Telecom, Rockwell, Saab, Silicon Graphics, Sony, Texas Instruments,
3Com and Toshiba, although no single customer accounts for a material amount of
revenue for the Company.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered.......... 3,000,000 shares (including 1,800,000 shares by
the Company and 1,200,000 shares by the Selling
Stockholder)(1)
Common Stock to be outstanding
after the offering........... 13,824,920 shares(2)
Use of proceeds............... For working capital, capital expenditures and
other general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National
Market symbol................ QWIK
</TABLE>

SUMMARY FINANCIAL DATA
(In thousands, except per share data)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue......................... $ 6,024 $15,148 $23,758 $11,440 $ 13,951
Gross profit.................... 1,971 7,409 12,600 5,895 6,508
Contract termination and legal
expense(3).................... -- (2,700) (4,125) (265) (23,009)
Loss from operations............ (5,609) (4,660) (3,897) (234) (24,562)
Net income (loss)............... (5,828) (4,707) (3,597) 63 (24,387)
Net income (loss) per share(4).. (1.19) (.95) $ (.68) $ -- $ (4.56)
Shares used in net income (loss)
per share calculation.......... 4,910 4,974 5,309 13,124 5,350
</TABLE>

<TABLE>
<CAPTION>
AT JUNE 30, 1997
---------------------
ACTUAL AS ADJUSTED(5)
------ --------------
<S> <C> <C>
SELECTED BALANCE SHEET
DATA:
Cash.............................. $9,537 $28,959
Total assets...................... 22,823 42,245
Long-term obligations............. 1,479 1,479
Stockholders' equity.............. 7,105 26,527
</TABLE>
- -------
(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an additional 450,000 shares of Common Stock.
(2) Based on Common Stock outstanding at June 30, 1997. Excludes 1,628,799
shares of Common Stock issuable upon exercise of outstanding options under
the Company's 1989 Stock Option Plan (the "Option Plan") and 685,165 shares
reserved for future grant under the 1989 Plan as of June 30, 1997. See
"Management--Benefit Plans" and Note 7 of Notes to Financial Statements.
(3) See Notes 8 and 11 of Notes to Financial Statements, "Risk Factors--
Potential Adverse Consequences of Actel Litigation" and "Business--Cypress
Transaction."
(4) See Note 1 of Notes to Financial Statements.
(5) As adjusted to reflect the sale of 1,800,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $12.00
per share and receipt of the estimated proceeds therefrom (after deducting
the underwriting discount and offering expenses payable by the Company) of
$19,338,000 and to reflect the exercise of a warrant to purchase 18,750
shares of Common Stock at $4.48 per share. See "Use of Proceeds" and
"Capitalization."

3
<PAGE>

THE COMPANY

QuickLogic's proprietary ViaLink antifuse technology places logic
interconnects between the metal layers of an FPGA device instead of on the
silicon substrate, thereby minimizing die size and cost. The ViaLink antifuse
technology offers lower resistance and lower capacitance than competing
interconnect technologies, thereby optimizing a device's performance. The
Company's pASIC architectures facilitate full routability and utilization of a
device's logic cells, enabling a high degree of design flexibility.
QuickLogic's QuickTools software design tools place and route logic cells on
an FPGA device, and the QuickWorks design software suite incorporates
QuickTools and industry-leading design tools for hardware description language
("HDL")/schematic entry, synthesis and simulation. In addition, QuickWorks
incorporates Institute of Electrical and Electronic Engineers ("IEEE")
standard design languages Verilog HDL and VHDL.

QuickLogic's fabless manufacturing strategy allows the Company to focus its
resources on product design, development and marketing rather than on
manufacturing expenditures. The Company has a foundry relationship with
Cypress for its existing products and has entered into a manufacturing
agreement with TSMC for the production of its anticipated 0.35 micron CMOS
products. QuickLogic sells its products through independent sales
representatives, distributors and a direct sales force in North America,
Europe and Asia. The Company's customers include Alcatel Alsthom, Compaq
Computer Corporation, Honeywell, Inc., International Business Machines
Corporation, McDonnell Douglas Corp., NEC Corporation, Northern Telecom Ltd.,
Rockwell International Corp., Saab, Silicon Graphics, Inc., Sony Corp., Texas
Instruments Incorporated, 3Com Corporation and Toshiba Corporation, although
no single customer accounts for a material amount of revenue for the Company.

In March 1997, the Company became the exclusive supplier of all of its
products worldwide, which affords significant advantages in supply, pricing,
and quality control. From October 1992 to March 1997, the Company had granted
to Cypress certain technology development, manufacturing and marketing rights
to the Company's products, making it a second source of such products. In
exchange for the termination of this arrangement in March 1997, the Company
paid Cypress $4.5 million in cash and agreed to issue 2,603,817 shares of
Common Stock to Cypress, increasing the aggregate number of shares of Common
Stock of the Company held by Cypress to 3,339,783, prior to the sale of any
shares by Cypress in this offering. In addition, the Company granted Cypress
certain contractual rights as to the shares of the Company's stock, including
the right to sell shares in this offering. The parties also entered into a new
foundry agreement and a cross-license agreement. See "Business--Cypress
Transaction" and "Principal and Selling Stockholders."

The Company was incorporated in California in April 1988 as Peer
Semiconductor, Inc., and changed its name in May 1988 to Peer Research, Inc.
and in February 1991 to QuickLogic Corporation. The Company intends to
reincorporate in Delaware prior to the date of this offering. Unless the
context requires otherwise, references in this Prospectus to the "Company" or
"QuickLogic" refer to the Delaware corporation and its California predecessor
corporation. The address of the Company's corporate headquarters is 1277
Orleans Drive, Sunnyvale, California 94089. The Company's telephone number is
(408) 990-4000. The Company's Web site is located at
http://www.quicklogic.com. Neither the information contained in the Company's
Web site nor Web sites linked to the Company's Web site shall be deemed to be
a part of this Prospectus.

4
<PAGE>

RISK FACTORS

The following risk factors should be considered carefully before purchasing
the Common Stock offered hereby.

POTENTIAL ADVERSE CONSEQUENCES OF ACTEL LITIGATION. Since January 1994, Actel
Corporation ("Actel"), a competitor and manufacturer of FPGA devices, and the
Company have been involved in a lawsuit entitled Actel Corporation v.
QuickLogic Corporation now currently pending in U.S. District Court in the
Northern District of California, Case No. C-9420050JW(PVT). This lawsuit
currently involves a total of seven Actel patents allegedly covering
substantially all of QuickLogic's products. Sales of the allegedly infringing
products have accounted for and are expected to continue to account for
substantially all of the Company's revenue. The Company has filed counterclaims
alleging that Actel infringes three patents owned by the Company. Also, Actel
asserted a claim for trade secret misappropriation against QuickLogic based on
the alleged actions of a former Actel consultant who was a co-founder of and is
now employed at QuickLogic. On July 28, 1997, Actel filed a request with the
Court seeking to amend its complaint to assert similar trade secret
misappropriation claims against two other employees of QuickLogic. That request
is scheduled to be heard on October 28, 1997 by a Special Master appointed by
the Court to assist in determining this and other motions. After the Special
Master makes a recommendation on the motion, the Court must decide whether to
adopt the recommendation.

To date, Actel and the Company have both undertaken and are undertaking
discovery in this matter and have brought certain motions. In one motion
brought by Actel, the Special Master recommended on October 4, 1996 that the
Court find that the Company's pASIC 1 products infringe Claim 1 of the Actel
logic module patent. On April 14, 1997, the Court adopted the recommendation of
the Special Master and granted Actel's motion for summary judgment that the
Company's pASIC 1 products infringe Claim 1 of that patent. There can be no
assurance that any appeal by the Company of this summary judgment, or any of
the Company's defenses to the validity of such patent, will be successful.

The trial on the other patent infringement and trade secret misappropriation
claims and counterclaims is currently scheduled for September 1998. There can
be no assurance that the trial will occur at such time and may be delayed
significantly. This litigation has been and will continue to be costly and will
divert the efforts and attention of the Company's management and technical
personnel from normal business operations, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company is unable to predict the outcome of the litigation, as
the outcome of any litigation is inherently uncertain. Therefore, there can be
no assurance that the Company will prevail in the trial on Actel's patent
infringement claims, on the Company's counterclaims or defenses or on Actel's
trade secret misappropriation claims, or in any hearings, motions or appeals
related to such proceedings. The announcement of any rulings, decisions,
recommendations or final verdict that are adverse to the Company will likely
have a material adverse effect upon the market price of the Company's stock.
Any adverse determination in this litigation against the Company, or a
settlement by the Company, could, among other things, result in the loss of the
Company's proprietary rights, subject the Company to significant liabilities,
require the Company to seek licenses from or grant licenses to third parties,
or prevent the Company from licensing its technology, any of which would have a
material adverse effect on the Company's business, financial condition and
results of operations. The risks of this litigation include the possibility of
an injunction barring the sale of part or all of QuickLogic's product line, the
cost of defending the litigation, and the payment of money or royalties to
Actel as a result of a judgment of the Court or as a result of settlement, any
of which would have a material adverse effect on the Company's business,
financial condition and results of operations and could render the Company
insolvent and unable to sell its products. The Company has incurred significant
legal expenses to date in connection with this litigation and has recorded
additional charges beyond actual legal expenses incurred. As of June 30,

5
<PAGE>

1997, the Company has a reserve of $4.2 million for this litigation. In
addition, this litigation includes the risk that the use of some or all of the
proceeds from the offering may be required to pay for such costs, damages,
and/or settlement. See "Business--Actel Litigation."

LIMITED OPERATIONS; HISTORY OF LOSSES; NO ASSURANCE OF PROFITABILITY. The
Company was incorporated in 1988 and did not begin shipping products in volume
until 1992. Accordingly, the Company has a limited operating history upon which
investors may evaluate the Company and its prospects. The Company had an
accumulated deficit of $52.2 million as of June 30, 1997. The Company's
historical revenue growth rate should not be considered to be indicative of
future revenue growth, if any, nor is there any assurance that the Company will
be profitable in any future period. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

FLUCTUATIONS IN OPERATING RESULTS. Fluctuations in the Company's operating
results have occurred in the past and may occur in the future due to a variety
of factors, any of which may have a material adverse effect on the Company's
operating results. In particular, the Company's quarterly results of operations
may vary significantly due to general business conditions in the semiconductor
industry, fluctuations in manufacturing yields at the Company's wafer
suppliers, the availability of foundry capacity, cancellations or delays of
deliveries of products to the Company, new product introductions by the Company
or its competitors, product obsolescence, price erosion for maturing products,
competition, changes in the mix of products sold, seasonal fluctuations in
demand, changes in distributor inventory levels, availability of wafer supply,
increases in the costs of materials, cancellations or delays of product orders,
developments in the Company's litigation with Actel the ability to safeguard
intellectual property in a rapidly evolving market, changing customer product
requirements, changes in demand for customers' products and fluctuations in
foreign currency exchange rates. A large portion of the Company's operating
expenses is fixed and difficult to reduce or modify. If revenue does not meet
the Company's expectations, the adverse effect of any such revenue shortfall
will be magnified by the fixed nature of these operating expenses. In addition,
the Company's quarterly operating results can vary due to the volume and timing
of product orders received and delivered during a quarter, the ability of the
Company and its key suppliers to respond to changes made in customer orders,
and the timing of new product introductions by the Company and its competitors.
All of the above factors are difficult for the Company to forecast, and these
and other factors could have a material adverse effect on the Company's
business, financial condition and results of operations. As a result, the
Company believes that period-to-period comparisons are not necessarily
meaningful and should not be relied upon as indicative of future operating
results. See "--Potential Adverse Consequences of Actel Litigation" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

INDUSTRY PRESSURES AND VOLATILITY; POTENTIAL PRICE EROSION. The semiconductor
industry in general and the programmable logic device ("PLD") segment of this
industry, in particular, are characterized by rapid technological change,
intense competitive pressure and fluctuating demand. The semiconductor industry
has historically been cyclical and subject to significant downturns at various
times, characterized by diminished product demand, accelerated erosion of
average selling prices ("ASPs") and production over-capacity. ASPs typically
decrease rapidly over the first three to six months following product
introduction and continue to decline thereafter. Therefore, the Company must
develop and introduce new products which incorporate features that can be sold
at higher ASPs on a timely basis. In addition, the Company's ability to
maintain desired gross margins depends upon its ability to achieve
manufacturing efficiencies and material cost reductions, such as manufacturing
its products in smaller product geometries on larger wafers. Failure to achieve
any or all of the foregoing could cause the Company's revenue and gross margins
to decline, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion of Financial Condition and Results of Operations."

6
<PAGE>

DEPENDENCE ON INDEPENDENT WAFER MANUFACTURERS. The Company does not
manufacture the wafers used to produce its products. In the past, wafer foundry
capacity in the semiconductor industry has been very limited and may become
limited in the future. To date, wafers have been manufactured for the Company
principally by Cypress and in limited quantities by TSMC. In the future, the
Company expects its wafers to be manufactured principally by TSMC. The Company
depends on these suppliers to produce wafers at acceptable yields and prices
and to deliver them to the Company in a timely manner. The process used to
manufacture the Company's semiconductors can be performed in only a limited
number of foundries, increasing the Company's dependence on Cypress and TSMC.
Although the Company has a supply contract with Cypress and recently entered
into a new supply contract for its future products with TSMC, either Cypress or
TSMC could allocate capacity to the manufacture of other products and reduce
deliveries to the Company on short notice.

Under its wafer supply arrangements, the Company is obligated to provide
rolling forecasts of anticipated purchases and place binding purchase orders
months prior to shipment. Forecasts for monthly purchases may not increase or
decrease by more than a certain percentage from the previous month's forecast
without the supplier's consent. Thus, the Company must make forecasts and place
purchase orders for wafers before it receives purchase orders from its own
customers. This limits the Company's ability to react to fluctuations in demand
for its products, which could cause the Company to have an excess or a shortage
of wafers for a particular product. Any delays in obtaining an adequate supply
of wafers at acceptable yields and prices would have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company's long-term growth will depend substantially on the Company's ability
to obtain increased wafer fabrication capacity at acceptable prices from
Cypress, TSMC and other suppliers. The Company's current supply contract with
Cypress expires in 2001, and its contract with TSMC expires in 2000 and is
renewable annually as a rolling three-year agreement. The inability of the
Company to obtain increased wafer fabrication capacity at acceptable prices, or
any delay or interruption in supply, could reduce the Company's supply of
wafers or increase the Company's cost of such wafers and could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Manufacturing."

DEPENDENCE ON CUSTOMIZED MANUFACTURING PROCESSES. The Company's products are
manufactured using customized steps which are added to the standard
manufacturing processes of its wafer suppliers. There is considerably less
operating history for the Company's customized process steps than for the
foundries' standard manufacturing processes. The Company's dependence on
customized processing steps means that, in contrast to competitors using only a
standard manufacturing process, the Company has more difficulty establishing
relationships with suppliers, takes longer to qualify a new supplier, must pay
more for wafers and may not obtain access as early as competitors to state-of-
the-art processes. Any of the above could be a material disadvantage for the
Company versus a competitor using a standard manufacturing process without
customized steps and could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
planned future products that will be supplied by TSMC will involve production
of new products utilizing 0.35^m CMOS technology on 8-inch wafers, which is a
manufacturing process that has not previously been used by the Company.
Accordingly, the development of this manufacturing process is subject to the
risks and uncertainties inherent in the technology and equipment necessary for
such manufacturing. This manufacturing process may not be able to be
implemented for any of the Company's products by TSMC, or by any other wafer
manufacturer, or may be delayed substantially due to development or
implementation difficulties. Even if this manufacturing process is successfully
implemented by TSMC for the Company's products, the Company will continue to be
subject to unforeseen problems or delays as this new process is developed. See
"Business--Manufacturing."

7
<PAGE>

PRODUCTION YIELD FLUCTUATIONS. The manufacture of semiconductor products is a
highly complex and precise process. Defects in masks, impurities in the
materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
to be nonfunctional. Yields can decline without warning, resulting in
substantially higher product costs and inventory shortages. Yield problems may
take substantial time to analyze and correct, particularly for the Company
because it utilizes independent facilities for all of its manufacturing. The
Company has from time to time experienced lower than anticipated production
yields, and there can be no assurance that the Company will not experience
production yield problems in the future, or that any such problem will not have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Manufacturing."

NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The market for the
Company's products is characterized by rapidly changing technology.
Accordingly, the Company's future performance depends on a number of factors,
including its ability to identify emerging technological trends in its target
markets, to develop and maintain competitive products, to enhance its products
by adding innovative features that differentiate its products from those of
competitors, to introduce products to market on a timely basis at competitive
prices, to properly identify target markets and to respond effectively to new
technological changes or new product announcements by others. The Company
recently introduced new products within its pASIC family of FPGAs and currently
is in the process of introducing new versions of its software design tool
suites. No assurance can be given that the Company's design and introduction
schedules for its pASIC families of products or any other new products will be
met, that these products will achieve market acceptance, or that these products
will be able to be sold at ASPs that are acceptable to the Company. In
evaluating new product decisions, the Company must anticipate well in advance
both the future demand and the technology that will be available to supply such
demand. The Company must also continue to make significant investments in
research and development in order to develop new products and achieve market
acceptance for such products. The failure of the Company to accomplish any or
all of the foregoing could have a material adverse effect on its business,
financial condition and results of operations. See "Business--Products."

COMPETITION; RAPID TECHNOLOGICAL CHANGE. The semiconductor industry is
intensely competitive and is characterized by constant technological change,
rapid rates of product obsolescence and price erosion. The Company's existing
competitors include suppliers of conventional gate arrays, complex programmable
logic devices ("CPLDs") and FPGAs, particularly Xilinx, Inc. ("Xilinx"), a
supplier of static random access memory ("SRAM")-based FPGAs, Actel, an
antifuse FPGA supplier, and Altera Corporation ("Altera"), a supplier of CPLDs.
The Company also faces competition from companies that offer standard gate
arrays, which can be obtained at a lower cost for high volumes and may have
gate densities and performance equal or superior to the Company's products.
Certain competitors of the Company also offer products at price points not
available from the Company. In addition, competitors' semiconductor devices may
have features, including reprogrammability, that the Company's products do not
have. The Company expects significant competition in the future from major
domestic and international semiconductor suppliers, and the Company's patents
may not bar competitors from manufacturing similar products. The Company also
may face competition from suppliers of products based on new or emerging
technologies.

8
<PAGE>

Company's competitors because of their familiarity with the products and
software design tools offered by such competitors and because the Company's
operations and resources are not as substantial as such competitors. In
addition, the Company expects significant competition in the future from major
domestic and international suppliers which have entered or are considering
entering the PLD market. Such suppliers include Lucent Technologies, Vantis
Corporation/Advanced Micro Devices, Inc., Motorola, Inc. and Atmel Corporation.
Most of the Company's current and prospective competitors offer broader product
lines and have significantly greater financial, technical, manufacturing and
marketing resources than the Company. In particular, companies such as Lucent
Technologies, Motorola, Inc. and others have proprietary wafer manufacturing
ability, preferred vendor status with many of the Company's customers,
extensive marketing power and name recognition, greater financial resources
than the Company, and other significant advantages over the Company. Certain of
the current and prospective competitors of the Company are or may become
customers as well. Failure of the Company to compete successfully in any of
these or other areas could have a material adverse effect on its operating
results. In addition, certain distribution channels are not available to the
Company because the Company's competitors, many of whom are more established
and have greater resources than the Company, discourage certain distributors
from distributing competing products including the Company's products. There
can be no assurance that the Company's products will be competitive. The
failure of the Company to develop and market products that compete successfully
with those of other companies in the market would have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Competition."

DEPENDENCE UPON DESIGN WINS; LENGTHY SALES CYCLE. The Company's success
depends upon its ability to convince a customer to incorporate the Company's
FPGA into the customer's circuit board during the design phase of a product.
Accordingly, the Company devotes substantial resources, which it may not
recover through product sales, in support of potential customer design efforts
and in persuading potential customers to incorporate the Company's FPGAs into
new or updated products. The typical engineer designing a circuit board will
make an FPGA decision only three or four times during the year. Accordingly,
the Company's sales force has limited windows of opportunity within which to
successfully sell the Company's products to design engineers. Sales efforts may
be targeted at a particular customer or market segment for several months and
may not be successful or, if successful, may not generate revenue for a year or
longer after the initial design win until the customer's products using the
Company's devices are being produced in volume. In addition, the Company may
achieve a design win with a customer, but the designed product may not ever be
produced and therefore not generate revenue. The value of any design win
depends in large part upon the ultimate success of the customer's product. No
assurance can be given that the Company will win sufficient designs or that any
design win will result in significant revenue. The failure of the Company to
achieve design wins in sufficient number or the failure of a substantial number
of such products to be produced would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Sales, Support and Marketing."

RISKS ASSOCIATED WITH PROTECTION OF INTELLECTUAL PROPERTY. Since its
inception, the Company has devoted significant resources to research and
development. The Company relies primarily on a combination of nondisclosure
agreements, mask work rights and other contractual provisions and patent,
trademark, trade secret, and copyright law to protect its proprietary rights.
Failure of the Company to enforce its patents, trademarks, mask work rights or
copyrights or to protect its trade secrets could have a material adverse effect
on the Company's business, financial condition and results of operations. There
can be no assurance that such intellectual property rights can be successfully
asserted in the future or will not be invalidated, circumvented or challenged.
From time to time, third parties, including competitors of the Company, may
assert patent, copyright and other intellectual property rights to technologies
that are important to the Company. There can be no assurance that third parties
will not assert infringement claims against the Company in the future, that
assertions by third parties will not result in costly litigation or that the
Company would prevail in any

9
<PAGE>

such litigation or be able to license any valid and infringed patents from
third parties on commercially reasonable terms. Litigation, regardless of the
outcome, could result in substantial cost and diversion of resources of the
Company. Any infringement claim or other litigation against or by the Company
could materially adversely affect the Company's business, financial condition
and results of operations. See "--Potential Adverse Consequences of Actel
Litigation."

In addition, there can be no assurance that competitors of the Company, many
of which have substantial resources and have made substantial investments in
competing technologies, do not have, or will not seek to apply for and obtain,
patents that will prevent, limit or interfere with the Company's ability to
make, use or sell its products either in the United States or in international
markets. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation or interference
proceedings declared by United States Patent and Trademark Office (the "USPTO")
to determine the priority of inventions. The defense and prosecution of
intellectual property suits, USPTO interference proceedings and related legal
and administrative proceedings are both costly and time consuming. Any such
suit or proceeding involving the Company could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"--Potential Adverse Consequences of Actel Litigation."

ORDER AND SHIPMENT UNCERTAINTIES. The Company's sales are generally made
pursuant to individual purchase orders that may be canceled or deferred by
customers on short notice without significant penalty. Cancellation or deferral
of product orders could result in excess inventory to the Company, which could
have a material adverse effect on the Company's profit margins and restrict its
ability to fund its operations. The Company sells to domestic distributors
under agreements which allow certain rights of return and price adjustments on
unsold inventory. The Company recognizes revenue from such sales to domestic
distributors upon shipment of products to the end-user. Revenue from all other
products is recognized at the time of shipment by the Company. Delays or
difficulties in collecting receivable accounts could result in significant
charges against income, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Texas
Instruments ("TI") accounted for approximately 27.0% and 11.2% of revenues in
1996 and the six months ended June 30, 1997, respectively.

RISKS OF GROWTH AND EXPANSION. The Company has recently experienced and
expects to continue to experience growth in the number of its employees and the
scope of its operations, resulting in increased responsibilities for management
personnel. To manage recent and potential future growth effectively, the
Company will need to continue to hire, train, motivate and manage a growing
number of employees. The future success of the Company will also depend on its
ability to attract and retain qualified technical, marketing, and management
personnel. In particular, the current availability of qualified design,
process, and test engineers is limited, and competition among companies for
skilled experienced engineering personnel is very intense. The Company has been
attempting to hire a number of engineering personnel and has experienced delays
in filling such positions. During strong business cycles, the Company expects
to experience continued difficulty in filling its needs for qualified engineers
and other personnel. No assurance can be given that the Company will be able to
achieve or manage effectively any growth, and the failure to do so could delay
product development and introductions and otherwise have a material adverse
effect on the Company's business, financial condition and results of
operations.

RELIANCE ON DISTRIBUTORS. Approximately 53.3% and 74.8% of the Company's
worldwide sales were made through independent distributors in 1996 and the six
months ended June 30, 1997, respectively. In these periods, most of the
Company's sales outside the United States were made through independent
distributors. No assurance can be given that future sales by these or other
distributors will continue at current levels or that the Company will be able
to retain its current distributors on terms that are acceptable to the Company.
The Company's distributors generally offer products of several different
companies, including products that are competitive with the Company's

10
<PAGE>

products. Accordingly, there is a risk that these distributors may give higher
priority to products of other suppliers, thus reducing their efforts to sell
the Company's products. In addition, the Company's agreements with its
distributors are generally terminable at the distributor's option. The Company
recently terminated its distribution relationships with Seymour Electronics and
Reptron Electronics Inc. The failure of the Company to successfully transition
from the termination of these relationships, a reduction in sales efforts by
one or more of the Company's current distributors, or a termination of any
other distributor relationship with the Company could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company's distributors have on occasion increased inventories
in anticipation of substantial growth in sales and, when such growth did not
occur as rapidly as anticipated, substantially decreased the amount of products
ordered from the Company in subsequent periods. Such a slowdown in sales would
adversely affect the Company's future revenue. No assurance can be given that
one or more of the Company's distributors will not experience financial
difficulties. The failure of one or more of the Company's distributors to pay
for products ordered from the Company or to continue operations because of
financial difficulties or for other reasons could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Sales, Support and Marketing."

RISKS ASSOCIATED WITH INTERNATIONAL BUSINESS ACTIVITIES. Sales to customers
located outside the United States accounted for approximately 29.6% and 45.4%
of revenue in 1996 and the six months ended June 30, 1997, respectively. The
Company expects that revenue derived from international sales will continue to
represent a significant portion of its total revenue. International sales are
subject to a variety of risks, including those arising from currency exchange
fluctuations, taxes, export license requirements, reduced protection for
intellectual property rights in some countries, the difficulty in enforcing
contractual rights, the impact of general business conditions of economies
outside the United States and generally longer periods for receivables
collection. Because all of the Company's foreign sales are denominated in U.S.
dollars, the Company's products become less price competitive in countries
whose currencies are declining in value against the dollar. The Company's
business is also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of semiconductor
products. In order to expand international sales and service capabilities, the
Company must maintain and expand existing foreign operations or establish new
foreign operations. Significant management attention and financial resources of
the Company will be necessary to hire additional personnel and maintain or
expand existing relationships with international distributors and sales
representatives. There can be no assurance that the Company will be able to
maintain or expand existing foreign operations, establish new foreign
operations or preserve and develop its relationships with international
distributors or sales representatives. The failure to take any of such measures
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company has entered into an agreement with TSMC to manufacture its
products at TSMC's foundries in the Republic of China (Taiwan), and TSMC is
currently producing research and development wafers for the Company. The
research and development of the technology that is planned to be used at the
TSMC foundry and any production by TSMC, are subject to the risk of political
instability in Taiwan, including but not limited to the potential for conflict
between Taiwan and the People's Republic of China. In addition, the United
States has had disputes with China relating to trade and human rights issues
and has also considered trade sanctions against Japan. If trade sanctions were
imposed, Japan or China could enact trade sanctions in response. Because the
Company plans to manufacture the majority of its products at the TSMC facility
in the future, and because a number of the Company's current and prospective
customers and suppliers are located in Japan and China, trade sanctions, if
imposed, could have a material adverse effect on the Company's business,
financial condition and results of operations. Similarly, protectionist trade
legislation in either the United States or foreign countries could have a
material adverse effect on the Company's ability to manufacture or to sell its
products in foreign markets. See "Business--Manufacturing."

11
<PAGE>

DEPENDENCE ON KEY PERSONNEL; RISKS ASSOCIATED WITH RECENT MANAGEMENT
ADDITIONS. The Company's future success depends substantially on the continued
service of its key management, engineering, marketing, and sales and support
employees, many of whom have worked together for only a short period of time.
In particular, two of the Company's executive officers joined the Company in
late 1996, and two of the Company's executive officers joined the Company in
early 1997. Competition for qualified personnel is intense in the semiconductor
industry, and the loss of any of the Company's current key employees, or the
inability of the Company to attract and retain other qualified personnel, could
have a material adverse effect on the Company's business, financial condition
and results of operations. The Company has not entered into any employment
agreements with any of its employees, nor does it have "key person" insurance
on any of its employees.

POSSIBLE VOLATILITY OF STOCK PRICE. The Company believes that factors such as
announcements of developments related to the Company's business, including the
Actel litigation, announcements by competitors, quarterly fluctuations in the
Company's financial results and general conditions in the semiconductor
industry or the national and international economies in which the Company
conducts business, and release of reports by securities analysts, among other
factors, could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years the stock market in
general, and the market for shares of technology stocks in particular, have
experienced extreme price fluctuations, which have often been unrelated to the
operating performance of affected companies. Such fluctuations could have a
material adverse effect on the price of the Company's Common Stock.

DISCRETIONARY USE OF PROCEEDS OF THIS OFFERING. The Company has no current
specific plans for the use of the net proceeds of this offering. As a
consequence, the Company's management will retain broad discretion in the
allocation of the net proceeds of this offering. The Company ultimately expects
to use the net proceeds from this offering for general corporate purposes,
including working capital and capital expenditures. There can be no assurance
that the proceeds will be utilized in a manner that the stockholders deem
optimal or that the proceeds can or will be invested to yield a significant
return upon the completion of this offering. Substantially all of the net
proceeds to the Company from the sale of the 1,800,000 shares of Common Stock
offered by the Company hereby which are estimated to be $19,338,000, assuming
an initial public offering price of $12.00 per share and after deducting the
underwriting discount and estimated offering expenses payable by the Company,
will be invested in U.S. short-term or medium-term, investment-grade, interest-
bearing securities for an indefinite period. See "Use of Proceeds."

