QUICKLOGIC CORPORATION, 424B4, 1999-10-15

QUICKLOGIC CORPORATION
424B4, 1999-10-15
SEMICONDUCTORS & RELATED DEVICES

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<PAGE>
Filed pursuant to
Rule 424(b)(4)

[LOGO]

6,667,000 SHARES
COMMON STOCK

QuickLogic is offering 3,333,500 shares of its common stock and the selling
stockholder is selling 3,333,500 shares of QuickLogic common stock. This is our
initial public offering and no public market currently exists for our shares.
Our common stock has been approved for quotation on the Nasdaq National Market
under the symbol "QUIK."

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

INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -------------
<S> <C> <C>
Public Offering Price.................................................................. $ 10.00 $ 66,670,000
Underwriting Discounts and Commissions................................................. $ 0.70 $ 4,666,900
Proceeds to QuickLogic................................................................. $ 9.30 $ 31,001,550
Proceeds to the Selling Stockholder.................................................... $ 9.30 $ 31,001,550
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

QuickLogic and the selling stockholder have granted the underwriters a
30-day option to purchase up to an additional 1,000,050 shares of common stock
to cover over-allotments. BancBoston Robertson Stephens Inc. expects to deliver
the shares of common stock to purchasers on October 20, 1999.

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

ROBERTSON STEPHENS

BEAR, STEARNS & CO. INC.

SOUNDVIEW TECHNOLOGY GROUP

THE DATE OF THIS PROSPECTUS IS OCTOBER 14, 1999.
<PAGE>
EDGAR
ARTWORK DESCRIPTIONS

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

Outside gatefold

[Images of QuickLogic products]

[QuickLogic logo]

BEYOND PROGRAMMABLE LOGIC

QuickLogic's user-configurable FPGA and ESP semiconductors are used to implement
logic in complex, high-performance electronic systems in data and
telecommunications, video, graphics, and imaging, instrumentation and test,
computing and military applications.

Our technology enables the manufacturers of these systems to get to market
quickly with products that have the best possible features and performance.
<PAGE>
[QuickLogic logo]
gatefold

[Image of QuickLogic products pointing to and describing the QuickLogic product
application in the following customer end-use products: Military aircraft,
notebook computer, fiber optic transmission device, handheld computer,
electronic projector and network server]

WITH PROGRAMMABLE SILICON ONE CHIP CAN SERVE MANY APPLICATIONS

QuickLogic's FPGA and ESP products feature a unique combination of high
performance, reliability, and security along with low power consumption and
short development times. As a result, a number of leading companies in a broad
range of industries use QuickLogic devices in their systems, including the
following:

DATA AND TELECOMMUNICATIONS

Alcatel, Ericcson, IBM, NEC, and Philips

VIDEO/AUDIO, GRAPHICS AND IMAGING

Digidesign, Eastman Kodak, Honeywell, Mitsubishi, NEC, Sony, and Texas
Instruments

INSTRUMENTATION AND TEST

ABB, LTX, National Instruments, Teradyne, and Toshiba

ENTERPRISE AND PERSONAL COMPUTING

Compaq Computer, IBM, and Mitsubishi

MILITARY SYSTEMS

B.F. Goodrich, DY-4, Hamilton Standard, Hughes Aircraft, McDonnell Douglas, and
Raytheon

The above products represent end applications for QuickLogic chips.
<PAGE>
EDGAR GRAPHIC DESCRIPTION

INSIDE BACK COVER

[Image of QuickLogic ESP device, projecting to a circuitboard]

QUICKLOGIC--PROGRAMMABLE LOGIC WITH THE POWER TO REPLACE MANY DEVICES

QuickLogic's ESP devices integrate standard functions along with high
performance embedded memory and programmable logic. This "system-on-a-chip"
approach allows a single ESP device to replace the function of many different
devices--reducing the cost and development time of a system and increasing its
performance, functionality and reliability.

[QuickLogic logo]

Embedded Standard Products ... a generation ahead

W W W . Q U I C K L O G I C . C O M
<PAGE>
EDGAR GRAPHIC DESCRIPTION

OBC

[QuickLogic LOGO]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"QUICKLOGIC," "WE," "OUR" AND "US" REFER TO QUICKLOGIC CORPORATION.

UNTIL NOVEMBER 8, 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 7
Use of Proceeds............................................................................................ 18
Dividend Policy............................................................................................ 18
Cautionary Statement Regarding Forward-Looking Statements.................................................. 18
Capitalization............................................................................................. 19
Dilution................................................................................................... 20
Selected Consolidated Financial Data....................................................................... 21
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 22
Business................................................................................................... 31
Management................................................................................................. 44
Certain Transactions....................................................................................... 53
Principal and Selling Stockholders......................................................................... 55
Description of Capital Stock............................................................................... 59
Shares Eligible for Future Sale............................................................................ 62
Underwriting............................................................................................... 63
Legal Matters.............................................................................................. 65
Experts.................................................................................................... 65
Where You Can Find Additional Information.................................................................. 65
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>

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

We have registered the trademarks QuickLogic and its logo, ViaLink, pASIC,
QuickWorks and DeskFAB. We have trademarks pending for QuickPCI and QuickRAM.
QuickTools, QuickPro and WebASIC are trademarks of QuickLogic Corporation. All
other trademarks or service marks appearing in this prospectus are the property
of their respective companies.

3
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE
BUYING SHARES IN THE OFFERING. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY.
EXCEPT AS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS ASSUMES THE
CONVERSION OF EACH OUTSTANDING SHARE OF CONVERTIBLE PREFERRED STOCK INTO ONE
SHARE OF COMMON STOCK AND ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION. INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS A
ONE-FOR-SIX STOCK SPLIT EFFECTED UPON OUR REINCORPORATION IN THE STATE OF
DELAWARE IN OCTOBER 1999.

OUR COMPANY

QuickLogic develops, markets and supports advanced field programmable gate
array semiconductors, or FPGAs, and associated software tools. In addition to
our FPGAs, we have pioneered the development of embedded standard products, or
ESPs. Our ESPs combine the flexibility and time-to-market advantages of our
FPGAs with the predictability and high performance of standard semiconductor
products, thereby enabling our customers to integrate increased amounts of
functionality on a single semiconductor device. Our FPGA and ESP products target
complex, high-performance systems in rapidly changing markets, including
telecommunications and data communications; video/ audio, graphics and imaging;
instrumentation and test; high-performance computing; and military systems.

Competitive pressures are forcing manufacturers of electronic systems to
rapidly bring to market products with improved functionality, higher performance
and greater reliability, all at lower cost. Providers of systems requiring
high-speed data transmission and processing face some of the most intense
time-to-market pressures in the technology industry. These market forces have
driven the evolution of logic semiconductors which are used in complex
electronic systems to coordinate the functions of other semiconductors.
Programmable Logic Devices, or PLDs, are logic semiconductors which provide
systems designers with the flexibility to implement designs after the wafer
manufacturing process is completed. FPGAs are types of PLDs used for complex
functions. We believe that our FPGAs offer higher performance and greater
flexibility at lower overall systems cost than competing FPGA solutions.
According to Cahners In-Stat Group, the projected total market size for high-
complexity programmable logic devices in 1999 is approximately $2.1 billion, of
which FPGAs are estimated to account for $1.1 billion. For the first six months
of 1999, our FPGA sales totaled approximately $17.0 million.

We have leveraged our unique FPGA technology, which delivers the advantages
offered by both FPGAs and application specific standard products in a single
chip solution, a "system-on-a-chip." These ESPs link blocks of user-configurable
standard functions with field programmable logic through a high-performance
interface. We believe ESPs offer the following specific advantages over chip-set
solutions:

- increased performance,

- decreased cost,

- increased reliability, and

- shorter development time.

We have introduced our first two ESP product lines, the QuickRAM and QuickPCI
families. According to Cahners In-Stat Group, the total ESP market size in 1998
was $13.8 million, and is projected to increase to $43.9 million in 1999. For
the first six months of 1999, our ESP sales totaled approximately $1.5 million.

4
<PAGE>
Our objective is to be the leading provider of high-speed, flexible,
cost-effective FPGAs and ESPs. We feel we can achieve this objective by offering
systems manufacturers the ability to accelerate design cycles to satisfy
demanding time-to-market requirements. We believe we will meet our objective by:

- continuing to invest in the development of FPGA and ESP technologies;

- capitalizing on cross-selling opportunities between our FPGA and ESP
products;

- broadening our ESP product lines;

- creating innovative, industry-leading customer services; and

- targeting high-performance, rapidly changing markets.

We were incorporated in California in April 1988 and changed our name in
February 1991 to QuickLogic Corporation. We reincorporated into the State of
Delaware in October 1999. The address of our corporate headquarters is 1277
Orleans Drive, Sunnyvale, California 94089. Our telephone number is (408)
990-4000. Our web site is located at http://www.quicklogic.com. Information
contained on our web site and web sites linked to our web site are not a part of
this prospectus.

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

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by
QuickLogic...................... 3,333,500 shares

Common stock offered by the
selling stockholder............. 3,333,500 shares

Common stock to be outstanding
after the offering.............. 17,642,570 shares

Use of proceeds................... For general corporate purposes and for payment of an
outstanding settlement obligation. See "Use of
Proceeds."

Nasdaq National Market symbol..... QUIK
</TABLE>

The table set forth above is based on shares of common stock outstanding as of
September 30, 1999. This table excludes:

- 2,994,261 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $4.22 per
share;

- 5,736,828 shares reserved for issuance under our stock plans; and

- 2,000,000 shares reserved for issuance under our 1999 employee stock
purchase plan.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)

<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash...................................................................................... $ 8,185 $ 32,187
Working capital (deficit)................................................................. (2,742) 27,260
Total assets.............................................................................. 19,406 43,408
Long-term obligations..................................................................... 161 161
Stockholders' equity...................................................................... 302 30,304
</TABLE>

See note 2 of notes to financial statements for an explanation of the
determination of the number of shares used in computing per share data.

"As Adjusted" amounts have been adjusted to give effect to receipt of the
net proceeds from the sale of the 3,333,500 shares of common stock offered by us
at an initial public offering price of $10.00 per share, after deducting the
underwriting discount, estimated offering expenses and payment of an outstanding
settlement obligation. See "Use of Proceeds" and "Capitalization."

6
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE PURCHASING
THE COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS
COULD BE MATERIALLY HARMED, AND OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. AS A RESULT, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MIGHT LOSE ALL OR PART OF YOUR
INVESTMENT.

OUR FUTURE OPERATING RESULTS ARE LIKELY TO FLUCTUATE AND THEREFORE MAY FAIL TO
MEET EXPECTATIONS WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE

Our operating results have varied widely in the past and are likely to do so
in the future. In addition, our operating results may not follow any past
trends. Our future operating results will depend on many factors and may fail to
meet our expectations for a number of reasons, including those set forth in
these risk factors. Any failure to meet expectations could cause our stock price
to significantly fluctuate or decline.

Factors that could cause our operating results to fluctuate that relate to
our internal operations include:

- the need for continual, rapid new product introductions;

- changes in our product mix; and

- our inability to adjust our fixed costs in the face of any declines in
sales.

Factors that could cause our operating results to fluctuate that depend upon
our suppliers and customers include:

- the timing of significant product orders, order cancellations and
reschedulings;

- the availability of production capacity and fluctuations in the
manufacturing yields at the facilities that manufacture our devices;
and

- the cost of raw materials and manufacturing services from our
suppliers.

Factors that could cause our operating results to fluctuate that are
industry risks include:

- intense competitive pricing pressures;

- introductions of or enhancements to our competitors' products; and

- the cyclical nature of the semiconductor industry.

Our day-to-day business decisions are made with these factors in mind. Although
certain of these factors are out of our immediate control, unless we can
anticipate, and be prepared with contingency plans that respond to these
factors, we will be unsuccessful in carrying out our business plan.

WE CANNOT ASSURE YOU THAT WE WILL REMAIN PROFITABLE BECAUSE WE HAVE A HISTORY OF
LOSSES AND HAVE ONLY RECENTLY BECOME PROFITABLE

We incurred significant losses from our inception in 1988 through 1997. Our
accumulated deficit as of June 30, 1999 was $60.2 million. We had net income of
$245,000 in 1998. We cannot assure you that we will be profitable in any future
periods and you should not rely on the historical growth of our revenue and our
recent profitability as any indication of our future operating results or
prospects.

7
<PAGE>
IF WE FAIL TO SUCCESSFULLY DEVELOP, INTRODUCE AND SELL NEW PRODUCTS, WE MAY BE
UNABLE TO COMPETE EFFECTIVELY IN THE FUTURE

We operate in a highly competitive, quickly changing environment marked by
rapid obsolescence of existing products. Our future success depends on our
ability to develop, introduce and successfully market new products, including
embedded standard products, or ESPs. We introduced our ESPs in September 1998.
To date, we have been selling our ESPs in limited quantities, and revenue from
our ESPs has been immaterial. If any of the following occur, our business will
be materially harmed:

- we fail to complete and introduce new product designs in a timely manner;

- we are unable to have these new products manufactured according to design
specifications;

- our customers do not successfully introduce new systems or products
incorporating our products;

- our sales force and independent distributors do not create adequate demand
for our products; or

- market demand for our new products, such as ESPs, does not develop as
anticipated.

WE HAVE ONLY RECENTLY INTRODUCED OUR EMBEDDED STANDARD PRODUCTS; THEREFORE, WE
CANNOT ACCURATELY PREDICT THEIR FUTURE LEVEL OF ACCEPTANCE BY OUR CUSTOMERS,
AND WE MAY NOT BE ABLE TO GENERATE ANTICIPATED REVENUE FROM THESE PRODUCTS

We have only recently started selling embedded standard products. In the
first six months of 1999, ESPs accounted for approximately 4.7% of our revenue.
We do not know the extent to which systems manufacturers will purchase or
utilize our ESPs. Since we anticipate that ESPs will become an increasingly
larger component of our business, their failure to gain acceptance with our
customers would materially harm our business. We cannot assure you that our ESPs
will be commercially successful or that these products will result in
significant additional revenues or improved operating margins in future periods.

IF THE MARKET IN WHICH WE SELL OUR EMBEDDED STANDARD PRODUCTS DOES NOT GROW AS
WE ANTICIPATE, IT WILL MATERIALLY AND ADVERSELY AFFECT OUR ANTICIPATED REVENUE

The market for embedded standard products is relatively new and still
emerging. If this market does not grow at the rate we anticipate, our business
will be materially harmed. One of the reasons that this market might not grow as
we anticipate is that many systems manufacturers are not yet fully aware of the
benefits provided by embedded standard products, in general, or the benefits of
our ESPs, specifically. Additionally, systems manufacturers may use existing
technologies other than embedded standard products or yet to be introduced
technologies to satisfy their needs. Although we have devoted and intend to
continue to devote significant resources promoting market awareness of the
benefits of embedded standard products, our efforts may be unsuccessful or
insufficient.

WE EXPEND SUBSTANTIAL RESOURCES IN DEVELOPING AND SELLING OUR PRODUCTS, AND WE
MAY BE UNABLE TO GENERATE SIGNIFICANT REVENUE AS A RESULT OF THESE EFFORTS

To establish market acceptance of our products, we must dedicate significant
resources to research and development, production and sales and marketing. We
experience a long delay between the time when we expend these resources and the
time when we begin to generate revenue, if any, from these expenditures.
Typically, this delay is one year or more. We record as expenses the costs
related to the development of new semiconductor products and software as these
expenses are incurred. As a result, our profitability from quarter to quarter
and from year to year may be materially and adversely affected by the number and
timing of our new product introductions in any period and the level of
acceptance gained by these products.

8
<PAGE>
OUR CUSTOMERS MAY CANCEL OR CHANGE THEIR PRODUCT PLANS AFTER WE HAVE EXPENDED
SUBSTANTIAL TIME AND RESOURCES IN THE DESIGN OF THEIR PRODUCTS

If one of our potential customers cancels, reduces or delays product orders
from us or chooses not to release equipment that incorporates our products after
we have spent substantial time and resources in designing a product, our
business could be materially harmed. Our customers often evaluate our products
for six to twelve months or more before designing them into their systems, and
they may not commence volume shipments for up to an additional six to twelve
months, if at all. During this lengthy sales cycle, our potential customers may
also cancel or change their product plans. Even when customers incorporate one
or more of our products into their systems, they may ultimately discontinue the
shipment of their systems that incorporate our products. Customers whose
products achieve high volume production may choose to replace our products with
lower cost customized semiconductors.

WE WILL BE UNABLE TO COMPETE EFFECTIVELY IF WE FAIL TO ANTICIPATE PRODUCT
OPPORTUNITIES BASED UPON EMERGING TECHNOLOGIES AND STANDARDS AND FAIL TO
DEVELOP PRODUCTS THAT INCORPORATE THESE TECHNOLOGIES AND STANDARDS

We may spend significant time and money on research and development to
design and develop products around an emerging technology or industry standard.
To date, we have introduced only one product family, QuickPCI, that is designed
to support a specific industry standard. If an emerging technology or industry
standard that we have identified fails to achieve broad market acceptance in our
target markets, we may be unable to generate significant revenue from our
research and development efforts. Moreover, even if we are able to develop
products using adopted standards, our products may not be accepted in our target
markets. As a result, our business would be materially harmed.

We have limited experience in designing and developing products that support
industry standards. If systems manufacturers move away from the use of industry
standards that we support with our products and adopt alternative standards, we
may be unable to design and develop new products that conform to these new
standards. The expertise required is unique to each industry standard, and we
would have to either hire individuals with the required expertise or acquire
such expertise through a licensing arrangement or by other means. The demand for
individuals with the necessary expertise to develop a product relating to a
particular industry standard is generally high, and we may not be able to hire
such individuals. The cost to acquire such expertise through licensing or other
means may be high and such arrangements may not be possible in a timely manner,
if at all.

WE MAY ENCOUNTER PERIODS OF INDUSTRY-WIDE SEMICONDUCTOR OVERSUPPLY, RESULTING IN
PRICING PRESSURE AND UNDERUTILIZATION OF MANUFACTURING CAPACITY, AS WELL AS
UNDERSUPPLY, RESULTING IN A RISK THAT WE COULD BE UNABLE TO FULFILL OUR
CUSTOMERS' REQUIREMENTS

The semiconductor industry has historically been characterized by wide
fluctuations in the demand for, and supply of, its products. These fluctuations
have resulted in circumstances when supply and demand for the industry's
products have been widely out of balance. Our operating results may be
materially harmed by industry-wide semiconductor oversupply, which could result
in severe pricing pressure and underutilization of our manufacturing capacity.
In a market with undersupply, we would have to compete with larger foundry
customers for limited manufacturing capacity. In such an environment, we may be
unable to have our products manufactured in a timely manner or in quantities
necessary to meet our requirements. Since we outsource all of our manufacturing,
we are particularly vulnerable to such supply shortages. As a result, we may be
unable to fulfill orders and may lose customers. Any future industry-wide
oversupply or undersupply of semiconductors would materially harm our business.

9
<PAGE>
NONE OF OUR PRODUCTS IS CURRENTLY MANUFACTURED BY MORE THAN ONE MANUFACTURER,
WHICH EXPOSES US TO THE RISK OF HAVING TO IDENTIFY AND QUALIFY ONE OR MORE
SUBSTITUTE SUPPLIERS

We depend upon independent third parties to manufacture, assemble and test
our semiconductor products. None of our products is currently manufactured by
more than one manufacturer. We have contractual arrangements with our two
foundry manufacturers of semiconductors, Taiwan Semiconductor Manufacturing
Company and Cypress Semiconductor Corporation, to provide us with specified
manufacturing capacity. Our assembly and test work is done on a purchase order
basis. If we are unable to secure adequate manufacturing capacity from TSMC or
Cypress or other suppliers to meet our supply requirements, our business will be
materially harmed. Processes used to manufacture our products are complex,
customized to our specifications and can only be performed by a limited number
of manufacturing facilities. If our current manufacturing suppliers are unable
to provide us with adequate manufacturing capacity, we would have to identify
and qualify one or more substitute suppliers for a substantial majority of our
products. Our manufacturers may experience unanticipated events, like the
September 1999 Taiwan earthquake, that could inhibit their abilities to provide
us with adequate manufacturing capacity on a timely basis, or at all.
Introducing new products or transferring existing products to a new third party
manufacturer would require significant development time to adapt our designs to
their manufacturing processes and could cause product shipment delays. In
addition, the costs associated with manufacturing our products may increase if
we are required to use a new third party manufacturer. If we fail to satisfy our
manufacturing requirements, our business would be materially harmed.

IF WE FAIL TO ADEQUATELY FORECAST DEMAND FOR OUR PRODUCTS, WE MAY INCUR PRODUCT
SHORTAGES OR EXCESS PRODUCT INVENTORY

Our agreements with third-party manufacturers require us to provide
forecasts of our anticipated manufacturing orders, and place binding
manufacturing orders in advance of receiving purchase orders from our customers.
This may result in product shortages or excess product inventory because we are
not permitted to increase or decrease our rolling forecasts under such
agreements. Obtaining additional supply in the face of product shortages may be
costly or not possible, especially in the short term. Our failure to adequately
forecast demand for our products would materially harm our business.

FLUCTUATIONS IN OUR PRODUCT YIELDS, ESPECIALLY OUR NEW PRODUCTS, MAY INCREASE
THE COSTS OF OUR MANUFACTURING PROCESS

Difficulties in the complex semiconductor manufacturing process can render a
substantial percentage of semiconductor wafers nonfunctional. We have, in the
past, experienced manufacturing runs that have contained substantially reduced
or no functioning devices. Varying degrees of these yield reductions occur
frequently in our manufacturing process. These yield reductions, which can occur
without warning, may result in substantially higher manufacturing costs and
inventory shortages to us. We may experience yield problems in the future which
may materially harm our business. In addition, yield problems may take a
significant period of time to analyze and correct. Our reliance on third party
suppliers may extend the period of time required to analyze and correct these
problems. As a result, if we are unable to respond rapidly to market demand, our
business would suffer.

Yield reductions frequently occur in connection with the manufacture of
newly introduced products. Newly introduced products, such as our QuickPCI
family of ESPs, are often more complex and more difficult to produce, increasing
the risk of manufacturing-related defects. While we test our products, these
products may still contain errors or defects that we find only after we have
commenced commercial production. Our customers may not place new orders for our
products if the products have reliability problems, which would materially harm
our business.

10
<PAGE>
WE MAY BE UNABLE TO GROW OUR BUSINESS IF THE MARKETS IN WHICH OUR CUSTOMERS SELL
THEIR PRODUCTS DO NOT GROW

Our success depends in large part on the continued growth of various markets
that use our products. Any decline in the demand for our products in the
following markets could materially harm our business:

- telecommunications and data communications;

- video/audio, graphics and imaging;

- instrumentation and test;

- high-performance computing; or

- military systems.

Slower growth in any of the other markets in which our products are sold may
also materially harm our business. Many of these markets are characterized by
rapid technological change and intense competition. As a result, systems sold by
our customers that use our products may face severe price competition, become
obsolete over a short time period, or fail to gain market acceptance. Any of
these occurrences would materially harm our business.

IN ORDER TO REMAIN PROFITABLE, WE WILL NEED TO OFFSET THE GENERAL PATTERN OF
DECLINES AND FLUCTUATIONS IN THE PRICES OF OUR PRODUCTS

The average selling prices of our products historically have declined during
the products' lives by, on average, approximately 7% per year, and we expect
this trend to continue. If we are unable to achieve cost reductions, increase
unit demand or introduce new higher-margin products in a timely manner to offset
these price declines, our business would be materially harmed.

In addition, the selling prices for our products fluctuate significantly
with real and perceived changes in the balance of supply and demand for our
products and comparable products. The growth in the worldwide supply of field
programmable gate arrays in recent periods has added to the decrease in the
average selling prices for our products. In addition, we expect our competitors
to invest in new manufacturing process technologies and achieve significant
manufacturing yield improvements in the future. These developments could
increase the worldwide supply of field programmable gate arrays and alternate
products and create additional downward pressure on pricing. If the worldwide
supply of field programmable gate arrays grows faster than the demand for such
products in the future, the price for which we can sell such products may
decline, which would materially harm our business.

WE DEPEND UPON THIRD PARTY DISTRIBUTORS TO MARKET AND SELL OUR PRODUCTS, AND
THEY MAY DISCONTINUE SALE OF OUR PRODUCTS, FAIL TO GIVE OUR PRODUCTS PRIORITY
OR BE UNABLE TO SUCCESSFULLY MARKET, SELL AND SUPPORT OUR PRODUCTS

We employ independent, third-party distributors to market and sell a
significant portion of our products. During the six months ended June 30, 1999,
approximately 85% of our sales were made through our distributors. We rely on
four principal distributors to market and sell a majority of our products,
particularly in North America. Although we have contracts with our distributors,
any of them may terminate their relationship with us on short notice. The loss
of one or more of our principal distributors, or our inability to attract new
distributors, would materially harm our business. We may lose distributors in
the future and we may be unable to recruit additional or replacement
distributors. As a result, our future performance will depend in part on our
ability to retain our existing distributors and attract new distributors that
will be able to market, sell and support our products effectively.

11
<PAGE>
Many of our distributors, including our principal distributors, market and
sell products for other companies, and many of these products may compete
directly or indirectly with our products. We generally are not one of the
principal suppliers of products to our distributors. If our distributors give
higher priority or greater attention to the products of other companies,
including products that compete with our products, our business would be
materially harmed.

WE MAY BE UNABLE TO ACCURATELY PREDICT QUARTERLY RESULTS IF DISTRIBUTORS ARE
INACCURATE OR UNTIMELY IN PROVIDING US WITH THEIR RESALE REPORTS, WHICH COULD
ADVERSELY AFFECT THE TRADING PRICE OF OUR STOCK

Since we generally recognize revenue from sales to our distributors only
when these distributors make sales to customers, we are highly dependent on the
accuracy and timeliness of their resale reports. Inaccurate resale reports
contribute to our difficulty in predicting and reporting our quarterly revenue
and results of operations, particularly in the last month of the quarter. If we
fail to accurately predict our revenue and results of operations on a quarterly
basis, our stock price could materially fluctuate. Distributors occasionally
increase their inventories of our products in anticipation of growth in the
demand for our products. If this growth does not occur, distributors will
decrease their orders for our products in subsequent periods, and our business
would be materially harmed.

CUSTOMERS MAY CANCEL OR DEFER SIGNIFICANT PURCHASE ORDERS OR OUR DISTRIBUTORS
MAY RETURN OUR PRODUCTS, WHICH WOULD CAUSE OUR INVENTORY LEVELS TO INCREASE
AND OUR REVENUES TO DECLINE

We sell our products on a purchase order basis through our distributors and
direct sales channels, and our distributors or customers may cancel purchase
orders at any time with little or no penalty. In addition, our distributor
agreements generally permit our distributors to return products to us.
Contractually, our distributors are permitted to return up to 10%, by value, of
the products they purchase from us every six months. In early 1998, for example,
a distributor cancelled a significant purchase order as a result of a customer
switching from a product we supply to a competitor's product. The distributor
also returned a significant amount of inventory of the product to us, which took
approximately 18 months for us to resell. If our customers cancel or defer
significant purchase orders or our distributors return our products, our
inventories would increase, which would materially harm our business.

MANY SYSTEMS MANUFACTURERS MAY BE UNWILLING TO SWITCH TO OUR PRODUCTS, BECAUSE
OF THEIR FAMILIARITY WITH THE PRODUCTS OFFERED BY OUR DIRECT COMPETITORS SUCH
AS XILINX AND ALTERA, WHICH DOMINATE THE PROGRAMMABLE LOGIC MARKET

The semiconductor industry is intensely competitive and characterized by:

- erosion of selling prices over product lives;

- rapid technological change;

- short product life cycles; and

- strong domestic and foreign competition.

If we are not able to compete successfully in this environment, our business
will be materially harmed. A primary cause of this highly competitive
environment is the strengths of our competitors. Our industry consists of major
domestic and international semiconductor companies, many of which have
substantially greater financial, technical, marketing, distribution and other
resources than we do. Our current direct competitors include suppliers of
complex programmable logic devices and field programmable gate arrays, such as
Xilinx, Altera, Actel, Lattice Semiconductor and Lucent. Xilinx and Altera
together have a majority share of the programmable logic market. Many systems
manufacturers

12
<PAGE>
may be unwilling or unable to switch to our products due to their familiarity
with competitors' products or other inhibiting factors.

We also face competition from companies that offer application specific
integrated circuits, which may be obtained at lower costs for higher volumes and
typically have greater logic capacity, additional features and higher
performance than those of our products. We may also face competition from
suppliers of products based on new or emerging technologies, including ESPs. Our
inability to successfully compete in any of the following areas could materially
harm our business:

- the development of new products and manufacturing technologies;

- the quality and price of products and devices;

- the diversity of product lines; or

- the cost effectiveness of design, development, manufacturing and marketing
efforts.

WE MAY BE UNABLE TO SUCCESSFULLY MANAGE OUR GROWTH IF WE FAIL TO COMPETE
EFFECTIVELY WITH OTHERS TO ATTRACT AND RETAIN KEY PERSONNEL

We believe our future success will depend upon our ability to successfully
manage our growth, including attracting and retaining engineers and other highly
skilled personnel. Our employees are at-will and not subject to employment
contracts. Hiring qualified sales and technical personnel will be difficult due
to the limited number of qualified professionals. Competition for these types of
employees is intense. We have in the past experienced difficulty in recruiting
and retaining qualified sales and technical personnel. For example, in the past
12 months, two of our executive officers resigned to pursue other opportunities.
Failure to attract and retain personnel, particularly sales and technical
personnel, would materially harm our business.

As we seek to expand our operations, we may also significantly strain our
management and financial systems and other resources. We cannot be certain that
our systems, procedures, controls and existing space will be adequate to support
our operations.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND MAY
FACE SIGNIFICANT EXPENSES AS A RESULT OF FUTURE LITIGATION

Protection of intellectual property rights is crucial to our business, since
that is how we keep others from copying the innovations which are central to our
existing and future products. From time to time, we receive letters alleging
patent infringement or inviting us to take a license to other parties' patents.
We evaluate these letters on a case-by-case basis. In September 1999, we
received an offer to license a patent related to field programmable gate array
architecture. It is too early for us to determine whether this license would be
necessary or useful, or whether a license would be obtainable at a reasonable
price. Offers such as these may lead to litigation if we reject the opportunity
to obtain the license. We have in the past and may again become involved in
litigation relating to alleged infringement by us of others' patents or other
intellectual property rights. This kind of litigation is expensive to all
parties and consumes large amounts of management's time and attention. For
example, we incurred substantial costs associated with the litigation and
settlement of our dispute with Actel Corporation, which materially harmed our
business. In addition, if the September 1999 letter or other similar matters
result in litigation that we lose, a court could order us to pay substantial
damages and/or royalties, and prohibit us from making, using, selling or
importing essential technologies. For these and other reasons, this kind of
litigation would materially harm our business. Also, although we may seek to
obtain a license under a third party's intellectual property rights in order to
bring an end to certain claims or actions asserted against us, we may not be
able to obtain such a license on reasonable terms or at all. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."

13
<PAGE>
We have entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
us, and which give us the right to use patents and other technology developed by
them. We anticipate that we will continue to enter into these kinds of licensing
arrangements in the future; however, it is possible that desirable licenses will
not be available to us on commercially reasonable terms. If we lose existing
licenses to key technology, or are unable to enter into new licenses which we
deem important, it could materially harm our business, and materially and
adversely affect our business.

Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent
and trade secret protection for our products. The process of seeking patent
protection can be long and expensive, and we cannot be certain that any
currently pending or future applications will actually result in issued patents,
or that, even if patents are issued, they will be of sufficient scope or
strength to provide meaningful protection or any commercial advantage to us.
Furthermore, others may develop technologies that are similar or superior to our
technology or design around the patents we own. We also rely on trade secret
protection for our technology, in part through confidentiality agreements with
our employees, consultants and third parties. However, employees may breach
these agreements, and we may not have adequate remedies for any breach. In any
case, others may come to know about or determine our trade secrets through a
variety of methods. In addition, the laws of certain territories in which we
develop, manufacture or sell our products may not protect our intellectual
property rights to the same extent as do the laws of the United States.

PROBLEMS ASSOCIATED WITH INTERNATIONAL BUSINESS OPERATIONS COULD AFFECT OUR
ABILITY TO MANUFACTURE AND SELL OUR PRODUCTS

Most of our products are manufactured outside of the United States at
manufacturing facilities operated by our suppliers in Taiwan, South Korea and
the Philippines. As a result, our manufacturing operations are subject to risks
of political instability, including the risk of conflict between Taiwan and the
People's Republic of China and conflict between North Korea and South Korea.
Moreover, the majority of available manufacturing capacity for our products is
located in Taiwan and South Korea.

Sales to customers located outside the United States accounted for 25%, 43%,
47% and 50% of our total sales in 1996, 1997, 1998, and the six months ended
June 30, 1999, respectively. We anticipate that sales to customers located
outside the United States will continue to represent a significant portion of
our total sales in future periods and the trend of foreign customers accounting
for an increasing portion of our total sales may continue. In addition, most of
our domestic customers sell their products outside of North America, thereby
indirectly exposing us to risks associated with foreign commerce. Asian economic
instability could also materially and adversely affect our business,
particularly to the extent that this instability impacts the sales of products
manufactured by our customers. Accordingly, our operations and revenues are
subject to a number of risks associated with foreign commerce, including the
following:

- managing foreign distributors;

- staffing and managing foreign branch offices;

- political and economic instability;

- foreign currency exchange fluctuations;

- changes in tax laws, tariffs and freight rates;

- timing and availability of export licenses;

- inadequate protection of intellectual property rights in some countries;
and

- obtaining governmental approvals for certain products.

14
<PAGE>
In the past we have denominated sales of our products in foreign countries
exclusively in United States dollars. As a result, any increase in the value of
the United States dollar relative to the local currency of a foreign country
will increase the price of our products in that country so that our products
become relatively more expensive to customers in the local currency of that
foreign country. As a result, sales of our products in that foreign country may
decline. To the extent any such risks materialize, our business would be
materially harmed.

IF OUR OPERATIONS AND PRODUCTS DO NOT FUNCTION PROPERLY IN THE YEAR 2000, OUR
BUSINESS OPERATIONS COULD BE DISRUPTED

We are highly dependent on third party computer software programs and
operating systems used in our business. We also depend on proper functioning of
computer systems of third parties, such as suppliers, distributors and
customers. Any computer programs that have date-sensitive software may
erroneously recognize a date using "00" as the year 1900 instead of the year
2000. We have completed audits of our internal systems, including our
accounting, sales and technical support automation system, and obtained
assurances from our major suppliers, distributors and customers that they have
done the same. However, we do not have the resources to verify these assurances.
Thus, there is a risk that some of our customers', distributors' and suppliers'
systems will not function adequately. If they do not, the result could be a
system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.

We have developed two products, QuickWorks and QuickTools, which are design
software tools that support our FPGA and ESP devices. QuickWorks operates on
Microsoft Windows, while QuickTools runs on UNIX platforms. We have tested these
products and found them to be Year 2000 compliant. Our software products
integrate software tools that have been developed and are maintained by third
party vendors. We have contacted these vendors and have confirmed that such
software products are Year 2000 compliant. However, any failure of Windows, UNIX
or the integrated third party software tools due to Year 2000 problems, will
adversely impact the performance of our software design tools, and our business
could be materially harmed. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000 Readiness Disclosure."

OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS

After this offering, our officers, directors and principal stockholders will
together control approximately 51.23% of our outstanding common stock. As a
result, these stockholders, if they act together, will be able to control the
management and affairs of QuickLogic and all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have the effect of
delaying or preventing a change in control and might affect the market price of
our common stock. This concentration of ownership may not be in the best
interest of our other stockholders.

OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER

Our basic corporate documents and Delaware law contain provisions that might
enable our management to resist a takeover. These provisions might discourage,
delay or prevent a change in the control of QuickLogic or a change in our
management. Our certificate of incorporation provides that we will have a
classified board of directors, with each class of directors subject to
re-election every three years. This classified board when implemented will have
the effect of making it more difficult for third parties to insert their
representatives on our board of directors and gain control of QuickLogic. These
provisions could also discourage proxy contests and make it more difficult for
you and other

15
<PAGE>
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of the common stock. See "Description of Capital
Stock."

Our certificate of incorporation also provides that our board of directors
may, without further action by the stockholders, issue shares of preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions thereof. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of QuickLogic. We have no present plan to issue
any shares of preferred stock.

A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE

If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. Such
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Upon
completion of this offering, we will have outstanding 17,642,570 shares of
common stock, based upon shares outstanding as of September 30, 1999 and
assuming no exercise of outstanding options after September 30, 1999. Of these
shares, the 6,667,000 shares sold in this offering will be freely tradable. The
remaining shares of common stock outstanding after this offering will be
available for sale in the public market as follows:

<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR SALE NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
The date of this prospectus................................................ 0
180 days after the date of this prospectus................................. 10,975,570
</TABLE>

The above table assumes the effectiveness of certain lock-up arrangements
with the underwriters, under which the stockholders have agreed not to sell or
otherwise dispose of their shares of common stock. Most of the shares that will
be available for sale after the 180th day after the date of this prospectus will
be subject to certain volume restrictions because they are held by affiliates of
QuickLogic. In addition, we cannot assure you that some or all of these lock-up
restrictions will not be removed prior to 180 days after the offering without
prior notice by the underwriters.

The holders of an aggregate of 9,053,036 shares of our common stock,
assuming the conversion of our preferred stock into common stock, and Cypress,
with respect to any remaining shares of common stock held by it after this
offering, have certain registration rights, including the right to require us to
register the sale of their shares and the right to include their shares in
public offerings we undertake in the future. See "Description of Capital
Stock--Registration Rights."

OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED, AND WE EXPECT THAT THE PRICE OF
OUR COMMON STOCK WILL FLUCTUATE SUBSTANTIALLY

Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. The price of
the shares of common stock sold in this offering was determined by negotiation
between us and the underwriters. This price will not necessarily reflect the
market price of the common stock following this offering. See "Underwriting" for
a discussion of the factors to be

16
<PAGE>
considered in determining the price. The market price for the common stock
following this offering will be affected by a number of factors, including:

- the announcement of new products or product enhancements by us or our
competitors;

- quarterly variations in our or our competitors' results of operations;

- changes in earnings estimates or recommendations by securities analysts;

- developments in our industry; and

- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.

In addition, stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations that have often been unrelated
to the operating performance of such companies. Such factors and fluctuations
may materially and adversely affect the market price of our common stock.

NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION FOLLOWING THE OFFERING

If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value of
$8.27. If the holders of outstanding options exercise those options, you will
incur further dilution. See "Dilution."

OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY FAIL TO USE SUCH FUNDS EFFECTIVELY TO ACHIEVE OUR OTHER
BUSINESS GOALS

Other than the payment of approximately $6.0 million to pay an outstanding
settlement obligation, we currently have no specific plans for using the
proceeds of this offering. As a consequence, our management will have broad
discretion to allocate a large percentage of the proceeds to uses which the
stockholders may not deem desirable or to uses that fail to achieve our business
goals effectively. See "Use of Proceeds."

17
<PAGE>
USE OF PROCEEDS

We estimate that we will receive net proceeds of $30.0 million from our sale
of 3,333,500 shares of common stock at the initial public offering price of
$10.00 per share, after deducting underwriting discounts and commissions and
estimated offering expenses. We will not receive any proceeds from the sale of
the shares to be sold by the selling stockholder, including the sale of shares
pursuant to the underwriters over-allotment option.

We expect to use approximately $24.0 million for general corporate purposes
and $6.0 million for payment of an outstanding settlement obligation with Actel
Corporation. In addition, we may use a portion of the net proceeds to acquire
complementary products, technologies or businesses; however, we currently have
no commitments or agreements and are not involved in any negotiations to do so.
See "Principal and Selling Stockholders."

DIVIDEND POLICY

We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance, or achievements expressed or implied
by such forward-looking statements. Such factors include, among other things,
those listed under "Risk Factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "expects," "plans," "intends," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms and other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Moreover, neither we nor anyone else assumes responsibility for
the accuracy and completeness of such statements. We are under no duty to update
any of the forward-looking statements after the date of this prospectus.

18
<PAGE>
CAPITALIZATION

The following table sets forth our actual capitalization as of June 30,
1999. It also sets forth our capitalization on a pro forma basis for:

- the conversion into common stock of our preferred stock

and capitalization on a pro forma, as adjusted basis for:

- the sale of 3,333,500 shares of common stock by us at an initial public
offering price of $10.00 per share, less underwriting discounts and
commissions and estimated offering expenses.

<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Long-term obligations................................... $ 161 $ 161 $ 161
---------- ----------- -----------
Stockholders' equity:
Preferred stock, $0.001 par value; 61,568,000 shares
authorized; 9,912,000 shares issued and outstanding,
actual; 10,000,000 shares authorized; no shares
issued and outstanding, as adjusted and pro forma as
adjusted............................................ 10 -- --
Common stock, $0.001 par value; 105,000,000 shares
authorized; 4,301,000 shares issued and outstanding,
actual; 100,000,000 shares authorized; 14,213,000
and 17,546,500 issued and outstanding, as adjusted,
and pro forma, as adjusted, respectively............ 4 14 18
Additional paid-in capital.............................. 61,730 61,730 91,728
Stockholder note receivable............................. (121) (121) (121)
Deferred compensation................................... (1,136) (1,136) (1,136)
Accumulated deficit..................................... (60,185) (60,185) (60,185)
---------- ----------- -----------
Total stockholders' equity............................ 302 302 30,304
---------- ----------- -----------
Total capitalization................................ $ 463 $ 463 $ 30,465
---------- ----------- -----------
---------- ----------- -----------
</TABLE>

The table set forth above is based on shares of common stock outstanding as
of June 30, 1999. This table excludes:

- 2,549,000 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $3.55 per
share; and

- 6,279,684 shares reserved for issuance under our stock plans; and

- 2,000,000 shares reserved for issuance under our 1999 employee stock
purchase plan.

See "Management--Employee Benefit Plans" and "Description of Capital Stock."

19
<PAGE>
DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. The pro forma net tangible book value of
our common stock as of June 30, 1999, was $302,000, or $0.02 per share. Pro
forma net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our 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.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the net tangible book value per share of our common stock
immediately afterwards. After giving effect to our sale of 3,333,500 shares of
common stock offered by this prospectus and after deducting the underwriting
discounts and commissions, estimated offering expenses payable by us and payment
of an outstanding settlement obligation, our pro forma as adjusted net tangible
book value as of June 30, 1999 was $30,304,000 or approximately $1.73 per share.
This represents an immediate increase in net tangible book value of $1.71 per
share to existing stockholders and an immediate dilution in net tangible book
value of $8.27 per share to new investors.

<TABLE>
<S> <C> <C>
Price per share........................................... $ 10.00
Pro forma net tangible book value per share
as of June 30, 1999................................... $ 0.02
Increase per share attributable to new investors........ 1.71
---------
As adjusted pro forma net tangible book value per share
after the offering...................................... 1.73
---------
Dilution per share to new investors....................... $ 8.27
---------
---------
</TABLE>

The table above assumes no exercise of options after June 30, 1999. The
number of shares outstanding as of June 30, 1999 excludes 2,549,000 shares of
common stock issuable upon exercise of options outstanding as of June 30, 1999,
having a weighted average exercise price of $3.55 per share. The exercise of
outstanding options having an exercise price less than the offering price would
increase the dilutive effect to new investors.

The following table sets forth, on a pro forma basis as of June 30, 1999,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and average price per share paid by existing
stockholders and by the new investors, before deducting expenses payable by us,
at an initial public offering price of $10.00 per share.

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------------- ------------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ---------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................................. 14,213,000 81% $ 61,744,000 65% $ 4.34
New investors.......................................... 3,333,500 19 33,335,000 35 10.00
------------- ---------- ------------- ----------
Total................................................ 17,546,500 100% $ 95,079,000 100%
------------- ---------- ------------- ----------
------------- ---------- ------------- ----------
</TABLE>

- ---------

If the underwriters' over-allotment option is exercised in full, the
following will occur:

- the number of shares of common stock held by existing stockholders will
decrease to approximately 79% of the total number of shares of
common stock outstanding; and

- the number of shares held by new investors will be increased to 3,770,635
or approximately 21% of the total number of shares of our common stock
outstanding after this offering.

20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of December 31, 1997
and 1998 and for the years ended December 31, 1996, 1997 and 1998, have been
derived from our audited consolidated financial statements and notes thereto,
which are included elsewhere in this prospectus. The selected consolidated
financial data as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994 and 1995 were derived from our audited consolidated financial
statements, which do not appear in this prospectus. The consolidated financial
data as of June 30, 1999 and for the six months ended June 30, 1998 and 1999
were derived from unaudited financial statements included elsewhere in this
prospectus. We have prepared this unaudited information on the same basis as the
audited consolidated financial statements and have included all adjustments,
consisting only of normal recurring adjustments that we consider necessary for a
fair presentation of our financial position and operating results for such
periods. When you read this selected consolidated financial data, it is
important that you also read the historical consolidated financial statements
and related notes included in this prospectus, as well as the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Historical results are not necessarily indicative of
future results. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................................... $ 6,024 $15,148 $23,758 $ 28,460 $30,007
Cost of revenue.................................................. 4,053 7,739 11,158 16,855 14,303
------- ------- ------- -------- -------
Gross profit..................................................... 1,971 7,409 12,600 11,605 15,704
Operating expenses:
Research and development....................................... 3,172 3,599 4,642 6,235 6,294
Selling, general and administrative............................ 4,408 5,770 7,730 10,981 9,368
Contract termination and legal(1).............................. -- 2,700 4,125 28,309 --
------- ------- ------- -------- -------
Net operating income (loss).................................. (5,609) (4,660) (3,897) (33,920) 42
Interest expense................................................. (240) (200) (60) (162) (161)
Interest income and other, net................................... 21 153 360 434 364
------- ------- ------- -------- -------
Net income (loss)................................................ $(5,828) $(4,707) $(3,597) $(33,648) $ 245
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Net income (loss) per share:
Basic.......................................................... $(10.69) $ (7.59) $ (4.66) $ (10.41) $ 0.06
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Diluted........................................................ $(10.69) $ (7.59) $ (4.66) $ (10.41) $ 0.02
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Weighted average shares:
Basic.......................................................... 545 620 772 3,232 4,231
Diluted........................................................ 545 620 772 3,232 14,645
Pro forma income per share:
Basic.......................................................... $ 0.02
-------
-------
Diluted........................................................ $ 0.02
-------
-------
Pro forma weighted average shares:
Basic.......................................................... 14,143
Diluted........................................................ 14,645

SIX MONTHS ENDED
JUNE 30,
----------------
1998 1999
------- -------

<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................................... $14,078 $18,425
Cost of revenue.................................................. 6,803 7,958
------- -------
Gross profit..................................................... 7,275 10,467
Operating expenses:
Research and development....................................... 2,932 3,567
Selling, general and administrative............................ 4,648 6,000
Contract termination and legal(1).............................. -- --
------- -------
Net operating income (loss).................................. (305) 900
Interest expense................................................. (86) (49)
Interest income and other, net................................... 202 136
------- -------
Net income (loss)................................................ $ (189) $ 987
------- -------
------- -------
Net income (loss) per share:
Basic.......................................................... $ (0.05) $ 0.23
------- -------
------- -------
Diluted........................................................ $ (0.05) $ 0.07
------- -------
------- -------
Weighted average shares:
Basic.......................................................... 4,200 4,286
Diluted........................................................ 4,200 15,042
Pro forma income per share:
Basic.......................................................... $ 0.07
-------
-------
Diluted........................................................ $ 0.07
-------
-------
Pro forma weighted average shares:
Basic.......................................................... 14,198
Diluted........................................................ 15,042
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash..................................................... $ 488 $ 3,856 $ 10,336 $ 7,331 $ 7,595 $ 8,185
Working capital (deficit)................................ (4,792) 7,068 10,650 2,395 (3,319) (2,742)
Total assets............................................. 2,531 12,199 22,577 19,951 16,168 19,406
Long-term obligations(2)................................. 509 137 602 7,724 591 161
Total stockholders' equity (deficit)..................... (4,848) 7,149 11,799 (1,756) (975) 302
</TABLE>

- ------------
(1) Contract termination and legal expenses include a charge of $23.0 million in
the year ended December 31, 1997 for termination of an agreement with
Cypress Semiconductor Corporation, and charges of $2.7 million, $4.1 million
and $5.3 million in the years ended December 31, 1995, 1996 and 1997,
respectively, for the legal and settlement costs associated with the Actel
Corporation litigation. See notes 8 and 12 of notes to consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

(2) Long term obligations at December 31, 1997 include obligations under the
Actel litigation settlement. At December 31, 1998 and June 30, 1999, this
obligation is classified as a current liability because under the terms of
the settlement, we will pay the remaining obligation out of the proceeds of
this offering. See notes 4 and 12 of notes to consolidated financial
statements.