DEPENDENCE ON AVAILABILITY OF FUTURE CAPITAL. In order to secure additional
foundry capacity, finance ongoing litigation, finance research and development,
acquire new technologies or businesses, satisfy personnel needs, or for other
general corporate purposes, the Company has considered and will continue to
consider various possible transactions, which could include, without
limitation, equity investments in, prepayments to, non-refundable deposits
with, or loans to, foundries in exchange for guaranteed capacity, "take or pay"
contracts that commit the Company to purchase specified quantities of wafers
over extended periods, joint ventures or other partnership relationships with
foundries, private or public financings or borrowings, or licenses of the
Company's technology. There can be no assurance that the Company will be able
to make any such arrangement in a timely fashion or at all, that the Company
will not require additional issuances of equity or debt in order to raise
capital for any such arrangements or that any such financing would be available
to the Company on acceptable terms or at all. The failure to obtain additional
capital when necessary, could have a material adverse effect on the Company's
business, financial condition and results of operations.

EFFECT OF ANTITAKEOVER PROVISIONS. Certain provisions of the Company's
Restated Certificate of Incorporation and Bylaws and of Delaware law could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above

12
<PAGE>

the then current market value of the Common Stock. Such provisions may also
inhibit fluctuations in the market price of the Common Stock that could result
from takeover attempts. In addition, the Restated Certificate of Incorporation
authorizes 10,000,000 shares of undesignated preferred stock. The Board of
Directors of the Company, without further stockholder approval, may issue this
preferred stock with such terms as the Board of Directors may determine, which
could have the effect of delaying or preventing a change in control of the
Company. The issuance of preferred stock could also adversely affect the voting
power of the holders of Common Stock, including the loss of voting control to
others. Such preferred stock could be utilized to implement, without
stockholder approval, a stockholders' rights plan that could be triggered by
certain change in control transactions, which could delay or prevent a change
in control of the Company or could impede a merger, consolidation, takeover or
other business combination involving the Company, or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control
of the Company. The Company's charter documents also provide that one-third of
the directors will be elected each year which could prevent or delay an attempt
to change the composition of the Board. See "Description of Capital Stock."

RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. An important element of the
Company's strategy is to review acquisition prospects that would complement its
existing product offerings, augment its market coverage or enhance its
technological capabilities or that may otherwise offer growth opportunities.
While the Company has no current agreements or negotiations underway with
respect to any such acquisitions, the Company may make acquisitions of
businesses, products or technologies in the future. Future acquisitions by the
Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization expenses
related to goodwill and other intangible assets, any of which could materially
adversely affect the Company's operating results and/or the price of the
Company's Common Stock. Acquisitions entail numerous risks, including
difficulties in the assimilation of acquired operations, technologies and
products, diversion of management's attention to other business concerns, risks
of entering markets in which the Company has no or limited prior experience and
potential loss of key employees of acquired organizations. No assurance can be
given as to the ability of the Company to successfully integrate any
businesses, products, technologies or personnel that might be acquired in the
future, and the failure of the Company to do so could have a material adverse
effect on the business, financial condition and results of operations of the
Company. See "Use of Proceeds."

RISKS OF CONTROL BY PRINCIPAL STOCKHOLDERS. A substantial majority of the
Company's capital stock is held by a limited number of stockholders. At the
completion of this offering, Cypress and the Company's seven largest
stockholders (including Cypress) will own approximately 15.5% and 60.6%,
respectively, of the shares of Common Stock outstanding or issuable upon
conversion of convertible securities. Accordingly, such stockholders are
likely, for the foreseeable future, to continue to be able to control major
decisions of corporate policy and determine the outcome of any major
transaction or other matter submitted to the Company's stockholders or Board of
Directors, including potential mergers or acquisitions involving the Company,
amendments to the Company's Certificate of Incorporation or Bylaws, and the
like. Stockholders other than such principal stockholders are therefore likely
to have little or no influence on decisions regarding such matters. See
"Principal and Selling Stockholders."

DILUTION. Investors participating in this offering will incur immediate and
substantial dilution in the net tangible book value of their shares of Common
Stock in the amount of approximately $10.08 per share, at an assumed initial
public offering price of $12.00 per share, after deducting the underwriting
discount and commissions and estimated offering expenses payable by the
Company. Additional dilution will occur upon the exercise of outstanding stock
options. See "Dilution."

13
<PAGE>

ABSENCE OF DIVIDENDS. The Company has not declared or paid cash dividends on
its capital stock to date. The Company presently intends to retain future
earnings, if any, for use in the operation and expansion of its business and
does not anticipate paying cash dividends with respect to the Common Stock in
the foreseeable future. See "Dividend Policy."

POTENTIAL ADVERSE CONSEQUENCES OF FUTURE SALES. Prior to this offering,
there has been no market for the Common Stock of the Company. Therefore,
future sales of substantial amounts of Common Stock in the public market could
adversely affect the prevailing market price from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly
after this offering because of certain contractual and legal restrictions on
resale, sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future. In particular, 2,322,632 shares will become immediately
available within 180 days of the date of this Prospectus. See "Description of
Capital Stock--Registration Rights" and "Shares Eligible for Future Sale."

14
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby are estimated to be $19,338,000,
assuming an initial public offering price of $12.00 per share and after
deducting the underwriting discount and estimated offering expenses payable by
the Company. The principal purposes of this offering are to obtain additional
capital, to create a public market for the Company's Common Stock, to enhance
the Company's ability to use its Common Stock as consideration for
acquisitions and as a means of attracting and retaining key employees, to
provide increased visibility and credibility in a marketplace where many of
the Company's current and potential competitors are or will be publicly held
companies, and to facilitate future access by the Company to public equity
markets. As of the date of this Prospectus, the Company has no specific plans
as to the use of the net proceeds of this offering. However, the Company
ultimately expects to use the net proceeds from this offering for general
corporate purposes, including working capital and capital expenditures,
including at least $2.0 million of capital expenditures in 1997. A portion of
the proceeds may also be used to make strategic acquisitions of complementary
businesses, technologies or products. Although the Company evaluates such
potential acquisitions from time to time, the Company currently has no
understanding, commitment or agreement with respect to any such acquisitions.
Proceeds of the offering may be used for expenses incurred in connection with
litigation with Actel and the settlement of such litigation. Pending such
uses, the Company intends to invest the net proceeds of this offering in U.S.
short-term or medium-term, investment grade, interest-bearing securities. The
Company will not receive any proceeds from the sale of the shares of Common
Stock offered by Cypress hereby. See "Risk Factors--Potential Adverse
Consequences of Actel Litigation" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."

DIVIDEND POLICY

The Company has not and does not intend to pay any cash dividends on its
capital stock. The Company presently intends to retain future earnings, if
any, for use in the operation and expansion of its business and does not
anticipate paying cash dividends in the foreseeable future.

15
<PAGE>

CAPITALIZATION

The following table sets forth the long-term obligations and capitalization
of the Company at June 30, 1997 (i) on an actual basis and (ii) as adjusted to
give effect to the sale of 1,800,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $12.00 per
share, after deducting the underwriting discount and estimated offering
expenses payable by the Company, the conversion of all outstanding shares of
preferred stock into Common Stock, the issuance of 2,603,817 shares of Common
Stock to Cypress in connection with the contract termination and the exercise
of a warrant to purchase 18,750 shares of Common Stock at $4.48 per share.
This table should be read in conjunction with the Financial Statements and the
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Long-term obligations.............................. 1,479 1,479
----------- -----------
Stockholders' equity:
Preferred Stock, $.001 par value; 8,795,410
shares authorized, 8,495,712 shares issued and
outstanding, actual; 10,000,000 shares
authorized, no shares issued and outstanding,
as adjusted..................................... 9 --
Common stock, $.001 par value; 15,000,000 shares
authorized; 860,957 shares issued and
outstanding, actual; 100,000,000 shares
authorized, 13,824,920 issued and outstanding,
as adjusted(1).................................. 1 14
Additional paid-in capital......................... 43,679 81,506
Common stock to be issued: 2,603,817 shares actual;
and no shares, as adjusted........................ 18,409 --
Stockholder note receivable........................ (125) (125)
Deferred compensation.............................. (2,712) (2,712)
Accumulated deficit................................ (52,156) (52,156)
----------- -----------
Total stockholders' equity....................... 7,105 26,527
----------- -----------
Total capitalization......................... 8,584 28,006
=========== ===========
</TABLE>
- --------
(1) As of June 30, 1997, excludes 1,628,799 shares of Common Stock subject to
outstanding options under the Option Plan and 685,165 shares reserved for
future issuance thereunder. See "Management--Benefit Plans" and Note 7 of
Notes to Financial Statements.

16
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1997,
was $7,105,000 million, or $0.59 per share of Common Stock. Pro forma net
tangible book value per share represents the amount of total tangible assets
of the Company reduced by the amount of its total liabilities and divided by
the total number of shares of Common Stock outstanding after giving effect to
the conversion of all outstanding shares of preferred stock into Common Stock
and the issuance of 2,603,817 shares of Common Stock to Cypress. After giving
effect to the sale by the Company of 1,800,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $12.00 per share, after
deducting the underwriting discount and estimated offering expenses payable by
the Company, and after giving effect to the exercise of a warrant to purchase
18,750 shares of Common Stock at $4.48 per share, the pro forma net tangible
book value of the Company as of June 30, 1997, would have been $26,527,000, or
$1.92 per share. This amount represents an immediate increase in such net
tangible book value of $1.33 per share to existing stockholders and an
immediate dilution of $10.08 per share to new investors. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $12.00
Pro forma net tangible book value per share as of June 30,
1997....................................................... $0.59
Increase per share attributable to new investors............ 1.33
-----
Pro forma net tangible book value per share after the
offering..................................................... 1.92
------
Dilution per share to new investors........................... $10.08
======
</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 1997,
the differences between the existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company and the average price paid per
share, based upon an assumed initial public offering price of $12.00 per share
(before deducting the underwriting discount and estimated offering expenses
payable by the Company) with respect to the 1,800,000 shares offered by the
Company hereby:

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 12,024,920 87.0% $59,161,000 73.3% $5.17
New investors(1).............. 1,800,000 13.0 21,600,000 26.7 12.00
---------- ----- ----------- -----
Total....................... 13,824,920 100.0% $80,761,000 100.0%
========== ===== =========== =====
</TABLE>
- --------
(1) The sale of shares of Common Stock by Cypress in the offering will reduce
the number of shares held by existing stockholders to 10,824,921 or 78.3%
of the total number of shares of Common Stock outstanding after the
offering, and will increase the number of shares to be purchased by the
new public investors to 3,000,000 or 21.7% of the total number of shares
of Common Stock outstanding after the offering. See "Principal and Selling
Stockholders."

The above computations assume that (i) no part of the Underwriters' over-
allotment option is exercised and (ii) no options are exercised after June 30,
1997. As of June 30, 1997, there were outstanding options to purchase an
aggregate of 1,628,799 shares of Common Stock at a weighted average exercise
price of $2.17 per share. To the extent the above options have been or are
exercised, there will be further dilution to new investors. See "Management--
Benefit Plans," "Description of Capital Stock" and Notes 5 and 7 of Notes to
Financial Statements.

17
<PAGE>

SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements and Notes thereto included
elsewhere in this Prospectus. The balance sheet information as of December 31,
1995 and 1996 and the statement of operations data set forth below for 1994,
1995, and 1996 are derived from the audited financial statements included
elsewhere in this Prospectus. The balance sheet information as of December 31,
1992, 1993 and 1994 and the statement of operations data for 1992 and 1993 are
derived from unaudited financial statements of the Company not included
herein. The balance sheet information as of June 30, 1997 and the statement of
operations data for the six months ended June 30, 1996 and 1997, are derived
from unaudited financial statements included herein. In the opinion of
management, such unaudited financial statements have been prepared on the same
basis as the audited financial statements referred to above and include all
adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of the financial position of the Company and the results of
operations for the indicated periods. Operating results for the six months
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the full year.

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------------------- JUNE 30, JUNE 30,
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $ 1,325 $ 4,141 $ 6,024 $15,148 $23,758 $11,440 $ 13,951
Cost of revenue......... 1,191 2,889 4,053 7,739 11,158 5,545 7,443
------- ------- ------- ------- ------- ------- --------
Gross profit............ 134 1,252 1,971 7,409 12,600 5,895 6,508
------- ------- ------- ------- ------- ------- --------
Operating expenses:
Research and
development........... 2,389 2,762 3,172 3,599 4,642 2,173 3,058
Sales, general and
administrative........ 2,232 2,625 4,408 5,770 7,730 3,691 5,003
Contract termination
and legal(1).......... -- -- -- 2,700 4,125 265 23,009
------- ------- ------- ------- ------- ------- --------
Total operating
expenses.............. 4,621 5,387 7,580 12,069 16,497 6,129 31,070
------- ------- ------- ------- ------- ------- --------
Loss from operations.... (4,487) (4,135) (5,609) (4,660) (3,897) (234) (24,562)
Interest expense........ -- (223) (240) (200) (60) (13) (65)
Interest income and
other, net............. 30 60 21 153 360 310 240
------- ------- ------- ------- ------- ------- --------
Net income (loss)...... $(4,457) $(4,298) $(5,828) $(4,707) $(3,597) $ 63 $(24,387)
======= ======= ======= ======= ======= ======= ========
Net income (loss) per
share ................. (.94) (.89) (1.19) (.95) $ (.68) $ -- $ (4.56)
======= ======= ======= ======= ======= ======= ========
Shares used in net
income (loss) per share
calculation............ 4,760 4,810 4,910 4,974 5,309 13,124 5,350
======= ======= ======= ======= ======= ======= ========
</TABLE>
- --------
(1) Includes a charge of $23.0 million in the six months ended June 30, 1997
for termination of the Existing Agreement (as defined herein) and charges
of $2.7 million and $4.1 million in the years ended December 31, 1995 and
1996, respectively, for expected costs of litigation. See "Risk Factors--
Actel Litigation" and Notes 8 and 11 of Notes to Financial Statements.

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------ ------ ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.......................... $5,071 $2,836 $ 488 $ 3,856 $10,336 $9,537
Working capital (deficit)..... 4,484 553 (4,792) 7,068 10,650 5,601
Total assets.................. 7,076 4,696 2,531 12,199 22,577 22,823
Long-term obligations......... 534 383 509 137 602 1,479
Total stockholders' equity
(deficit).................... 5,255 956 (4,848) 7,149 11,799 7,105
</TABLE>

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.

OVERVIEW

From its inception in April 1988 through the third quarter of 1991,
QuickLogic was primarily engaged in product development. Accordingly, the
majority of the Company's operating expenses during such period was related to
research and development activities. The Company recorded revenue from its
first product family, pASIC 1, in August 1991. The pASIC 1 product family
includes logic devices consisting of 1-, 2-, 4- and 8-thousand usable ASIC
gates. The Company first recorded revenue from its pASIC 2 product family in
the third quarter of 1996. The pASIC 2 product family includes logic devices
consisting of 3-, 5-, 7- and 9-thousand usable ASIC gates. At June 30, 1997,
the Company had an accumulated deficit of $52.2 million.

Revenue from the Company's pASIC products represented over 90.0% of revenue
for each of 1994, 1995 and 1996 and the six months ended June 30, 1997. The
Company derives the remainder of revenue from licenses of its QuickWorks and
QuickTools design software. One customer accounted for approximately 27.0% and
11.2% of revenue in 1996 and the six months ended June 30, 1997, respectively.
No other customer accounted for more than 10% of revenue in 1994, 1995, 1996
or the six months ended June 30, 1997.

Sales through distributors represented 65.4%, 60.5% and 53.3% of revenue in
1994, 1995 and 1996, respectively, and 42.3% and 74.8% for the six months
ended June 30, 1996 and 1997, respectively. The Company expects that these
percentages will increase over time. The Company's general policy is to defer
recognition of revenue on shipments to domestic distributors until the product
is sold by such distributors to the end-user. Revenue from all other products
is recognized at the time of shipment by the Company.

International revenue accounted for 30.0%, 29.4% and 29.6% of the Company's
revenue for 1994, 1995 and 1996, respectively and 32.6% and 45.4% for the six
months ended June 30, 1996 and 1997, respectively. The Company expects that
revenue derived from purchases by international customers will continue to
represent a significant portion of its total revenue. All of the Company's
sales are denominated in U.S. dollars.

Average selling prices ("ASPs") for the Company's products typically decline
rapidly during the first six to 12 months after introduction, then decline
less rapidly as the product matures. To date, the Company has been able to
offset price declines by periodically introducing higher-priced, higher-
density products, which results in relatively constant overall ASPs. In
addition, the Company seeks to maintain acceptable gross margins through
manufacturing efficiencies and cost reductions, including manufacturing its
products using smaller product geometries on larger wafers. However, the
markets in which the Company competes are highly competitive, and there can be
no assurance that the Company will continue to successfully introduce higher-
density products, that overall ASPs can be maintained or that the Company will
continue to achieve manufacturing efficiencies or material cost reductions.
Any significant decline in the Company's overall ASPs or gross margins could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Risk Factors--Industry Pressures."

19
<PAGE>

In March 1997, the Company and Cypress terminated the existing Technical
Transfer, Joint Development License and Foundry Supply Agreement between the
parties dated October 2, 1992 (the "Existing Agreement") related to the
Company's FPGA products, and replaced it with a new arrangement whereby the
Company's FPGA products will no longer be second sourced by Cypress. In
exchange for the termination of the Existing Agreement and the reversion of
the rights to the intellectual property developed thereunder to the Company,
the Company paid $4.5 million in cash and agreed to issue 2,603,817 shares of
Common Stock to Cypress, resulting in a charge of approximately $23 million in
the first quarter of 1997. In addition, the Company granted Cypress certain
contractual rights as to the shares of the Company's stock held by Cypress,
including the right to sell shares in this offering. The parties also entered
into a new foundry agreement and a cross-license agreement.

The Company entered into the Existing Agreement in 1992 to obtain guaranteed
fabrication capacity and to secure a second source for the Company's products.
At that time, the Company had less revenue and many competitors with
substantially more resources than the Company. The Company believed that
having Cypress as a second source would provide credibility and enable the
Company to do business with customers who otherwise would overlook the
Company. By 1997, wafer fabrication capacity was no longer scarce in the
current semiconductor market, and the Company had established a customer base
and reputation. In addition, over the past year, Cypress began selling the
Company's products at substantially discounted prices which substantially
disrupted the Company's market. Accordingly, the Existing Agreement with
Cypress was no longer beneficial and created potential issues in the Company's
ability to grow revenues and gross margins at the pace it otherwise believed
it could achieve. See "Business--Cypress Transaction."

In 1995 and 1996, the Company recorded a $2.7 million and $4.1 million,
respectively, increase to its legal reserves for the Actel litigation (see
Note 11 of Notes to Financial Statements). The Company intends to continue to
reassess anticipated litigation costs and will adjust its reserve as
necessary. See "Risk Factors--Potential Adverse Consequences of Actel
Litigation."

20
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth the percentage of revenue for certain items
in the Company's statements of operations for the periods indicated:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- --------------
1994 1995 1996 1996 1997
------- ------- ------- ----- -------
<S> <C> <C> <C> <C> <C>
Revenue.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue.................. 67.3 51.1 47.0 48.5 53.4
------- ------- ------- ----- -------
Gross margin..................... 32.7 48.9 53.0 51.5 46.6
------- ------- ------- ----- -------
Operating expenses:
Research and development....... 52.6 23.8 19.5 19.0 21.9
Selling, general and
administrative................ 73.2 38.1 32.5 32.3 35.9
Contract termination and legal
expense....................... -- 17.8 17.4 2.2 164.9
------- ------- ------- ----- -------
Total operating expenses..... 125.8 79.7 69.4 53.5 222.7
------- ------- ------- ----- -------
Operating loss................... (93.1) (30.8) (16.4) (2.0) (176.1)
Interest expense................. (3.9) (1.3) (0.2) (0.1) (0.4)
Interest income and other, net... 0.3 1.0 1.5 2.7 1.7
------- ------- ------- ----- -------
Net income (loss)................ (96.7)% (31.1)% (15.1)% 0.6% (174.8)%
======= ======= ======= ===== =======
</TABLE>

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996

Revenue. Revenue for 1994, 1995 and 1996 was $6.0 million, $15.1 million and
$23.8 million, respectively, an increase of 151.5% in 1995 and 56.8% in 1996
over the respective prior year periods. The majority of the 1995 increase was
due to a substantial growth in sales of the Company's 4-thousand gate ("4K")
logic device products, first commercially shipped in the third quarter of
1994, the introduction of its 8-thousand gate ("8K") logic device products,
first commercially shipped in the second quarter of 1995, and increased sales
to customers in the data communications markets, primarily in North America
and Europe. The 1996 revenue growth was primarily attributable to increased
acceptance of the Company's 4K and 8K products in North America and Europe,
and a substantial increase in volume of sales to Texas Instruments. Increased
unit sales in 1995 and 1996 were partially offset by declining ASPs as newly
introduced products matured in 1995 and 1996. The Company expects rapid ASP
declines for a product during the first six to 12 months after introduction
and slowing declines thereafter, and seeks to increase revenue through the
introduction of new products and increased unit sales of its existing
products. However, no assurance can be given that the Company's efforts in
this regard will be successful.

Gross Profit. Gross profit was $2.0 million, $7.4 million and $12.6 million
in 1994, 1995 and 1996, respectively, which constituted 32.7%, 48.9% and 53.0%
of revenue for such periods. The improvement in 1995 gross margin was
primarily attributable to increased efficiencies as the Company's
manufacturing volume increased. The 1996 improvement resulted primarily from
continued volume-related efficiencies, wafer yield improvement and reductions
in wafer prices as foundry capacity constraints experienced in 1995 eased. The
improvement in margins in 1995 and 1996 was somewhat offset by yield
fluctuations as production began on the 8K products. The Company attempts to
offset declining ASPs as products mature through achieving manufacturing
efficiencies and material cost reductions as well as introducing new products
with higher prices. The Company's operating environment and resource
requirements necessitate managing a variety of factors such as general
business conditions in the semiconductor industry, fluctuations in
manufacturing yields at the Company's wafer suppliers, the availability of
foundry capacity, cancellations or delays of deliveries of products to the
Company, new product introductions by the

21
<PAGE>

Company or its competitors, product obsolescence, price erosion for maturing
products, competition, changes in the mix of products sold, seasonal
fluctuations in demand, changes in distributor inventory levels, availability
of wafer supply, increases in the costs of materials, cancellations or delays
of product orders, developments in the Company's litigation with Actel, the
ability to safeguard intellectual property in a rapidly evolving market,
changing customer product requirements, changes in demand for customers'
products and fluctuations in foreign currency exchange rates. As a result of
changes in these factors, the Company's past results may not be indicative of
future operating results. See "Risk Factors--Fluctuations in Operating
Results" and "--Industry Pressures."

Research and Development Expense. Research and development ("R&D") expense
includes personnel and other costs associated with product design and
development, process technology development and software development. R&D
expense was $3.2 million, $3.6 million, and $4.6 million in 1994, 1995 and
1996, respectively, which constituted 52.6%, 23.8% and 19.4% of revenue for
such periods. The increases in R&D expense in 1995 and 1996 were primarily due
to increases in headcount. The decline in R&D expense as a percentage of
revenue in 1995 and 1996 was primarily attributable to the increase in revenue
during those periods. The Company believes that continued investment in
process technology and product development are essential for it to remain
competitive in the markets it serves and expects to continue to increase R&D
expense in the future. The Company also expects R&D expense to increase as a
result of deferred compensation charges in future periods (see "--Deferred
Compensation") and costs associated with the migration to a new wafer
supplier.

Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense was $4.4 million, $5.8 million and $7.7
million in 1994, 1995 and 1996, respectively, which constituted 73.2%, 38.1%
and 32.5% of revenue for such periods, respectively. The increase in 1995 SG&A
expense over the year earlier period was primarily attributable to an increase
in personnel and increased sales and marketing efforts in support of existing
and new products. The increase in SG&A expense in 1996 was attributable to
increased sales commissions, marketing efforts and increased headcount. SG&A
expense decreased in 1995 and 1996 as a percentage of revenue primarily as a
result of increased revenue. The Company anticipates that SG&A expense will
increase as a result of deferred compensation charges in future periods (see
"--Deferred Compensation") and as a result of costs associated with the
Company becoming a public company.

Deferred Compensation. The Company grants incentive stock options to hire,
incent and retain employees. With respect to the grant of certain stock
options to employees, the Company recorded aggregate deferred compensation of
approximately $851,000 and $2.2 million in 1996 and in the first half of 1997,
respectively. Deferred compensation is presented as a reduction of
stockholders' equity and amortized ratably over the vesting period of the
applicable options, generally four years. The Company currently expects to
record amortization of deferred compensation of approximately $644,000,
$755,000, $755,000, $712,000 and $107,000 during the years ended 1997, 1998,
1999, 2000 and 2001, respectively. The amortization of deferred compensation
will be recorded as R&D and SG&A expense in such periods.

Interest Income and Other, Net. Interest and other income was $21,000,
$153,000 and $360,000 in 1994, 1995 and 1996, respectively. Interest and other
income increased in 1995 and 1996 as a result of increased interest income on
higher average cash and investment balances in 1995 and 1996. See "--Liquidity
and Capital Resources."

Interest Expense. Interest expense was $240,000, $200,000 and $60,000 in
1994, 1995 and 1996, respectively. Interest expense decreased in 1996 as a
result of the conversion to preferred stock of notes payable to stockholders
during 1995.

Provision for Income Taxes. No provision for income taxes has been recorded
in the years ended December 31, 1994, 1995 and 1996, as the Company incurred
net operating losses ("NOLs")

22
<PAGE>

in those years. At December 31, 1996, the Company had NOL carryforwards for
federal and state tax purposes of approximately $16 million and $1 million
respectively. These carryforwards, if not utilized to offset future taxable
income and income taxes payable, will expire through the year 2010.

SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1997

Revenue. Revenue was $11.4 million and $14.0 million for the six months
ended June 30, 1996 and June 30, 1997, respectively. Revenue increased 21.9%
for the six-month period ended June 30, 1997 compared to the year earlier six-
month period. The increases in revenue resulted from increased sales of the
Company's first pASIC 2 product, which began shipping in the second quarter of
1996, as well as an expanded presence in the marketplace through the addition
of two significant distributors at the beginning of 1997.

Gross Profit. Gross profit was $5.9 million and $6.5 million for the six
months ended June 30, 1996 and 1997, respectively. The increase in gross
profit was primarily due to yield improvements on the 4K and 8K products and
increased operating efficiencies due to greater volumes of the Company's
higher ASP, higher-density products, partially offset by a $1.0 million
inventory write-down in the second quarter of 1997. The inventory write-down
was primarily attributable to inventory acquired from Cypress in association
with the termination of the companies' Existing Agreement (see "Business--
Cypress Transaction") which contributed to higher than desired levels of
inventory, thus increasing the risk of obsolescence. Gross margin declined
from 51.5% for the first half of 1996 to 46.7% for the first half of 1997. The
decline in gross margin was due to the inventory write-down and declining ASPs
of the Company's lower-density products.

Research and Development Expense. R&D expense was $2.2 million and $3.1
million for the six months ended June 30, 1996 and 1997, respectively. The
increase in R&D expense was primarily due to the hiring of additional
personnel, as well as $133,000 attributable to deferred compensation charges
in the first six months of 1997 associated with the grant of incentive stock
options to employees. R&D increased as a percentage of revenue from 19.0% in
the first half of 1996 to 21.9% in the first half of 1997.

Selling, General and Administrative Expense. SG&A expense was $3.7 million
and $5.0 million for the first half of 1996 and 1997, respectively. SG&A
increased as a percentage of revenue from 32.3% in the first half of 1996 to
35.9% in the first half of 1997. The 1997 increases were due to hiring of
additional sales, marketing, finance and human resources personnel. In
addition, SG&A expense includes $133,000 attributable to deferred compensation
charges in the first six months of 1997 associated with the grant of incentive
stock options to employees.

Interest Income and Other, Net. Interest income and other, net was $310,000
in the first half of 1996 compared to $240,000 in the first half of 1997. The
decreases were due to lower average cash and investment balances in the first
half of 1997 compared to the same period in 1996.

Interest Expense. Interest expense was $13,000 and $65,000 in the first half
of 1996 and 1997, respectively. The increase was due to additional financing
of capital expenditures for furniture, test equipment and leasehold
improvements in late 1996 and the first half of 1997.