21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING THE RISKS
DESCRIBED IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We design and sell field programmable gate arrays, embedded standard
products and associated software and programming hardware. From our inception in
April 1988 through the third quarter of 1991, we were primarily engaged in
product development. In 1991, we introduced our first line of field programmable
gate array products, or FPGAs, based upon our ViaLink technology. FPGAs have
accounted for substantially all of our product revenue to date. We currently
have three FPGA product families: pASIC 1, introduced in 1991; pASIC 2,
introduced in 1996; and pASIC 3, introduced in 1997. The newer product families
generally contain greater logic capacity, but do not necessarily replace sales
of older generation products. In fact, for the first six months of 1999, pASIC 1
revenue accounted for approximately half of our total revenue.

In September 1998, we introduced QuickRAM, our first line of embedded
standard products, or ESPs. Our ESPs are based on our FPGA technology. In April
1999, we introduced QuickPCI, our second line of ESPs. Revenue for our QuickRAM
and QuickPCI products together accounted for approximately 5% of sales for the
first six months of 1999. We also license our QuickWorks and QuickTools design
software and sell our programming hardware, which together have typically
accounted for less than 5% of total revenue.

We sell our products through three channels. First, we sell the majority of
our products through distributors who have contractual rights to earn a
negotiated margin on the sale of our products and who have limited rights to
return unsold product. We refer to these distributors as point-of-sale
distributors. We defer recognition of revenue for sales to these point-of-sale
distributors until after they have sold our products to systems manufacturers.
Second, we sell our products through certain foreign distributors who have no
contractual rights to earn a negotiated margin and who may only return defective
products to us. We recognize revenue from sales to these distributors at the
time of shipment. Finally, we sell our products directly to systems
manufacturers and recognize revenue at the time of shipment to these systems
manufacturers. The percentage of sales derived through each of these three
channels in 1998 was 54%, 32% and 14%, respectively, and 61%, 24% and 15% for
the first six months of 1999, respectively. We believe that this trend of an
increasing percentage of our sales being made through our point-of-sale
distribution channel will continue as we convert more of our foreign
distributors to point-of-sale distributors.

Four of our distributors accounted for approximately 27%, 10%, 10% and 6% of
sales, respectively, in 1998, and the same four distributors accounted for 28%,
9%, 9% and 8% of sales, respectively, for the six months ended June 30, 1999. No
other distributor or direct customer accounted for more than 5% of sales in 1998
or the six months ended June 30, 1999. We expect that a limited number of
distributors will continue to account for a significant portion of our total
sales.

Our international sales were 25%, 43% and 47% of our total sales for 1996,
1997 and 1998, respectively, and 50% for the six months ended June 30, 1999. We
expect that revenue derived from sales to international customers will continue
to represent a significant and growing portion of our total revenue. All of our
sales are denominated in U.S. dollars.

22
<PAGE>
Average selling prices for our products typically decline rapidly during the
first six to 12 months after their introduction, then decline less rapidly as
the products mature. We attempt to maintain gross margins even as average
selling prices decline through the introduction of new products with higher
margins and through manufacturing efficiencies and cost reductions. However, the
markets in which we operate are highly competitive, and there can be no
assurance that we will be able to successfully maintain gross margins. Any
significant decline in our gross margins will materially harm our business.

We outsource the wafer manufacturing, assembly and test of all of our
products. We rely upon TSMC and Cypress to manufacture our products, and we rely
primarily upon Amkor and ChipPAC to assemble and test our products. Under our
arrangements with these manufacturers, we are obligated to provide forecasts and
enter into binding obligations for anticipated purchases. This limits our
ability to react to fluctuations in demand for our products, which could lead to
excesses or shortages of wafers for a particular product.

We entered into an agreement with Cypress in 1992 to obtain guaranteed
fabrication capacity and to secure a second source for our FPGA products. By
1997, wafer fabrication capacity was no longer scarce and we had established a
customer base and reputation. In March 1997, our agreement with Cypress was
terminated. In exchange for the termination and the reversion to us of the
rights to the intellectual property covered by that agreement, we paid Cypress
$4.5 million in cash and agreed to issue to Cypress 3,037,786 shares of our
common stock, resulting in a charge of approximately $23.0 million in the first
quarter of 1997.

In 1996 and 1997, we recorded an accrual for legal and settlement fees of
$4.1 million and $5.3 million, respectively, associated with the settlement of
patent litigation with Actel Corporation in 1998. We have made quarterly
payments to Actel since the settlement date. The remainder of the settlement
will be paid to Actel immediately after this offering.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- (UNAUDITED)
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue............................................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue....................................... 47.0 59.2 47.7 48.3 43.2
----- ------ ----- ----- -----
Gross profit.......................................... 53.0 40.8 52.3 51.7 56.8
Operating expenses:
Research and development............................ 19.5 21.9 21.0 20.8 19.4
Selling, general and administrative................. 32.5 38.6 31.2 33.0 32.6
Contract termination and legal...................... 17.4 99.5 -- -- --
----- ------ ----- ----- -----
Net operating income (loss)........................... (16.4) (119.2) 0.1 (2.1) 4.8
Interest expense...................................... (0.3) (0.6) (0.5) (0.6) (0.3)
Interest income and other, net........................ 1.6 1.6 1.2 1.4 0.9
----- ------ ----- ----- -----
Net income (loss)..................................... (15.1)% (118.2)% 0.8 % (1.3)% 5.4 %
----- ------ ----- ----- -----
----- ------ ----- ----- -----
</TABLE>

SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999

REVENUE. Revenue increased 30.9% from $14.1 million for the six months
ended June 30, 1998 to $18.4 million for the six months ended June 30, 1999. The
increase in revenue resulted from increased

23
<PAGE>
sales of our pASIC 2 and pASIC 3 products and initial sales of our QuickRAM
ESPs, offset in part by declines in sales of our pASIC 1 product family. Our
pASIC 2 and pASIC 3 revenues, together, increased by approximately $3.8 million.
QuickRAM revenue increased by approximately $0.9 million and pASIC 1 and other
revenue declined by approximately $0.4 million. We expect this trend in product
mix to continue.

GROSS PROFIT. Gross profit increased 43.9% from $7.3 million for the six
months ended June 30, 1998 to $10.5 million for the six months ended June 30,
1999. Gross margin improved between those periods from 51.7% to 56.8%. This
increase in gross profit was primarily due to higher revenue. The gross margin
improvement was primarily due to increased sales of our higher margin pASIC 2
and pASIC 3 products and higher revenue over relatively fixed production costs.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense includes
personnel and other costs associated with the development of product designs,
process technology, software and programming hardware. Research and development
expense increased from $2.9 million for the six months ended June 30, 1998 to
$3.6 million for the six months ended June 30, 1999. As a percentage of revenue,
research and development expense declined from 20.8% to 19.4% for the same
periods. The increase in dollars spent on research and development was primarily
due to investments in the development of our new ESP products. These efforts
required the use of consultants and the hiring of additional personnel, which
increased costs. We believe that continued investments in process technology and
product development are essential for us to remain competitive in the markets we
serve. Specifically in regard to our ESPs, we expect to continue to increase
research and development spending.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling expense consists
primarily of personnel, commissions and other costs associated with the
marketing and sale of our products. General and administrative expense consists
primarily of personnel and other costs associated with the management of our
business. Selling, general and administrative expense increased from $4.6
million for the six months ended June 30, 1998 to $6.0 million for the six
months ended June 30, 1999. Selling, general and administrative expense declined
as a percentage of revenue from 33.0% for the first six months of 1998 to 32.6%
for the first six months of 1999 due to higher revenues in the later period. The
1999 increase of approximately $1.4 million was due to increased advertising
expense of approximately $1.1 million related to the introduction of our ESPs
and to hiring of additional sales, marketing, finance and administrative
personnel. We anticipate that selling, general and administrative expense will
continue to increase in absolute dollars as we invest in our business and seek
to find new customers for our products.

INTEREST AND OTHER INCOME, NET. Interest income, interest expense and other
income, net was $116,000 in the six months ended June 30, 1998 compared to
$87,000 for the six months ended June 30, 1999. A gain on the disposal of fixed
assets of $5,000 was recorded in 1998.

DEFERRED COMPENSATION. We grant incentive stock options to hire, motivate
and retain employees. With respect to the grant of stock options to employees,
we recorded aggregate deferred compensation of approximately $332,000 for the
six months ended June 30, 1999. We currently expect to record amortization of
deferred compensation of approximately $485,000, $499,000 and $337,000 during
the years ended December 31, 1999, 2000 and 2001, respectively. The amount of
deferred compensation is presented as a reduction of stockholders' equity and
amortized ratably over the vesting period of the applicable options, generally
four years.

PROVISION FOR INCOME TAXES. No provision for income taxes was recorded for
the six-month period ended June 30, 1998, as we incurred an operating loss
during that period. No provision for income taxes was recorded for the six-month
period ended June 30, 1999, due to our ability to utilize a portion of our state
and federal net operating loss carryforwards.

24
<PAGE>
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998

REVENUE. Our revenue for 1996, 1997 and 1998 was $23.8 million, $28.5
million and $30.0 million, respectively, representing growth of 19.8% from 1996
to 1997 and 5.4% from 1997 to 1998. The majority of the 1997 increase in revenue
was due to growth in sales of our pASIC 2 products, the second generation of our
FPGAs. Our pASIC 2 revenue increased in 1997 by approximately $4.9 million,
partially offset by a decrease in pASIC 1 and other revenue of approximately
$0.2 million. The 1998 revenue growth reflected increasing sales of our pASIC 2
products as well as the initial shipments of our pASIC 3 products. The increase
in 1998 was partially offset by declines in sales of our mature pASIC 1
products. In 1998, our pASIC 2 and pASIC 3 revenues together increased by
approximately $3.8 million, while our pASIC 1 and other revenue declined by
approximately $1.7 million and $0.6 million, respectively. In aggregate, unit
sales increased in both 1997 and 1998 and were only partially offset by
declining average selling prices of our pASIC 1 and pASIC 2 products.

GROSS PROFIT. Gross profit was $12.6 million, $11.6 million and $15.7
million in 1996, 1997 and 1998, respectively, which was 53.0%, 40.8% and 52.3%
of revenue for those periods. The decline in 1997 was primarily attributable to
inventory write-downs for obsolescence of approximately $3.6 million, associated
with higher than desired inventory levels due to inventory acquired from Cypress
as part of the termination of our agreement with Cypress in 1997. The increase
in gross profit in 1998 was attributable to the growth in sales, the
introduction of higher-margin pASIC 3 products, the absence of any inventory
write-downs, and the maintenance of margin levels on our pASIC 1 and pASIC 2
products.

RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $4.6
million, $6.2 million, and $6.3 million in 1996, 1997 and 1998, respectively,
which was 19.5%, 21.9% and 21.0% of revenue for those periods. The increases in
research and development spending in 1997 and 1998 were primarily due to
increases in the number of employees involved in research and development as we
accelerated the introduction of new products, particularly the pASIC 3 family of
products and our first ESPs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense was $7.7 million, $11.0 million and $9.4 million in 1996,
1997 and 1998, respectively, which was 32.5%, 38.6% and 31.2% of revenue for
those periods. The increase in selling, general and administrative expense in
1997 was primarily attributable to increases in personnel and sales and
marketing efforts in support of existing and new products. The decreases in
selling, general and administrative expenses in 1998 were attributable to
reduced personnel costs due to temporary vacancies in senior management
positions.

CONTRACT TERMINATION AND LEGAL EXPENSE. We recorded an expense of $23.0
million in the first quarter of 1997 as a result of the termination of our 1992
agreement with Cypress. Legal and settlement costs associated with the Actel
litigation were $4.1 million and $5.3 million in 1996 and 1997, respectively. No
additional charges were recorded upon settlement of this litigation in 1998.

DEFERRED COMPENSATION. With respect to the grant of stock options to
employees, we recorded aggregate deferred compensation of $851,000, $1.9 million
and $204,000 in 1996, 1997 and 1998, respectively. The amount of deferred
compensation is presented as a reduction of stockholders' equity and amortized
ratably over the vesting period of the applicable options, generally four years.
We amortized $43,000, $625,000 and $426,000 in 1996, 1997 and 1998,
respectively. The amortization of deferred compensation will be recorded as
research and development and selling, general and administrative expenses in
those periods.

INTEREST AND OTHER INCOME, NET. Interest and other income, net was
$300,000, $272,000 and $203,000 in 1996, 1997 and 1998, respectively. Interest
and other income decreased in 1997 and 1998 as

25
<PAGE>
interest income on increased cash balances was offset by interest expense
incurred as a result of new equipment financing arrangements.

PROVISION FOR INCOME TAXES. No provision for income taxes was recorded in
the years ended December 31, 1996 and 1997, as we incurred net operating losses
in those years. No provision for income taxes was recorded for the year ended
December 31, 1998, as we were able to utilize a portion of our state and federal
net operating loss carryforwards. At December 31, 1998, we had net operating
loss carryforwards for federal and state tax purposes of approximately $44.0
million and $21.0 million, respectively. These carryforwards, if not utilized to
offset future taxable income and income taxes payable, will begin to expire in
1999 and will continue to expire through 2013.