23
<PAGE>

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth certain unaudited statement of operations
data for the four quarters of each of 1995 and 1996 and the first and second
quarters of 1997, as well as such data expressed as a percentage of the
Company's revenue for the periods indicated. This data has been derived from
unaudited financial statements that, in the opinion of management, include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of such information. The Company's quarterly results have
been in the past, and in the future may be, subject to fluctuations. See "Risk
Factors--Fluctuations in Operating Results." As a result, the Company believes
that results of operations for the interim periods are not necessarily
indicative of results for any future period.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ $ 2,644 $2,715 $ 3,951 $5,838 $5,154 $6,286 $6,047 $ 6,271 $ 6,268 $ 7,683
Cost of revenue........ 1,372 1,391 2,108 2,868 2,563 2,982 2,828 2,785 2,813 4,630
------- ------ ------- ------ ------ ------ ------ ------- -------- -------
Gross profit........... 1,272 1,324 1,843 2,970 2,591 3,304 3,219 3,486 3,455 3,053
------- ------ ------- ------ ------ ------ ------ ------- -------- -------
Operating expenses
Research and
development.......... 784 942 749 1,124 1,042 1,131 1,127 1,342 1,333 1,725
Selling, general
and administrative... 1,455 1,198 1,615 1,502 1,685 2,006 2,058 1,981 2,313 2,690
Contract termination
and legal............ -- -- 2,700 -- -- 265 -- 3,860 23,009 --
------- ------ ------- ------ ------ ------ ------ ------- -------- -------
Total operating
expenses............. 2,239 2,140 5,064 2,626 2,727 3,402 3,185 7,183 26,655 4,415
------- ------ ------- ------ ------ ------ ------ ------- -------- -------
Operating income
(loss)................ (967) (816) (3,221) 344 (136) (98) 34 (3,697) (23,200) (1,362)
Interest expense....... (90) (67) (41) (2) (7) (6) (30) (17) (21) (44)
Interest income and
other, net............ 2 37 65 49 164 146 57 (7) 118 122
------- ------ ------- ------ ------ ------ ------ ------- -------- -------
Net income (loss)...... $(1,055) $ (846) $(3,197) $ 391 $ 21 $ 42 $ 61 $(3,721) $(23,103) $(1,284)
======= ====== ======= ====== ====== ====== ====== ======= ======== =======
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
QUARTER ENDED
-----------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996 1996 1996 1997 1997
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........ 51.9 51.2 53.3 49.1 49.7 47.4 46.8 44.4 44.9 60.3
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Gross profit........... 48.1 48.8 46.7 50.9 50.3 52.6 53.2 55.6 55.1 39.7
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Operating expenses
Research and
development.......... 29.7 34.7 19.0 19.3 20.2 18.0 18.6 21.4 21.2 22.4
Selling, general
and administrative... 55.0 44.1 40.9 25.7 32.7 31.9 34.0 31.6 36.9 35.0
Contract termination
and legal............ -- -- 68.3 -- -- 4.2 -- 61.6 367.1 --
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Total operating
expenses............. 84.7 78.8 128.2 45.0 52.9 54.1 52.6 114.6 425.2 57.4
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Operating income
(loss)................ (36.6) (30.0) (81.5) 5.9 (2.6) (1.5) 0.6 (59.0) (370.1) (17.7)
Interest expense....... (3.4) (2.5) (1.0) -- (0.2) (0.1) (0.5) (0.3) (0.3) (0.6)
Interest income and
other, net............ 0.1 1.4 1.6 0.8 3.2 2.3 0.9 (0.1) 1.9 1.6
----- ----- ----- ----- ----- ----- ----- ----- ------ -----
Net income (loss)...... (39.9)% (31.1)% (80.9)% 6.7% 0.4% 0.7% 1.0% (59.4)% (368.5)% (16.7)%
===== ===== ===== ===== ===== ===== ===== ===== ====== =====
</TABLE>

Revenue increased and gross margin improved substantially from the third to
the fourth quarters of 1995 due to market acceptance of the Company's 4K
products as well as yield improvements and manufacturing efficiencies
attributable to greater volume production. Revenue declined in the first
quarter of 1996 due to a slowdown in demand affecting the entire semiconductor
industry. Revenue and gross margin declined in the first quarter of 1996
compared to the fourth quarter of 1995 due to a general slowdown in the
semiconductor industry, which resulted in relatively more rapid declines in
ASPs of the Company's pASIC 1 products. Revenue increased and gross margin
improved in the second quarter of 1996 due to market acceptance of the
Company's new 8K products. Quarter-to-

24
<PAGE>

quarter revenue has been relatively constant from the second quarter of 1996
through the first quarter of 1997 due to general semiconductor industry
conditions as well as demand for the Company's products partially shifting to
products with lower ASPs. Revenue increased in the second quarter of 1997 due
to increased sales of the Company's products. Gross margins in the fourth
quarter of 1995 and the first quarter of 1996 were adversely affected by lower
than expected fabrication and test yields. Gross margins continued to increase
throughout 1996 due to manufacturing efficiencies and material cost reductions
and remained flat in the first quarter of 1997. Gross margins declined in the
second quarter of 1997 primarily as a result of a $1.0 million inventory
write-down attributable to higher than desired levels of inventory.

SG&A increased significantly in the third quarter of 1995 and the second
quarter of 1996 primarily as a result of higher commissions. The increase in
the first and second quarter of 1997 was due primarily to the hiring of
additional personnel and higher commissions. SG&A is expected to continue to
increase due to increasing commissions as revenue increases, additional costs
associated with being a public company, and deferred compensation charges
related to certain option grants. See "--Deferred Compensation."

R&D increased in the second quarter of 1997 primarily due to the hiring of
additional personnel and deferred compensation charges related to certain
option grants. See "--Deferred Compensation."

Total operating expenses increased substantially in the third quarter of
1995 and the fourth quarter of 1996 due to charges for legal reserves. In the
first quarter of 1997, the Company incurred a $23.0 million charge in
connection with the termination of the Existing Agreement with Cypress. See
"Business--Cypress Transaction" and "--Actel Litigation."

Interest expense declined in the third quarter of 1995 as the Company
converted notes payable to stockholders to preferred stock and increased in
the third quarter of 1996 and second quarter of 1997 due to financing of
capital acquisitions. Interest and other income, net increased in the first
quarter of 1996 due to higher yields from investments and decreased in the
third quarter of 1996 due to a $4.5 million payment to Cypress. See
"Business--Cypress Transaction." The increase in the first quarter of 1997 was
due to higher cash balances from the issuance of preferred stock in December
1996.

Fluctuations in the Company's operating results have occurred in the past
and may occur in the future due to a variety of factors, any of which may have
a material adverse effect on the Company's operating results. In particular,
the Company's quarterly results of operations may vary significantly due to
general business conditions in the semiconductor industry, fluctuations in
manufacturing yields at the Company's wafer suppliers, the availability of
foundry capacity, cancellations or delays of deliveries of products to the
Company, new product introductions by the Company or its competitors, product
obsolescence, price erosion for maturing products, competition, changes in the
mix of products sold, seasonal fluctuations in demand, changes in distributor
inventory levels, availability of wafer supply, increases in the costs of
materials, cancellations or delays of product orders, developments in the
Company's litigation with Actel, the ability to safeguard intellectual
property in a rapidly evolving market, changing customer product requirements,
changes in demand for customers' products and fluctuations in foreign currency
exchange rates. A large portion of the Company's operating expenses is fixed
and difficult to reduce or modify. If revenue does not meet the Company's
expectations, the material adverse effect of any such revenue shortfall will
be magnified by the fixed nature of these operating expenses. In addition, the
Company's quarterly operating results can vary due to the volume and timing of
product orders received and delivered during a quarter, the ability of the
Company and its key suppliers to respond to changes made in customer orders,
and the timing of new product introductions by the Company and its
competitors. All of the above factors are difficult for the Company to
forecast, and these and other factors could have a material adverse effect on
the

25
<PAGE>

Company's business, financial condition and results of operations. As a
result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indicative of future
operating results. See "Risk Factors--Fluctuations in Operating Results."

LIQUIDITY AND CAPITAL RESOURCES

The Company has primarily financed its operations and capital requirements
through sales of preferred stock, borrowings from stockholders and, in the
most recent two quarters, bank debt to finance its capital requirements. At
June 30, 1997, the Company had $9.5 million in cash, an increase of $1.7
million from cash and short-term investments held at December 31, 1995. This
increase was primarily attributable to the issuance of $8.9 million in
preferred stock in December 1996 and January 1997, offset in part by the
payment of $4.5 million to Cypress and increased cash used in operating
activities. As of June 30, 1997, the Company had an accumulated deficit of
$52.2 million. See "Business--Cypress Transaction" and Note 8 of Notes to
Financial Statements.

The Company currently has a $6.0 million bank facility which will increase
to $7.0 million upon the closing of this offering. Under this facility, the
Company has a $3.0 million domestic accounts receivable revolving line of
credit, a $2.0 million equipment term loan facility, and a $1.0 million
foreign accounts receivable and inventory revolving line of credit. The
domestic and foreign revolving lines of credit are available for general
working capital purposes, bear interest at the bank's prime rate and expire
October 6, 1997. The Company expects to renew these lines of credit. At June
30, 1997, the Company had utilized $1.8 million of the equipment term loan
facility, and has not drawn down under the other lines as of such time or to
date. The drawdown period for the equipment term loan facility expired on June
30, 1997. Borrowings bear interest at prime plus 0.25% and are payable in
equal monthly installments from July 1997 through June 2000. See Note 4 of
Notes to Financial Statements.

Through June 30, 1997, the Company has purchased approximately $5.5 million
in capital assets, $1.9 million of which were purchased through bank financing
during 1996 and the first quarter of 1997. The Company intends to purchase
approximately $600,000 of additional capital assets during the remainder of
1997 but currently has no other significant commitments to acquire capital
equipment.

Net cash used in operations was $3.5 million, $5.0 million, $4.6 million and
$1.5 million in 1994, 1995, 1996 and the first half of 1997, respectively. The
increase in cash used in 1995 as compared to 1994 was primarily attributable
to a $2.6 million increase in accounts receivable, partially offset by a $2.0
million increase in liabilities in 1995 and $122,000 reduction in accounts
payable in 1995 compared to a $1.5 million increase in accounts payable in
1994, partially offset by a $1.1 million decrease in net loss in 1995 compared
to 1994. The decline in cash used for operations (excluding the increase in
the charge for legal reserves) in 1996 as compared to 1995 was due to net
income of $528,000 in 1996 compared to a net loss of $2.0 million in 1995, and
a substantial increase in accounts payable in 1996, offset in part by the $4.5
million payment to Cypress and a substantial increase in inventory in 1996.
Net cash used in operations during the first half of 1997 resulted primarily
from increases in accounts receivable and inventory and a decline in accounts
payable and accrued liabilities.

Net cash provided by (used for) investing activities was $(259,000), $(4.1)
million, $2.5 million and $(1.5) million in 1994, 1995, 1996 and the first
half of 1997, respectively. In 1995, the Company invested $4.0 million in
short-term investments which were sold in 1996. The Company acquired
$1.5 million in property and equipment in each of 1996 and the first half of
1997, primarily furniture, leasehold improvements and computer and networking
equipment as a result of its move to its new facility in December of that
year. The majority of these acquisitions were financed under the Company's
equipment term loan facility.

26
<PAGE>

Net cash provided from financing activities was $1.4 million, $12.5 million,
$8.5 million and $2.3 million in 1994, 1995, 1996 and the first half of 1997,
respectively, and resulted primarily from the issuance of $11.8 million of
preferred stock in 1995 and $8.1 million of preferred stock in 1996, and $1.5
million and $1.2 million in borrowings from stockholders in 1994 and 1995,
respectively. In 1996 and the first half of 1997, the Company had bank
borrowings of $470,000 and $1.5 million, respectively.

The Company requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable. The Company's
future capital requirements will depend on many factors, including the rate of
sales growth, market acceptance of the Company's existing and new products,
the amount and timing of research and development expenditures, the timing of
the introduction of new products, expansion of sales and marketing efforts,
and the status of ongoing litigation. See "Risk Factors--Potential Adverse
Consequences of Actel Litigation." There can be no assurance that additional
equity or debt financing, if required, will be available on terms satisfactory
to the Company. See "Risk Factors--Future Capital Needs." The Company believes
the net proceeds of this offering combined with its existing capital resources
and cash generated from operations will be sufficient to meet the Company's
needs for the next 12 months, although the Company could seek to raise
additional capital during that period.

27
<PAGE>

BUSINESS

QuickLogic develops, markets and supports advanced FPGA semiconductors and
software design tools. QuickLogic products enable designers of complex
electronic systems to achieve rapid time to market by optimizing design speed,
design flexibility and cost. The Company's products target complex, high-
performance electronic systems in rapidly changing markets including video,
graphics and imaging, telecommunications and data communications,
instrumentation and test, high-performance computers and military systems. The
key components of the QuickLogic solution are the Company's proprietary
ViaLink antifuse technology and pASIC architectures, and its software design
tools. QuickLogic's proprietary ViaLink antifuse technology places logic
interconnects between the metal layers of an FPGA device, instead of on the
silicon substrate, thereby minimizing die size and cost. The ViaLink antifuse
technology offers lower resistance and lower capacitance than competing
interconnect technologies, resulting in high speed. The Company's pASIC
architectures facilitate full routability and utilization of a device's logic
cells, enabling a high degree of design flexibility. QuickLogic's QuickTools
software design tools place and route logic cells on an FPGA device, and the
QuickWorks design software suite incorporates QuickTools and industry-leading
design tools for HDL/schematic entry, synthesis and simulation. In addition,
QuickWorks incorporates IEEE standard design languages Verilog and VHDL.

INDUSTRY BACKGROUND

Competitive pressures are forcing manufacturers of electronic systems to
bring increasingly complex products to market rapidly. Electronic systems such
as video, graphics and imaging, telecommunications and data communications,
instrumentation and test, high-performance computers and military systems
require improved functionality, performance and reliability, all at lower
cost. These requirements are addressed through combinations of advanced
semiconductors such as microprocessors, memory and logic devices, which enable
electronic systems to achieve greater competitive differentiation through
faster speed, smaller size, lower power consumption and lower cost.

These competitive pressures have driven the evolution of logic devices,
which are used in virtually every complex electronic system to coordinate the
functions of other semiconductor devices such as microprocessors and memory
devices. However, the inherent technological limitations of certain logic
devices typically force system manufacturers to make trade offs among speed,
density, design flexibility and cost.

The gate array is one of the most common types of logic devices, made up of
a matrix of uncommitted logic elements. The two most commonly used logic
solutions are mask-programmed or "standard" gate arrays and customer-
programmed PLDs. Standard gate arrays typically offer higher gate densities
and faster performance than PLDs. The logic elements of standard gate arrays
are configured by the device manufacturer during the manufacturing process for
a specific customer application. However, as standard gate arrays are
customized during the manufacturing process, these devices generally require
significant initial non-recurring engineering costs ("NREs"), and therefore
restrict design flexibility, cause longer device delivery times, and generate
dedicated custom product inventory that becomes obsolete when product life
cycles end. Therefore, standard gate arrays are effective in high-volume
applications where design changes are infrequent and time-to-market
considerations are less critical.

Unlike standard gate arrays which are semi-custom devices, PLDs are standard
products purchased by systems manufacturers in a "blank" state, which are then
rapidly configured by a system designer into specific logic circuits. This
approach shortens design cycles, and therefore enables faster time to market
for manufacturers of electronic systems. The PLD market consists of three
product categories: low density simple PLDs ("SPLDs"), which are devices with
generally less

28
<PAGE>

than 1,000 gates; higher-density CPLDs; and FPGAs. CPLDs and FPGAs are devices
that integrate up to tens of thousands of gates. CPLDs and FPGAs have
different architectural models that allow them to more effectively solve
various functional problems on a circuit board. However, as market
requirements have become more stringent and competition more intense, many
systems manufacturers have found that typical PLDs, including traditional
higher-density FPGAs and CPLDs, have inherent architectural and technological
constraints.

Traditional CPLD and FPGA manufacturers have employed transistor-based
interconnect technologies such as SRAM, EPROM and Flash, but these
technologies often fail to achieve the optimal combination of high speed,
design flexibility and low cost. Device speed is slowed because transistor-
based interconnections have a relatively high electrical resistance. In
addition, transistor- based interconnects are placed on the silicon substrate,
consuming large amounts of silicon area, and therefore limiting the number of
programming elements for device routability. Design flexibility is
subsequently compromised because of limited device utilization, inability to
maintain pin-outs, and device timing uncertainties. These inadequacies often
require manual design to supplement the use of automatic software design
tools, thereby slowing time to market. End-users are also required to use the
proprietary software of the device manufacturer, which compels the customer to
use a specific device vendor, even if the vendor does not provide a device
that is optimal for a given application. In addition, the cost of the device
increases as die sizes increase, and additional design time is required.

Some device manufacturers have attempted to address the limitations of
transistor-based interconnects with antifuse technologies. Antifuse
interconnects are smaller than transistor-based interconnects and offer lower
electrical resistance and smaller die size, resulting in higher speed, greater
design flexibility and lower cost. However, traditional antifuse technology
still requires interconnects to be placed on the silicon substrate and retains
relatively high electrical resistance. Therefore, traditional antifuse
technology fails to fully address the die size, electrical resistance and
design flexibility problems of transistor-based interconnects.

THE QUICKLOGIC SOLUTION

QuickLogic produces FPGA semiconductors that offer high speed and design
flexibility at low cost. QuickLogic products enable designers of complex
electronic systems to achieve rapid time to market by optimizing design speed,
design flexibility and cost. The key components of the QuickLogic solution are
the Company's proprietary ViaLink antifuse technology and pASIC architectures,
and its software design tools.

ViaLink Antifuse Technology. QuickLogic's ViaLink antifuse technology places
logic interconnects between the metal layers of a chip, instead of on the
silicon substrate thereby minimizing die size and cost. The ViaLink antifuse
technology features lower resistance and capacitance than competing
interconnect technologies, thereby optimizing a device's performance.

pASIC Architectures. QuickLogic's pASIC architectures facilitate full
utilization of a device's logic cells and I/O pins. The architectures use
ViaLink antifuse technology to maximize interconnects at every routing wire
intersection. The abundance of wiring resources allows more paths between
logic cells and I/O pins. As a result, designers can maintain pin-out
assignments throughout the design cycle, and can achieve more complex designs
utilizing more of a device's circuit elements.

QuickWorks and QuickTools Software Design Tools. QuickLogic's QuickWorks
software design tools provide high-level design entry, schematic capture,
synthesis, simulation, and placement and routing on Windows, while QuickTools
place and route software operates on UNIX platforms. QuickWorks incorporates
IEEE standard design languages (Verilog and VHDL) and leading third-party
software to offer a cost-effective solution for the rapid design of complex
logic devices. QuickTools

29
<PAGE>

integrates with all leading third-party design environments to support
QuickLogic's pASIC products. QuickLogic tools also optimize the design for
device utilization and in-system operating speed and also transfer the design
to its FPGA devices.

THE QUICKLOGIC STRATEGY

QuickLogic's objective is to be a leading provider of high-speed, flexible,
cost-effective FPGA solutions that allow customers to accelerate design cycles
to satisfy demanding time-to-market requirements. To achieve this objective,
the Company has adopted the following key strategies:

Target High-Performance, Rapidly Changing Markets. QuickLogic focuses its
design and marketing efforts on complex electronics systems that require high
speed, design flexibility, low cost and rapid time to market. These
electronics systems include video, graphics and imaging systems,
telecommunications and data communications, instrumentation and test, and
high-performance computers. Competition within these high-growth markets is
intense, and the Company's proprietary technologies allow customers to deliver
faster products and accelerate time to market.

Apply Proprietary Technology to High Density Applications. The Company
believes that future applications of PLDs will require logic density that will
be difficult to achieve using traditional FPGA technology. The placement of
the Company's ViaLink antifuse interconnects between metal layers maximizes
interconnect resources and minimizes die size. These attributes will become
increasingly critical as logic density requirements increase.

Optimize Product Offerings. The Company's current product offerings are
designed to address the segments of the logic market with the highest levels
of design activity. The Company's marketing efforts and product features will
continue to be determined by market demand. Based on market requirements for
devices that are faster, less costly and consume less power, the Company plans
to release its third generation of products utilizing 0.35^m CMOS technology
on 8-inch wafers during 1998.

Exploit Shift in Design Technologies. Historically, designers of electronic
systems have been tied to device-specific schematic design software offered by
FPGA device companies and have been reluctant to consider alternative vendors
because of the costs and difficulties associated with switching to new design
software. However, as logic densities increase and designs become more
complex, end-users are shifting to Verilog and VHDL, IEEE standard high level
design languages, to simplify the management of more complex design processes.
The Company offers software design products that are inexpensive and that
incorporate both Verilog and VHDL as well as leading third-party software for
use on Windows or Unix platforms. The Company believes the combination of its
design software and pASIC architectures enables customers using Verilog or
VHDL to choose FPGA devices based on speed, design flexibility and cost, while
minimizing the impact of switching design software.

Leverage Manufacturing Alliances. QuickLogic's manufacturing strategy is to
establish close relationships with third-party manufacturers for its wafer
requirements. This allows the Company to focus its resources on product
design, development and marketing rather than on manufacturing expenditures.
The Company has a foundry relationship with Cypress for its existing products
and has entered into a manufacturing agreement with TSMC for the production of
its anticipated 0.35^m CMOS products on 8-inch wafers.

TECHNOLOGY

QuickLogic's key technologies are the proprietary ViaLink antifuse
technology and pASIC architectures, and the QuickWorks and QuickTools design
software packages. The following table sets forth certain specific features
and benefits of each of these key technologies.

30
<PAGE>

VIALINK ANTIFUSE
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Features Benefits
.Interconnect resides between metal .More room on the silicon substrate for
layers logic cells; protection against
reverse engineering of end-user
designs
.Smaller interconnect element .Smaller, less expensive die with dense
interconnect resources
.Lower resistance and capacitance .Faster performance

- -------------------------------------------------------------------------------
PASIC ARCHITECTURES
- -------------------------------------------------------------------------------

Features Benefits
.Dense interconnect resources .Design flexibility with pin-out
stability
.Variable grain logic cell .High utilization of available logic
.Pin-out compatibility among product .Ease of migration among different
lines density devices

- -------------------------------------------------------------------------------
QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE
- -------------------------------------------------------------------------------

Features Benefits
.Windows and UNIX platform support .Choice of design platform
.Incorporates leading third-party tools .Easy-to-use, fast, low-cost software
.IEEE standard languages Verilog and .Choice of optimal silicon device
VHDL
</TABLE>

ViaLink Antifuse Technology

A key distinguishing feature of FPGAs is the programmable element. The
technology used to provide programmability determines practical parameters for
logic capacity, amount of interconnect resources, architecture and
performance.

QuickLogic's ViaLink antifuse is based on a patented amorphous silicon
antifuse technology. The ViaLink antifuse allows connections to be made
vertically within the device by placing programming elements above the
substrate, between the layers of metal routing paths on the die. Removing
interconnects from the substrate allows more logic cells to reside in the die
and results in a die size reduction for a given number of logic cells. In
addition, the location of the ViaLink antifuse between metal layers helps to
protect against unauthorized reverse engineering of a PLD circuit design. The
ViaLink "metal to metal" connections also have lower resistance and
capacitance, the primary inhibitors of circuit performance, thereby optimizing
speed and performance. The Company believes that the ViaLink antifuse can be
utilized without significant modification for CMOS fabrications processes with
feature sizes as small as 0.18 micron. In addition, the ViaLink's programming
algorithm produces a link filament that tolerates operating voltage and
current overloads, reducing the likelihood of device malfunction.

QuickLogic's proprietary ViaLink interconnect technology provides solutions
to the primary design problems inherent in using traditional FPGAs and CPLDs.
The large programmable elements created using traditional dielectric antifuse
and SRAM technologies reside on the die. Therefore, in order to minimize die
size, traditional technologies must limit the number of transistor
interconnections,

31
<PAGE>

thereby constraining flexibility and device utilization. This increases the
time and cost needed to design with traditional FPGAs and CPLDs. The high
resistance and capacitance of these transistor- based technologies also limit
devices to relatively low performance. To illustrate, the resistance of a
transistor-based SRAM interconnect is a maximum of 1,000 ohms, whereas a
ViaLink interconnect is a maximum of 50 ohms of resistance.

Based upon published industry materials, the following table compares the
critical features of the Company's ViaLink antifuse technology with the
comparable features of competing dielectric antifuse and SRAM interconnect
technologies.

<TABLE>
<CAPTION>
VIALINK DIELECTRIC SRAM
PROGRAMMING TECHNOLOGY ANTIFUSE ANTIFUSE INTERCONNECT
---------------------- -------- ---------- ------------
<S> <C> <C> <C>
Relative Interconnect Performance
(Speed).................................. 1.0x 0.1x 0.05x
Relative Interconnect Density (Design
Flexibility)............................. 1.0x 0.8x 0.24x
Silicon Area Required (Cost).............. 1.0x 2.5x 12.50x
</TABLE>

The Company's ViaLink interconnect make it one time programmable. While
certain traditional FPGA devices allow reprogrammability, the use of SRAM
interconnect technologies in such devices compromises speed, design
flexibility and cost. Devices with SRAM-based interconnect also require
reprogramming before the device is fully operational each time they are
powered up. While the Company believes the delay due to such reprogramming is
a disadvantage, some users perceive reprogrammability to be an advantage
because it allows them to change the configuration of the device after it is
attached to a circuit board. The Company believes that less than 5% of
customer applications actually utilize the reprogrammability feature of PLDs
that are reprogrammable. The ViaLink antifuse's one-time programmability is
also sometimes viewed as a costly inconvenience since devices programmed with
experimental designs during development are no longer visible while SRAM-based
parts can be reprogrammed multiple times. The Company believes, however, that
in most customer applications the benefit of reprogrammability is less
important than time-to-market pressures, speed, design flexibility and cost
effectiveness. QuickLogic's ViaLink antifuse and one time programmability also
assure that after a fuse is programmed it remains programmed. By contrast,
SRAM-based interconnect technologies require reprogramming each time the
device is powered up. See "Risk Factors--Competition; Rapid Technological
Change."

Unlike dielectric antifuse technologies that require more complex
manufacturing processes, the amorphous silicon used to manufacture ViaLink
antifuses is simply deposited using processing equipment that is commonly
available in modern silicon fabrication facilities. This deposition requires
only one additional manufacturing mask, and since it is placed between a
device's metal layers, it does not affect the underlying CMOS process or the
yield of that process. This allows the Company's devices to be produced at a
lower price and with greater yields than other antifuse processes. Because the
ViaLink technology creates a flat surface, additional metal layers and
interconnects can be stacked one above another yet retain a stable
architecture. The Company's next generation of pASIC products, which use a
four-layer metal process, are designed to take further advantage of this
feature. See "--Manufacturing: Relationship with TSMC."

pASIC Architectures

The Company's pASIC architectures incorporate more programmable elements and
routing wire resources than traditional FPGAs and offer pin-out compatibility
across the Company's product offerings. In addition, the pASIC 2 architecture
uses a variable grain logic cell that can be utilized for either a large,
single function or up to five independent functions. These features provide
users with greater design flexibility, a high utilization of available logic,
minimal need to change pin-out and the ability to move among product offerings
according to changing requirements.

32
<PAGE>

The ViaLink antifuse allows the Company's pASIC devices to have a fully
populated interconnect scheme in combination with abundant routing tracks to
enable full design routability for the user. Typically, pASIC devices have
from four to six times the total number of programmable elements per usable
gate of logic than SRAM-based FPGAs. Full design routability allows complete
utilization of logic cells and I/O pins, reduces timing problems associated
with circuitous routing of logic paths, maintains pin-out stability and
eliminates the need for manual routing, thereby accelerating the development
process to reduce time to market. In addition, full routability is crucial to
Verilog and VHDL users, who lose the productivity offered by an HDL when large
amounts of time are required to relate HDL code to specific routing paths in
an attempt to meet design requirements through manual routing.

The routability and pin-out maintenance of the Company's products allow an
engineer to program a chip, designate pin-out and know that the device will be
automatically, fully routed while holding the set pin-out. This technology
also allows an engineer to alter the design of a chip and remain assured of
the designated pin-out that is required for the chip to function in the
circuit board. The Company designs its product architectures so that product
densities may be scaled up or down to create a family of standard products to
meet a wide variety of customer needs. This feature, combined with pin-out
compatibility between products, allows a customer to move among density
choices in the QuickLogic product lines to meet design requirements. Certain
competitors of the Company, however, may offer products at price points not
available from QuickLogic. Although the Company's products are designed to
address the segments of the logic semiconductor market with the highest levels
of design activity, potential customers may choose competitors' products
because they are available at a price point not offered by QuickLogic. See
"Risk Factors--Competition; Rapid Technological Change."

The pASIC 2 variable grain logic cell was engineered to operate as one large
cell for high performance or separated into as many as five independent logic
fragments for high utilization. A larger logic cell delivers higher
performance by consolidating multiple logic fragments to perform a specific
function. However, traditional HDL synthesis tools were originally designed
for the architecture used in standard gate arrays that chain smaller logic
fragments together to perform the same function, resulting in lower
performance when applied to the larger logic cells typical of FPGAs. As HDL
synthesis tools become more capable of utilizing larger logic cells, these
tools can utilize QuickLogic's pASIC 2 variable grain logic cell either as a
large cell for higher performance or as independent logic fragments for higher
utilization.

Software

QuickLogic offers software design tools that are inexpensive and incorporate
IEEE standard languages Verilog and VHDL and leading third-party software for
use on Windows and UNIX platforms. The use of devices with greater densities
to implement more complex designs, while reducing costs and meeting time-to-
market pressures, have led to increased reliance on HDLs. Verilog and VHDL as
well as sophisticated third-party software design tools have emerged as FPGA
industry standards because they make front-end design more efficient resulting
in accelerated design cycles. The Company's inclusion of these languages in
its software design tools helps customers migrate to QuickLogic easily and
inexpensively.

In addition, the Company believes that its software tools facilitate the use
of these languages more effectively than the software tools offered by the
Company's competitors. The Company's proprietary ViaLink technology and pASIC
architectures provide QuickLogic products with the abundance of interconnect
resources necessary for logic synthesis design tools to efficiently synthesize
designs. Accordingly, QuickLogic's products require less silicon to implement
the Verilog and VHDL code. The Company intends to exploit the market shift to
Verilog and VHDL and the competitive advantage that the Company's products
afford in implementing these languages.