QUARTERLY RESULTS OF OPERATIONS

The following tables contain unaudited statement of operations data for our
six most recent quarters. The first table contains revenue and expense data
expressed in dollars, while the second table contains the same data expressed as
a percentage of our revenue for the periods indicated. The data has been derived
from unaudited financial statements that, in our opinion, include all
adjustments necessary for a fair presentation of the information. Our quarterly
results have been in the past, and in the future may be, subject to
fluctuations. As a result, we believe 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,
1998 1998 1998 1998
-------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenue........................................... $7,751 $6,327 $7,883 $8,046
Cost of revenue................................... 3,638 3,165 3,825 3,675
-------- -------- --------- --------
Gross profit...................................... 4,113 3,162 4,058 4,371
Operating expenses:
Research and development........................ 1,394 1,538 1,586 1,776
Selling, general and administrative............. 2,391 2,257 2,302 2,418
-------- -------- --------- --------
Net operating income (loss)....................... 328 (633) 170 177
Interest expense.................................. (44) (42) (46) (29)
Interest income and other, net.................... 134 68 83 79
-------- -------- --------- --------
Net income (loss)................................. $ 418 $ (607) $ 207 $ 227
-------- -------- --------- --------
-------- -------- --------- --------
AS A PERCENTAGE OF REVENUE
Revenue........................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 46.9 50.0 48.5 45.7
-------- -------- --------- --------
Gross profit...................................... 53.1 50.0 51.5 54.3
Operating expenses:
Research and development........................ 18.0 24.3 20.1 22.1
Selling, general and administrative............. 30.8 35.7 29.2 30.0
-------- -------- --------- --------
Net operating income (loss)....................... 4.3 (10.0) 2.2 2.2
Interest expense.................................. (0.6) (0.7) (0.6) (0.4)
Interest income and other, net.................... 1.7 1.1 1.0 1.0
-------- -------- --------- --------
Net income (loss)................................. 5.4% (9.6%) 2.6% 2.8%
-------- -------- --------- --------
-------- -------- --------- --------

<CAPTION>
QUARTER ENDED
--------------------
MARCH 31, JUNE 30,
1999 1999
--------- --------

<S> <C> <C>
STATEMENT OF OPERATIONS
Revenue........................................... $8,597 $9,828
Cost of revenue................................... 3,722 4,236
--------- --------
Gross profit...................................... 4,875 5,592
Operating expenses:
Research and development........................ 1,780 1,787
Selling, general and administrative............. 2,856 3,144
--------- --------
Net operating income (loss)....................... 239 661
Interest expense.................................. (26) (23)
Interest income and other, net.................... 69 67
--------- --------
Net income (loss)................................. $ 282 $ 705
--------- --------
--------- --------
AS A PERCENTAGE OF REVENUE
Revenue........................................... 100.0% 100.0%
Cost of revenue................................... 43.3 43.1
--------- --------
Gross profit...................................... 56.7 56.9
Operating expenses:
Research and development........................ 20.7 18.2
Selling, general and administrative............. 33.2 32.0
--------- --------
Net operating income (loss)....................... 2.8 6.7
Interest expense.................................. (0.3) (0.2)
Interest income and other, net.................... 0.8 0.7
--------- --------
Net income (loss)................................. 3.3% 7.2%
--------- --------
--------- --------
</TABLE>

Over the six quarters presented, our quarterly revenue grew from $7.8
million to $9.8 million. Revenues have fluctuated over this time, and were
negatively affected in the quarter ended June 30, 1998, when sales declined
18.4% primarily as a result of the Asian financial crisis which had a dramatic
effect on the global semiconductor industry. Revenue growth commencing in the
quarter ended September 30, 1998 has been a result of renewed strength in our
core FPGA business, and the

26
<PAGE>
introduction of our pASIC 3 product family. Beginning in the quarter ended March
31, 1999, revenue included sales from our QuickRAM product family, the first of
our ESPs.

Gross profit declined in the quarter ended June 30, 1998, along with
revenue, for the reasons described above. Gross profit began to improve during
the third quarter of 1998 as revenue increased. Gross margins increased from
54.3% in the quarter ended December 31, 1998 to 56.9% in the quarter ended June
30, 1999. This recent improvement was caused by favorable product mix shifts as
newer, higher margin pASIC 2, pASIC 3 and QuickRAM products comprised a higher
percentage of our overall revenue.

Over the last six quarters, research and development expenses increased from
$1.4 million to $1.8 million. To serve the evolving needs of systems
manufacturers in our target markets, we have spent aggressively to develop new
products and technologies. Our research and development expenses over this
period have averaged 20.6% of revenues. Selling, general and administrative
expenses over this period have fluctuated between $2.3 million and $3.1 million.

We have accumulated substantial net operating loss carryforwards. As a
result, we have not paid income taxes. Although we have been increasingly
profitable over the past four quarters, we expect to have minimal tax
obligations over the next several quarters due to application of net operating
loss carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

We financed our operating losses in 1996 and 1997 through the issuance of
common stock, the sales of preferred stock, the deferral of litigation
settlement obligations and the incurrence of debt to finance capital equipment
purchases. We have been profitable since the third quarter of 1998. At June 30,
1999, we had $8.2 million in cash, a decrease of $2.2 million from cash held at
December 31, 1996, but an increase of $590,000 from cash held at December 31,
1998. As of June 30, 1999, we had an accumulated deficit of $60.2 million.

During 1996 and 1997, working capital increased due to growth in accounts
receivable and inventories. During 1998 and the first six months of 1999,
inventory balances have been substantially reduced.

We have an equipment financing line with a commercial bank. At June 30,
1999, we had obligations of $806,000 outstanding under this equipment line and a
remaining available balance of $137,000, which can be drawn upon through the
fourth quarter of 1999. The outstanding obligations under the equipment line are
due over the next one to three years. The interest rate on these borrowings is
at the bank's prime interest rate plus 0.5%.

Net cash provided by (used for) operating activities was $(4.6) million,
$(1.4) million, $2.3 million and $2.3 million in 1996, 1997, 1998 and the first
six months of 1999, respectively. The decreases in cash in 1996 and 1997 were
primarily attributable to increases in working capital, particularly accounts
receivable and inventory. Inventory reductions were the primary source of cash
in 1998. Net income and an increase in accounts payable were the primary sources
of cash in the first six months of 1999. Our operating cash flow activities are
affected by changes in our accounts receivable and related allowances. At
December 31, 1997 and 1998 and June 30, 1999, we had allowances for doubtful
accounts totaling $226,000, $245,000, and $245,000, respectively. We have not
had any material collection issues to date. At December 31, 1997 and 1998 and
June 30, 1999, we had sales returns and allowance reserves totaling $2,402,000,
$3,027,000, and $2,095,000, respectively, offsetting accounts receivable
balances for contractual obligations for potential product returns and
discounts. The increase in sales returns and allowances at December 31, 1998 was
due to timing of credits earned in 1998 and not taken by distributors until
1999.

27
<PAGE>
Net cash provided by (used for) investing activities was $2.5 million,
$(2.6) million, $(679,000), and $(1.0) million in 1996, 1997, 1998 and the first
six months of 1999, respectively. In 1995, we invested $4.0 million in
short-term investments which were sold in 1996. We acquired $1.5 million, $2.6
million, $679,000 and $1.0 million of property and equipment in 1996, 1997, 1998
and the first six months of 1999, respectively. The increases in property and
equipment in 1996 and 1997 were comprised primarily of furniture, leasehold
improvements and computer and networking equipment as a result of our move to
our new facility in December 1996. The majority of these acquisitions were
financed under our equipment financing line. We intend to purchase approximately
$800,000 of additional capital assets during the remainder of 1999.

Net cash provided by (used for) financing activities was $8.5 million, $1.1
million, $(1.4) million and $(664,000) in 1996, 1997, 1998 and the first six
months of 1999, respectively, and resulted primarily from the issuance of $8.9
million of preferred stock in 1996 and 1997, borrowings under equipment debt
facilities of $2.0 million in 1996 and 1997 and repayment of bank debt of
$124,000, $1.5 million, $1.5 million and $832,000 in 1996, 1997, 1998 and the
first six months of 1999, respectively.

Our relationship with TSMC requires that we provide a forecast of the
minimum level of our wafer requirements for the following year. This creates a
minimum wafer purchase commitment to TSMC for such year. For 1999, our committed
purchases from TSMC are $2.8 million. None of our other agreements with
manufacturing subcontractors has similar minimum purchase commitments.

We require substantial working capital to fund our business, particularly to
finance inventories and accounts receivable. Our future capital requirements
will depend on many factors, including the rate of sales growth, market
acceptance of our existing and new products, the amount and timing of research
and development expenditures, the timing of the introduction of new products and
expansion of sales and marketing efforts. There can be no assurance that
additional equity or debt financing, if required, will be available on
satisfactory terms. We believe the net proceeds of this offering combined with
existing capital resources and cash generated from operations will be sufficient
to meet our needs for the next 12 months, although we could seek to raise
additional capital during that period. After the next 12 months, our capital and
operating requirements will depend on many factors, including the levels at
which we maintain inventory and accounts receivable, costs of securing access to
adequate manufacturing capacity and increases in our operating expenses.

INFLATION

The impact of inflation on our business has not been material for the fiscal
years ended December 31, 1996, 1997 and 1998 or for the six month period ended
June 30, 1999.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing accounting standards. SFAS No. 133 requires that all derivatives be
recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral
of Effective Date of FASB Statement No. 133," is effective for all fiscal
quarters and years beginning after June 15, 2000. We do not currently have, or
plan to enter into, forward exchange contracts to hedge exposures denominated in
foreign currencies or any other derivative financial instruments for trading or
speculative purposes.

28
<PAGE>
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position, or SOP, No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. We do not expect that the
adoption of SOP No. 98-1 will have material impact on our consolidated financial
statements.

YEAR 2000 READINESS DISCLOSURE

STATE OF READINESS. We utilize a number of computer software programs and
operating systems across our entire organization, including applications used in
financial business systems and various administrative functions. We have a team
of eight employees representing each of our major departments, led by our
manager of information systems, to identify and correct non-compliant systems.
To the extent that any of our software applications had source code unable to
appropriately interpret the upcoming Year 2000 and beyond, we have completed
modification or replacement of such applications. We have recently replaced
certain computer hardware in connection with our Year 2000 readiness program.

We are highly dependent on semiconductor foundry companies to produce our
FPGA and ESP products. We have contacted these suppliers and have received
assurances that Year 2000 issues will not affect their ability to deliver
product. We are also dependent upon third party software for the functioning of
our software design tools, QuickWorks and QuickTools, that support our FPGA and
ESP products. QuickWorks operates on Microsoft Windows while QuickTools runs on
UNIX platforms. Our software products integrate software tools that have been
developed and are maintained by third party vendors. We have contacted these
vendors and have confirmed that such software products are Year 2000 compliant.
We have also tested these products and found them to be Year 2000 compliant.
However, any failure of Windows, UNIX or the integrated third party software
tools due to Year 2000 problems, will adversely impact the performance of our
software design tools, and our business could be materially harmed.

COSTS OF ADDRESSING YEAR 2000 ISSUES. Given the information known at this
time about our non-compliant systems, coupled with our ongoing process of
monitoring our third party suppliers and vendors for Year 2000 compliance, as
well as implementing contingency plans, we do not expect Year 2000 compliance
costs to have any material adverse impact on our business. We estimate that
total costs for the Year 2000 compliance assessment and remediation will not
exceed $400,000. The costs of this assessment and remediation will be paid out
of general and administrative expenses. Through June 30, 1999, we have incurred
expenses of approximately $300,000 in addressing the year 2000 problem. We
expect to incur expenses of approximately $100,000 more for remediation, testing
and contingency planning.

RISKS OF YEAR 2000 ISSUES. In light of our assessment and remediation
efforts to date, and the planned upgrades, testing and contingency planning, we
believe that our Year 2000 risk is limited to non-critical business applications
and support hardware. No assurance can be given, however, that:

- our systems will be Year 2000 compliant;

- the manufacturers who supply semiconductors for us will be Year 2000
compliant with their internal systems; or

- other major suppliers, vendors, distributors and customers, upon whom our
business is materially dependant, will be Year 2000 compliant.

If our internal operations or those of our suppliers, vendors, distributors
or customers are adversely impacted because they are not Year 2000 compliant,
our business could be materially harmed.

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<PAGE>
CONTINGENCY PLANS. In the event any Year 2000 issues relating to key
suppliers, vendors, distributors or customers are identified and not
successfully resolved, based on information available to us at present, we
believe that the most likely worst case scenario is a temporary disruption in
infrastructure service, particularly power and telecommunications, which could
materially and adversely impact supplier deliveries or customer shipments. If
severe disruptions occur in these areas and are not corrected in a timely
manner, a revenue or profit shortfall may result in the Year 2000. We have
developed contingency plans for our operations to address the most reasonably
likely worst case scenarios regarding Year 2000 compliance. These plans include
increasing our inventories and using assembly and test facilities in different
countries.

30
<PAGE>
BUSINESS

INTRODUCTION

QuickLogic develops, markets and supports advanced field programmable gate
array, or FPGA, semiconductors and the software tools needed for our customers
to use our products. In addition to our FPGA semiconductors, we have pioneered
the development of embedded standard products, or ESPs. Our ESPs combine the
flexibility and time-to-market advantages of our FPGAs with the predictable,
high performance of standard semiconductor products, thereby enabling our
customers to integrate increased amounts of functionality on a single
semiconductor device. Our FPGA and ESP products target complex, high-performance
systems in rapidly changing markets where system manufacturers seek to minimize
time-to-market and maximize product differentiation and functionality. Examples
of markets we sell to include telecommunications and data communications;
video/audio, graphics and imaging; instrumentation and test; high-performance
computing; and military systems.

The key components of our FPGA and ESP product families are our ViaLink
programmable metal technology, our pASIC architecture and the associated
software tools used for product design. Our ViaLink technology allows us to
create smaller devices than competitors' comparable products, thereby minimizing
silicon area and cost. In addition, our ViaLink technology has lower electrical
resistance and capacitance than other programmable technologies and,
consequently, supports higher signal speed. Our FPGA and ESP architectures
provide full routability and utilization of a device's logic cells, thereby
enabling greater usable device density and design flexibility. Finally, our
software enables our customers to efficiently implement their designs using our
products.

INDUSTRY BACKGROUND

- Application Specific Integrated Circuits, or ASICs, are special purpose
devices designed for a particular manufacturer's electronic system. These
devices are customized during wafer manufacturing.

- Application Specific Standard Products, or ASSPs, are fixed-function
devices designed to comply with industry standards that can be used by a
variety of electronic systems manufacturers. Their functions are fixed
prior to wafer manufacturing.

- Programmable Logic Devices, or PLDs, are general purpose devices which can
be used by a variety of electronic systems manufacturers, and are
customized after purchase for a specific application. Field Programmable
Gate Arrays, or FPGAs, are types of PLDs used for complex functions.

Systems manufacturers have relied heavily on ASICs to implement the advanced
logic required for their products. ASICs provide high performance due to
customized circuit design. However, because ASICs are design-specific devices,
they require long development and manufacturing cycles, delaying product
introductions. In addition, because of the expense associated with the design of
ASICs, they are cost effective only if they can be manufactured in high volumes.
Finally, once ASICs are manufactured, their functionality cannot be changed to
respond to evolving market demands.

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<PAGE>
ASSPs have become widely utilized as industry standards have developed to
address increasing system complexity and the need for communication between
systems and system components. These standards include:

- Peripheral Component Interconnect, or PCI, a standard developed to provide
a high performance, reliable and cost-effective method of connecting
high-speed devices within a system.

- SONET, or Synchronous Optical NETwork, a fiber-optic transmission standard
for high-speed digital traffic, employed mainly by telephone companies and
other network service providers.

- Ethernet, a widely-used local area network, or LAN, transport standard
which controls the interconnection between servers and computers.

- Fibre Channel Interconnect Protocol, an industry networking standard for
storage area networks, or SANs, which controls the interconnection between
servers and storage devices.

Compared to ASICs, ASSPs offer the systems designer shorter development time,
lower risk and reduced development cost. However, ASSPs generally cannot be used
by systems manufacturers to differentiate their products.

To address markets where industry standards do not exist or are changing and
time-to-market is important, FPGAs are often used. FPGAs provide systems
manufacturers with the flexibility to customize and thereby differentiate their
systems, unlike ASSPs. FPGAs also enable systems manufacturers to change the
logic functionality of their systems after product introduction without the
expense and time of redesigning an ASIC. However, most FPGAs are more expensive
than ASSPs and even ASICs of equivalent functionality because they require more
silicon area. In addition, most FPGAs offer lower performance than
nonprogrammable solutions, such as ASSPs and ASICs. According to Cahners In-Stat
Group, the projected total market size for high-complexity programmable logic
devices in 1999 is approximately $2.10 billion, of which FPGAs are estimated to
account for $1.12 billion.

QUICKLOGIC'S FPGA SOLUTION

QuickLogic's FPGAs offer higher performance at lower overall systems cost
than competing FPGA solutions, in addition to offering the advantages typically
associated with FPGAs. Specifically, our products provide greater design
flexibility than standard FPGAs and enable designers of complex systems to
achieve rapid time-to-market with highly differentiated products. Our products
are based on our ViaLink technology and pASIC architectures, and our associated
QuickWorks and QuickTools design software:

- VIALINK PROGRAMMABLE METAL TECHNOLOGY. Unlike conventional SRAM-based
FPGAs, our ViaLink programmable metal technology embeds logic
interconnects between the metal layers of a chip, instead of on the
silicon substrate. As a result, we are able to provide a programmable
switch at every intersection in the wire grid, as illustrated in the graph
below. This vertical interconnect structure is more efficient and flexible
than that of conventional FPGAs, minimizing silicon area and therefore
cost. The ViaLink technology also features lower resistance and
capacitance than competing interconnect technologies, thereby optimizing
the device's performance.

32
<PAGE>
[GRAPHIC DEPICTING A CONVENTIONAL SRAM-BASED
FPGA ARCHITECTURE AND QUICKLOGIC'S PASIC ARCHITECTURE]

- PASIC ARCHITECTURE. FPGA device architectures consist of logic cells,
routing wires and interconnect elements. Unlike conventional SRAM-based
FPGA architectures, our pASIC architectures facilitate full utilization of
a device's logic cells and Input/Output pins. These logic cells have been
optimized to efficiently implement a wide range of logic functions at high
speed. Our pASIC architectures use our ViaLink technology to maximize
interconnects at every routing wire intersection. The abundance of
interconnect resources allows more paths between logic cells. As a
consequence, system designers are able to use QuickLogic FPGAs with
smaller gate counts than competing FPGAs to implement their designs. These
smaller gate count FPGAs require less silicon area and as a result are
able to be offered at a lower price.

- QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE. Our design software for
Windows and Unix operating systems provides systems manufacturers with the
ability to easily customize QuickLogic FPGAs for their specific needs.
These design tools feature 100% fully automatic place and route
capabilities, which speed design development by permitting very complex
designs to be implemented quickly. Once a design has been completed,
systems manufacturers can use the DeskFab device programmer to transfer
their design to an FGPA in minutes. Alternatively, systems manufacturers
can use our unique WebASIC program to transmit their design to QuickLogic
in order to receive a programmed device for evaluation within two business
days.

THE ADVENT OF SYSTEM-ON-A-CHIP

Over the past few years, semiconductor manufacturers have migrated to
smaller process geometries. These smaller process geometries enable more logic
elements to be incorporated in a single chip using less silicon area. More
recently, advances have been made in the integration of logic and memory on a
single chip, which had been difficult previously due to incompatible process
technologies. Advantages of the single chip approach to systems manufacturers
include:

- simplified system development,

- reduced time-to-market,

- elimination of delays associated with the transfer of data between chips,

- smaller physical size,

- lower power dissipation,

- greater reliability and

- lower cost.

However, as levels of logic integration have increased, devices have become more
specific to a particular application. This fact limits their use and potential
market size.

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<PAGE>
QUICKLOGIC'S ESP SOLUTION

QuickLogic has leveraged its unique FPGA technology to address the
limitations inherent in current system-on-a-chip approaches. The result is
embedded standard products, or ESPs, that deliver the advantages offered by both
FPGAs and ASSPs. In its simplest form, an ESP contains four basic parts: a
programmable logic array, an embedded standard function, an optional
programmable read-only memory to configure the embedded function, and an
interface that allows communication between the standard function and
programmable logic array. Our ESP products combine the system-level
functionality of ASSPs with the flexibility of FPGAs. We believe ESPs offer the
following specific advantages:

- INCREASED PERFORMANCE. In a typical design, data must travel between an
ASSP and an FPGA across a printed circuit board. The limited number of
connections available and the distance between the devices can degrade the
system's overall performance. Our ESP solution allows all data to be
processed on a single chip.

- DECREASED COST. Because our ESP is a single chip solution, it requires
less silicon area, and therefore is less expensive to produce.
Additionally, this single chip approach lowers the component, assembly and
test cost for the system manufacturer.

- INCREASED RELIABILITY. ESP designs are more reliable because single chip
solutions contain fewer components and circuit board connections that are
subject to failure.

- SHORTER DEVELOPMENT TIME. With a multiple chip design, systems designers
must solve complex routing and timing issues between devices. A single
chip ESP solution eliminates the timing issues between devices and
simplifies software simulation, leading to shorter development time.

We have introduced our first two ESP product lines, the QuickRAM and
QuickPCI families. Both families are designed for a wide range of
performance-driven applications. For example, QuickRAM products, which combine
blocks of embedded, high-performance memory with our FPGA logic, are used by
Alcatel in its Lightwave telecommunication transmission systems. QuickPCI
products combine PCI controllers with our FPGA logic. We completed development
of our first QuickPCI product in April 1999, and have shipped development
quantities to several customers.

According to Cahners In-Stat Group, the total ESP market size in 1998 was
$13.8 million, and is projected to increase to $43.9 million in 1999.

THE QUICKLOGIC STRATEGY

Our objective is to be the leading provider of high-speed, flexible,
cost-effective FPGAs and ESPs. We feel we can achieve this objective by offering
systems manufacturers the ability to accelerate design cycles to satisfy
demanding time-to-market requirements. To achieve our objective, we have adopted
the following strategies:

EXTEND TECHNOLOGY LEADERSHIP

Our ViaLink technology, pASIC architectures and proprietary software design
tools enable us to offer flexible, high-performance FPGA and ESP products. We
intend to continue to invest in the development of these technologies and to
utilize such developments in future innovations of both our FPGA and our ESP
products. We also intend to focus our resources on building critical
systems-level expertise to introduce new ESP products and enhance existing ESP
product families.

CAPITALIZE ON CROSS-SELLING OPPORTUNITIES BETWEEN OUR FPGA AND ESP PRODUCTS

Because our development tools share many of the same features for both FPGAs
and ESPs, once a manufacturer designs a system with either product, we believe
the manufacturer will recognize the

34
<PAGE>
advantages of our other products. Accordingly, we intend to leverage our FPGA
and ESP design wins to pursue additional design wins on complementary products
with the same customer.

BROADEN ESP PRODUCT LINES

In addition to our QuickRAM and QuickPCI families, we intend to focus on the
needs of large, high-growth, performance-driven market segments. Our product
design approach consists of continuous solicitation of feedback from existing
and prospective customers.

CREATE INNOVATIVE, INDUSTRY-LEADING CUSTOMER SERVICES

We continue to develop and implement innovative ways to serve and
communicate with our customers. For example, we recently introduced our WebASIC
service. This service allows our customers to use our development software to
design a circuit, transmit design information over the Internet and receive a
QuickLogic FPGA or ESP device programmed with their design within one business
day in North America and Europe or within two business days in Asia. We are in
the process of deploying ProChannel, a web-based system which will allow our
customers to obtain promotional material, receive quotations, place orders for
our products and view their order status over the Internet. This system will
complement the Electronic Data Interchange systems that we have used for the
past several years with our largest customers.

TARGET HIGH-PERFORMANCE, RAPIDLY CHANGING MARKETS

We will continue to focus our design and marketing efforts on systems
manufacturers who sell complex systems that require high performance, design
flexibility, low cost and rapid time-to-market. Such applications include
telecommunications and data communications; video/audio, graphics and imaging
systems; instrumentation and test; high-performance computing; and military
systems.

MARKETS AND APPLICATIONS

Our FPGA and ESP products are targeted at high growth markets that have
demanding performance, design flexibility, cost and time-to-market requirements.
Examples of the markets and applications in which our products are used include:

TELECOMMUNICATIONS AND DATA COMMUNICATIONS

Telecommunications and data communications companies require logic devices
with high performance, low power consumption and design flexibility.
QuickLogic's single-chip QuickRAM devices meet this need by providing
comprehensive solutions that eliminate the need for multiple chip solutions.
Alcatel uses our QuickRAM products in their fiber optic Lightwave transmission
equipment.

VIDEO/AUDIO, GRAPHICS AND IMAGING

Honeywell uses our QuickRAM and FPGA products for their Primus Epic
commercial avionics display systems. Their applications for QuickLogic's devices
include flight data managers, back panel interfaces, flat panel display
interfaces, and PCI interfaces.

INSTRUMENTATION AND TEST

Instrumentation and industrial controls manufacturers require logic devices
with low power consumption, high reliability and, often, high performance.
Teradyne uses our QuickRAM and FPGA devices in their semiconductor test
equipment.

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<PAGE>
HIGH-PERFORMANCE COMPUTING

IBM uses our FPGA devices in numerous applications, including controllers
for its redundant array of independent disks, or RAID, products. Compaq Computer
also uses our FPGAs in their Alpha-based workstations and servers.

MILITARY SYSTEMS

Military electronics systems manufacturers have demanding reliability and
performance requirements. Military applications require devices that remain
configured even when power is lost or interrupted. Our ViaLink technology
creates connections within the device which are permanent, unlike reprogrammable
FPGAs, which must be reconfigured after losing power. We provide several product
lines that are specially assembled and tested to meet demanding military
requirements. Hamilton Standard, a division of United Technologies, uses our
FPGA devices for a flight computer in the F-117 stealth fighter.

CUSTOMERS

Through our ten years of business in the FPGA market, we have developed a
strong customer base. Our customers include leading systems manufacturers, such
as IBM, which recently added QuickLogic to its recommended supplier list for
high performance FPGA products. The following chart provides a representative
list by industry of our current customers:

<TABLE>
<S> <C> <C>
INDUSTRY CUSTOMER APPLICATION
Data Communications and Alcatel Fiber optic transmission equipment
Telecommunications Ericsson GSM base stations
IBM Data encryption, network servers
NEC PBX electronics, wireless base stations
Philips Data encryption
Video/Audio, Graphics and Digidesign PC-based audio editing
Imaging Eastman Kodak High-speed video motion analysis
Honeywell Aircraft navigation and flight controls
Mitsubishi Large screen displays
NEC Solid state video cameras
Sony Industrial video cameras
Texas Instruments Digital micro mirror applications
Instrumentation and Test ABB Industrial power management systems
LTX Semiconductor test equipment
National PC-based instrumentation boards
Instruments
Teradyne Semiconductor test equipment
Toshiba Mail sorting equipment
High-Performance Computing Compaq Computer Alpha processor motherboards
IBM RAID controller, ThinkPad display
controls
Mitsubishi Mobile PC pen-input display controllers
Military Systems B.F. Goodrich Launch vehicle for Delta Four rockets
DY-4 VME-based computer systems
Hamilton Standard Flight computers
Hughes Aircraft Helicopter motor controls and radar
McDonnell Douglas C-17 flight controllers
Raytheon Tornado missile
</TABLE>

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<PAGE>
PRODUCTS

We make field programmable gate arrays and embedded standard products based
on our ViaLink technology and pASIC architecture. Each product family includes a
range of devices to address differing performance and cost requirements. A
variety of package types are available to satisfy varying customer requirements
for physical size and the number of input and output connections to the circuit
board. We also offer most of our devices in commercial, industrial and military
temperature ranges.

FIELD PROGRAMMABLE GATE ARRAYS

Our pASIC products are general purpose FPGAs that address the
high-performance segments of the programmable logic market. Our current product
line consists of three families of FPGAs. Each of these product families include
devices with a range of logic capacities and number of input and output pins.
Having such a range of devices is important to design engineers whose device
requirements can vary broadly from one application to another. Smaller devices
address simpler applications at lower cost, while larger devices cost more but
can support larger and more complex applications. The following tables describe
these families:

PASIC 3 FPGA FAMILY

<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL3004 4,000 76 Q3 1999
QL3012 12,000 118 Q2 1998
QL3025 25,000 204 Q4 1997
QL3040 40,000 252 Q3 1998
QL3060 60,000 316 Q2 1998
</TABLE>

PASIC 2 FPGA FAMILY

<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL2003 6,000 118 Q1 1997
QL2005 12,000 156 Q4 1996
QL2007 18,000 174 Q4 1995
QL2009 25,000 225 Q2 1996
</TABLE>

PASIC 1 FPGA FAMILY

<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL8x12B 2,000 64 Q4 1991
QL12x16B 4,000 88 Q4 1992
QL16x24B 8,000 122 Q4 1993
QL24x32B 16,000 180 Q2 1995
</TABLE>

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<PAGE>
EMBEDDED STANDARD PRODUCTS

ESPs are single chip solutions that combine the system-level functionality
of ASSPs with the flexibility of FPGAs. ESPs link blocks of user-configurable
standard functions with field programmable logic through a high-performance
interface. We have introduced our first two lines of ESPs, the QuickRAM and
QuickPCI families.

QUICKRAM. Our QuickRAM family of products, which began shipping in June
1998, combines blocks of high-performance, embedded memory with our high-speed
programmable logic. The QuickRAM family includes five devices that span a range
of logic and memory sizes, allowing design engineers to choose the optimal part
for a particular application. Larger devices feature more memory and logic
supporting more complex designs, while smaller devices offer lower cost. The
QuickRAM family includes four available devices and one planned device that span
a wide range of logic and memory sizes:

QUICKRAM ESP FAMILY

<TABLE>
<CAPTION>
MEMORY CAPACITY LOGIC CAPACITY MAXIMUM INPUTS INTRODUCTION
DEVICE (BITS) (GATES) AND OUTPUTS(#) DATE
<S> <C> <C> <C> <C>
QL4009 9,216 6,000 82 Q3 1999
QL4016 11,520 12,000 118 Q2 1999
QL4036 16,128 25,000 204 Q4 1998
QL4058 20,736 40,000 252 Q2 1999
QL4090 25,344 60,000 316 Q2 1998
</TABLE>

QUICKPCI. The PCI bus, or Peripheral Component Interconnect, is a standard
hardware architecture that manages the transfer of data among major components
in an electronic system at high speed. The master PCI bus function controls the
PCI bus while the target function only operates under the control of the PCI
bus. The QuickPCI family includes five devices that span a range of PCI bus
capabilities and memory and programmable logic capacities, with both master and
target functions. Our QuickPCI family of products combines high-performance
embedded PCI bus controllers with our high-speed programmable logic. We
completed development of our first QuickPCI product in April 1999, and we have
shipped development quantities of devices to several customers.

The PCI bus is available in two basic configurations: 32 bits wide and 64
bits wide. Clock speeds for the PCI bus range from 33MHz to 75MHz. Devices which
support the smaller, slower PCI configurations cost less than devices which
support the wider, faster configurations. While many semiconductor vendors offer
devices that address one particular PCI configuration, very few offer a full
range of devices to meet all of the possible configurations.

QUICKPCI ESP FAMILY

<TABLE>
<CAPTION>
MEMORY LOGIC
PCI BUS MAX. PCI BUS CAPACITY CAPACITY INTRODUCTION
DEVICE FUNCTION SPEED/WIDTH (BITS) (GATES) DATE
<S> <C> <C> <C> <C> <C>
QL5030 Target 33MHz/32-bits 11,500 4,500 Q3 1999
QL5130 Target 33MHz/32-bits 16,000 17,500 Expected Q4 1999
QL5032 Master/Target 33MHz/32-bits 16,000 14,500 Q2 1999
QL5232 Master/Target 33MHz/32-bits 25,344 49,500 Q3 1999
QL5064 Master/Target 75MHz/64-bits 25,344 30,000 Q3 1999
</TABLE>

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<PAGE>
FPGA AND ESP DEVELOPMENT TOOLS

Our FPGA and ESP devices are supported by a complete range of development
tools including software and device programming hardware.