33
<PAGE>

The Company has developed software that maximizes the usability of VHDL and
Verilog, includes tutorials in these languages, optimizes the HDL output,
simulates and transfers the design to the lowest cost device. The
compatibility of the Company's QuickWorks and QuickTools software tools with
Verilog and VHDL fully supports engineers experienced in these design
languages and, when combined with the pASIC products, affords 100% placement
and routing, stable timing, and the ability to hold pin-out through all design
iterations. Engineers who are unfamiliar with these HDLs are able to train
themselves and program at their desktops simultaneously by utilizing the
bundled tutorial programs for Verilog and VHDL in the Company's software
tools. Software support for the pASIC families is available through two basic
environments: QuickWorks and QuickTools. A wide assortment of design
environments is supported on both Windows and UNIX platforms by combining
QuickLogic's software packages with design libraries from vendors such as
Cadence, Mentor, Synario, Synopsys, Veribest and Viewlogic. Interoperability
is also provided for other third-party vendors by supporting industry standard
interfaces such as EDIF, OVI, SDF and VITAL.

Most of the Company's competitors have also developed software tools that
allow migration to Verilog and VHDL. Potential customers of the Company may
continue to utilize software of the Company's more-established competitors
because of their familiarity with the tools of the Company's competitors,
rather than switching to the Company's software tools. See "Risk Factors--
Competition; Rapid Technological Change."

PRODUCTS

The Company has developed its pASIC products to address the primary
requirements of the FPGA market, including speed, design flexibility, cost and
time to market. The Company's current product line consists of two families of
FPGAs, and the QuickWorks and QuickTools design software. The Company's
product offerings are designed to address the segments of the logic market
with the highest levels of design activity. The Company's marketing efforts
and product parameters will continue to be determined by market demand. Based
on market requirements for devices that are faster, less costly and consume
less power, the Company plans to release its third generation of products
during 1998. The Company has entered into an agreement with TSMC to
manufacture this third generation product family utilizing a 0.35 micron CMOS
technology on 8-inch wafers. However, the projections regarding the timing,
and the type of, the releases of the Company's third generation family of
products are forward-looking statements that involve risks and uncertainties.
The completion and release of any new product family depends upon the
development of necessary technology, the Company's relationship with its
manufacturers, in particular TSMC, market conditions and other factors.
Accordingly, new products may not be released within the time frame stated or
at all. See "Risk Factors--New Product Development and Technological Change,"
"--Dependence on Independent Wafer Manufacturers" and "Dependence on
Customized Manufacturing Processes."

The following table describes the available usable gate densities of the
Company's two families of FPGAs, their product release dates and applicable
process technologies.

<TABLE>
<CAPTION>
PRODUCT FAMILY USABLE GATE DENSITIES
- -------------- -----------------------------------------------
<S> <C> <C> <C> <C>
pASIC 1 1K 2K 4K 8K
Product Release/Process 1991/1.0m* 1992/1.0m* 1994/0.65m 1995/0.65m
Technology 1994/0.65m 1994/0.65m
pASIC 2 3K 5K 7K 9K
Product Release/Process 1997/0.65m 1997/0.65m 1996/0.65m 1997/0.65m
Technology
</TABLE>
- --------
* No Longer Offered

34
<PAGE>

The Company offers devices in a range of speeds to address differing
customer performance and cost requirements. The Company also offers most of
its devices in commercial, industrial and military temperature ranges. A
variety of package types are available to satisfy varying customer demand for
I/O pin count and space constraints. Package styles include PLCC (plastic
leaded chip carrier), PQFP (plastic quad flat pack), TQFP (thin plastic quad
flat pack) and PBGA (plastic ball grid array). Military package styles include
CPGA (ceramic pin grid array) and CQFP (ceramic quad flat pack). The Company
plans to introduce additional package styles as customer demand warrants.

QuickWorks. The QuickWorks suite provides a complete FPGA software solution,
including design entry, logic synthesis, place and route, and simulation.
QuickWorks' fully integrated design solution consists of internally developed
and licensed third-party software operating on Microsoft Windows. QuickWorks
includes VHDL, Verilog, schematic, boolean and mixed mode entry for fast and
efficient logic design.

QuickTools. The QuickTools package provides a solution for designers who use
Cadence, Mentor, Synario, Synopsys, Veribest, Viewlogic or other third-party
software tools for design entry, synthesis or simulation. QuickTools provides
optimization, place and route, timing analysis and back-annotation support for
all QuickLogic devices. QuickTools runs on Windows and UNIX platforms.

MARKETS AND APPLICATIONS

QuickLogic's FPGA solutions are well suited for applications that have
demanding requirements for high performance, design flexibility, low cost and
time to market. During the year ended December 31, 1996 and the six months
ended June 30, 1997, TI accounted for 27.0% and 11.2% of revenue,
respectively. The examples below describe some typical applications which
incorporate combinations of semiconductor devices, including products of the
Company, and the reasons for the selection of QuickLogic FPGAs.

Video, Graphics and Imaging

The video, graphics and imaging industries are characterized by the rapid
emergence of new, more complex and faster-performing technologies and by short
product life cycles. Applications for QuickLogic FPGAs include LCD display
panel controls, high speed image cameras, image editing and display hardware,
and audio processing/mixing systems. Manufacturers of these systems usually
require components that can meet extremely high performance standards as they
must quickly process large amounts of data. They also demand a fast design
cycle to help get their products to market as quickly as possible.
QuickLogic's FPGA products address these particularly demanding speed and
time-to-market requirements.

For example, in 1993, TI required an extremely high performance PLD for its
new Digital Light Processing video projector component. After evaluating a
number of alternatives, TI determined that the QuickLogic FPGA products were
the only solution that met the performance and design flexibility demands of
the Digital Light Processing system and, in particular, TI's requirement that
the device maintain pin-out assignments as TI refined its design. During the
following one-year period, TI determined that the QuickLogic products also
demonstrated superior ease-of-use, and QuickLogic FGPAs were subsequently
designed into every PLD socket in the TI Digital Light Processing system.

Telecommunications and Data Communications

Telecommunications and data communications equipment manufacturers are
forced to make product and design changes quickly to keep pace with new and
rapidly evolving industry standards and technologies. Applications include
satellite-based and Internet telephones, cable television equipment, wireless
Internet communications systems and networking equipment. New products in

35
<PAGE>

the telecommunications and data communications industries often require high
performance components to handle the ever-increasing data rates and latest
digital communications standards. QuickLogic's products facilitate this
market's accelerating time-to-market goals and meet the high performance
demands of communications equipment manufacturers.

An example of the demanding time-to-market requirements in the data
communications industry is 3Com's large-bandwidth ISDN "superchannel" board,
the "143." After using competing devices, 3Com found that only QuickLogic's
FPGAs allowed simultaneous design of both the circuit board layout and the
circuitry within the FPGA. 3Com has stated that it found no other solution
that enabled full device utilization with rigidly fixed pin-out assignments.

Instrumentation and Test

Test equipment and industrial electronics manufacturers require components
that afford a high degree of reliability. Applications include aircraft
controls, semiconductor test and instrumentation circuit boards. The Company's
proprietary ViaLink antifuse technology creates stable, permanent circuit
connections unlike traditional reprogrammable FPGA solutions. In addition,
QuickLogic's range of device packages and operating temperatures allow pASIC
products to be designed into a variety of applications.

For example, Honeywell selected QuickLogic for its flight navigation and
control systems for business jets. QuickLogic products demonstrated
significant performance advantages when implementing Honeywell's industrial
temperature PCI-bus design. In addition, Honeywell determined that QuickLogic
designs could be fully implemented with VHDL without compromising system
performance. Honeywell subsequently designed QuickLogic products into five
additional circuit boards, including Honeywell's redundant CPU boards.

High-Performance Computers

The ability to bring new computer models to market as quickly as possible is
the hallmark of the computer industry. QuickLogic's FPGAs accelerate time to
market by allowing computer companies to manufacture hardware products
immediately upon the completion of the design, without waiting for production
quantities of a standard gate array. IBM, for example, uses QuickLogic's FPGAs
for the prototype and initial production of its display controllers for
ThinkPad laptop computers.

Military

Military systems manufacturers must meet demanding reliability and
performance requirements in system designs. Applications include weapons
control systems and navigational equipment. QuickLogic's permanently
programmed products are well-suited components for such systems. The Company's
proprietary ViaLink antifuse technology creates interconnects which are more
stable and reliable than traditional reprogrammable FPGA solutions. The range
of ceramic package options, which include both surface-mount and through-hole
packages, are also attractive to military systems designers. Hughes Aircraft,
for example, uses QuickLogic devices in a wide range of applications from
missile tail-fin controllers to helicopter instrumentation.

36
<PAGE>

The following chart illustrates ways that certain of the Company's customers
use QuickLogic products.

<TABLE>
<CAPTION>
INDUSTRY CUSTOMER APPLICATION
-------- -------- -----------
<S> <C> <C>
Video, Graphics Digidesign (AVID) PC-based audio editing
and Imaging (used to edit "The Lion King" and other
movies)
Dome Imaging Medical imaging products
Fujitsu Stadium display controls
Hitachi DVD, MPEG image compression
Miro Computer Image editing PC hardware
Silicon Graphics Flat panel display controller
Texas Instruments Video display projectors
TV/Com Satellite TV signal encryption & compression
Telecommunications AG Communications Telephone networking equipment
Alcatel Alsthom Microwave communication systems
NEC PBX electronics
Northern Telecom Satellite-based telephone systems
Uniden Internet telephone
Data Bay Networks/Xylogics ISDN networking and PC cards
Communications Compaq/Networth Networking equipment
Daewoo ATM switch, fiber optic equipment
EMC/McData Mainframe I/O communications
3Com Data-com boards
Instrumentation Analog Devices Integrated circuit testers
and Test Honeywell Aircraft navigation and flight controls
National Instruments PC-based instrumentation boards
Teradyne Semiconductor test equipment
Toshiba Mail sorting equipment
Unisys Computer board test applications
High-Performance Asea Brown Boveri Industrial control for power distribution
systems
Computers Colorbus/Concept Color copier add-ons for photographic quality
IBM Pre-production ThinkPad display controller
Mitsubishi Mobile PC Pen-input display controller
Sony MiniDisk editing equipment
Synopsys Hardware simulation accelerator
Military Systems Hughes Aircraft Helicopter and missile motor controls, radars
McDonnell Douglas C-17 flight controller
Rockwell Submarine navigational equipment
Saab Simulation systems for military training
</TABLE>

SALES, SUPPORT & MARKETING

QuickLogic sells its products through a network of Company sales managers,
independent sales representatives and electronics distributors in North
America, Europe and Asia. In addition to its corporate headquarters in
Sunnyvale, the Company has regional sales operations in Los Angeles, San Jose,
Dallas, Boston, Raleigh, Chicago and London. The Company's direct sales
organization

37
<PAGE>

consists of 18 sales managers, field application engineers and administrative
personnel. In North America, the Company's six sales managers direct the
activities of 19 independent manufacturers' representative firms operating out
of more than 40 offices totaling approximately 182 sales representatives, as
well as the activities of five distributor organizations with more than 220
locations. Internationally, four sales managers direct the activities of 11
distributors in Europe and nine distributors in Asia. All of the foregoing
numbers are as of June 30, 1997.

QuickLogic's major North American distributors include Anthem Electronics,
Bell Industries, Bell Microproducts, Future Electronics and Sterling
Electronics. The Company added Anthem Electronics as a distributor in March
1997. Future Electronics also distributes the Company's products in Europe and
Asia. During 1996 and the six months ended 1997, 34.5% and 63.9%,
respectively, of the Company's revenue from the United States was realized
through distributors, while most of the Company's revenue from outside of
North America was realized through third-party distributors.

As of June 30, 1997, the Company's applications support organization
included four direct field application engineers and 140 application engineers
employed by the Company's distributors. These application engineers provide
pre-sales and on-site technical support to customers. Application support is
also provided by five factory-based customer engineers, who offer the majority
of post-sale support through a dedicated customer support hotline.

Under its arrangement with Cypress, the Company provides support for former
Cypress FPGA customers. With the elimination of Cypress as an alternate source
of the Company's products, the Company no longer faces competition with
respect to its proprietary products. The Company's and Cypress' sales
organizations have transitioned most customer accounts to QuickLogic. See "--
Cypress Transaction."

As of June 30, 1997, the Company's marketing organization consisted of nine
employees that promote the performance and flexibility offered by the
Company's products. The Company believes that the opportunity for design wins
with individual design engineers arises several times throughout the year, and
uses various forms of advertising, seminars, shows and conferences to maintain
visibility with these engineers.

RESEARCH AND DEVELOPMENT

The Company's R&D efforts are focused on three areas: device architecture,
development tools, and foundry process development. As of June 30, 1997, the
research and development staff consisted of 47 employees. The device design
engineers endeavor to design products with the optimal combination of speed,
flexibility, HDL compatibility, testability and low cost. Devices are designed
so that their capacities can be quickly scaled up or down to create a family
of standard products that meet a diverse range of user needs. The Company's
software engineering group develops place and route tools (which fit the
design into specific logic cell elements within a device, then devise the
necessary interconnections), and delay modeling tools (which estimate the
timing of all the circuit paths for accurate simulation). The software group
also incorporates third-party software tools into the QuickWorks tool suite,
and develops the design libraries needed for the QuickTools product to
integrate with third-party design environments. The Company's process
engineering group maintains the Company's proprietary antifuse processes,
oversees product manufacturing and process development in its third-party
foundries, and is involved in ongoing process improvements to increase yields
and optimize device characteristics.

The Company's R&D expense for 1994, 1995 and 1996 and for the six months
ended June 30, 1997 was $3.2 million, $3.6 million, $4.6 million and $3.1
million, respectively. The Company anticipates that it will continue to commit
substantial resources to research and development in the future.

38
<PAGE>

MANUFACTURING

The Company's manufacturing strategy is to establish close relationships
with third-party manufacturers for its wafer fabrication and package assembly
requirements. This allows the Company to focus its resources on product
design, development and marketing rather than on manufacturing expenditures.
Assembly of the Company's devices is primarily performed by Anam/Amkor in
Korea. Final testing is primarily performed by the Company internally, and the
Company is exploring additional outsourcing of its testing.

The Company's relationships with wafer foundries are intended to provide the
Company with stability in the supply of its products, while seeking to
maintain its position as a technology leader. The current pASIC 1 and pASIC 2
product wafers are fabricated by Cypress. The Company expects that its future
products, utilizing smaller product geometries and larger wafer sizes, will be
fabricated by TSMC, which is one of the world's largest dedicated
semiconductor foundries. See "Risk Factors--Dependence on Independent Wafer
Manufacturers" and "--Dependence on Customized Manufacturing Process."

Relationship with Cypress

In connection with the Company's new relationship with Cypress, the
companies entered into a new foundry agreement effective through the year
2001. This agreement guarantees weekly wafer starts at established prices and
yields for the Company's pASIC 1 and pASIC 2 product families, which are
fabricated using a 0.65^m three-layer metal CMOS process on 6-inch wafers.
These products will continue to be manufactured at Cypress' Round Rock, Texas
facility, and will continue to utilize the Company's proprietary ViaLink
amorphous silicon antifuse technology.

Relationship with TSMC

In July 1997, the Company entered into a manufacturing agreement with TSMC
enabling the co-development of a 0.35^m four-layer metal CMOS process for 8-
inch wafers using the Company's ViaLink antifuse technology. The agreement is
effective for three years and is renewable annually as a rolling three-year
agreement. The agreement guarantees certain capacity availability and requires
that a minimum percentage of the total number of wafers required by the
Company in any one year are purchased from TSMC (excluding wafers purchased
from Cypress and certain other wafer requirements), and requires "take or pay"
volume commitments. Obligations are payable in U.S. dollars. However, the
purchase price for wafers shall be adjusted for any fluctuations in the New
Taiwan Dollar exchange rate greater than 5%. TSMC's foundries are located in
Hsin Chu, Taiwan.

TSMC is now processing R&D wafers for the Company's FPGA products.
QuickLogic intends that its 9-thousand usable gate pASIC 2 device will be the
first Company product manufactured at TSMC. The high density members of
QuickLogic's third generation pASIC FPGA family are intended to be in
production at TSMC during 1998. The Company anticipates migrating selected
other pASIC 2 devices (which are also currently in production on a 0.65^m
process) to the 0.35^m CMOS process at TSMC during 1998.

The projections regarding the timing and type of releases of the Company's
third generation family of products are forward-looking statements that
involve risks and uncertainties. The completion and release of any new product
family depend upon the development of necessary technologies, the Company's
relationship with its manufacturers, in particular TSMC, market conditions and
other factors. Accordingly, new products may not be released within the time
frame stated or at all. See "Risk Factors--Dependence on Independent Wafer
Manufacturers," "--Dependence on Customized Manufacturing Processes" and "--
Risks Associated with International Business Activities."

39
<PAGE>

CYPRESS TRANSACTION

In March 1997, the Existing Agreement related to the Company's FPGA products
was terminated and replaced with a new arrangement whereby the Company's FPGA
products will no longer be second sourced by Cypress. In addition, Cypress
agreed to not compete with the Company with respect to antifuse FPGAs or
products that are pin-compatible with the Company's existing pASIC 1 and pASIC
2 products. QuickLogic has commenced support for Cypress's FPGA customers, and
Cypress assisted the Company in the transition of these customers to the
Company. In exchange for the termination of the Existing Agreement and the
reversion of the rights to the intellectual property developed thereunder to
the Company, the Company paid $4.5 million in cash and agreed to issue
2,603,817 shares of Common Stock to Cypress, increasing the aggregate number
of shares of Common Stock of the Company held by Cypress to 3,339,785, prior
to the sale of any shares by Cypress in this offering. In addition, the
Company granted Cypress, including the right to sell shares of Common Stock in
this offering, certain contractual rights as to the shares of the Company's
stock held by Cypress. The parties also entered into a new foundry agreement
and a cross-license agreement. The terms of the new foundry agreement are
discussed under "--Manufacturing: Relationship with Cypress."

Under the terms of the cross-license agreement, Cypress granted to the
Company a royalty-free, non-exclusive, non-sublicensable license to make, have
made, use, offer for sale, sell and distribute programmable logic products
under patents that are currently issued to Cypress or are issued prior to
March 2007. In the event of an acquisition of the Company, the license
continues only as to those products that were commercially available as of the
acquisition or the design of which is in the layout stage and subsequently
become commercially available within one year after the acquisition. The
Company granted a reciprocal right to Cypress under its patent portfolio,
except that the license does not extend to antifuse FPGAs or products that are
pin-compatible with the Company's existing pASIC 1 and pASIC 2 products. The
parties also licensed to each other the intellectual property rights developed
under the Existing Agreement, within the scope of the patent licenses set
forth above.

The shares issued to Cypress in connection with the termination of the
Existing Agreement were provided with the same contractual rights as the other
shares of the Company's stock held by Cypress and the other holders of the
Company Common Stock issuable upon conversion of the Preferred Stock. In
addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares in this offering, and any subsequent public offerings
of the Company's stock. Second, the Company is obligated to file a
registration statement with respect to all of the shares of Common Stock held
by Cypress and not sold in this offering, with such registration statement
being effective upon the expiration of the lockup period imposed by the
Underwriters in connection with this offering. The Company must keep this
registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144. Notwithstanding the foregoing, the Company
has the right to suspend Cypress's ability to sell under such registration
statement under certain circumstances. Finally, Cypress has the individual
right to require registration of its shares that is separate from a similar
right held by the other holders of registration rights. The other stockholders
of the Company do not have the right to require inclusion of their shares in
these separate Cypress registrations.

COMPETITION

The semiconductor industry is intensely competitive and is characterized by
constant technological change, rapid rates of product obsolescence and price
erosion. The Company's existing competitors include suppliers of conventional
gate arrays, CPLDs and FPGAs, particularly Xilinx, a supplier of SRAM-based
FPGAs, Actel, an anti-fuse FPGA supplier, and Altera, a supplier of CPLDs.

40
<PAGE>

The Company also faces competition from companies that offer standard gate
arrays, which can be obtained at a lower cost for high volumes and may have
gate densities and performance equal or superior to the Company's products. In
addition, the Company expects significant competition in the future from major
domestic and international semiconductor suppliers, and the Company's patents
may not bar competitors to which it has not granted a license from
manufacturing similar products. The Company also may face competition from
suppliers of products based on new or emerging technologies.

The PLD market is dominated by Xilinx and Altera, which together control
over 55% of the market, according to Pace Technologies, a semiconductor market
research firm. The Xilinx products dominate the FPGA segment of the market
while Altera dominates the CPLD segment of the market. In addition, the
Company expects significant competition in the future from major domestic and
international suppliers which have entered or are considering entering the PLD
market. Such suppliers include Lucent Technologies, Vantis
Corporation/Advanced Micro Devices, Inc., Motorola, Inc. and Atmel
Corporation. Most of the Company's current and prospective competitors offer
broader product lines and have significantly greater financial, technical,
manufacturing and marketing resources than the Company. In particular,
companies such as Lucent Technologies, Motorola, Inc. and others have
proprietary wafer manufacturing ability, preferred vendor status with many of
the Company's customers, extensive marketing power and name recognition,
greater financial resources than the Company, and other significant advantages
over the Company. Certain of the current and prospective competitors of the
Company are or may become customers as well. There can be no assurance that
such customers will continue to buy the Company's products if they are
offering their own competing products, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company believes that important competitive factors in its
market are length of development cycle, price, performance, installed base of
development systems, adaptability of products to specific applications, ease
of use and functionality of development system software, reliability and
technical service and support, wafer fabrication capacity and sources of raw
materials, and protection of products by effective utilization of intellectual
property laws. Failure of the Company to compete successfully in any of these
or other areas could have a material adverse effect on its operating results.
In addition, certain distribution channels are not available to the Company
because the Company's competitors, many of whom are well established and have
greater resources, discourage certain distributors from distributing competing
products including the Company's products. There can be no assurance that the
Company's products will be competitive. The failure of the Company to develop
and market products that compete successfully with those of other companies in
the market would have a material adverse effect on the Company's business,
financial condition and results of operations.

INTELLECTUAL PROPERTY

The Company holds 34 U.S. patents and has filed 27 applications for
additional U.S. patents, six of which have been allowed for issuance,
containing claims covering various aspects of programmable integrated
circuits, programmable interconnect structures, programmable antifuse devices,
as well as methods and apparatus for programming antifuse devices. In
addition, the Company has two patent applications pending in Japan. The
Company's patents expire between June 2009 and March 2015. The Company has
also registered four of its trademarks in the United States with applications
to register an additional two trademarks now pending. See "Risk Factors--
Protection of Intellectual Property."

ACTEL LITIGATION

On January 20, 1994, Actel, a competitor of the Company, filed a lawsuit
against the Company entitled Actel Corporation v. QuickLogic Corporation in
the United States District Court for the Northern District of California (the
"Court"), Case No. C-94 20050JW (PVT). The original complaint alleged
infringement by the Company of four U.S. patents held by Actel: U.S. Patent
4,873,459 (the

41
<PAGE>

"'459 Patent") issued October 10, 1989 and entitled "Programmable Interconnect
Architecture;" U.S. Patent 4,758,745 (the "'745 Patent") issued July 19, 1988
and entitled "User Programmable Integrated Circuit Interconnect Architecture
and Test Method;" U.S. Patent 5,055,718 (the "'718 Patent") issued October 8,
1991 and entitled "Logic Module With Configurable Combinational and Sequential
Blocks;" and U.S. Patent 5,198,705 (the "'705 Patent") issued March 30, 1993
and entitled "Logic Modular and Configurable Combinational and Sequential
Blocks." In each of March 1995 and March 1996, Actel added a claim that an
additional Actel patent was infringed: U.S. Patent 5,367,208 (the "'208
Patent") issued November 22, 1994 and entitled "Reconfigurable Programmable
Interconnect Architecture" and U.S. Patent 5,479,113 (the "'113 Patent")
issued December 26, 1995 and entitled "User Configurable Logic Circuits
Comprising Antifuses and Multiplexer-Based Logic Modules." In August, 1997
Actel added a claim that an additional Actel patent was infringed: U.S. Patent
5,610,534 (the "534 Patent") issued March 11, 1997 and entitled "Logic Module
For a Programmable Logic Device". The '459, '745, '208 and '113 Patents all
relate to user programmable interconnect architectures and are based upon the
same application. Actel's '705, '718 and '534 Patents relate to logic modules
for use in FPGAs. As to the '745 and '459 Patents, Actel asserts that
QuickLogic's programmable interconnect circuits and architecture found in its
pASIC 1 and pASIC 2 product families infringe one or more claims of these
patents. As to the '705 and '718 Patents, Actel asserts that QuickLogic's
programmable logic module used in its pASIC1 and pASIC2 product families
infringes one or more claims of each patent. As to Actel's '113 patent, Actel
asserts that QuickLogic's control circuit controlling the program voltage
within QuickLogic's user programmable interconnect architecture infringes one
or more claims. As to each patent-in-suit, Actel seeks an injunction
preventing QuickLogic from further use of the claimed inventions, damages for
past infringement of the inventions, Actel's attorneys' fees and treble
damages for willful infringement. Sales of the Company's pASIC products have
accounted for substantially all of the Company's revenue to date and are
expected to account for substantially all of the Company's revenue for the
foreseeable future. Fees from licenses of the QuickWorks and QuickTools
software design tools have accounted for substantially all of the remainder of
the Company's revenue. The Company has filed answers to each
of these complaints and counter-claims seeking declarations that the Actel
patents at issue are not infringed by the Company, are invalid, and are
unenforceable. On April 19, 1994, QuickLogic moved to stay proceedings pending
reexamination by the United States Patent and Trademark Office (the "USPTO")
of two of the patents involved in the litigation, the '745 Patent and the '459
Patent. The Court granted this stay on July 21, 1994. The USPTO confirmed the
patentability of these two patents on November 15, 1994 and January 10, 1995,
respectively, which Actel may argue will increase the burden upon QuickLogic
to prove the invalidity of the two reexamined patents. The Court lifted the
stay on November 8, 1994.

On November 15, 1994, Actel filed a motion for summary judgment with respect
to the Company's alleged infringement of claim 1 of the '705 Patent. Actel's
'705 Patent relates to an interconnect structure, programming structures, and
logic circuits wherein a multiplicity of logic circuits are arranged in a
regular pattern on the semiconductor substrate. The logic circuits (logic
modules) contain circuitry which ultimately determines the function that the
FPGA could perform. The '705 Patent covers a logic module, and its structure
and its connections to the interconnect structure. Actel has referred to this
technology as its "nested three multiplexer" architecture, which involves
three dual input, single output multiplexers. The logic module, as claimed in
the '705 Patent, includes two multiplexers wherein each output is coupled to
one of the pair of inputs of a third multiplexer. The first and second
multiplexers have four inputs which are "connected to" four respective "data
nodes." The output of the third multiplexer may be connected to a sequential
logic circuit. First and second multiplexers are controlled by a "single level
logic gate" at their select inputs as is the third multiplexer which is
similarly controlled by a second "single level logic gate." The Court
appointed a Special Master to assist in determining certain issues related to
this litigation, and the Special Master recommended on October 4, 1996 that
the Court find that the Company's pASIC 1 products infringe claim 1 of the
'705 Patent. On April 14, 1997, the Court adopted the recommendation of the
Special

42
<PAGE>

Master and granted Actel's motion for summary judgment that the Company's
pASIC 1 products infringe claim 1 of the '705 Patent. Any appeal of the
summary judgment motion on infringement of the '705 Patent cannot be made
until after there is a final judgment. If the '705 Patent is finally
adjudicated to be valid and enforceable, and the summary judgment motion is
upheld on appeal, then Actel would be entitled to damages for past
infringement and potentially would be entitled to an injunction on future
infringement. Such an injunction and/or the payment of damages would have a
material adverse effect on the Company's business, financial condition and
results of operations, and could potentially render it insolvent and unable to
sell its products.

On April 12, 1995, QuickLogic filed a counterclaim alleging that Actel has
infringed two U.S. patents held by the Company, U.S. Patent Nos. 5,220,213
(the "'213 Patent") and 5,396,127 (the "'127 Patent"). The '127 Patent recites
a logic module having three multiplexers wherein each output of two of the
multiplexers is connected to one of the pair of inputs of the third. The
output of the third multiplexer is connected to a flip flop. The '213 Patent
recites logic gates coupled to the data inputs of the first two multiplexers.
In July, 1997 QuickLogic amended its counterclaim to allege that Actel has
infringed an additional U.S. patent, issued to the Company on January 14,
1997, U.S. Patent No. 5,594,364 (the "364 Patent"). The 364 Patent recites a
field programmable gate array having a logic cell, wherein the logic cell
includes a sequential logic element, a three-multiplexer structure, and
multiple gates. The data input of the sequential logic element is driven by
the three-multiplexer structure. An output lead of a first gate is coupled to
a select input lead of one of the multiplexers of the three-multiplexer
structure. An output lead of a second gate is coupled to a select input lead
of another of the multiplexers of the three-multiplexer structure. The clear
input lead of the sequential logic element is electrically isolated from all
of the input leads of the first gate and from all of the input leads of the
second gate. As to each patent-in-suit in the counterclaim, the Company
alleges infringement of one or more claims and seeks an injunction preventing
Actel from further infringement of the claimed inventions. The Company also
seeks damages for past infringement of the inventions and the Company's
attorneys' fees based on the alleged infringement and increased damages for
willful infringement. On January 18, 1996, Actel filed a motion for summary
judgment declaring the '213 and '127 Patents to be invalid. Actel's motion is
based on an "on-sale bar" defense, i.e. that the Actel products which the
Company claims infringe these patents were offered for sale more than one year
before the filing dates of the '213 and '127 Patents which, if proven under
patent law, would invalidate these patents. QuickLogic's opposition to this
motion is due to be filed on October 23, 1997 and a hearing by the Special
Master on the motion is scheduled for November 21, 1997. On February 5, 1996,
QuickLogic filed a motion for summary judgment of infringement by Actel of
claim 1 of the '213 Patent. Actel has opposed this motion, and discovery is
currently in progress. Actel also requested a separate trial on the "on-sale
bar" defense. The Special Master recommended to the Court on June 13, 1997
that such request be denied and this recommendation has been adopted by the
Court.

In addition to the patent infringement actions, Actel amended its claims
against the Company to include a claim against the Company and one of its
employees on June 14, 1995 alleging misappropriation of trade secrets, breach
of contract, breach of confidential relationship, and unfair competition.
Actel has sought assignment of certain issued and future patents of the
Company, two of which are part of this lawsuit, unspecified money damages, a
doubling of the damages for willful and malicious misappropriation, attorneys'
fees and other remedies. These claims are based on allegations that this
employee, who had once been a consultant to Actel and is a named inventor of
some of QuickLogic's patents, had misappropriated confidential information
from Actel related to logic cells, which the Company then incorporated into
its pASIC products. The employee and the Company have filed answers denying
each of these claims. Discovery is ongoing at this time. On July 3, 1997,
QuickLogic filed a motion to dismiss Actel's claims for misappropriation of
trade secrets, breach of contract, breach of confidential relationship, and
unfair competition on the basis that those claims were filed after the statute
of limitations had run. Actel has opposed Quicklogic's motion, and a

43
<PAGE>

hearing by the Special Master on the motion is scheduled for November 21,
1997. On September 5, 1997, Actel filed a motion asking for permission to
amend its complaint to add claims against two additional QuickLogic employees
alleging misappropriation of trade secrets, breach of and inducing breach of
fiduciary relationship and unfair trade practices. Actel has opposed this
motion, and a hearing by the Special Master on the motion is scheduled for
October 28, 1997.

All of the patent infringement and trade secret misappropriation claims are
currently pending before the same Court in the United States District Court
for the Northern District of California and are currently scheduled for trial
in September 1998. However, there can be no assurance that the trial will
occur at such time and may be delayed significantly. As the outcome of any
litigation is inherently uncertain, the Company is unable to predict the
outcome of this litigation. Therefore, there can be no assurance that the
Company will prevail in the trial on its defenses to the patent infringement
claims and its counterclaims or defenses, the trial on the alleged
misappropriation of intellectual property, or hearings, motions or appeals
related to such proceedings. The timing of the filing of any motions by Actel,
hearings on motions by either Actel or the Company, the issuance of rulings on
such motions, the issuance of recommendations by the Special Master and the
adoption or rejection of such recommendations by the Court are not within the
Company's control and could occur at any time. The announcement of any rulings
or recommendations, or the adoption or rejection of recommendations, that are
adverse to the Company, will likely have a material adverse effect upon the
market price for the Company's stock.

The semiconductor industry is characterized by frequent litigation regarding
patent and other intellectual property rights, which involve highly technical
and subjective analysis. Discovery and litigation of such issues are time-
consuming and costly, and Actel possesses more personnel and greater financial
resources than the Company and is able to conduct extensive and protracted
litigation at less of a relative detriment to its current business. While
patent infringement litigation in the semiconductor industry has at times
resulted in voluntary settlements by the parties, often involving cross-
licensing of the patents involved, there can be no assurance that such a
result will be reached in this case. In addition, the terms of any settlement
may require the Company to stop selling all or certain of its products, pay
damages or royalties or other forms of consideration to Actel or grant
licenses to all or a portion of its intellectual property portfolio, any or
all of which could have a material adverse effect on the Company's business,
financial condition and results of operations. Patent infringement litigation
in the semiconductor industry has also resulted in court orders to pay
significant damages and/or injunctions preventing a party from making, using
or offering to sell, selling or importing any products that incorporate
technology covered by such patents. As referenced above, sales of the
allegedly infringing products by the Company have accounted for substantially
all of the Company's past revenue and are expected to account for
substantially all of the Company's revenue for the foreseeable future. This
litigation could result in the Company being required to cease selling its
products and/or could also result in the Company paying significant damages,
including treble damages for willful infringement, either of which would have
a material adverse effect on the Company's business, financial condition and
results of operations and could potentially render it insolvent.

There can be no assurance that the Company will prevail in its claims,
appeals or defenses or that it would be able to obtain a license under any
Actel patents that are found to be infringed, or if such a license were
obtained, that it would be on terms that would not have an adverse effect on
the Company's business, financial condition and results of operations. The
current litigation and any future litigation, whether or not determined in the
Company's favor or settled by the Company, has been and will continue to be
costly and will divert the efforts and attention of the Company's management
and technical personnel from normal business operations, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. It is expected that legal fees

44
<PAGE>

and other litigation-related expenses will continue to adversely affect the
Company's operating results for the foreseeable future. Any adverse
determinations in this litigation or a settlement could result in the loss of
the Company's proprietary rights, subject the Company to significant
liabilities, require the Company to seek licenses from or to grant licenses to
third parties, prevent the Company from licensing its technology or enjoin the
Company from sale of its products, any of which could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Potential Adverse Consequences of Actel
Litigation and "Certain Transactions--Actel Litigation."

EMPLOYEES

As of June 30, 1997, the Company had a total of 146 employees worldwide,
with 45 people in operations, 47 people in research and development, 21 people
in sales, 14 people in marketing, 19 people in general and administrative and
two people in management information systems. The Company believes that its
future success will depend in part on its continued ability to attract, hire
and retain qualified personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to identify, attract
and retain such personnel in the future. None of the Company's employees is
represented by a labor union, and management believes its employee relations
are good.

FACILITIES

The Company's principal administrative, sales, marketing, research and
development and final testing facility is located in a building of
approximately 42,624 square feet in Sunnyvale, California. This facility is
leased through the 2003 with an option to renew through 2006. In addition, the
Company leases sales offices in London, England. The London offices are leased
through December 1997. The Company believes that its existing facilities are
adequate for its current needs.

45
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company as of August 31, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
E. Thomas Hart.................. 55 President, Chief Executive Officer and
Director
John M. Birkner................. 53 Vice President, Computer-Aided Engineering
Andrew K. Chan.................. 46 Vice President, Product Development
Hua-Thye Chua................... 62 Vice President, Process Technology and
Director
Donald F. Faria................. 37 Vice President, Marketing
Richard C. Johnson.............. 46 Vice President, Worldwide Sales
Vincent A. McCord............... 51 Vice President, Finance, Chief Financial
Officer and Secretary
Reynold W. Simpson.............. 48 Vice President, Operations
Scott D. Ward................... 43 Vice President, Engineering
Ronald D. Zimmerman............. 49 Vice President, Human Resources
Irwin Federman(1)(2)............ 62 Chairman and Director
Donald P. Beadle(1)(2).......... 61 Director
Michael J. Callahan(1)(2)....... 61 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee

E. THOMAS HART has served as President and Chief Executive Officer and a
director of the Company since June 1994. Prior to joining the Company, Mr.
Hart was Vice President and General Manager of the Advanced Networks Division
at National Semiconductor Corp., a semiconductor manufacturing company, where
he worked from September 1992 to June 1994. Prior to joining National
Semiconductor Corporation, Mr. Hart was a private consultant from February
1986 to September 1992 with Hart Weston International, a technology-based
management consulting firm. Mr. Hart earned a B.S.E.E. degree from the
University of Washington.

JOHN M. BIRKNER, a co-founder of the Company, has served with the Company
since April 1988, most recently as Vice President of Computer-Aided
Engineering. As a fellow at Monolithic Memory Inc. ("MMI"), a semiconductor
manufacturing company, from September 1975 to June 1986, he co-invented the
PAL device and helped to lead its development and marketing efforts. Mr.
Birkner holds a B.S.E.E. degree from the University of California at Berkeley
and an M.S.E.E. degree from the University of Akron.

ANDREW K. CHAN, a co-founder of the Company, has served with the Company
since April 1988, most recently as Vice President of Product Development.
Prior to joining the Company, Mr. Chan was a design engineering manager at
MMI. Mr. Chan earned a B.S.E.E. degree from Washington State University and an
M.S.E.E. degree from the University of New York at Stony Brook.

HUA-THYE CHUA, a co-founder of the Company, has been a director of the
Company since the Company's inception in April 1988. Since December 1996, Mr.
Chua has been Vice President of Process Technology of the Company. He served
as Vice President of Technology Development from April 1989 to December 1996.
During the prior 25 years, Mr. Chua worked at semiconductor companies
Fairchild Semiconductor Corporation, Intel Corporation and MMI where he was
involved in the design of bipolar and CMOS integrated circuits. While at MMI,
Mr. Chua co-invented the PAL device. Mr. Chua holds a B.S.E.E. degree from
Ohio University and an M.S.E.E. degree from the University of California at
Berkeley.

46
<PAGE>

DONALD F. FARIA joined the Company in April 1997 as Vice President of
Marketing. Prior to joining QuickLogic, Mr. Faria was Director of FPGA
Solutions at Synopsys, Inc., a computer automated design technology company,
from September 1995 to March 1997. From January 1995 to August 1995, he was
director of Product Marketing at Chip Express Corporation, a laser
programmable gate array company. Mr. Faria was employed by Altera Corporation,
a CPLD company, from July 1984 until December 1994. While at Altera, Mr. Faria
held several positions including Director of Marketing for Development Tools
and Special Projects, Director of Applications and Product Planning, Product
Planning Manager and Application Manager. Mr. Faria received a B.S.E.E. degree
from the University of Massachusetts.

RICHARD C. JOHNSON has served as Vice President of Worldwide Sales for the
Company since August 1995. From June 1992 to July 1995, Mr. Johnson was Vice
President of Sales and Corporate Marketing at Integrated Information
Technology, a semiconductor manufacturing company. He received a B.S. degree
in Marketing and an M.B.A. degree from the University of Southern California.

VINCENT A. MCCORD joined the Company in November 1996 as Vice President,
Finance, Chief Financial Officer and Secretary. From July 1996 to October
1996, Mr. McCord was a business and financial consultant. From April 1996 to
June 1996, Mr. McCord was Chief Financial Officer at Exergy, Inc., an energy
company. Prior to joining Exergy, Inc., Mr. McCord was Vice President and
Corporate Controller at LSI Logic Corporation, a semiconductor manufacturing
company, from September 1991 to April 1996. Mr. McCord received a B.S. degree
in Applied Mathematics from the Georgia Institute of Technology and an M.B.A.
degree from Harvard University.

REYNOLD W. SIMPSON joined the Company in August 1997 as Vice President of
Operations. From February 1996 to July 1997, Mr. Simpson was Vice President of
Manufacturing at GateField, a semiconductor manufacturing company. Prior to
joining Gatefield, Mr. Simpson was at LSI Logic Corporation where he was
Operations Manager from March 1990 to February 1996 and Quality Director from
February 1989 to March 1990. Mr. Simpson received his Mechanical Engineering
Certificate from the Coatbridge Polytechnic Institute in Scotland, a degree in
Technical Horology (Mechanical Engineering) from the Barmulloch Polytechnic
Institute in Scotland and studied for a degree in Electronic Engineering from
the Kingsway Polytechnic Institute in Scotland.

SCOTT D. WARD joined the Company in April 1997 as Vice President of
Engineering. From June 1980 to March 1997, Mr. Ward was employed by National
Semiconductor Corporation. While at National Semiconductor Corporation, Mr.
Ward held several positions, including Product Line Director--New Venture
Start-Up, Product Line Director--Automotive Systems Group, Product Line
Director--Amplifier Products Group, Product Line Manager for SLIC, Senior
Product Engineering Manager and Section Head--MOS 1, where he was responsible
for product engineering. Mr. Ward obtained a B.S.E.T. degree from California
Polytechnic University at San Luis Obispo.

RONALD D. ZIMMERMAN joined the Company in October 1996 as Vice President of
Human Resources with more than 15 years experience in the human resources
industry. From August 1988 to October 1996, Mr. Zimmerman was the group human
resources director of the Analog Products Group at National Semiconductor
Corporation. Also during his eight years at National Semiconductor
Corporation, he was group human resources director of the corporate technology
and quality/reliability organizations and the human resources director of
corporate administration. Mr. Zimmerman received a B.A. degree in Sociology
and Psychology and an M.A. in Psychology from San Jose State University.

IRWIN FEDERMAN has served as a director of the Company since September 1989.
Mr. Federman has been a general partner of U.S. Venture Partners, a venture
capital company, since 1990. From 1988 to 1990, he was a Managing Director of
Dillon Read & Co., an investment banking firm, and a general partner in its
venture capital affiliate, Concord Partners. Mr. Federman serves on the Boards
of Directors of TelCom Semiconductor, Inc., a semiconductor company, SanDisk
Corporation, a

47
<PAGE>

semiconductor company, Western Digital Corporation, a disk drive manufacturer,
Komag Incorporated, a thin film media manufacturer, NeoMagic Corporation, a
developer of multimedia accelerators, and Check Point Software Technologies,
Ltd, a network security software company. He is on the Dean's Advisory Board
of Santa Clara University's Leavy School of Business. He received a B.S.
degree in Accounting from Brooklyn College, is a Certified Public Accountant,
and was awarded an honorary Doctorate of Engineering Science from Santa Clara
University.

DONALD P. BEADLE has served as a director of the Company since July 1997.
Mr. Beadle was employed by National Semiconductor Corporation in executive
sales and marketing positions for 34 years until his retirement in June 1994.
From May 1997 to July 1997, Mr. Beadle was a consultant at Interwave
Communications, a developer of microcell systems, where he served as Acting
Vice President of Sales and Sales Operations. From October 1994 to December
1996, he was a consultant for Asian business development at National
Semiconductor Corporation. From the periods between June 1994 to October 1994
and December 1996 to May 1997, Mr. Beadle was in retirement. At National
Semiconductor Corporation, he was Managing Director, Southeast Asia from 1993
until June 1994, Vice President of Worldwide Marketing and Sales,
International Business Group from 1987 until 1993, and Managing Director,
Europe from 1982 to 1986. He received his technical education at the
University of Connecticut and the Bridgeport Institute of Engineering.

MICHAEL J. CALLAHAN has served as a director of the Company since July 1997.
Since March 1990, Mr. Callahan has served as Chairman of the Board, President
and Chief Executive Officer of Waferscale Integration, Inc., a producer of
peripheral integrated circuits. From 1987 to March 1990, Mr. Callahan was
President of MMI, which became a subsidiary of AMD after MMI merged with AMD
in 1987. Also during this time, he was Senior Vice President of Programmable
Products at AMD. From 1978 to 1987, Mr. Callahan held a number of positions at
MMI including Vice President of Operations and Chief Operating Officer. Prior
to joining MMI, he worked at Motorola Semiconductor for 16 years where he was
Director of Research and Development as well as Director of Linear Operations.
Mr. Callahan obtained a B.S.E.E. degree from the Massachusetts Institute of
Technology.

There are no family relationships among any of the Company's directors or
executive officers.

AUDIT COMMITTEE

The Audit Committee was first formed in June 1995 and currently consists of
Messrs. Federman, Beadle and Callahan. The Audit Committee makes
recommendations to the Board regarding the selection of independent
accountants, reviews the results and scope of the audit and other services
provided by the Company's independent accountants and reviews and evaluates
the Company's internal audit and control functions.

COMPENSATION COMMITTEE; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION

The Compensation Committee was first formed in June 1995 and currently
consists of Messrs. Federman, Beadle and Callahan. The Compensation Committee
administers the Company's stock option plans and makes recommendations to the
Board concerning salaries and incentive compensation for employees, directors
and consultants of the Company. No member of the Compensation Committee or
executive officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity.

DIRECTOR COMPENSATION

The Company's non-employee directors currently do not receive any cash
compensation for attending board meetings, including the meetings of any
committees on which they sit. Board members will be reimbursed for their out-
of-pocket expenses incurred in attending Board of Directors and committee
meetings. The directors will be eligible to receive stock option grants under
the Company's 1997 Director Option Plan.

48
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth, for the fiscal year ended December 31, 1996,
all compensation earned for services rendered to the Company by the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company and a former executive officer of the
Company each of whose total salary and bonus compensation for 1996 exceeded
$100,000 (the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
IN 1996 AWARDS
------------------ ---------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTION GRANTS(#) COMPENSATION($)
- --------------------------- --------- -------- ---------------- ---------------
<S> <C> <C> <C> <C>
E. Thomas Hart............. 171,635 33,731 -- $8,515(1)
Chief Executive Officer
and President
Richard C. Johnson......... 140,865 39,585 -- 6,581(2)
Vice President, Sales
Philip J. Ong(3)........... 116,255 26,244 28,571 --
Vice President, Operations
Nim Cho Lam(4)............. 62,234 59,932 -- 4,133(5)
Vice President,
Engineering
Andrew K. Chan............. 107,885 -- -- --
Vice President,
Product Development
John M. Birkner............ 102,981 -- -- --
Vice President, Computer-
Aided Engineering
</TABLE>

- --------
(1) Represents reimbursement of automobile lease payments.
(2) Represents automobile allowance.
(3) Mr. Ong ceased to be Vice President, Operations as of July 1997.
(4) Mr. Lam was employed at the Company until July 1996.
(5) Represents compensation for vacation time not taken.

Vincent A. McCord, the Company's Vice President, Finance, Chief Financial
Officer and Secretary was employed by the Company beginning in November 1996
and received $18,846 in salary in 1996. On an annualized basis, his salary for
1996 would have been $140,000. Ronald D. Zimmerman, the Company's Vice
President, Human Resources, was employed by the Company beginning in October
1996 and received $20,000 in salary and $25,000 in a sign-on bonus in 1996. On
an annualized basis, his salary for 1996 would have been $130,000.

49
<PAGE>

OPTION GRANTS IN FISCAL YEAR 1996

The following table sets forth certain information with respect to stock
options granted to each of the Company's Named Executive Officers during the
fiscal year ended December 31, 1996.

OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED 1996 SHARE(3) DATE 5% 10%
---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart.......... -- -- -- -- -- --
Richard C. Johnson...... -- -- -- -- -- --
Philip J. Ong(4)........ 28,571 9.0% $1.05 10/14/2006 $ 17,968 $ 45,535
Nim Cho Lam(5).......... -- -- -- -- -- --
Andrew K. Chan.......... -- -- -- -- -- --
John M. Birkner......... -- -- -- -- -- --
</TABLE>
- --------
(1) All options are fully exercisable, subject to the Company's right to
repurchase any unvested shares at the original exercise price in the event
of the optionee's termination. Shares generally vest at the rate of 12.5%
after six months of service from the date of grant and 6.25% of the total
number of shares each three month period of service thereafter.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. Actual gains, if
any, on stock option exercises are dependent on the future finalized
performance of the Company, overall conditions and the option holder's
continued employment through the vesting period and option term. This
table does not take into account any appreciation in the fair market value
of the Common Stock from the date of grant to the date of this offering,
other than the columns reflecting assumed rates of appreciation of 5% and
10%.
(3) The exercise price per share of options granted represented the fair
market value of the underlying shares of Common Stock on the dates the
respective options were granted as determined by the Company's Board of
Directors.
(4) Mr. Ong ceased to be Vice President, Operations as of July 1997.
(5) Mr. Lam was employed at the Company until July 1996.

Mr. McCord was employed by the Company beginning in November 1996. If he
were a Named Executive Officer, the information set forth opposite his name in
the above table would have been 92,857; 29.3%; $1.05; 11/14/2006; $65,960; and
$147,990. Mr. Zimmerman was employed by the Company beginning in October 1996.
If he were a Named Executive Officer, the information set forth opposite his
name in the above table would have been 57,143; 9.0%; $1.05; 10/14/2006;
$35,937; and $91,071.

50
<PAGE>

OPTION EXERCISES AND HOLDINGS

The following table sets forth for each of the Named Executive Officers
certain information concerning the number of shares subject to both
exercisable and nonexercisable stock options at December 31, 1996. Also
reported are values for "in-the-money" options that represent the positive
spread between the respective exercise prices of outstanding stock options and
the fair value of the Company's Common Stock as of December 31, 1996, as
determined by the Board of Directors.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END: AT FISCAL YEAR END (1):
ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE ($) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
---- -------- -------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart.......... -- -- 342,857 -- $1,704,000 --
Richard C. Johnson...... -- -- 178,571 -- 887,500 --
Philip J. Ong(3)........ -- -- 78,571 -- 380,500 --
Nim Cho Lam(4).......... 19,197 $40,314(5) 19,197 -- 6,719 --
Andrew K. Chan.......... -- -- -- -- 67,452 --
John M. Birkner......... -- -- 12,679 -- 67,452 --
</TABLE>
- --------
(1) Calculated by determining the difference between the fair value of the
securities underlying the option at December 31, 1996 as determined by the
Company's Board of Directors ($5.67 per share) and the weighted average
exercise price of the Named Executive Officer's option.
(2) Options granted under the 1989 Stock Plan may be exercised immediately
upon grant and prior to full vesting subject to the optionee's entering a
Restricted Stock Purchase Agreement with the Company with respect to
unvested shares. Any exercises of unvested shares are subject to
repurchase by the Company at the original exercise price until fully
vested. Shares generally vest at the rate of 12.5% after six months of
service from the date of grant and 6.25% of the total number of shares
each three-month period of service thereafter.
(3) Mr. Ong ceased to be Vice President, Operations as of July 1997.
(4) Mr. Lam was employed at the Company until July 1996.
(5) Calculated by determining the differences between the fair value of the
securities underlying the option at the time of exercise and the exercise
price.

Mr. McCord was employed by the Company beginning in November 1996. He had
92,857 shares subject to unexercised options at fiscal year end having value
at fiscal year end of $429,000. Mr. Zimmerman was employed by the Company
beginning in October 1996. He had 57,143 shares subject to unexercised options
at fiscal year end having value at fiscal year end of $264,000.

51
<PAGE>

BENEFIT PLANS

Option Plan

The Option Plan was adopted by the Board of Directors and approved by its
stockholders in October 1989. In February 1996, the Board of Directors amended
the Option Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 1,385,714 shares to 2,100,000 shares, which increase
was approved by the Company's stockholders in March 1996. In July 1996, the
Board of Directors amended the Option Plan to allow employees to exercise
unvested stock options (prior to vesting), and to have those exercised
unvested shares deposited with an escrow agent until the shares are fully
vested and the Company's repurchase option lapses. In March 1997, the Board of
Directors amended the Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder to a total of 2,814,286 shares. The
amendment was submitted to the stockholders for approval in July 1997. As of
June 30, 1997, options to purchase a total of 1,628,799 shares at a weighted
average exercise price of $2.17 per share were outstanding, and 685,165 shares
remained available for future option grants.

The Option Plan provides for the grant to employees (including officers and
employee-directors) of "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and for the
grant to employees, consultants and directors of nonstatutory stock options.

The Option Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator") and is currently
administered by the Compensation Committee. The Administrator determines the
terms of options granted under the Option Plan, including the number of shares
subject to option, the exercise price and the exercisability of the option.
The exercise price of all incentive stock options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of
the Company on the date of grant. The exercise price of all nonstatutory stock
options must equal at least 85% of the fair market value of the Common Stock
on the date of grant. The exercise price of any incentive stock option granted
to an optionee who owns stock representing more than 10% of the voting power
of the Company's outstanding capital stock must equal at least 110% of the
fair market value of the Common Stock on the date of grant. Payment of the
exercise price may be made in cash, check, certain other shares of the
Company's stock, promissory notes or other consideration determined by the
Administrator.

The Administrator determines the term of options. The term of an incentive
stock option may not exceed ten years; provided, however, that the term of an
incentive stock option granted to an optionee who, at the time of grant, owns
stock representing more than 10% of the voting power of the Company's
outstanding capital stock may not exceed five years. No options may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by such optionee. Options granted to each employee under the Option Plan
generally become exercisable cumulatively as to 12.5% of the shares subject to
the option six months after the vesting start date, and as to 6.25% of the
shares subject to the option at the end of each succeeding three-month period.
As of July 16, 1996, options granted to employees under the Option Plan became
immediately exercisable, subject to the provisions of the Exercise Notice and
Restricted Stock Agreement for Unvested Shares signed by optionees at the time
of exercise pursuant to which any unvested shares are subject to repurchase by
the Company at the original exercise price.

In the event the Company merges with or into another corporation, all
outstanding options shall be assumed or an equivalent option substituted by
the successor corporation. In the event that such successor corporation does
not agree to assume such options or to substitute an equivalent option,
options granted prior to February 1996 may be exercised in full, including
shares as to which would

52
<PAGE>

not otherwise be exercisable. Options granted subsequent to February 1996 may
be exercised for a period of 15 days to the extent vested upon the expiration
of such period, after which any such options not exercised will terminate
immediately. The Administrator has the authority to amend or terminate the
Option Plan as long as such action does not adversely affect any outstanding
option, and provided that stockholder approval shall be required for an
amendment to increase the number of shares subject to the Option Plan, to
change the designation of the class of persons eligible to be granted options,
or to materially increase benefits accruing to participants under the Option
Plan if the Company is registered under Section 12 of the Exchange Act. Unless
terminated earlier, the Option Plan will terminate in October 1999.

1997 Stock Plan

The Company's 1997 Stock Plan (the "1997 Plan") was approved by the Board of
Directors in May 1997 and was submitted to the stockholders in July 1997. The
1997 Plan is intended to be a successor to the Option Plan. The remaining
shares reserved for issuance pursuant to the Option Plan will roll over and be
reserved for issuance pursuant to the 1997 Plan. The 1997 Plan provides for
the grant of incentive stock options to employees (including officers and
employee directors) and for the grant of nonstatutory stock options and stock
purchase rights ("SPRs") to employees, directors and consultants. A total of
1,000,000 shares of Common Stock, including the remaining shares reserved
under the Option Plan, are currently reserved for issuance pursuant to the
1997 Plan, plus annual increases equal to the lesser of (i) 800,000 shares,
(ii) 5% of the outstanding shares, or (iii) a lesser amount determined by the
Board of Directors. Unless terminated sooner, the 1997 Plan will terminate
automatically in May 2007.

The 1997 Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator"). It is currently
contemplated that the 1997 Plan will be administered by the Compensation
Committee of the Board of Directors. The Administrator has the power to
determine the terms of the options or SPRs granted, including the exercise
price of the option or SPR, the number of shares subject to each option or
SPR, the exercisability thereof, and the form of consideration payable upon
such exercise. In addition, the Administrator has the authority to amend,
suspend or terminate the 1997 Plan, provided that no such action may affect
any share of Common Stock previously issued and sold or any option previously
granted under the 1997 Plan.

Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within 90 days after the end of optionee's status as an
employee, director or consultant of the Company, or within 12 months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option's ten year term. In the case of SPRs, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator. The exercise price of all
incentive stock options granted under the 1997 Plan must be at least equal to
the fair market value of the Common Stock on the date of grant. The exercise
price of nonstatutory stock options and SPRs granted under the 1997 Plan is
determined by the Administrator, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended,
the exercise price must at least be equal to the fair market value of the
Common Stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital

53
<PAGE>

stock, the exercise price of any incentive stock option granted must equal at
least 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other
options granted under the 1997 Plan may not exceed ten years.

The 1997 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each option shall be assumed or an equivalent option substituted for
by the successor corporation. If the outstanding options are not assumed or
substituted for by the successor corporation, the Administrator shall provide
for the optionee to have the right to exercise the option or SPR as to all of
the optioned stock, including shares which would not otherwise be exercisable.
If the Administrator makes an option or SPR exercisable in full in the event
of a merger or sale of assets, the Administrator shall notify the optionee
that the option or SPR shall be fully exercisable for a period of 15 days from
the date of such notice, and the option or SPR will terminate upon the
expiration of such period.

1997 Director Option Plan

The 1997 Director Option Plan (the "Director Plan") was adopted by the Board
of Directors in May 1997 and was submitted to the stockholders in July 1997.
The Director Plan provides for the grant of nonstatutory stock options to non-
employee directors. The Director Plan has a term of ten years, unless
terminated sooner by the Board. A total of 500,000 shares of Common Stock have
been reserved for issuance under the Director Plan, plus annual increases
equal to (i) 25,000 shares or (ii) a lesser amount determined by the Board. As
of August 31, 1997, options to purchase a total of 60,000 shares at a weighted
average exercise price of $10.50 per share were outstanding, and 440,000
shares remained available for future option grants.

The Director Plan provides for the automatic grant of 30,000 shares of
Common Stock (the "First Option") to each non-employee director on the later
of (i) the effective date of the Director Plan, or (ii) the date on which the
non-employee director was appointed to the Board, unless immediately prior to
becoming a non-employee director, such person was an employee director of the
Company. In addition to the First Option, each non-employee director shall
automatically be granted an option to purchase 6,000 shares (a "Subsequent
Option") on the first day of May of each year, if on such date he or she shall
have served on the Board for at least six months. Each First Option and each
Subsequent Option shall have a term of ten years. The shares subject to the
First Option and to the Subsequent Option shall vest as to 25% of the optioned
stock one year from the date of grant, and 1/48 of the optioned stock shall
vest each month thereafter, provided the person continues to serve as a
Director on such dates. The exercise price of each First Option and each
Subsequent Option shall be 100% of the fair market value per share of the
Common Stock, generally determined with reference to the closing price of the
Common Stock as reported on the Nasdaq National Market, on the last trading
day prior to date of grant.

In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option granted under the Director Plan may be
assumed or an equivalent option substituted for by the successor corporation.
If an option is assumed or substituted for by the successor corporation, it
shall continue to vest as provided in the Director Plan. However, if a non-
employee director's status as a director of the Company or the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the non-employee director, each option granted to such non-
employee director shall become fully vested and exercisable. If the successor
corporation does not agree to assume or substitute for the option, each option
shall become fully vested and exercisable for a period of 15 days from the
date the Board notifies the optionee of the option's full exercisability,
after which period the option shall terminate. Options granted under the
Director Plan must be exercised within three months of the end of the
optionee's tenure as a director of the Company, or within 12 months after such
director's termination by death or disability, but in no

54
<PAGE>

event later than the expiration of the option's ten-year term. No option
granted under the Director Plan is transferable by the optionee other than by
will or the laws of descent and distribution, and each option is exercisable,
during the lifetime of the optionee, only by such optionee.