QUICKWORKS. QuickWorks is a fully integrated design solution consisting of
internally developed and licensed third-party software operating on Microsoft
Windows. QuickWorks includes industry-standard, hardware description languages,
including VHDL and Verilog, as well as schematic and mixed-mode entry for fast
and efficient logic design. Our suite provides a complete FPGA software
solution, including design entry, logic synthesis, place and route, and
simulation. A derivative product, called QuickWorks-Lite, offers basic design
entry via schematic capture along with place and route free to designers.

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

PROGRAMMING HARDWARE. After a design has been completed using our software,
the device is configured using our line of DeskFAB programming hardware and
associated device adapters.

SALES, MARKETING AND TECHNICAL SUPPORT

We sell our products through a network of sales managers, independent sales
representatives and electronics distributors in North America, Europe and Asia.
In addition to our corporate headquarters in Sunnyvale, we have regional sales
operations in Los Angeles, Dallas, Boston, Raleigh, Chicago, London and Hong
Kong. Our direct sales organization consists of a staff of 23, including sales
managers, field application engineers and administrative personnel. In North
America, our six sales managers direct the activities of 19 independent sales
representative firms operating out of more than 40 offices totaling
approximately 180 sales representatives, as well as the activities of four
electronics distributors with more than 230 locations. Internationally, three
sales managers direct the activities of nine distributors and three independent
sales representatives in Europe and nine distributors in Asia. Our marketing
organization consists of 14 employees. All of the foregoing numbers are as of
September 30, 1999.

Our major distributors, Arrow Electronics, Bell Microproducts, Future
Electronics and Sterling Electronics accounted for approximately 53% of our
sales in 1998 and 54% of our sales in the six months ended June 30, 1999. Our
international sales were 25%, 43% and 47% of our total sales for 1996, 1997 and
1998, respectively and 50% for the six months ended June 30, 1999. Although we
have contracts with our distributors, any of them may terminate their
relationship with us on short notice. The loss of one or more of our principal
distributors, or our inability to attract new distributors, would materially
harm our business. We may lose distributors in the future and we may be unable
to recruit additional or replacement distributors. As a result, our future
performance will depend in part on our ability to retain our existing
distributors and attract new distributors that will be able to market, sell and
support our products effectively. We anticipate that sales to customers located
outside the United States will continue to represent a significant portion of
our total sales in future periods and the trend of foreign customers accounting
for an increasing portion of our total sales may continue. We believe that no
end customer accounted for more than 5% of sales in 1998 or the six months ended
June 30, 1999.

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<PAGE>
We provide systems manufacturers with comprehensive technical support, which
we believe is critical to remaining competitive in the markets we serve. As of
September 30, 1999, our applications support organization included four direct
field application engineers and over 200 application engineers employed by our
distributors. These application engineers provide pre-sales and on-site
technical support to customers. Application support is also provided by six
factory-based customer engineers who offer the majority of post-sale support
through a dedicated customer support hotline. In 1998, we established a design
center to develop new embedded functions for ESPs, and to provide in-depth,
system-level technical support to our customers.

Our WebASIC program allows systems manufacturers to download our design
software from our web site and create a custom design for a QuickLogic device at
their desktop. They can then transmit the design data to us via e-mail and
request configured sample devices. We also use our web site to provide product
documentation and technical support information.

RESEARCH AND DEVELOPMENT

Our future success will depend to a large extent on our ability to rapidly
develop and introduce new products and enhancements to our existing products
that meet emerging industry standards and satisfy changing customer
requirements. We have made and expect to continue to make substantial
investments in research and development and to participate in the development of
new and existing industry standards.

As of September 30, 1999, the research and development staff consisted of 40
employees. Our research and development efforts are focused on standard function
development and integration, device architecture, development tools and foundry
process development. Our standard function development and integration personnel
create circuit designs for inclusion in our ESP products. They also evaluate
circuit designs by third parties for inclusion in our ESP products and integrate
those circuit designs with our FPGA technology. Our device architecture
personnel develop new and improved architectures for our FPGA and ESP products
to better serve the needs of our customers. Our software engineering group
develops place and route tools, which fit the design into specific logic cell
elements within a device and determine the necessary interconnections. They also
develop delay modeling tools, which estimate the timing of all the circuit paths
for accurate simulation. The software group incorporates third-party software
tools into the QuickWorks design software suite, and develops the design
libraries needed for the QuickWorks and QuickTools products to integrate with
third-party design environments. Our process engineering group maintains our
proprietary wafer manufacturing processes, oversees product manufacturing and
process development with our third-party foundries, and is involved in ongoing
process improvements to increase yields and optimize device characteristics.

Our research and development expense for 1996, 1997 and 1998 and for the
first half of 1999 were $4.6 million, $6.2 million, $6.3 million and $3.6
million, respectively. We anticipate that we will continue to commit substantial
resources to research and development in the future.

MANUFACTURING

We have established close relationships with third-party manufacturers for
our wafer fabrication, package assembly, test and programming requirements to
ensure stability in the supply of our products and minimize the risk of
localized capacity constraints.

We outsource all of our wafer manufacturing to Taiwan Semiconductor
Manufacturing Company at its Taiwan facilities and Cypress Semiconductor
Corporation at its Round Rock, Texas facility. TSMC manufactures our pASIC 3,
QuickRAM and QuickPCI product families using a four-layer metal, 0.35 micron
CMOS process on eight-inch wafers. Cypress manufactures our pASIC 1 and pASIC 2
product families using a three-layer metal, 0.65 micron CMOS process on six-inch
wafers. Our foundry agreement with TSMC is effective through August 2002 with
successive automatic one-year renewal

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<PAGE>
terms. We have committed to purchase approximately $2.8 million under this
agreement in 1999. Our foundry agreement with Cypress is effective through 2001.
Each of our foundry agreements guarantee capacity availability and provide for
volume commitments. We purchase all of our pASIC 1 and pASIC 2 requirements from
Cypress. TSMC's manufacturing commitment is based upon our forecasted
requirements. TSMC requires that we purchase a minimum percentage of our total
production requirements in any one year from them.

We outsource our product packaging, test and programming to Amkor and
ChipPAC at their South Korea facilities and to Advanced Semiconductor
Engineering at its Taiwan facility.

COMPETITION

The semiconductor industry is intensely competitive and is characterized by
constant technological change, rapid rates of product obsolescence and price
erosion. Our existing competitors include suppliers of conventional standard
products, such as PLX Technology and Applied Micro Circuits Corporation, or
AMCC; suppliers of complex programmable logic devices, or CPLDs, including
Lattice Semiconductor and Altera; and suppliers of FPGAs, particularly Xilinx
and Actel. The PLD market is dominated by Xilinx and Altera, which together
control over 60% of the market, according to Cahners In-Stat Group, a
semiconductor market research firm. Xilinx dominates the FPGA segment of the
market while Altera dominates the CPLD segment of the market. We also face
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 our products. As we introduce additional ESPs,
we will also face competition from standard product manufacturers who are
already servicing or who may decide to enter the markets addressed by these new
ESP devices. In addition, we expect significant competition in the future from
major domestic and international semiconductor suppliers. We also may face
competition from suppliers of products based on new or emerging technologies.

We believe that important competitive factors in our 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, technical service and support,
wafer fabrication capacity and sources of raw materials, and protection of
products by effective utilization of intellectual property laws.

TECHNOLOGY

We believe that our FPGA and ESP products have distinct advantages over
traditional FPGA solutions and multiple chip solutions combining FPGAs and ASSPs
with regard to speed, design flexibility, cost and time-to-market. Our key
technologies are the ViaLink programmable metal technology, pASIC architectures,
and the QuickWorks and QuickTools design software.

VIALINK PROGRAMMABLE METAL TECHNOLOGY. Our ViaLink programmable metal
technology embeds programmable switches between the metal layers of a device
without consuming silicon surface area. As a result, we are able to provide a
programmable switch at every intersection in the wire grid. The abundance of
programmable switches allows for more complex paths between logic cells and
facilitates full utilization of an FPGA's logic cells and input/output pins. As
a consequence, system designers using QuickLogic FPGAs can be assured that their
design can consume all of the logic capacity of the FPGA and will have enough
resources to route their signals in very complex designs. Changes in our
customers' designs will not move the positions of their inputs and outputs. The
programming resources of our FPGAs allow designers to select smaller, less
expensive QuickLogic FPGAs to implement their designs as opposed to customary
SRAM-based FPGAs. In addition, our ViaLink technology also features lower
resistance and capacitance than competing programming technologies, thereby
optimizing the device's performance.

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<PAGE>
PASIC ARCHITECTURE. Our FPGA device architecture consists of logic cells,
routing wires and interconnect switches. Our pASIC logic cell is optimized to
efficiently implement a wide range of logic functions at high speed. Each cell
can implement one large function, five smaller independent functions, or any
combination in-between. The logic cell has abundant inputs that allow many user
functions to be implemented with a single logic delay, resulting in high
performance. The flexibility of the pASIC architecture is especially important
for designs synthesized from hardware design languages. The pASIC architecture
gives logic synthesis tools the needed degrees of freedom for high logic
utilization without sacrificing performance.

QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE. Our comprehensive QuickWorks
design software provides high-level design entry, schematic capture, logic
synthesis, functional and timing simulation, placement and routing on the
Windows operating system. QuickWorks incorporates standard design languages,
Verilog and VHDL, and leading third-party software to integrate with all leading
third-party design environments to support our pASIC products. A derivative
product, called QuickWorks-Lite, offers basic design entry via schematic capture
along with place and route free to designers. QuickTools is QuickLogic's place
and route software for UNIX platforms. These tools optimize designs for device
utilization and in-system operation speed and create an output file which allows
users to transfer their designs to our programmable devices.

INTELLECTUAL PROPERTY

Our future success and competitive position depend upon our ability to
obtain and maintain the proprietary technology used in our principal products.
We hold 61 U.S. patents and have 13 pending applications for additional U.S.
patents containing claims covering various aspects of programmable integrated
circuits, programmable interconnect structures and programmable metal devices.
In addition, we have three patent applications pending in Japan. Our issued
patents expire between 2009 and 2016. We have also registered five of our
trademarks in the U.S. with applications to register an additional two
trademarks now pending.

Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent
protection for our products. The process of seeking patent protection can be
long and expensive, and we cannot be certain that any currently pending or
future applications will actually result in issued patents, or that, even if
patents are issued, they will be of sufficient scope or strength to provide
meaningful protection or any commercial advantage to us. Furthermore, others may
develop technologies that are similar or superior to our technology or design
around the patents we own.

We also rely on trade secret protection for our technology, in part through
confidentiality agreements with our employees, consultants and third parties.
However, employees may breach these agreements, and we may not have adequate
remedies for any breach. In any case, others may come to know about or determine
our trade secrets through a variety of methods. In addition, the laws of certain
territories in which we develop, manufacture or sell our products may not
protect our intellectual property rights to the same extent as do the laws of
the United States.

In March 1997, we entered into a patent cross-license agreement with
Cypress, whereby we granted Cypress a nonexclusive license to our patents and
intellectual property rights in exchange for Cypress' nonexclusive license to
their programmable logic technology patents. In August 1998, we also entered
into a patent cross-license agreement with Actel pursuant to which we have each
granted the other a nonexclusive license to certain of our respective
programmable logic device technology patents. We anticipate that we will
continue to enter into licensing arrangements in the future; however, it is
possible that desirable licenses will not be available to us on commercially
reasonable terms. If we lose existing licenses to key technology, or are unable
to enter into new licenses which we deem important, it could materially harm our
business.

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<PAGE>
From time to time, we receive letters alleging patent infringement or
inviting us to take a license to other parties' patents. We evaluate these
letters on a case-by-case basis. In September 1999, we received an offer to
license a patent related to field programmable gate array architecture. It is
too early for us to determine whether this license would be necessary or useful
and obtainable at a reasonable price. Offers such as these may lead to
litigation if we reject the opportunity to obtain the license.

We have entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
us, and which give us the right to use patents and other technology developed by
them. The failure to obtain a license from a third party for technology used by
us could cause us to incur substantial liabilities and to suspend the
manufacture or shipment of products or our use of processes requiring the
technology. Litigation could result in significant expenses to us, adversely
affect sales of the challenged product or technology and divert the efforts of
our technical and management personnel, whether or not the litigation is
determined in our favor. In the event of an adverse result in any litigation, we
could be required to pay substantial damages, cease the manufacture, use, sale
or importation of infringing products, expend significant resources to develop
or acquire non-infringing technology, and discontinue the use of processes
requiring the infringing technology or obtain licenses to the infringing
technology. We may not be successful in the development or acquisition, or the
necessary licenses may not be available under reasonable terms, and any
development, acquisition or license could require expenditures by us of
substantial time and other resources. Any of these developments would have a
material adverse effect on our business. We may be unable to adequately protect
our intellectual property rights, and may face significant expenses as a result
of future litigation.

EMPLOYEES

As of September 30, 1999, we had a total of 156 employees worldwide, with 46
people in operations, 40 people in research and development, 23 people in sales,
20 people in marketing, 23 people in administration and four people in
management information systems. We believe that our future success will depend
in part on our continued ability to attract, hire and retain qualified
personnel. None of our employees is represented by a labor union, and we believe
our employee relations are good.

FACILITIES

Our 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 2003 with an
option to renew through 2006. In addition, we lease sales offices near London
and in Hong Kong. The London office is leased through September 2004, and the
Hong Kong office is leased on a month-to-month basis. We believe that our
existing facilities are adequate for our current needs.

LITIGATION

QuickLogic is not a party to any pending litigation.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information concerning our current
executive officers and directors:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
E. Thomas Hart....................................... 57 President, Chief Executive Officer and Director
John M. Birkner...................................... 55 Vice President, Chief Technical Officer
Michael R. Brown..................................... 49 Vice President, Worldwide Sales
Andrew K. Chan....................................... 48 Vice President, Research and Development
Hua-Thye Chua........................................ 64 Vice President, Process Technology and Director
Reynold W. Simpson................................... 50 Vice President, Operations
Bill J. Smithson..................................... 56 Vice President, Engineering
Arthur O. Whipple.................................... 51 Vice President, Finance, Chief Financial Officer and
Secretary
Ronald D. Zimmerman.................................. 51 Vice President, Human Resources
Irwin Federman....................................... 64 Chairman of the Board of Directors
Donald P. Beadle..................................... 63 Director
Michael J. Callahan.................................. 63 Director
</TABLE>

E. THOMAS HART has served as our President, Chief Executive Officer and a
member of our board of directors since June 1994. Prior to joining QuickLogic,
Mr. Hart was Vice President and General Manager of the Advanced Networks
Division at National Semiconductor, 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 holds a B.S.E.E. from the University of Washington.

JOHN M. BIRKNER, a co-founder of QuickLogic, has served with us since April
1988, serving as Vice President, Chief Technical Officer since 1993. From
September 1975 to June 1986, Mr. Birkner was a fellow at Monolithic Memories, a
semiconductor manufacturing company. Mr. Birkner holds a B.S.E.E. from the
University of California, Berkeley and an M.S.E.E. from the University of Akron.

MICHAEL R. BROWN has served as our Vice President, Worldwide Sales since
January 1999. From 1984 until January 1999, he was employed by Hitachi America,
a semiconductor manufacturing company, in a variety of sales management
positions, most recently as the Vice President of Sales for the Americas. Mr.
Brown holds a B.A. in Kinesiology/Psychology from California State University,
Northridge and attended the U.S. Navy Aviation Electronics School. Mr. Brown
holds a certificate in Advanced Management from Stanford University.

ANDREW K. CHAN, a co-founder of QuickLogic, has served with us since April
1988, most recently as Vice President, Research and Development. Prior to
joining QuickLogic, Mr. Chan was a design engineering manager at Monolithic
Memories. Mr. Chan holds a B.S.E.E. in Electrical Engineering from Washington
State University and an M.S.E.C. in Electrical Sciences from the University of
New York, Stonybrook.