1997 Employee Stock Purchase Plan

The Company's 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
was adopted by the Board of Directors in May 1997 and was submitted to the
stockholders in July 1997. A total of 750,000 shares of Common Stock has been
reserved for issuance under the 1997 Purchase Plan, plus annual increases
equal to the lesser of (i) 500,000 shares, (ii) 3% of the outstanding shares
on such date or (iii) a lesser amount determined by the Board.

The 1997 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains consecutive,
overlapping, 24-month offering periods. Each offering period includes four
six-month purchase periods. The offering periods generally start on the first
trading day on or after the first of October and the first of April of each
year, except for the first such offering period which commences on the first
trading day on or after the date of this offering and ends on the last trading
day on or before April 1, 1999.

Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of the Company, or
(ii) whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for each
calendar year may be not be granted an option to purchase stock under the 1997
Purchase Plan. The 1997 Purchase Plan permits participants to purchase Common
Stock through payroll deductions of up to 20% of the participant's
"compensation." Compensation is defined as the participant's base straight
time gross earnings and commissions but excludes payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 2,500 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each purchase period. The price of stock
purchased under the 1997 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock at the beginning of the offering period or at the
end of the purchase period. In the event the fair market value at the end of a
purchase period is less than the fair market value at the beginning of the
offering period, the participants will be withdrawn from the current offering
period following exercise and automatically re-enrolled in a new offering
period. The new offering period will use the lower fair market value as of the
first date of the new offering period to determine the purchase price for
future purchase periods. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with the
Company.

Rights granted under the 1997 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1997 Purchase Plan. The 1997 Purchase Plan
provides that, in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be
shortened and a new exercise date will be set prior to the date of any such
Merger. The 1997 Purchase Plan will terminate in April 2007. The Board of
Directors has the authority to amend or terminate the 1997 Purchase Plan,
except that no such action may adversely affect any outstanding rights to
purchase stock under the 1997 Purchase Plan.

55
<PAGE>

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i)
any breach of their duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful payments of dividends
or unlawful stock repurchase or redemptions or (iv) any transaction from which
the director derived an improper personal benefit.

The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers and employees and
other agents to the fullest extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. The Company's Bylaws also
permit it to secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the Bylaws would permit indemnification.

The Company intends to enter into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the
Company's Bylaws. These agreements, among other things, will indemnify the
Company's directors and executive offices for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the
Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.

56
<PAGE>

CERTAIN TRANSACTIONS

SERIES E PREFERRED FINANCING; ISSUANCE AND CONVERSION OF PROMISSORY NOTES

From December 1993 through February 1995, the Company issued promissory
notes at varying interest rates to certain investors in exchange for an
aggregate principal amount of $4,639,693. In June 1995 the Company issued and
sold shares of its Series E Preferred Stock ("Series E Preferred") convertible
into an aggregate of 3,410,481 shares of Common Stock at a price per common
equivalent share of $4.90. The Company sold the shares pursuant to a preferred
stock purchase agreement and a registration rights agreement under which,
among other things, it made standard representations, warranties and
covenants, and provided the purchasers with registration rights and
information rights. As part of the Series E Preferred financing, the holders
of the outstanding promissory notes issued by the Company converted the notes,
including accrued but unpaid interest, into shares of Series E Preferred Stock
convertible into an aggregate of 989,786 shares of Common Stock. See "Shares
Eligible for Future Sale--Registration Rights." The purchasers of the Series E
Preferred included, among others, the following principal stockholders,
directors and affiliated entities:

<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES(1) SHARES PURCHASE PRICE
-------------------------------------------------- ---------- --------------
<S> <C> <C>
Cypress Semiconductor Corporation..................... 289,537 $1,418,740
Morgenthaler Venture Partners III..................... 290,289 $1,422,420
New Enterprise Associates and affiliated funds........ 653,061 $3,200,000
Sequoia Capital and affiliated funds.................. 312,427 $1,530,897
Technology Venture Investors and affiliated funds..... 562,121 $2,754,396
U.S. Venture Partners and affiliated funds............ 588,785 $2,885,050
Vertex Investments and affiliated funds............... 282,161 $1,382,590
</TABLE>
- --------
(1) See "Principal and Selling Stockholders."

SERIES F PREFERRED FINANCING

In November 1996 and January 1997, the Company sold shares of its Series F
Preferred Stock ("Series F Preferred") convertible into an aggregate of
1,102,303 shares of Common Stock at a price per common equivalent share of
$8.12. The Company sold the shares pursuant to a preferred stock purchase
agreement and a registration rights agreement under which, among other things,
it made standard representations, warranties and covenants, and provided the
purchasers with registration rights and information rights. See "Shares
Eligible for Future Sale--Registration Rights." The purchasers of the Series F
Preferred included, among others, the following principal stockholders,
directors and affiliated entities:

<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES(1) SHARES PURCHASE PRICE
-------------------------------------------------- ---------- --------------
<S> <C> <C>
Hua-Thye Chua(2)...................................... 14,284 $ 116,000
Morgenthaler Venture Partners III..................... 78,869 $ 640,416
New Enterprise Associates and affiliated funds........ 113,183 $ 919,050
Sequoia Capital and affiliated funds.................. 30,788 $ 250,000
Technology Venture Investors and affiliated funds..... 123,152 $1,000,000
U.S. Venture Partners and affiliated funds............ 73,891 $ 600,000
Vertex Investments and affiliated funds............... 184,729 $1,500,000
</TABLE>
- --------
(1) See "Principal and Selling Stockholders."
(2) Includes 3,571 shares beneficially owned by Mr. Chua for Bryan Shyang-Ming
Chua; 3,571 shares beneficially owned by Mr. Chua for Caroline Siok-Yau
Chua; 3,571 shares beneficially owned by Mr. Chua for Cathleen Siok-Syuan
Chua; and 3,571 shares beneficially owned by Mr. Chua for Christine Siok-
Pee Chua.

57
<PAGE>

CYPRESS TRANSACTION

In March 1997, the Company and Cypress terminated the Existing Agreement
related to the Company's FPGA products and replaced it with a new arrangement
whereby the Company's FPGA products will no longer be second sourced by
Cypress. In addition, Cypress agreed to not compete with the Company with
respect to antifuse FPGAs or products that are pin-compatible with the
Company's existing pASIC 1 and pASIC 2 products. QuickLogic has commenced
support for Cypress's FPGA customers, and Cypress assisted the Company in the
transition of these customers to the Company. In exchange for the termination
of the Existing Agreement and the reversion of the rights to the intellectual
property developed thereunder to the Company, the Company paid $4.5 million in
cash and agreed to issue 2,603,817 shares of Common Stock to Cypress,
increasing the aggregate number of shares of Common Stock of the Company held
by Cypress to 3,339,785, prior to the sale of any shares by Cypress in this
offering. In addition, the Company granted Cypress, including the right to
sell shares of Common Stock in this offering, certain contractual rights as to
the shares of the Company's stock held by Cypress. The parties also entered
into a new foundry agreement and a cross-license agreement.

The shares issued to Cypress in connection with the termination of the
Existing Agreement were provided with the same contractual rights as the other
shares of the Company's stock held by Cypress and the other holders of the
Company Common Stock issued upon conversion of the Preferred Stock. In
addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares of Common Stock offered hereby, and in any subsequent
public offerings of the Company's stock. Second, the Company is obligated to
file a registration statement with respect to all of the shares of Common
Stock held by Cypress and not sold in this offering, with such registration
statement being effective upon the expiration of the lockup period imposed by
the underwriters in connection with this offering. The Company must keep this
registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended. Notwithstanding the foregoing, the Company has the right to
suspend Cypress's ability to sell under such registration statement under
certain circumstances. Finally, Cypress has the right to require registration
of its shares that is separate from a similar right held by the other holders
of registration rights. The other stockholders of the Company do not have the
right to require inclusion of their shares in these separate Cypress
registrations.

Payments to Cypress under the Existing Agreement and new agreement were
$554,143, $5,850,944, $12,101,598 and $6,018,164 for 1994, 1995, 1996 and the
first half of 1997, respectively.

LOANS TO JOHN BIRKNER

From time to time, the Company has made loans to John Birkner, an officer of
the Company. Mr. Birkner's current loan obligation to the Company totals
$125,300 plus interest at annual rates ranging from 6.7% to 8.5%, and is
evidenced by demand promissory notes from Mr. Birkner to the

58
<PAGE>

Company secured by a pledge of Mr. Birkner's shares of the Company's stock.
The largest amount outstanding under these loans since December 1, 1994 is
$125,300, the current amount. These loans were approved by the Company's Board
of Directors.

ACTEL LITIGATION

The Company and Mr. Birkner are co-parties in litigation with Actel. The
Company's legal counsel in connection with the litigation is also representing
Mr. Birkner. Actel has filed a second amended and supplemental complaint to
assert claims against Andrew K. Chan and Hua-Thye Chua. The Company has borne
and expects to continue to bear all fees and expenses related to the
litigation. See "Risk Factors--Potential Adverse Consequences of Actel
Litigation."

59
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of June 30, 1997, and
as adjusted to reflect the sale of the securities offered by the Company and
the Selling Stockholder in the offering made hereby, (i) by each person (or
group of affiliated persons) who is known by the Company to own beneficially
more than 5% of the Company's Common Stock or Common Stock equivalents, (ii)
each of the Company's directors and executive officers and (iii) all directors
and executive officers as a group. Except as indicated in the footnotes to
this table and subject to applicable community property laws, the persons
named in the table, based on information provided by such persons, have sole
voting and investment power with respect to all shares of Common Stock shown
as beneficially owned by them.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF NUMBER OF BENEFICIALLY OWNED(1)
SHARES SHARES -------------------------
NAMES AND ADDRESS, IF REQUIRED, BENEFICIALLY BEING BEFORE THE AFTER THE
OF BENEFICIAL OWNER OWNED(1) OFFERED OFFERING OFFERING
- ------------------------------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Technology Venture 1,441,748 -- 12.0% 10.4%
Investors(2)..............
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
U.S. Venture Partners(3)... 1,205,669 -- 10.0% 8.7%
2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Vertex Investments(4)...... 1,166,458 -- 9.7% 8.4%
3 Lagoon Drive, Ste. 220
Redwood City, CA 94065
Sequoia Capital(5)......... 962,093 -- 8.0% 7.0%
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
New Enterprise 766,244 -- 6.4% 5.5%
Associates(6).............
1119 St. Paul Street
Baltimore, MD 21202
Morgenthaler Venture 703,980 -- 5.9% 5.1%
Partners III..............
2730 Sand Hill Road
Suite 280
Menlo Park, CA 94025
Cypress Semiconductor 3,339,783 1,200,000 27.8% 15.5%
Corporation...............
3901 N. First Street
San Jose, CA 95134
EXECUTIVE OFFICERS AND
DIRECTORS
E. Thomas Hart(7).......... 428,571 -- 3.4% 3.0%
Vincent A. McCord(8)....... 107,142 -- * *
Richard C. Johnson(9)...... 185,713 -- 1.5% 1.3%
Andrew K. Chan(10)......... 171,428 -- 1.4% 1.2%
John M. Birkner(11)........ 157,141 -- 1.3% 1.1%
Hua-Thye Chua(12).......... 171,427 -- 1.4% 1.2%
Ronald D. Zimmerman(13).... 62,856 -- * *
Donald F. Faria(14)........ 100,000 -- * *
Scott D. Ward(15).......... 100,000 -- * *
Reynold W. Simpson(16)..... 71,428 -- * *
Irwin Federman(17)......... 1,205,669 -- 10.0% 8.7%
Donald P. Beadle........... 0 -- * *
Michael J. Callahan........ 0 -- * *
All executive officers and
directors as a group
(12 persons).............. 2,689,947 -- 20.6% 18.1%
</TABLE>
- --------
* Under 1%

60
<PAGE>

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by
that person that are currently exercisable or will become exercisable
within 60 days after June 30, 1997 are deemed outstanding, while such
shares are not deemed outstanding for purposes of computing percentage
ownership of any other person.
(2) Includes 1,368,252 shares held by Technology Investors-IV; 72,112 shares
held by Technology Venture Investors-3, L.P.; and 1,384 shares held by
TVI Management-3, L.P.
(3) Includes 802,676 shares held by U.S. Venture Partners III; 308,463 shares
held by U.S.V. Entrepreneur Partners; 38,803 shares held by Second
Ventures II, L.P.; 25,083 shares held by Second Ventures Limited
Partnership; 19,558 shares held by U.S. Venture Partners IV, L.P.; and
11,086 shares held by U.S.V.P. Entrepreneur Partners II, L.P.
(4) Includes 879,688 shares held by Vertex Investment Pte. Ltd.; 184,134
shares held by Vertex Investment (II) Limited; 82,094 shares held by
Vertex Asia Limited; and 20,542 shares held by HWH Investment Pte. Ltd.
(5) Includes 874,188 shares held by Sequoia Capital V; 47,828 shares held by
Sequoia Technology Partners V; 15,419 shares hold by Sequoia XXI; 10,923
shares held by Sequoia XXIV; 6,643 shares held by Sequoia Capital XXI;
4,285 shares held by Sequoia XX; and 2,807 shares held by Sequoia XXIII.
(6) Includes 735,456 shares held by New Enterprise Associates VI, Limited
Partnership and 30,788 shares held by New Venture Partners III L.P.
(7) Includes 428,571 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(8) Includes 107,142 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(9) Includes 185,713 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(10) Includes 125,714 shares beneficially owned by Mr. Chan as trustee for
Andrew Ka-Lab Chan and Amy Shuk-Chun Chan, Trustees or successor(s), U/a
of trust dated January 30, 1991; 4,285 shares beneficially owned by Mr.
Chan for Michael P. Gamboa, Trustee under Erica H. Chan trust agreement
dated May 14, 1992; 4,285 shares beneficially owned by Mr. Chan for
Michael P. Gamboa, Trustee under Rebecca H. Chan trust agreement dated
May 14, 1992; 4,285 shares beneficially owned by Mr. Chan for Michael P.
Gamboa, Trustee under Vicki H. Chan trust agreement dated May 14, 1992;
2,142 shares beneficially owned by Mr. Chan for Clement Chan and Susie
S.J. Chan, Trustees under Nicholas Chan trust agreement dated July 3,
1996; 2,142 shares beneficially owned by Mr. Chan for Clement Chan and
Susie S.J. Chan, Trustees under Phillip Chan trust agreement dated
July 3, 1996; and 28,571 shares issuable pursuant to stock options and
exercisable within 60 days of June 30, 1997.
(11) Includes 26,963 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(12) Includes 30,179 shares beneficially owned by Mr. Chua, as trustee for
H.T. Chua & Jessie Chua TTEES for the H.T. Chua Trust Agreement dated
December 20, 1974; 17,857 shares beneficially owned by Mr. Chua, as
custodian for Bryan Shyang-Ming Chua; 17,857 shares beneficially owned by
Mr. Chua, as custodian for Caroline Siok-Yau Chua; 17,857 shares
beneficially owned by Mr. Chua, as custodian for Cathleen Siok-Syuan
Chua; 17,857 shares beneficially owned by Mr. Chua, as custodian for
Christine Siok-Pee Chua; and 14,285 shares issuable pursuant to stock
options exercisable within 60 days of June 30, 1997.
(13) Includes 62,856 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(14) Includes 100,000 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.
(15) Includes 100,000 shares issuable pursuant to stock options exercisable
within 60 days of June 30, 1997.

(16) Includes 71,428 shares issuable pursuant to stock options exercisable
within 60 days of August 31, 1997. Mr. Simpson was employed by the
Company beginning in August 1997.

(17) Includes 1,205,669 shares held by U.S. Venture Partners. Mr. Federman is
a general partner of U.S. Venture Partners. See Footnote 3 above. Mr.
Federman disclaims beneficial ownership of all shares held by U.S.
Venture Partners Entities except to the extent of his pecuniary interest
therein.

61
<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon the completion of this offering, the Company will be authorized to
issue 100,000,000 shares of Common Stock, $0.001 par value, and 10,000,000
shares of undesignated Preferred Stock, $0.001 par value. Immediately after
the completion of this offering, the Company estimates there will be an
aggregate of 13,828,302 shares of Common Stock outstanding, 1,660,741 shares
of Common Stock will be issuable upon exercise of outstanding options, no
shares of Common Stock will be issuable upon exercise of outstanding warrants,
and no shares of Preferred Stock will be issued and outstanding. As of June
30, 1997, there were 228 stockholders of the Company.

The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Amended and Restated Certificate of Incorporation and Bylaws and by the
provisions of applicable Delaware law related to capital stock, although the
Company believes all material elements of the subject documents and such
provisions of applicable Delaware law are set forth below.

The Amended and Restated Certificate of Incorporation and Bylaws contain
certain provisions that are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and which may have
the effect of delaying, deferring, or preventing a future takeover or change
in control of the Company unless such takeover or change in control is
approved by the Board of Directors. See "Risk Factors--Effect of Antitakeover
Provisions."

COMMON STOCK

Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights under the Company's Bylaws or Certificate of
Incorporation, and, therefore, holders of a majority of the shares voting for
the election of directors can elect all of the directors. In such event, the
holders of the remaining shares will not be able to elect any directors.

Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the rights of preferred stockholders and the
terms of any existing or future agreements between the Company and its
debtholders. The Company has never declared or paid cash dividends on its
capital stock, expects to retain future earnings, if any, for use in the
operation and expansion of its business, and does not anticipate paying any
cash dividends in the foreseeable future. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets legally available for distribution
after payment of all debts and other liabilities and subject to the prior
rights of any holders of Preferred Stock then outstanding.

PREFERRED STOCK

Effective prior to the closing of this offering, the Company will be
authorized to issue 10,000,000 shares of undesignated Preferred Stock. The
Board of Directors has the authority to issue the Preferred Stock in one or
more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting a series or the designation
of such series, without any further vote or action by the Company's
stockholders. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change
in control of the Company without further action by the stockholders and may
adversely affect the market price of, and the voting and other rights of, the
holders of Common Stock. The issuance

62
<PAGE>

of Preferred Stock with voting and conversion rights may adversely affect the
voting power of the holders of Common Stock, including the loss of voting
control to others. The Company has no current plans to issue any shares of
Preferred Stock.

WARRANTS

As of June 30, 1997, the Company had one outstanding warrant to purchase
18,750 shares of its Common Stock with an exercise price of $4.48 per share.
The warrant to purchase the shares expires on the earlier to occur of this
offering or January 1999.

TRANSFER AGENT AND REGISTRAR

The Company's transfer agent and registrar is Bank of Boston, N.A.

LISTING

The Company has applied to designate its Common Stock for quotation on the
Nasdaq National Market System under the trading symbol "QWIK." The Company has
not applied to list its Common Stock on any other exchange or quotation
system.

REGISTRATION RIGHTS

Following the closing of this offering, the holders of approximately
9,899,413 shares of Common Stock (the "Registrable Securities") will be
entitled to certain rights with respect to the registration of such shares
under the Securities Act. In the event that the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other security holders, the holders of Registrable
Securities are entitled to notice of such registration and are entitled to
include their Registrable Securities in such registration, subject to certain
marketing and other limitations. Beginning six months after the closing of
this offering, the holders of at least 30% of the Registrable Securities have
the right to require the Company, on not more than two occasions, to file a
registration statement under the Securities Act in order to register all or
any part of their Registrable Securities. The Company may in certain
circumstances defer such registrations and the underwriters have the right,
subject to certain limitations, to limit the number of shares included in such
registrations. Further, holders of Registrable Securities may require the
Company to register all or a portion of their shares on Form S-3, when such
form becomes available to the Company, subject to certain conditions and
limitations.

In connection with the Company's transaction with Cypress, Cypress was
granted registration rights in addition to those held by other stockholders of
the Company. First, Cypress may sell a minimum of one-third of the shares of
Common Stock offered hereby, and in any subsequent public offerings of the
Company's stock. Second, the Company is obligated to file a registration
statement with respect to all shares of Common Stock held by Cypress and not
sold in this offering, with such registration statement being effective upon
the expiration of the lockup period imposed by the underwriters in connection
with this offering. The Company must keep this registration statement
effective until the earlier of (i) the date all of such shares held by Cypress
are sold; (ii) three years from the closing of this offering; or (iii) the
date all such shares are able to be sold in a three-month period pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, the Company has the right to suspend Cypress's
ability to sell under such registration statement under certain circumstances.
Finally, Cypress has the right to require registration of its shares that is
separate from a similar right held by the other holders of registration
rights. The other stockholders of the Company do not have the right to require
inclusion of their shares in these separate Cypress registrations.

63
<PAGE>

DELAWARE ANTITAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

Certain provisions of the Company's Certificate of Incorporation and Bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of the Company. Such provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offer at a price above the then current market value of the Common
Stock. Such provisions may also inhibit fluctuations in the market price of
the Common Stock that could result from takeover attempts. The Company is also
afforded the protections of Section 203 of the Delaware General Corporation
Law, which could delay or prevent a change in control of the Company or could
impede a merger, consolidation, takeover or other business combination
involving the Company or discourage a potential acquiror from making a tender
offer or otherwise attempting to obtain control of the Company. In addition,
the Board of Directors has authority to issue up to 10,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further
vote or action by the stockholders. The rights of the holders of the Company's
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third-party to acquire a majority
of the outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company. Furthermore, such Preferred
Stock may have other rights, including economic rights, senior to the Common
Stock, and as a result, the issuance of such Preferred Stock could have a
material adverse effect on the market value of the Common Stock. The Company
has no present plan to issue shares of Preferred Stock. The Company's
Certificate of Incorporation provides that, so long as the Board of Directors
consists of more than two directors, the Board of Directors will be divided
into three classes of directors serving staggered three-year terms. As a
result, only one of the three classes of the Company's Board of Directors will
be elected each year, which could have the effect of delaying a change in the
composition of the Board of Directors. See "Risk Factors--Effect of
Antitakeover Provisions."

64
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for the Common Stock of the
Company. Therefore, future sales of substantial amounts of Common Stock in the
public market could adversely affect the prevailing market price from time to
time. Furthermore, because only a limited number of shares will be available
for sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.

Upon completion of this offering, the Company will have outstanding an
aggregate of approximately 13,828,941 shares of Common Stock, assuming no
exercise of outstanding options under the Option Plan. Of these outstanding
shares of Common Stock, the 3,000,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act. The remaining 10,828,941 shares of Common Stock outstanding
upon completion of this offering and held by existing stockholders will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares").

The holders of 10,828,941 Restricted Shares, including all officers and
directors of the Company, are subject to "lock up" agreements with the
Representatives of the Underwriters and/or the Company providing that they
will not offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of the shares of Common Stock owned by them or that could be
purchased by them through the exercise of options to purchase Common Stock of
the Company for a period of at least 180 days after the effective date of this
offering (the "Lock Up Period") without the prior written consent of Deutsche
Morgan Grenfell, UBS Securities LLC, Cowen & Company and/or the Company, as
applicable. The lock up agreements provide that the Lock Up Period will be
extended in the event that the Lock Up Period would expire in a period where
the Company's directors and officers are prevented from trading because of the
set "blackout" period between earnings releases provided in the Company's
insider trading policy, until the date that trading will commence under the
Company's insider trading policy. The Company has agreed with Representatives
of the Underwriters not to release any holders from such agreements without
the prior written consent of Deutsche Morgan Grenfell. Such lock up agreements
may be released at any time as to all or any portion of the shares subject to
such agreements at the sole discretion of Deutsche Morgan Grenfell. Of the
9,344,434 Restricted Shares that first become eligible for sale in the public
market 180 days after the date of this Prospectus (depending upon the duration
of the lock-up), 2,345,985 shares will be immediately eligible for sale
without restriction under Rule 144(k) or Rule 701, and 6,998,449 shares will
be immediately eligible for sale subject to certain volume and other
restrictions pursuant to Rule 144. All 10,828,941 shares will be eligible for
sale pursuant to Rule 144 upon the expiration of one-year holding periods, all
of which will expire on or before March 31, 1998, subject in some cases to
Rule 144's volume and other restrictions.

In general, under Rule 144, beginning 90 days after the date of this
Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year, including persons
who may be deemed to be "affiliates" of the Company, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 138,289 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock
as reported through the Nasdaq National Market during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an

65
<PAGE>

affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned for at least two years the Restricted Shares
proposed to be sold (including the holding period of any prior owner except an
affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144.

Subject to certain limitations on the aggregate offering price of a
transaction and certain other conditions, Rule 701 permits resales of shares
issued prior to the date the issuer becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to certain compensatory benefit plans and contracts commencing
90 days after the issuer becomes subject to the reporting requirements of the
Exchange Act, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule
144. In addition, the Securities and Exchange Commission has indicated that
Rule 701 will apply to typical stock options granted by an issuer before it
becomes subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of such options (including exercises after
the date of this offering). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this Prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its two-year
minimum holding period requirements.

Except with respect to (a) the shares of Common Stock to be sold hereunder
and (b) any shares of such Common Stock sold by the Company pursuant to the
Company's 1997 Purchase Plan or upon the exercise of an option or warrant, or
the conversion of a security outstanding on the date hereof, the Company
hereby agrees that, without the prior written consent of Deutsche Morgan
Grenfell Inc., it will not, during the Lock Up Period (and any extension
thereof), (x) offer, pledge, sell, contract to sell, sell any option, or
contract to purchase, purchase any option or contract to sell, grant any
option, right, or warrant to purchase, or otherwise transfer or dispose of,
directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock or (y)
enter into any swap or similar agreement that transfers, in whole or in part,
the economic risk of ownership of the Common Stock, whether any such
transaction described in (x) or (y) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The foregoing
prohibitions shall not prevent the Company from granting options and other
rights under its existing equity compensation plans.

The Company intends to file a registration statement under the Securities
Act covering approximately 1,000,000 shares of Common Stock subject to
outstanding options or reserved for issuance under the 1997 Plan, 500,000
shares of Common Stock reserved for issuance under the Director Plan, and
750,000 shares of Common Stock reserved for issuance under the 1997 Purchase
Plan. See "Management--Benefit Plans." Such registration statement is expected
to be filed simultaneously with the effectiveness of the registration
statement covering the shares of Common Stock offered in this offering and
will automatically become effective upon filing. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates and the lapsing of the Company's
repurchase options, be available for sale in the open market, except to the
extent that such shares are subject to vesting restrictions with the Company
or the contractual restrictions described above.

In addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares of Common Stock offered hereby, and any subsequent
public offerings of the Company's stock. Second, the Company is obligated to
file a registration statement with respect to all of the shares of Common
Stock held by Cypress and not sold in this offering, with such registration
statement being effective upon the expiration of the lockup period imposed by
the underwriters in connection with this offering. The Company must keep this

66
<PAGE>

registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended. Notwithstanding the foregoing, the Company has the right to
suspend Cypress's ability to sell under such registration statement under
certain circumstances. Finally, Cypress has the individual right to require
registration of its shares that is separate from a similar right held by the
other holders of registration rights. The other stockholders of the Company do
not have the right to require inclusion of their shares in these separate
Cypress registrations.

67
<PAGE>

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Deutsche Morgan
Grenfell Inc., UBS Securities LLC and Cowen & Company are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the underwriting agreement (the form of
which is filed as an exhibit to the Company's Registration Statement, of which
this Prospectus is a part, (the "Underwriting Agreement"), purchase from the
Company and the Selling Stockholder the number of shares of Common Stock set
forth below opposite their respective names:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Deutsche Morgan Grenfell Inc....................................
UBS Securities LLC..............................................
Cowen & Company.................................................
---
Total.........................................................
===
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions.

The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose initially to offer the Common Stock to the
public on the terms set forth on the cover page of this offering. The
Underwriters may allow to selected dealers (who may include the Underwriters)
a concession of not more than $ per share. The selected dealers may reallow
a concession of not more than $ per share to certain other dealers. After
the initial public offering, the price and concessions and re-allowances to
dealers and other selling terms may be changed by the Representatives. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part. The Underwriters do not intend to sell any of the shares of Common
Stock offered hereby to accounts for which they exercise discretionary
authority.

The Selling Stockholder has granted an option to the Underwriters to
purchase up to a maximum of 450,000 additional shares of Common Stock to cover
over-allotments, if any, at the public offering price, less the underwriting
discount set forth on the cover page of this Prospectus. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with the offering.

In connection with the offering, the Company and the directors, executive
officers and certain stockholders of the Company have agreed not to offer or
sell any Common Stock until the expiration of 180 days following the closing
of this offering without the prior written consent of Deutsche Morgan Grenfell
Inc.

The Underwriting Agreement provides that the Company and the Selling
Stockholder will indemnify the several Underwriters against certain
liabilities, including civil liabilities under the Securities Act, as amended,
or will contribute to payments the Underwriters may be required to make in
respect thereof.

Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Representatives. The principal factors to be
considered in determining the public offering price include the information
set forth in this offering and otherwise available to the Representatives; the
history and the prospects for

68
<PAGE>

the industry in which the Company will compete; the ability of the Company's
management; the prospects for future earnings of the Company; the present
state of the Company's development and its current financial condition; the
general condition of the securities markets at the time of this offering; and
the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies. Each of the Representatives has informed
the Company that it currently intends to make a market in the shares
subsequent to the effectiveness of this offering, but there can be no
assurance that the Representatives will take any action to make a market in
any securities of the Company.

Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with this offering. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with this offering when shares of Common Stock sold by
the syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq Stock Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the Common Stock offered hereby for employees and directors
of the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the Underwriters to the general public on the same basis as
other shares offered hereby.

LEGAL MATTERS

Certain legal matters relating to the legality of the Common Stock offered
hereby will be passed upon for the Company by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. Certain legal matters
in connection with the offering will be passed upon for the Underwriters by
Venture Law Group, A Professional Corporation, Menlo Park, California. As of
the date of this Prospectus, three investment partnerships composed of certain
members of and persons associated with Wilson Sonsini Goodrich & Rosati
beneficially owned an aggregate of 16,152 shares of Common Stock of the
Company and a member of Wilson Sonsini Goodrich & Rosati owned 644 shares of
Common Stock of the Company.

EXPERTS

The financial statements of the Company as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.

69
<PAGE>

CHANGE IN INDEPENDENT ACCOUNTANTS

Effective January 23, 1996, Price Waterhouse LLP was engaged as the
Company's principal independent accountants. In the period from April 1994
through December 28, 1995, Deloitte & Touche LLP ("Deloitte & Touche") had
been the Company's independent accountants, and the December 31, 1993 and 1994
financial statements were audited by Deloitte & Touche. The decision to change
independent accountants was approved by the Company's Board of Directors. In
the period from April 1994 through December 28, 1995, there were no
disagreements with Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures
which disagreements if not resolved to the satisfaction of Deloitte & Touche
would have caused them to make reference thereto in their report on the
financial statements. The report of Deloitte & Touche on the financial
statements of the Company as of and for the year ended December 31, 1994, the
most recent financial statements audited by such firm, contained no adverse
opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope, or accounting principle. Prior to January 23, 1996,
the Company had not consulted with Price Waterhouse LLP on either the
application of accounting principles to a specified transaction, either
complete or proposed, or on the type of opinion that might be rendered on the
Company's financial statements.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1, including amendments thereto, under the
Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. For further information with respect
to the Company and the Common Stock offered hereby, reference is hereby made
to such Registration Statement and to the exhibits and schedules filed
therewith. Statements contained in this Prospectus regarding the contents of
any contract or other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference, although the
Company believes all material elements of such documents are described in this
Prospectus. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies of all or any part thereof may be obtained from such office
upon the payment of the prescribed fees. Such materials may also be obtained
from the Commission's web site at http://www.sec.gov. Information concerning
the Company is also available for inspection at the offices of the Nasdaq
National Market, Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent
auditors and quarterly reports containing unaudited consolidated financial
information.

ViaLink, pASIC, QuickWorks, QuickLogic and the QuickLogic logo are
registered trademarks of QuickLogic. QuickTools is a trademark of QuickLogic.
All other trademarks or service marks appearing in this Prospectus are the
property of their respective companies.

70
<PAGE>

QUICKLOGIC CORPORATION

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Balance Sheet as of December 31, 1995, December 31, 1996 and June 30,1997
(unaudited).............................................................. F-3
Statement of Operations for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 (unaudited) and 1997
(unaudited).............................................................. F-4
Statement of Stockholders' Equity (Deficit) for the Years Ended December
31, 1994, 1995 and 1996 and for the Six Months Ended June 30, 1997
(unaudited).............................................................. F-5
Statement of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 (unaudited) and 1997
(unaudited).............................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
QuickLogic Corporation

The reincorporation described in Note 12 to the financial statements has not
been consummated at June 9 1997. When it has been consummated, we will be in a
position to furnish the following report:

"In our opinion, the accompanying balance sheet and the related
statements of operations, stockholders' equity (deficit) and cash flows
present fairly, in all material respects, the financial position of
QuickLogic Corporation at December 31, 1995 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."

Price Waterhouse LLP
San Jose, California
June 9, 1997

F-2
<PAGE>

QUICKLOGIC CORPORATION

BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------ JUNE 30, JUNE 30,
1995 1996 1997 1997
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................. $ 3,856 $ 10,336 $ 9,537
Short term investments........... 4,000 -- --
Accounts receivable, less
allowance for doubtful accounts
and sales returns and allowances
of $982, $2,084, and $4,876..... 2,680 2,609 3,239
Inventory........................ 1,324 3,248 6,515
Other current assets............. 121 4,633 549
-------- -------- --------
Total current assets........... 11,981 20,826 19,840
Property and equipment, net........ 218 1,708 2,940
Other assets....................... -- 43 43
-------- -------- --------
$ 12,199 $ 22,577 $ 22,823
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 1,610 $ 3,044 $ 2,670
Accrued and other liabilities.... 3,228 6,929 9,754
Current portion of long-term
obligations..................... 75 203 1,815
-------- -------- --------
Total current liabilities...... 4,913 10,176 14,239
Long-term obligations.............. 137 602 1,479
-------- -------- --------
5,050 10,778 15,718
-------- -------- --------
Commitments and contingencies
(Notes 10 and 11)
Stockholders' equity:
Preferred stock, $0.001 par
value; 8,093, 8,767, and 8,767
shares authorized, 10,000 shares
authorized pro forma; 7,390,
8,394, and 8,496 shares issued
and outstanding, no shares
issued and outstanding pro
forma........................... 7 8 $ 9 $ --
Common stock, $0.001 par value;
10,714, 12,143, and 12,143
shares authorized; 100,000
shares authorized pro forma;
551, 722, and 907 shares issued
and outstanding; 9,403 shares
issued and outstanding pro
forma........................... 1 1 1 10
Additional paid-in capital....... 31,432 40,486 43,679 43,679
Common stock to be issued:
2,604 shares.................... -- -- 18,409 18,409
Stockholder note receivable...... (119) (119) (125) (125)
Deferred compensation............ -- (808) (2,712) (2,712)
Accumulated deficit.............. (24,172) (27,769) (52,156) (52,156)
-------- -------- -------- --------
Total stockholders' equity..... 7,149 11,799 7,105 $ 7,105
-------- -------- -------- ========
$ 12,199 $ 22,577 $ 22,823
======== ======== ========
</TABLE>

See notes to financial statements.

F-3
<PAGE>

QUICKLOGIC CORPORATION

STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue........................ $ 6,024 $15,148 $23,758 $11,440 $ 13,951
Cost of revenue................ 4,053 7,739 11,158 5,545 7,443
------- ------- -------- ------- --------
Gross profit................... 1,971 7,409 12,600 5,895 6,508
------- ------- -------- ------- --------
Operating expenses:
Research and development..... 3,172 3,599 4,642 2,173 3,058
Selling, general and
administrative.............. 4,408 5,770 7,730 3,691 5,003
Contract termination and
legal....................... -- 2,700 4,125 265 23,009
------- ------- -------- ------- --------
Loss from operations........... (5,609) (4,660) (3,897) (234) (24,562)
Interest expense............... (240) (200) (60) (13) (65)
Interest and other income,
net........................... 21 153 360 310 240
------- ------- -------- ------- --------
Net income (loss).............. $(5,828) $(4,707) $(3,597) $ 63 $(24,387)
======= ======= ======== ======= ========
Net income (loss) per share.... (1.19) (.95) $ (.68) $ -- $ (4.56)
======= ======= ======== ======= ========
Shares used in net income
(loss) per share calculation.. 4,910 4,974 5,309 13,124 5,350
======= ======= ======== ======= ========
</TABLE>

See notes to financial statements.

F-4
<PAGE>

QUICKLOGIC CORPORATION

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
PREFERRED STOCK COMMON STOCK TO BE ISSUED ADDITIONAL STOCKHOLDER STOCKHOLDERS'
---------------- ------------- -------------- PAID-IN NOTE DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION DEFICIT (DEFICIT)
------- ------- ------ ------ ------ ------- ---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993............. 3,983 $ 4 417 $ 1 -- $ -- $14,726 $(119) $ -- $(13,637) $ 975
Common stock
issued under
stock option
plan............ -- -- 100 -- -- -- 31 -- -- -- 31
Net loss........ -- -- -- -- -- -- -- -- -- (5,828) (5,828)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1994............. 3,983 4 517 1 -- -- 14,757 (119) -- (19,465) (4,822)
Common stock
issued under
stock option
plan............ -- -- 34 -- -- -- 17 -- -- -- 17
Issuance of
Series E
preferred stock
for cash and
conversion of
notes payable to
stockholders,
net of issuance
cost............ 3,407 3 -- -- -- -- 16,658 -- -- -- 16,661
Net loss........ -- -- -- -- -- -- -- -- -- (4,707) (4,707)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1995............. 7,390 7 551 1 -- -- 31,432 (119) -- (24,172) 7,149
Common stock
issued under
stock option
plan, net of
repurchases..... -- -- 171 -- -- -- 99 -- -- -- 99
Issuance of
Series E
preferred stock
in exchange for
services........ 4 -- -- -- -- -- 15 -- -- -- 15
Issuance of
Series F
preferred stock
for cash, net of
issuance cost... 1,000 1 -- -- -- -- 8,089 -- -- -- 8,090
Deferred
compensation.... -- -- -- -- -- -- 851 -- (851) -- --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 43 -- 43
Net loss........ -- -- -- -- -- -- -- -- -- (3,597) (3,597)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1996............. 8,394 8 722 1 -- -- 40,486 (119) (808) (27,769) 11,799
Common stock
issued under
stock option
plan, net of
repurchases
(unaudited)..... -- -- 185 -- -- -- 256 -- -- -- 256
Issuance of
Series F
preferred stock
for cash, net of
issuance cost
(unaudited)..... 102 1 -- -- -- -- 767 -- -- -- 768
Common stock to
be issued in
exchange for
contract
termination
(unaudited)..... -- -- -- -- 2,604 18,409 -- -- -- -- 18,409
Deferred
compensation
(unaudited)..... -- -- -- -- -- -- 2,170 -- (2,170) -- --
Amortization of
deferred
compensation
(unaudited)..... -- -- -- -- -- -- -- -- 266 -- 266
Note receivable
from
stockholder..... -- -- -- -- -- -- -- (6) -- -- (6)
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- -- (24,387) (24,387)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at June
30, 1997
(unaudited)...... 8,496 $ 9 907 $ 1 2,604 $18,409 $43,679 $(125) $(2,712) $(52,156) $ 7,105
======= ======= === ==== ===== ======= ======= ===== ======= ======== ========
</TABLE>

See notes to financial statements.

F-5
<PAGE>

QUICKLOGIC CORPORATION

STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............. $(5,828) $(4,707) $ (3,597) $ 63 $(24,387)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and other non-
cash charges................ 562 320 235 458 309
Provision for doubtful
accounts.................... 34 912 1,102 372 2,792
Amortization of deferred
compensation................ -- -- 43 -- 266
Contract termination and
other....................... -- 2,700 4,125 -- 23,009
Changes in assets and
liabilities:
Accounts receivable......... (602) (2,567) (1,031) (936) (3,422)
Inventory................... 185 (880) (1,924) (439) (2,068)
Other assets................ 5 -- (4,555) (4,615) (516)
Accounts payable............ 1,472 (122) 1,434 855 (374)
Accrued and other
liabilities................ 674 (673) (409) 107 2,852
------- ------- -------- ------- ---------
Net cash used for operating
activities................ (3,498) (5,017) (4,577) (4,135) (1,539)
------- ------- -------- ------- ---------
Cash flows from investing
activities:
Capital expenditures for
property and equipment....... (259) (85) (1,478) (608) (1,541)
Proceeds on sale of
investments.................. -- -- 4,000 2,277 --
Investments in short-term
instruments.................. -- (4,000) -- -- --
------- ------- -------- ------- ---------
Net cash provided by (used
for) investing
activities................ (259) (4,085) 2,522 1,669 (1,541)
------- ------- -------- ------- ---------
Cash flows from financing
activities:
Repayment of debt and capital
leases....................... (148) (770) (124) (48) (233)
Proceeds from issuance of
common stock, net............ 31 17 99 14 256
Proceeds from issuance of
preferred stock, net......... -- 11,811 8,090 -- 768
Borrowings on notes payable to
stockholders................. 1,526 1,198 -- -- --
Note receivable from
stockholder.................. -- -- -- -- (6)
Borrowings from bank.......... -- 214 470 100 1,496
------- ------- -------- ------- ---------
Net cash provided by
financing activities...... 1,409 12,470 8,535 66 2,281
------- ------- -------- ------- ---------
Net increase (decrease) in
cash.......................... (2,348) 3,368 6,480 (2,400) (799)
Cash at beginning of period.... 2,836 488 3,856 3,856 10,336
------- ------- -------- ------- ---------
Cash at end of period.......... $ 488 $ 3,856 $10,336 $1,456 $ 9,537
======= ======= ======== ======= =========
Non-cash transactions:
Conversion of notes payable to
stockholder into Series E
preferred stock............... $ -- $ 4,850 $ -- $ -- $ --
======= ======= ======== ======= =========
Inventory acquired in exchange
for note payable............. $ -- $ -- $ -- $ -- $ 1,199
======= ======= ======== ======= =========
</TABLE>

See notes to financial statements.

F-6
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS

NOTE 1. THE COMPANY AND BASIS OF PRESENTATION:

QuickLogic Corporation ("QuickLogic" or the "Company") was incorporated in
California in April 1988. The Company develops, markets, and supports field
programmable gate arrays (FPGAs) and software design tools.

The FPGA business is highly cyclical and has been subject to significant
downturns at various times that have been characterized by diminished product
demand, production overcapacity and accelerated erosion of average selling
prices. The selling price that the Company is able to command for its products
is highly dependent on industry-wide production capacity and demand. Both of
these factors could result in rapid changes in product pricing and could
adversely affect the Company's operating results.

The Company's fiscal year ends on the Sunday closest to December 31. For
presentation purposes the financial statements and notes refer to December 31
as year end and June 30 as quarter end. Certain reclassifications have been
made to the 1995 financial statements to conform to the 1996 presentation.
Such reclassifications had no effect on the results of operations or the
accumulated deficit.

Use of Estimates

The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates, particularly
in relation to sales returns and allowances, product obsolescence and
litigation. (See Note 11--Contingencies)

Interim Results (unaudited)

The accompanying balance sheet as of June 30, 1997, the statements of
operations and of cash flows for the six months ended June 30, 1996 and 1997
and the statement of stockholders' equity (deficit) for the six months ended
June 30, 1997 are unaudited. In the opinion of management, these statements
have been prepared on the same basis as the audited financial statements and
include all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of the results of the interim periods. The
data disclosed in these financial statements, including notes to the financial
statements, at such date and for such periods are unaudited. Operating results
for the six months ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the full year.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:

Short Term Investments

All short term investments are classified as available for sale and are
accounted for at fair value with unrealized gains and losses, if any, reported
as a separate component of stockholders' equity. Management determines the
appropriate classification of investments at the time of purchase and
reassesses the classification at each reporting date. Short-term investments
represent high grade marketable corporate debt securities and one government
agency security at December 31, 1995.

F-7
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Fair Value of Financial Instruments

The estimated fair values of financial instruments are determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required to interpret and
analyze the available data and to develop estimates. Accordingly, estimates
could differ significantly from the amounts the Company would realize in a
current market exchange. The estimated fair values of all financial
instruments at December 31, 1995 and 1996, approximate the amounts presented
in the balance sheet.

Inventory

Inventory is stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the assets estimated
useful life of three to seven years. Amortization of leasehold improvements is
computed on a straight-line basis over the shorter of the facility lease term
or the estimated useful lives of the improvements.

Revenue Recognition

The Company sells to certain domestic distributors under agreements which
allow certain rights of return and price adjustments on unsold inventory. Such
sales are not recognized until the inventory is sold by the distributor.
Amounts billed to such distributors for shipments are included as accounts
receivable, inventory is relieved and the related revenue and cost of revenue
are deferred and the resultant gross profit is recorded as a current liability
until the inventory is resold by the distributor. Reserves for estimated
returns and distributor price adjustments are provided against accounts
receivable. Revenue from all other products is recognized upon shipment.
Software revenue is recognized upon delivery of the software, provided that no
significant Company obligations remain and collection of the resulting
receivable is probable.

In fiscal 1996, the Company retroactively change its revenue recognition
policy from recognizing revenues upon shipment of products to domestic
distributors to deferring recognition of such revenue until the product is
sold by the domestic distributor to the end customer. Management believes the
new revenue recognition policy is more consistent with industry practice and
better reflects the economics of its terms of sale, particularly in light of
recent changes in distributor pricing practices. This change in accounting
policy was made retroactively in accordance with Accounting Principles Board
Opinion No. 20.

Stock-Based Compensation

In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
establishes a fair value method of accounting for stock-based compensation
plans and requires additional disclosures for those companies who elect not to
adopt the new method of accounting. The Company has elected to continue to
measure compensation costs using the intrinsic value method prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and to comply with
the pro forma disclosure requirements of SFAS 123.

F-8
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Concentration of Credit Risk

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, short-term
investments and accounts receivable. Cash and short-term investments are
maintained with high quality institutions. The Company's accounts receivable
are derived primarily from sales to customers located in North America,
Europe, Japan and Korea. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. Bad debt write-offs
to date have been immaterial.
At December 31, 1996, accounts receivable from four customers represented
24%, 12%, 11% and 10%, respectively, of the Company's accounts receivable. At
December 31, 1995, accounts receivables from three customers represented 12%,
10% and 10%, respectively, of the Company's accounts receivable.

Costs of Litigation

The Company accrues for the cost of litigation in the period that costs
become estimable and occurrence is determined to be probable. Accrued legal
costs of $2,200 and $4,860 at December 31, 1995 and 1996, respectively,
primarily represent estimated legal fees.

Software Development Costs

Software development costs incurred prior to the establishment of
technological feasibility are included in research and development and are
expensed as incurred. Development costs incurred subsequent to the
establishment of technological feasibility through the period of general
market availability are capitalized, if material. To date, all software
development costs have been expensed as incurred due to their immateriality.

Pro Forma Stockholders' Equity (Unaudited)

If the offering contemplated by this Prospectus is consummated, unaudited
pro forma stockholders' equity would be adjusted for the conversion of
8,496,000 shares of preferred stock outstanding into 8,496,000 shares of
common stock.

The pro forma effect of this transaction has been reflected in the
accompanying unaudited pro forma stockholders' equity as of June 30, 1997.

Net Income (Loss) Per Share

Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares outstanding during the periods. Common
equivalent shares consist of preferred stock (using the "as if converted"
method), stock options and warrants (using the "treasury stock" method) and
common stock to be issued. Common equivalent shares are excluded from the
computation if their effect is antidilutive. Pursuant to a Securities and
Exchange Commission Staff Accounting Bulletin, preferred stock (using the "as
if converted" method) and common and common equivalent shares (using the
"treasury stock" method and the assumed initial public offering price) issued
subsequent to August 1996 have been included in the computation as if they
were outstanding for all periods presented.

F-9
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Recent Accounting Pronouncements (Unaudited)

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This
statement is effective for the Company's fiscal year ending December 31, 1997.
The Statement defines the calculation of earnings per share under generally
accepted accounting principles. Under the new standard, primary earnings per
share is replaced by basic earnings per share and fully diluted earnings per
share is replaced by diluted earnings per share. If the Company had adopted
this Statement for the years ended December 31, 1992, 1993, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and 1997, the Company's pro
forma basic and diluted earnings (loss) per share would have been as follows:

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------------- ----------------
1992 1993 1994 1995 1996 1996 1997
----- ----- ------ ----- ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pro forma basic earnings
(loss) per share....... (.94) (.89) (1.19) (.95) $ (.68) $ -- $ (4.56)
Pro forma diluted
earnings (loss) per
share.................. (.94) (.89) (1.19) (.95) $ (.68) $ -- $(4.56)
</TABLE>

NOTE 3. BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) ---------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Inventory:
Raw materials................................... $ 533 $ 1,693 $ 2,454
Work-in-process................................. 512 1,268 3,506
Finished goods.................................. 279 287 555
------- ------- -------
$ 1,324 $ 3,248 $ 6,515
======= ======= =======
Property and equipment:
Equipment....................................... $ 1,755 $ 2,323 $ 3,499
Software........................................ 492 601 780
Furniture and fixtures.......................... 23 555 708
Leasehold improvements.......................... 18 519 552
------- ------- -------
2,288 3,998 5,539
Accumulated depreciation........................ (2,070) (2,290) (2,599)
------- ------- -------
$ 218 $ 1,708 $ 2,940
======= ======= =======
Accrued and other liabilities:
Accrued employee compensation................... $ 320 $ 731 $ 875
Accrued legal costs............................. 2,200 4,860 4,215
Deferred income................................. 318 662 3,975
Other liabilities............................... 390 676 689
------- ------- -------
$ 3,228 $ 6,929 $ 9,754
======= ======= =======
</TABLE>

F-10
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 4. DEBT FACILITIES:

<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) ------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Installment notes payable to bank..................... $212 $580 $2,011
====== ====== ======
</TABLE>

At December 31, 1996, the Company had outstanding installment notes totaling
$210,000. The notes bear interest at prime plus 0.25% (8.5% as of December 31,
1996), and are secured by the specific equipment financed. Principal payments
are due in equal monthly installments over the term of the notes which mature
between 1998 and 1999.

At December 31, 1996, the Company had a $6.0 million bank facility which
includes a $2.0 million equipment term loan, a $1.0 million export/import
revolving line of credit and a $3.0 million domestic revolving line of credit.
At December 31, 1996, $370,000 had been drawn down under the equipment line
and no borrowings were outstanding against the revolving lines of credit.
Borrowings under the equipment term loan bear interest at prime plus 0.25%
(8.5% as of December 31, 1996) and are secured by the specific equipment
financed. Principal payments are due in equal monthly installments over the
term of the note which matures in the year 2000. The revolving line of credit
bears interest at prime (8.25% as of December 31, 1996).

During the six months ended June 30, 1997, the Company drew down an
additional $1.5 million under the equipment term loan.

In conjunction with the bank facility, the Company must comply with certain
financial covenants related to profitability, tangible net worth, working
capital, debt leverage and liquidity. The Company was in breach of certain
financial covenants as of March 31, 1997 and June 30, 1997 for which it has
obtained a waiver from the bank.

The Company paid $126,000, $103,000, $56,000 and $69,000 in interest during
1994, 1995, 1996, and the six months ended June 30, 1997, respectively.

F-11
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 5. STOCKHOLDERS' EQUITY:

Preferred Stock

Preferred stock consists of the following at December 31, 1995 and 1996 and
June 30, 1997 (in thousands, except per share data):

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Series A, par value $0.001 per share; 358 shares
designated, issued and outstanding................. $ -- $ -- $ --
Series B, par value $0.001 per share; 1,468 shares
designated, issued and outstanding................. 1 1 1
Series C, par value $0.001 per share; 1,729 shares
designated, 1,711 shares issued and outstanding.... 2 2 2
Series D, par value $0.001 per share; 446 shares
designated, issued and outstanding................. 1 1 1
Series E, par value $0.001 per share; 3,411 shares
designated, 3,407, 3,411 and 3,411 shares issued
and outstanding.................................... 3 3 4
Series F, par value $0.001 per share; 1,355 shares
designated, 1,000 and 1,102 shares issued and
outstanding........................................ -- 1 1
------ ------ -----
$ 7 $ 8 $ 9
====== ====== =====
</TABLE>

The holders of the outstanding Series A, Series B, Series C, Series D,
Series E and Series F preferred stock shall be entitled to an annual dividend
of $.0233, $.0289, $0.448, $0.448, $0.49 and $0.812 per share, respectively,
when and if declared by the Board of Directors. Such dividends are payable
prior to any payment of dividends on the shares of common stock. No dividends
have been declared or paid as of December 31, 1996.

In the event of liquidation, dissolution or winding up of the Company, the
holders of Series F preferred stock shall be entitled to receive $8.12 per
share plus declared but unpaid dividends thereon, prior to any distribution to
holders of Series A, Series B, Series C, Series D and Series E preferred stock
and holders of common stock. The holders of Series A, Series B, Series C,
Series D and Series E preferred stock shall be entitled to receive $2.331,
$2.891, $4.48, $4.48 and $4.90 per share, respectively, plus declared but
unpaid dividends thereon, prior to any distribution to holders of common
stock. As of December 31, 1996, the aggregate liquidation preference of Series
A, Series B, Series C, Series D, Series E and Series F preferred stock is
approximately $39.6 million.

Each share of preferred stock is convertible at the option of the holder
into one share of common stock, subject to adjustment for dilutive events, as
defined. Each share of preferred stock will be automatically converted into
common stock upon the earlier of (i) closing of an underwritten public
offering of the Company's common stock, the aggregate gross proceeds of which
exceed $15,000,000, at a per share issuance price of at least $8.75 or (ii)
upon the vote or written consent of holders of at least two-thirds of the
total number of shares of Series A, Series B, Series C, Series D, Series E and
Series F preferred stock then outstanding.

The holders of the preferred shares have voting rights equivalent to the
number of common shares into which the preferred shares are convertible. The
Company must obtain the approval of the holders of at least two-thirds of such
outstanding preferred shares, voting together as a single class,

F-12
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

to alter the preferences, rights or privileges of the preferred stock; create
a new class of stock having preference over the Series A, Series B, Series C,
Series D, Series E and Series F preferred stock, or increase the authorized
number of shares of Series A, Series B, Series C, Series D, Series E or
Series F preferred stock.

In December 1991, in conjunction with the issue of Series C preferred stock,
the Company issued warrants to purchase 18,750 shares of Series C preferred
stock at $4.48 per share. The warrants expire seven years from date of
issuance or upon the closing of the Company's initial public offering,
whichever is sooner.

In January 1997, the Company issued 101,593 shares of Series F preferred
stock at $8.12 per share for cash of $0.8 million.

Common Stock

In November 1996, in conjunction with the issuance of Series F preferred
stock, the Company authorized an additional 1,428,571 shares of common stock.

NOTE 6. INCOME TAXES:

No provision for federal or state income taxes has been recorded for the
years ended December 31, 1994, 1995, and 1996 as the Company incurred net
operating losses.

Deferred tax balances comprise the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.......................... $ 6,149 $ 5,742
Accruals and reserves.................................... 2,431 2,355
Credit carryforward...................................... 772 1,159
Capitalized research and development..................... 554 692
------- -------
9,906 9,948
Valuation allowances..................................... (9,906) (9,948)
------- -------
Deferred tax asset....................................... $ -- $ --
======= =======
</TABLE>

Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability
of the deferred tax assets such that a full valuation allowance has been
recorded. These factors include the Company's history of losses, the fact that
the market in which the Company competes is intensely competitive and
characterized by rapidly changing technology, the lack of carryback capacity
to realize deferred tax assets, and uncertainty regarding market acceptance of
the Company's products. The Company will continue to assess the realizability
of the deferred tax assets in future periods.

At December 31, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $16 million and $1
million, respectively. These carryforwards, if not utilized to offset future
taxable income and income taxes payable, will expire through the year 2010.

F-13
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

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 carryovers
include, but are not limited to, a cumulative ownership change of more than
50% over a three year period. The issuance of Series A and Series C preferred
stock resulted in an annual limitation of the Company's ability to utilize net
operating losses incurred prior to that date. The limitation is insignificant.
Net operating losses incurred between the time of the Series C preferred stock
issuance and June 30, 1997, had not been subject to any annual limitations as
of June 30, 1997.

NOTE 7. EMPLOYEE BENEFIT PLANS:

Stock Option Plan

As of December 31, 1996, under the Company's 1989 Stock Option Plan, as
amended in 1996, (the "Plan"), incentive and nonqualified stock options to
purchase up to 2,100,000 shares of common stock may be granted to key
employees, directors and consultants of the Company. Options are granted at an
exercise price equal to the fair market value of the Company's common stock
(as determined by the Board of Directors) at the date of grant and generally
vest over four years, and expire up to ten years from the date of grant.

In July 1996, the 1989 Stock Option Plan was amended to allow options to be
exercised prior to vesting. Unvested shares must be deposited with an escrow
agent and the Company has a right to repurchase such shares at their initial
issuance price if the optionee is terminated from service prior to vesting.

The following table summarizes the Company's stock option activity and
related weighted average exercise price for each of the years ended December
31, 1994, 1995 and 1996 and the quarter ended June 30, 1997 (in thousands,
except per share data):

<TABLE>
<CAPTION>
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
<S> <C> <C>
Balance at December 31, 1993............................ 366 $0.39
Granted............................................... 470 $0.70
Canceled.............................................. (139) $0.41
Exercised............................................. (100) $0.36
-----
Balance at December 31, 1994............................ 597 $0.64
Granted............................................... 635 $0.70
Canceled.............................................. (24) $0.64
Exercised............................................. (34) $0.51
-----
Balance at December 31, 1995............................ 1,174 $0.67
Granted............................................... 317 $0.98
Canceled.............................................. (200) $0.70
Exercised............................................. (193) $0.62
-----
Balance at December 31, 1996............................ 1,098 $0.77
Granted (unaudited)................................... 758 $3.52
Canceled (unaudited).................................. (27) $0.71
Exercised (unaudited)................................. (200) $0.78
-----
Balance at June 30, 1997 (unaudited).................... 1,629 $1.94
=====
</TABLE>

F-14
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

As of December 31, 1996, 674,000 options were vested, 697,660 shares were
available for grant and 14,317 unvested shares had been exercised and remain
subject to the Company's buyback rights.

In March 1997, an additional 714,286 shares were authorized for issuance
under the 1989 Stock Option Plan.

Related weighted average exercise price and contractual life information at
December 31, 1996 are as follows (share amounts in thousands):

<TABLE>
<CAPTION>
OPTIONS WITH OUTSTANDING EXERCISABLE REMAINING
EXERCISE PRICES OF: SHARES SHARES LIFE (YEARS)
------------------- ----------- ----------- ------------
<S> <C> <C> <C>
$0.35.............................. 43 43 3.3
$0.70.............................. 802 802 8.0
$1.05.............................. 253 253 9.8
</TABLE>

The weighted average estimated grant date fair value, as defined by SFAS
123, for options granted during 1995 and 1996 was $ 0.70 and $ 3.71 per
option, respectively. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model. The Black-Scholes
model, as well as other currently accepted option valuation models, was
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards.

The following weighted average assumptions are included in the estimated
grant date fair value calculations for grants in 1995 and 1996:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Expected life (years)........................................ 4.5 5.0
Risk-free interest rate...................................... 5.99% 6.05%
Volatility................................................... -- --
Dividend yield............................................... -- --
</TABLE>

Had the Company recorded compensation cost based on the estimated grant date
fair value, as defined by SFAS 123, for awards granted under its stock option
plan, the Company's pro forma net loss and pro forma net loss per share would
have been as follows for the years ended December 31, 1995 and 1996 (in
thousands except per share data):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Pro forma net loss......................................... $(4,715) $(3,676)
Pro forma net loss per share............................... (.95) (.69)
</TABLE>

The pro forma effect on net loss for 1995 and 1996 is not representative of
the pro forma effect on net loss in future years because it does not take into
consideration pro forma compensation expense related to grants made prior to
1995 and because the determination of the fair value of all options granted
after the Company becomes a public entity will include an expected volatility
factor.

F-15
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Deferred Compensation

During the year ended December 31, 1996 and the six months ended June 30,
1997, the Company granted options and recorded related deferred compensation
of $851,000 and $2,170,000, respectively. Such deferred compensation will be
amortized ratably over the vesting period of the options.

NOTE 8. RELATED PARTY TRANSACTIONS:

Technology Development and Foundry Supply Agreement

In October 1992, in conjunction with the issuance of Series D preferred
stock, the Company entered into a Technical Transfer, Joint Development
License and Foundry Supply Agreement (the Existing Agreement) with Cypress
Semiconductor Corporation ("Cypress"). Cypress owns 100% of the Company's
Series D preferred stock. The agreement provides that the Company and Cypress
share processing technologies and licenses to market developed FPGA products
and that Cypress guarantees the Company certain wafer start capacity. The
Company purchased all of its wafer requirements under this agreement during
1995 and 1996.

In March 1997, the Company and Cypress terminated the Existing Agreement,
and replaced it with a new arrangement whereby the Company's FPGA products
will no longer be second sourced by Cypress. In exchange for the termination
of the Existing Agreement and the reversion of the rights to the intellectual
property developed thereunder to the Company, the Company paid $4.5 million in
cash and agreed to issue 2,603,817 shares of Common Stock to Cypress,
resulting in a charge of approximately $23 million in the first quarter of
1997. The 2,603,817 shares of Common Stock to be issued to Cypress are
issuable upon the consummation of an initial public offering by the Company or
by April 1, 1998, whichever is first. In addition, the Company granted Cypress
certain contractual rights as to the shares of the Company's stock held by
Cypress, including the right to sell shares in this offering. The parties also
entered into a new foundry agreement and a cross-license agreement.

Notes Receivable From Stockholder

As of December 31, 1996, the Company has $119,000 of demand promissory notes
from a stockholder. During the six months ended June 30, 1997, an additional
$6,300 was advanced to the stockholder. The notes bear interest at rates
ranging from 6.7% to 8.5% per annum, and are secured by shares of the
Company's common stock held by the stockholder.

NOTE 9. GEOGRAPHIC REPORTING AND CUSTOMER CONCENTRATION:

<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE ASIA TOTAL
------- ------ ------ -------
<S> <C> <C> <C> <C>
Net revenue (in thousands):
Year ended December 31, 1994................ $ 4,217 $ 865 $ 942 $ 6,024
Year ended December 31, 1995................ $10,694 $2,779 $1,675 $15,148
Year ended December 31, 1996................ $16,726 $4,124 $2,908 $23,758
</TABLE>

During the year ended December 31, 1996, one customer accounted for
approximately 27% of revenue. All sales are made from the United States and
are denominated in U.S. dollars.

F-16
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10. COMMITMENTS:

The Company leases its primary facility under a noncancelable operating
lease which expires in 2003, and includes an option to renew through 2006. The
lease is secured by a $300,000 standby letter of credit. Rent expense for the
years ended December 31, 1994, 1995 and 1996 was approximately $314,000,
$358,000 and $358,000, respectively.

The Company also leases certain equipment and leasehold improvements under
capital leases which expire in 1997 and 2003. At December 31, 1996, $232,000
of assets acquired under capital leases were included in plant and equipment.

Future minimum lease commitments, excluding property taxes and insurance,
are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ --------- -------
<S> <C> <C>
1997..................................................... $ 523 $ 57
1998..................................................... 523 45
1999..................................................... 546 45
2000..................................................... 563 45
2001 and thereafter...................................... 1,694 136
------ -----
$3,849 328
======
Less amount representing interest........................ (103)
-----
Present value of capital lease obligations............... 225
Less current portion..................................... (33)
-----
Long term portion of capital lease obligations........... $ 192
=====
</TABLE>

NOTE 11. CONTINGENCIES:

During 1994, Actel Corporation ("Actel"), a competitor of the Company, filed
a lawsuit seeking unspecified damages and alleging that the Company's products
infringe upon its patents. During 1995 and 1996, the suit was amended to
include a trade misappropriation claim and additional patent infringement
claims. The Company has filed answers to each of these complaints seeking that
the Actel patents are invalid, void, not enforceable and are not infringed and
denying the trade misappropriation. Additionally, the Company has filed
counterclaims against Actel claiming that Actel has infringed upon the
Company's patents.

In April 1997, the court adopted the recommendation of the Special Master
and granted Actel's motion for summary judgment that the Company's products
infringe on one claim of one of the patents. If the patent is finally found to
be valid and enforceable, and the summary judgment motion is upheld on appeal,
then Actel would be entitled to significant damages and an injunction
preventing the sale of products incorporating the infringing patent. Such an
injunction and/or the payment of damages could have a material adverse effect
on the Company's business, financial condition and results of operations and
could potentially render it insolvent.

Trial on the patent infringement and trade misappropriation claims is
currently scheduled for September 1998. However, there can be no assurance
that the trial will occur at such time and may be delayed significantly. As
the outcome of any litigation is inherently uncertain, the Company is unable
to predict the outcome of this litigation. Therefore, there can be no
assurance that the

F-17
<PAGE>

QUICKLOGIC CORPORATION

NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)

Company will prevail in the trial on the patent infringement claims and
counter-claims, the trial on the alleged trade misappropriation, or hearings
on any motions related to such proceedings. The timing of the filing of any
motions by Actel, hearings on motions by either Actel or the Company, the
issuance of rulings on such motions, the issuance of recommendations by the
Special Master and the adoption or rejection of such recommendations by the
Court are not within the Company's control and could occur at any time. The
announcement of any rulings or recommendations, or the adoption or rejection
of recommendations, that are adverse to the Company, will likely have a
material adverse effect upon the market price for the Company's stock.

Due to the inherent uncertainty of litigation, management cannot estimate
the possible loss, if any, that may ultimately be incurred in connection with
the allegations. Any adverse determinations in this litigation or a settlement
could result in the loss of the Company's proprietary rights, subject the
Company to significant liabilities, require the Company to seek or to grant
licenses with third parties, require the Company to cease selling its products
or prevent the Company from licensing its technology, any of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.

Management intends to vigorously defend itself against the allegations that
the Company's products infringe upon Actel's patents as well as pursue its
claims that Actel's products infringe upon the Company's patents. In addition,
management believes that settlement is not a likely course of action and that
the case will go to trial. Accordingly, the Company recorded charges of $2.7
million and $4.1 million in the years ended December 31, 1995 and 1996,
respectively, in conjunction with the Actel litigation. As of June 30, 1997,
the Company has a reserve of $4.2 million for this litigation.

NOTE 12. SUBSEQUENT EVENTS:

In May 1997, the Board of Directors authorized the reincorporation of the
Company in Delaware and, in conjunction with such reincorporation a 7-for-1
reverse stock split (the "Stock Split") of the Company's preferred stock and
common stock. All references to the number of shares of preferred stock,
common stock and per share amounts have been retroactively restated in the
accompanying financial statements to reflect the effect of the Stock Split.
The Board of Directors also approved a recapitalization that would increase
the total of authorized shares of common stock to one hundred million and
authorized ten million shares of undesignated stock. In addition the Board of
Directors approved the adoption of the 1997 Employee Stock Purchase Plan, the
1997 Stock Plan and the 1997 Director Option Plan. Adoption of these plans is
subject to stockholder approval.

In July 1997, the Company entered into a manufacturing agreement with Taiwan
Semiconductor Manufacturing Company, Ltd. ("TSMC") for a term of three years
renewable annually as a rolling three-year agreement. The agreement guarantees
certain capacity availability and requires that a minimum percentage of the
total number of wafers required by the Company in any one year are purchased
from TSMC (excluding wafers purchased from Cypress and certain other wafer
requirements), and requires "take or pay" volume commitments twelve months in
length based upon usage forecasts supplied by the Company. Obligations are
payable in U.S. dollars. However, the purchase price for wafers shall be
adjusted for any fluctuations in the New Taiwan Dollar exchange rate greater
than 5%.

All of the above items will be effected prior to the date of the offering.

F-18
<PAGE>

GLOSSARY OF TERMS

<TABLE>
<C> <S>
MICRON.................. Symbol for micron.
AMORPHOUS SILICON....... A type of silicon that acts as an insulator of
electric current instead of as a semiconductor.
ANTIFUSE................ A normally open circuit element that is programmed to
form a permanent connection through which electric
current passes. The opposite of a fuse.
CMOS.................... Complimentary Metal Oxide Semiconductor; a type of
semiconductor manufacturing process.
CAPACITANCE............. The electrical charge storage characteristic of a
circuit element that affects the time required for
the element to activate.
CPLD.................... Complex Programmable Logic Device; a term commonly
applied to a larger programmable logic device which
is essentially an array of conventional PLDs on a
single chip, interconnected by a routing matrix.
DENSITY................. Refers to the quantity of programmable logic in a
device.
DESIGN TOOLS............ Software programs used for the development of
applications to be programmed into programmable logic
devices.
DIE..................... The rectangle of silicon which defines a single
semiconductor device.
DIELECTRIC.............. A material which does not conduct electricity.
EPROM................... Erasable Programmable Read Only Memory; memory
technology which can be repeatedly reprogrammed with
an algorithm of electrical pulses and erased with
ultraviolet light.
FPGA.................... Field Programmable Gate Array; an array of logic
cells with a programmable interconnect matrix used to
form a circuit.
FLASH................... A memory technology that is electrically programmed
and erased, and retains its programmed state in the
absence of power.
FLIP FLOP............... A logic element that stores a logic value of "1" or
"0".
GATE.................... The fundamental control element of transistor-based
semiconductors.
GATE ARRAY.............. An array of gates on a device that is electrically
connected during the manufacturing process according
to individual customer specifications.
IEEE.................... Institute of Electrical and Electronic Engineers.
INTERCONNECT............ Physical connection structure that connects the logic
elements of a device.
I/O PINS................ Input/Output pins; the physical metal conductors
which protrude from a device and are used for
electrical connection to a circuit board, enabling
electrical signals to enter and exit a device.
ISDN.................... Integrated Services Digital Network; a high-speed
digital telephony system.
HDL..................... Hardware Description Language; a textual means of
describing desired circuitry in a highly summarized
fashion.
LOGIC/LOGIC CELL........ Basic functional elements of PLDs which are digital
transistor circuits designed to be combined for
making decisions and performing control and
computational functions.
MASK.................... A pattern of chrome on glass representing circuit
components of a semiconductor device. Masks are used
to transfer patterns onto a wafer by projecting light
onto a light sensitive material which coats the
surface of a water during the fabrication process.
</TABLE>

G-1
<PAGE>

<TABLE>
<C> <S>
METAL LAYER............. A layer of metal deposited over transistor silicon
forming wiring paths for electrical signals.
MICRON.................. A unit of length equal to one millionth of a meter
(0.000001 meters).
MULTIPLEXER............. A circuit which selects one of its multiple inputs
for connection to a single output.
PIN-COMPATIBLE.......... Differing semiconductor devices that have pin signal
assignments substantially the same when in packages
of identical dimensions and pin count.
PIN-OUT................. The complete functional pin assignment list for a
device's I/O pins.
PLACE AND ROUTE......... The action of designating particular logic cell
elements to physically realize a design ("place"),
combined with the action of selecting wiring paths
and associated programmable elements to physically
connect the logic elements together into the
specified circuit ("route").
PLD..................... Programmable Logic Device; a type of semiconductor
device that combines pre-configured logic structures
with a programmable interconnect structure to allow
designers to configure the device for specific
applications.
RESISTANCE.............. The characteristic of a circuit element which impedes
and therefore slows the flow of electrical current.
ROUTABILITY............. A measure of the degree of difficulty for a PLD to
connect the logic elements necessary to complete a
circuit. Generally, the routability of a device
improves with increased amounts of interconnect
wiring and the number of programmable elements.
SCHEMATIC A computer-based design method in which circuit
CAPTURE/ENTRY.......... elements and their connections are graphically
symbolized.
SEMICONDUCTOR........... An electronic device which uses semiconducting
materials (materials with a moderate level of
electrical conductivity) in its manufacture.
SILICON................. A fundamental element processed for use in the
manufacture of semiconductors.
SILICON SUBSTRATE....... The foundation silicon of a device into which
transistor structures are manufactured.
SIMULATION.............. A computer-based modeling and analysis of a circuit's
functional behavior.
SRAM.................... Static Random Access Memory; a memory technology
which retains its programmed state only as long as
power is applied.
SYNTHESIS............... An automated process of converting HDL-based designs
into a form suitable for place and route into a
specific PLD.
TIMING.................. An electrical signal's speed through a circuit's
elements.
UTILIZATION............. A measure of the number of logic elements that can be
effectively employed in constructing circuits
relative to the PLD's total amount of logic elements.
VARIABLE GRAIN LOGIC A logic element that has the ability to be utilized
CELL................... as one large pre-configured logic structure ("large
grained") or as a number of smaller pre-configured
logic structures ("small grained").
</TABLE>

G-2
<PAGE>

<TABLE>
<C> <S>
VERILOG HDL............. A widely used, IEEE standard HDL language.
VHDL.................... VHSIC Hardware Description Language; a widely used
HDL language that originated in the U.S. government's
Very High Speed Integrated Circuit program.
WAFER................... A thin, circular slice of silicon material upon which
numerous semiconductor die are simultaneously
manufactured.
</TABLE>

G-3
<PAGE>

Title: The QuickLogic Solution
Graphic: Three rows, with text on the left column and a corresponding graphic on
the right column accompanied by a short description of the graphic.

Left Column Text Graphic Description of graphic (presented as a caption)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
"ViaLink Antifuse Cross section of a ViaLink "Cross Section of a metal-layer ViaLink
QuickLogic's interconnect as photographed by connection as photographed by a scanning
interconnect a scanning electron microscope electron microscope (SEM)"
technology enables
high speed
connections"

- ---------------------------------------------------------------------------------------------------------------------------
"pASIC Architecture Two graphics for this row
Programmable Diagram of the silicon substrate "Wiring resources and ViaLink interconnects are
interconnects are with the logic gates, and the metal located above the silicon substrate, allowing
placed between the layers floating above more logic cells to reside on the die"
metal layers above the
silicone substrate,
maximizing wiring "ViaLink interconnects are placed at every
resources and possible intersection of routing wires"
minimizing die size Zoom in of picture above, showing
and cost" a small cross section of the chip,
with the silicon substrate on the
bottom and three layers of metal
routing wires above it

- ---------------------------------------------------------------------------------------------------------------------------
"QuickWorks and Picture of a PC [none]
QuickTools Design A box of software with QuickLogic
Software logo on the cover as well as the
A comprehensive titles "QuickWorks" and
software design tool "QuickTools"
solution that supports CD-ROM disk with the QuickLogic
schematic entry and logo
IEEE standard design
languages Verilog and
VHDL, and operates
on Windows and UNIX
platforms"

- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE COM-
MON STOCK IN ANY JURISDICTION WHERE, TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IM-
PLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................... 3
The Company............................................................ 4
Risk Factors........................................................... 5
Use of Proceeds........................................................ 14
Dividend Policy........................................................ 14
Capitalization......................................................... 15
Dilution............................................................... 16
Selected Financial Data................................................ 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 18
Business............................................................... 27
Management............................................................. 45
Certain Transactions................................................... 56
Principal and Selling Stockholders..................................... 59
Description of Capital Stock........................................... 61
Shares Eligible for Future Sale........................................ 64
Underwriting........................................................... 67
Legal Matters.......................................................... 68
Experts................................................................ 68
Change in Independent Accountants...................................... 69
Additional Information................................................. 69
Index to Financial Statements.......................................... F-1
Glossary............................................................... G-1
</TABLE>

UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------

[LOGO OF QUICKLOGIC CORP.]

3,000,000 SHARES
COMMON STOCK

DEUTSCHE MORGAN GRENFELL
UBS SECURITIES
COWEN & COMPANY

PROSPECTUS
, 1997
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated costs and expenses payable by
the Registrant in connection with the sale of the Common Stock being
registered hereby, other than underwriting commissions and discounts.

<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC Registration Fee............................................... $ 13,591
NASD Filing Fee.................................................... 4,985
Nasdaq National Market Listing Fee................................. 50,000
Blue Sky Fees and Expenses......................................... 5,000
Printing and Engraving Expenses.................................... 150,000
Legal Fees and Expenses............................................ 250,000
Accounting Fees and Expenses....................................... 225,000
Transfer Agent and Registrar Fees.................................. 3,000
Miscellaneous...................................................... 48,424
--------
Total............................................................ $750,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), the Registrant's Certificate of Incorporation provides that each
person who is or was or who had agreed to become a director or officer of the
Registrant or who had agreed at the request of the Registrant's Board of
Directors or an officer of the Registrant to serve as an employee or agent of
the Registrant or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Registrant to the full extent permitted by the DGCL or any
other applicable laws. Such Certificate of Incorporation also provides that
the Registrant may enter into one or more agreements with any person which
provides for indemnification greater of different than that provided in such
Certificate, and that no amendment or repeal of such Certificate shall apply
to or have any effect on the right to indemnification permitted or authorized
thereunder for or with respect to claims asserted before or after such
amendment or repeal arising from acts or omissions occurring in whole or in
part before the effective date of such amendment or repeal.

The Registrant's Bylaws provide that the Registrant shall indemnify to the
full extent authorized by law any person made or threatened to be made a party
to an action or a proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate was or
is a director, officer or employee of the Registrant or any predecessor of the
Registrant or serves or served any other enterprise as a director, officer or
employee at the request of the Registrant or any predecessor of the
Registrant.

The Registrant intends to enter into indemnification agreements with its
directors and certain of its officers.

The Registrant intends to purchase and maintain insurance on behalf of any
person who is or was a director or officer against any loss arising from any
claim asserted against him and incurred by him in any such capacity, subject
to certain exclusions.

See also the undertakings set out in response to Item 17 herein.

II-1
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since June 1, 1994, the Registrant has issued and sold the following
securities:

1. From June 1, 1994 through June 30, 1997, the Registrant issued and
sold 432,927 shares of Common Stock to employees of the Registrant at
prices ranging from $0.35 to $2.10 per share upon exercise of stock options
pursuant to Registrant's 1989 Stock Option Plan, as amended.

2. On June 1, 1995 and June 9, 1995, the Registrant issued and sold to 54
private investors 3,410,481 shares of Series E Preferred Stock convertible
into an aggregate of 3,410,481 shares of Common Stock at a purchase price
per share of $4.90.

3. On November 27, 1996 and January 24, 1997, the Registrant issued and
sold to 54 private investors an aggregate of 1,102,279 shares of Series F
Preferred Stock convertible into an aggregate of 1,102,279 shares of Common
Stock at a purchase price per share of $8.12.

4. On March 29, 1997, the Registrant agreed to issue an aggregate of
2,603,816 shares of Common Stock to Cypress as partial consideration for
the termination of the Existing Agreement and the reversion to the Company
of certain intellectual property rights developed thereunder.

The above share and dollar amounts reflect the 7-for-1 reverse stock split
to be effected upon the reincorporation of the Company in Delaware. The sales
of the above securities were deemed to be exempt from registration under the
Securities Act with respect to items 2 through 4 above in reliance on Section
4(2) of the Securities Act, or Regulation D promulgated thereunder, and with
respect to item 1 above Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention to acquire the securities
for investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and warrants issued in such transactions. All recipients had
adequate access, through their relationships with the Company, to information
about the Registrant.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

a. EXHIBITS.

<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation of the Registrant.
3.2** Second Amended and Restated Certificate of Incorporation of the
Registrant to be effective upon closing of the offering.
3.3** Bylaws of the Registrant.
4.1** Specimen Common Stock certificate of the Registrant.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1** Form of Indemnification Agreement for directors and executive officers.
10.2** 1989 Stock Option Plan.
10.3** 1991 Sales Representative Stock Purchase Plan.
10.4** 1997 Stock Plan.
10.5** 1997 Employee Stock Purchase Plan.
10.6** 1997 Director Option Plan.
10.7** Series E Preferred Stock Purchase Agreement dated June 1, 1995 and June
9, 1995 by and among the Registrant and the Purchasers named therein.
10.8** Series F Preferred Stock Purchase Agreement dated November 27, 1996 and
January 24, 1997 by and among the Registrant and the Purchasers named
therein.
</TABLE>

II-2
<PAGE>

<TABLE>
<C> <S>
10.9**+ Termination Agreement dated March 29, 1997 between the Registrant and
Cypress Semiconductor Corporation ("Cypress").
10.10** Cross License Agreement dated March 29, 1997 between the Registrant
and Cypress.
10.11**+ Wafer Fabrication Agreement March 29, 1997 between the Registrant and
Cypress.
10.12** Sixth Amended and Restated Shareholder Agreement dated March 29, 1997
by and among the Registrant, Cypress and certain stockholders.
10.13** Sixth Amended and Restated Registration Rights Agreement dated March
29, 1997 by and among the Registrant, Cypress and certain
stockholders.
10.14** Technical Transfer, Joint Development License and Foundry Supply
Agreement, dated October 2, 1992, between the Registrant and Cypress.
10.15** Lease dated June 17, 1995, as amended, between Kairos, LLC and Moffet
Orchard Investors as Landlord and the Registrant for the Registrant's
facility located in Sunnyvale, California.
10.16** Business Loan Agreement dated August 9, 1995 between the Registrant
and Silicon Valley Bank, as amended.
10.17** Loan and Security Agreement dated August 8, 1996 between the
Registrant and Silicon Valley Bank, as amended.
10.18** Export-Import Bank Loan and Security Agreement dated August 8, 1996
between the Registrant and Silicon Valley Bank.
10.19**+ Memorandum of Understanding dated October 28, 1996 between Registrant
and TSMC, Ltd.
10.20** First Amended and Restated Common Stock Purchase Agreement dated June
13, 1997 between the Registrant and Cypress.
10.21**+ Manufacturing Agreement dated July 21, 1997 between the Registrant
and Taiwan Semiconductor Manufacturing Company, Ltd.
11.1 Statement regarding calculation of earnings per share.
16.1** Letter of Deloitte & Touche LLP, independent accountants, dated July
28, 1997 regarding change in certifying accountant.
23.1 Consent of Price Waterhouse LLP, independent accountants (see page
II-7).
23.2** Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(See Exhibit 5.1).
24.1** Power of Attorney (see page II-4 and page II-4 of the Registration
Statement on Form S-1 filed with the Securities and Exchange
Commission on June 9, 1997).
27.1** Financial Data Schedule (EDGAR filed version only).
</TABLE>
- --------
* Documents to be filed by amendment.
** Previously filed.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and
230.406.

b. FINANCIAL STATEMENT SCHEDULES.

All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the Registrant or notes
thereto.

II-3
<PAGE>

ITEM 17. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the time
it was declared effective; and (2) for the purpose of determining any
liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
SUNNYVALE, STATE OF CALIFORNIA, ON THE 24TH DAY OF OCTOBER 1997.

QuickLogic Corporation

By: /s/ Vincent A. McCord
--------------------------------
VINCENT A. MCCORD,
VICE PRESIDENT, FINANCE, CHIEF
FINANCIAL OFFICER
AND SECRETARY

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints E. Thomas Hart and Vincent A. McCord,
and each of them acting individually, as his true and lawful attorneys-in-fact
and agents, with full power of each to act alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing
the number of securities for which registration is sought), and 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, with full power of each to act alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or his or their substitutes, may lawfully do or cause to
be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

* President, Chief October 24, 1997
- ------------------------------------- Executive Officer
E. THOMAS HART and Director
(Principal
Executive Officer)

/s/ Vincent A. McCord Vice President, October 24, 1997
- ------------------------------------- Finance, Chief
VINCENT A. MCCORD Financial Officer
and Secretary
(Principal
Financial and
Accounting Officer)
</TABLE>

II-5
<PAGE>

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ Irwin Federman Director October 24, 1997
- -------------------------------------
IRWIN FEDERMAN

* Director October 24, 1997
- -------------------------------------
HUA-THYE CHUA

/s/ Donald P. Beadle Director October 24, 1997
- -------------------------------------
DONALD P. BEADLE

Director October 24, 1997
- -------------------------------------
MICHAEL J. CALLAHAN

*By: /s/ Vincent A. McCord
----------------------------------
VINCENT A. MCCORD
ATTORNEY-IN-FACT

</TABLE>

II-6
<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 9, 1997, relating
to the financial statements of QuickLogic Corporation, which appears in such
Prospectus. We also consent to the references to us under the headings
"Experts" in such Prospectus.

Price Waterhouse LLP
San Jose, California

October 24, 1997

II-7
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1** Amended and Restated Certificate of Incorporation of
the Registrant.
3.2** Second Amended and Restated Certificate of
Incorporation of the Registrant to be effective upon
closing of the offering.
3.3** Bylaws of the Registrant.
4.1** Specimen Common Stock certificate of the Registrant.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
10.1** Form of Indemnification Agreement for directors and
executive officers.
10.2** 1989 Stock Option Plan.
10.3** 1991 Sales Representative Stock Purchase Plan.
10.4** 1997 Stock Plan.
10.5** 1997 Employee Stock Purchase Plan.
10.6** 1997 Director Option Plan.
10.7** Series E Preferred Stock Purchase Agreement dated June
1, 1995 and June 9, 1995 by and among the Registrant
and the Purchasers named therein.
10.8** Series F Preferred Stock Purchase Agreement dated
November 27, 1996 and January 24, 1997 by and among
the Registrant and the Purchasers named therein.
10.9**+ Termination Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation
("Cypress").
10.10** Cross License Agreement dated March 29, 1997 between
the Registrant and Cypress.
10.11**+ Wafer Fabrication Agreement March 29, 1997 between the
Registrant and Cypress.
10.12** Sixth Amended and Restated Shareholder Agreement dated
March 29, 1997 by and among the Registrant, Cypress
and certain stockholders.
10.13** Sixth Amended and Restated Registration Rights
Agreement dated March 29, 1997 by and among the
Registrant, Cypress and certain stockholders.
10.14** Technical Transfer, Joint Development License and
Foundry Supply Agreement, dated October 2, 1992,
between the Registrant and Cypress.
10.15** Lease dated June 17, 1995, as amended, between Kairos,
LLC and Moffet Orchard Investors as Landlord and the
Registrant for the Registrant's facility located in
Sunnyvale, California.
10.16** Business Loan Agreement dated August 9, 1995 between
the Registrant and Silicon Valley Bank, as amended.
10.17** Loan and Security Agreement dated August 8, 1996
between the Registrant and Silicon Valley Bank, as
amended.
10.18** Export-Import Bank Loan and Security Agreement dated
August 8, 1996 between the Registrant and Silicon
Valley Bank.
10.19**+ Memorandum of Understanding dated October 28, 1996
between Registrant and TSMC, Ltd.
10.20** First Amended and Restated Common Stock Purchase
Agreement dated June 13, 1997 between the Registrant
and Cypress.
10.21**+ Manufacturing Agreement dated July 21, 1997 between
the Registrant and Taiwan Semiconductor Manufacturing
Company, Ltd.
11.1 Statement regarding calculation of earnings per share.
16.1** Letter of Deloitte & Touche LLP, independent
accountants, dated July 28, 1997 regarding change in
certifying accountant.
23.1 Consent of Price Waterhouse LLP, independent
accountants (see page II-7).
23.2** Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (See Exhibit 5.1).
24.1** Power of Attorney (see page II-4 and page II-4 of the
Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on June 9, 1997).
27.1** Financial Data Schedule (EDGAR filed version only).
</TABLE>
- -------
* Documents to be filed by amendment.
** Previously filed.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and
230.406.

<PAGE>

EXHIBIT 11.1

QUICKLOGIC CORPORATION

SCHEDULE OF COMPUTATION OF EARNINGS (LOSS) PER SHARE

(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
----------------------------------------------------- ---------------------------
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996 JUNE 30, 1996 JUNE 30, 1997
----------------- ----------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net income (loss)....... (5,828) (4,707) $(3,597) $ 63 $(24,387)
------ ------ ------- ------- --------
Weighted average common
shares outstanding(2).. 467 531 866 586 907
Convertible preferred
stock (using the as if-
converted method) (1).. 1,102 1,102 1,102 8,496 1,102
Common equivalent shares
relating to stock
options issued on or
before August 1996
(using the treasury
stock method)(1)....... -- -- -- 701 --
Common equivalent shares
relating to stock
options and common
stock to be issued
issued subsequent to
August 1996 (2)........ 3,341 3,341 3,341 3,341 3,341
------ ------ ------- ------- --------
Shares used in net
income (loss) per share
calculation............ 4,910 4,974 5,309 13,124 5,350
Net income (loss) per
share.................. (1.19) (.95) $ (0.68) $ -- $ (4.56)
</TABLE>
- -------

(1) Common equivalents shares issued on or before August 1996 in a net loss
period are excluded from the calculation as their inclusion would have
been anti-dilutive.

(2) Common Stock and Common equivalent shares issued subsequent to August 1996
have been included in the calculation as if they were outstanding for all
periods presented pursuant to a Securities and Exchange Commission Staff
Accounting Bulletin.