HUA-THYE CHUA, a co-founder of QuickLogic, has served as a member of our
board of directors since QuickLogic's inception in April 1988. Since December
1996, Mr. Chua has served as our Vice President, Process Technology. He served
as our Vice President of Technology Development from April 1989 to December
1996. During the prior 25 years, Mr. Chua worked at semiconductor manufacturing
companies, including Fairchild Semiconductor, Intel and Monolithic Memories.

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<PAGE>
Mr. Chua holds a B.S.E.E. from Ohio University and an M.S.E.E. from the
University of California, Berkeley.

REYNOLD W. SIMPSON has served as our Vice President, Operations since August
1997. 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 Operations Manager at LSI Logic, a
semiconductor manufacturing company, from March 1990 to February 1996 and
Quality Director from February 1989 to March 1990. Mr. Simpson holds a
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 at the Kingsway Polytechnic Institute in Scotland.

BILL J. SMITHSON has served as our Vice President, Engineering since
September 1999. From April 1991 to September 1999, Mr. Smithson was Vice
President, Semiconductor Technology at Adaptec Inc., a developer and
manufacturer of input/output technology products. From 1987 to 1990, Mr.
Smithson was Division Director, Integrated Circuit Research and Development at
Data General Corporation, a semiconductor corporation. Mr. Smithson has also
held senior management positions at other semiconductor companies, including
VLSI Technology, Inc., National Semiconductor Corporation, and Motorola, Inc.
Mr. Smithson holds a B.S.E.E. from the University of Missouri at Rolla, an
M.S.E.E. from Arizona State University and an M.B.A. from Santa Clara
University.

ARTHUR O. WHIPPLE has served as our Vice President, Finance, Chief Financial
Officer and Secretary since April 1998. From April 1994 to April 1998, Mr.
Whipple was employed by ILC Technology, a manufacturer of high performance
lighting products, as its Vice President of Engineering and by its subsidiary,
Precision Lamp, a manufacturer of high-performance lighting products, as its
Vice President of Finance and Operations. From February 1990 to April 1994, Mr.
Whipple served as the President of Aqua Design, a privately-held provider of
water treatment services and equipment. Mr. Whipple holds a B.S.E.E. from the
University of Washington and an M.B.A. from Santa Clara University.

In May 1990, Mr. Whipple reached a settlement with the SEC in connection
with an action brought by the SEC concerning the accounting treatment for
certain revenue reflected in the financial statements of URS Corporation, then
known as Thortec, in 1986 and 1987. Mr. Whipple was Vice President and Treasurer
at URS Corporation during that period. Mr. Whipple consented to the entry of an
injunction with the SEC without admitting or denying any of the SEC's
allegations, and there was no adjudication or findings of fact. The injunction
bars Mr. Whipple from aiding and abetting the filing of any report with the SEC
that contains an untrue statement of material fact and aiding and abetting the
failure to keep accurate and fair books and records. Our Audit Committee
conducted a detailed investigation into Mr. Whipple's involvement in the matter,
and concluded that nothing concerning that matter affects Mr. Whipple's
integrity or ability to serve as our Chief Financial Officer.

RONALD D. ZIMMERMAN has served as our Vice President, Human Resources since
October 1996. From August 1988 to October 1996, Mr. Zimmerman was Human
Resources Director of the Analog Products Group at National Semiconductor
Corporation, as well as group human resources director of the corporate
technology and quality/reliability organizations and the human resources
director of corporate administration. Mr. Zimmerman holds a B.A. in Sociology
and Psychology and an M.A. in Psychology from San Jose State University.

IRWIN FEDERMAN has served as chairman of our board of directors 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 the following public companies: TelCom
Semiconductor, a semiconductor company; SanDisk, a semiconductor company;
Western Digital, a disk drive manufacturer; Komag, a thin film media
manufacturer; NeoMagic, a developer of multimedia accelerators; and Check Point

45
<PAGE>
Software Technologies, a network security software company. Mr. Federman holds a
B.S. in Economics from Brooklyn College, is a Certified Public Accountant, and
holds an honorary Doctorate of Engineering Science from Santa Clara University.

DONALD P. BEADLE has served as a member of our board of directors since July
1997. Since June 1994, Mr. Beadle has been President of Beadle Associates, a
consulting firm. 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. At National Semiconductor, 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. Mr. Beadle was employed by National Semiconductor in
executive sales and marketing positions for 34 years until June 1994, at which
time he was Executive Vice President, Worldwide Sales and Marketing. Mr. Beadle
serves on the board of directors of one public company, HMT Technology, a disk
media manufacturer. He received his technical education at the University of
Connecticut and the Bridgeport Institute of Engineering.

MICHAEL J. CALLAHAN has served as a member of our board of directors since
July 1997. Since March 1990, Mr. Callahan has served as Chairman of the Board,
President and Chief Executive Officer of Waferscale Integration, a producer of
peripheral integrated circuits. From 1987 to March 1990, Mr. Callahan was
President of Monolithic Memories, or MMI, which became a subsidiary of Advanced
Micro Devices, a semiconductor manufacturing company, or AMD. 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, a semiconductor manufacturing company, for 16 years
where he was Director of Research and Development as well as Director of Linear
Operations. Mr. Callahan holds a B.S.E.E. from the Massachusetts Institute of
Technology.

EXECUTIVE OFFICERS

Our executive officers are elected by, and serve at the discretion of, our
board of directors. There are no family relationships among our directors and
officers.

BOARD OF DIRECTORS

We currently have authorized five directors. Our directors consist of
Messrs. Beadle, Callahan, Chua, Federman and Hart. All directors hold office
until the next annual meeting of stockholders or until their successors are duly
qualified and elected. Our certificate of incorporation provides that, as of the
first annual meeting of stockholders following this offering, our board of
directors will be divided into three classes, each with staggered three-year
terms. As a result, only one class of directors will be elected at each annual
meeting of our stockholders, with the other classes continuing for the remainder
of their respective three-year terms. Messrs. Beadle and Callahan have been
designated as Class I directors, whose term expires at the 2000 annual meeting
of stockholders; Messrs. Chua and Federman have been designated as Class II
directors, whose term expires at the 2001 annual meeting of stockholders; and
Mr. Hart has been designated as a Class III director, whose term expires at the
2002 annual meeting of stockholders.

BOARD COMMITTEES

Our board of directors has an audit committee and a compensation committee.

AUDIT COMMITTEE. The audit committee was formed in June 1995 and currently
consists of Messrs. Beadle, Callahan and Federman. The audit committee reviews
the results and scope of the annual audit and other services provided by our
independent accountants, reviews and evaluates our

46
<PAGE>
internal control functions and monitors financial transactions between us and
our employees, officers and directors.

COMPENSATION COMMITTEE. The compensation committee was formed in June 1995
and currently consists of Messrs. Beadle, Callahan and Federman. The
compensation committee administers the 1989 stock option plan, 1999 stock plan
and 1999 employee stock purchase plan, and reviews the compensation and benefits
for our executive officers.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the compensation committee or executive officer of QuickLogic has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.

DIRECTOR COMPENSATION

Our non-employee directors are reimbursed for their out-of-pocket expenses
incurred in connection with attending board and committee meetings but are not
compensated for their services as board members. We have in the past granted to
our non-employee directors options to purchase our common stock pursuant to the
terms of our 1989 stock option plan. We intend to grant to our non-employee
directors options to purchase our common stock pursuant to the terms of our 1999
stock plan. See "--Benefit Plans."

EXECUTIVE COMPENSATION

The following table sets forth certain information concerning compensation
of our chief executive officer and each of the next four most highly compensated
executive officers as of December 31, 1998, and one former executive officer,
whose aggregate cash compensation exceeded $100,000 during the year ended
December 31, 1998. We refer to these persons as the "named executive officers"
elsewhere in this prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY OPTIONS COMPENSATION
- ------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
E. Thomas Hart President, ......................................... $ 269,208 166,667 $ 12,693
Chief Executive Officer and Director
Scott D. Ward ..................................................... 196,961 25,000 --
Vice President, Engineering
Michael Burger .................................................... 174,117 183,334 30,954
Former Vice President, Worldwide Sales
Reynold W. Simpson ................................................ 180,868 41,667 --
Vice President, Operations
Ronald D. Zimmerman ............................................... 177,162 -- --
Vice President, Human Resources
Andrew K. Chan .................................................... 130,999 16,667 --
Vice President, Research and Development
</TABLE>

A portion of each executive officer's salary is dependent upon their meeting
of certain sales, gross margin and other management objectives.

47
<PAGE>
The amounts listed under the column captioned "All Other Compensation"
represent automobile allowances we have given to Mr. Hart and Mr. Burger and a
relocation fee for Mr. Burger. Mr. Burger terminated employment with us in
December 1998 and Mr. Ward terminated employment with us in August 1999.

Mr. Whipple, Vice President, Finance, Chief Financial Officer and Secretary,
commenced employment with us in April 1998 and received $99,007 in salary in
1998. On an annualized basis, his salary for 1998 would have been $170,000. In
addition, during the year ended December 31, 1998, Mr. Whipple received options
to purchase 108,334 shares of QuickLogic common stock. Mr. Brown, Vice
President, Worldwide Sales, joined QuickLogic in January 1999 at an annual base
salary of $225,000 and received options to purchase 166,667 shares of QuickLogic
common stock.

OPTION GRANTS IN FISCAL YEAR 1998

The following table sets forth certain information with respect to stock
options granted to each of our named executive officers during the fiscal year
ended December 31, 1998.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION --------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ------------------------------------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart............................ 166,667 14.77% $ 4.50 8-19-08 $ 471,671 $ 1,195,307
Scott D. Ward............................. 25,000 2.22% 4.50 8-19-08 70,751 179,296
Michael Burger............................ 166,667 14.77% 4.50 1-20-08 471,671 1,195,307
16,667 1.48% 4.50 8-19-08 47,167 119,531
Reynold W. Simpson........................ 41,667 3.69% 4.50 8-19-08 117,918 298,827
Ronald D. Zimmerman....................... -- -- -- -- -- --
Andrew K. Chan............................ 16,667 1.48% 4.50 8-19-08 47,167 119,531
</TABLE>

Mr. Burger terminated employment with us in December 1998. Mr. Burger
exercised none of the options shown above and such options have since expired.
Mr. Ward terminated employment with us in August 1999. Of the shares shown
above, 4,688 shares are vested and may be exercised by Mr. Ward prior to
September 8, 1999, at which date that option will expire.

In the last fiscal year, we granted options to purchase an aggregate of
1,151,000 shares. Options to purchase shares generally vest at the rate of 12.5%
after six months of service from the date of grant, and 6.25% at the end of each
three-month period thereafter. Options have a term of ten years but may
terminate before their expiration dates if the optionee's status as an employee
is terminated or upon the optionee's death or disability.

The amounts disclosed in the column captioned "Exercise Price Per Share"
represent the fair market value of the underlying shares of common stock on the
dates the respective options were granted as determined by our board of
directors.

With respect to the amounts disclosed in the column captioned "Potential
Realizable Value At Assumed Annual Rates Of Stock Price Appreciation For Option
Term," the 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission and
do not represent our estimate or projection of our future common stock prices.
The potential realizable values are calculated by assuming that $4.50 per share
was the fair market value of our common stock at the time of grant, that the
common stock appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last day
of the option term at the appreciated price.

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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

The following table sets forth certain information concerning the number and
value of unexercised options held by each of the named executive officers on
December 31, 1998. No options were exercised by the named executive officers in
1998.

Options generally vest at the rate of 12.5% after six months of service from
the date of grant, and 6.25% at the end of each three-month period thereafter.

The value of "In-the-Money" stock options represents the positive spread
between the exercise price of stock options and the fair market value of the
options of $4.50 per share, as determined by our board of directors, at December
31, 1998.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
1998 AT DECEMBER 31, 1998
-------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
E. Thomas Hart.................................. 416,667 250,000 $ 1,520,001 $ 189,999
Scott D. Ward................................... 57,292 109,375 76,563 98,438
Michael Burger.................................. -- -- -- --
Reynold W. Simpson.............................. 30,209 111,459 -- --
Ronald D. Zimmerman............................. 38,750 44,853 124,374 125,624
Andrew K. Chan.................................. 20,833 54,167 21,875 28,125
</TABLE>

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to the
fullest extent permitted by Delaware law. Our bylaws allow us to enter into
indemnification agreements with our directors and officers and to purchase
insurance for any person whom we are required or permitted to indemnify. We are
obtaining a policy of directors' and officers' liability insurance that insures
such persons against the cost of defense, settlement or payment of a judgment
under certain circumstances.

We intend to enter into agreements with our directors and executive officers
regarding indemnification. Under these agreements we will indemnify them against
amounts actually and reasonably incurred in connection with an actual, or a
threatened, proceeding if any of them may be made a party because of their role
as one of our directors or officers. We are obligated to pay these amounts only
if the officer or director acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to our best interests. With respect
to any criminal proceeding, we are obligated to pay these amounts only if the
officer or director had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth procedures that will
apply in the event of a claim for indemnification thereunder.

In addition, our certificate of incorporation filed in connection with this
offering provides that the liability of our directors for monetary damages shall
be eliminated to the fullest extent permissible under Delaware law. This
provision does not eliminate a director's duty of care. Each director will
continue to be subject to liability for:

- breach of the director's duty of loyalty to us,

- acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law,

- acts or omissions that the director believes to be contrary to our best
interests or our stockholders,

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<PAGE>
- any transaction from which the director derived an improper personal
benefit,

- improper transactions between the director and us, and

- for improper distributions to stockholders and loans to directors and
officers. This provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws
or state or federal environmental laws.

There is no pending litigation or proceeding involving any of our directors
or officers for which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer.

BENEFIT PLANS

1989 STOCK OPTION PLAN

Our 1989 stock plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code and
for the granting to employees, directors and consultants of nonstatutory stock
options. As of September 30, 1999, options to purchase an aggregate of 2,944,261
shares of common stock were outstanding under our 1989 plan. Our board of
directors has determined that no further options will be granted under the 1989
plan after this offering. The 1989 plan provides that in the event of a merger
of QuickLogic with or into another corporation, each outstanding option will be
assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the QuickLogic options, the
QuickLogic options will terminate as of the closing of the merger.

1999 STOCK PLAN

Our 1999 stock plan was adopted by our board of directors in August 1999 and
was approved by the stockholders in September 1999. As of the date of this
prospectus, no options have been granted under the 1999 stock plan.

The 1999 stock 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 to employees, directors and
consultants.

The total shares of common stock currently reserved for issuance from the
1999 stock plan equals:

- 5,000,000 shares of common stock;

- the shares of common stock which have been reserved but unissued under the
1989 stock option plan as of the effective date of the offering (as of
September 30, 1999, there were 736,828 shares reserved but unissued under
the 1989 stock option plan); and

- any shares returned to the 1989 stock option plan as a result of
termination of options under such plan.

In addition, commencing on the first day of our next fiscal year, annual
increases will be added to the 1999 stock plan equal to the lesser of 5,000,000
shares, or 5% of the outstanding shares or such lesser amount as provided by the
board.

Unless terminated sooner, the 1999 stock plan will terminate automatically
ten years from its effective date.

The administrator of our 1999 stock plan has the power to determine:

- the terms of the options or stock purchase rights granted, including the
exercise price of the option or stock purchase right;

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<PAGE>
- the number of shares subject to each option or stock purchase right;

- the exercisability of each option or stock purchase right; and

- the form of consideration payable upon the exercise of each option or
stock purchase right.

In addition, the board has the authority to amend, suspend or terminate the
1999 stock plan, so long as no such action affects any shares of common stock
previously issued and sold or any option previously granted under the plan. The
maximum number of shares each optionee may be granted during a fiscal year is
1,000,000 shares. In addition, in connection with an optionee's initial
employment with us, such optionee may be granted an option covering an
additional 1,000,000 shares.

Options and stock purchase rights granted under our 1999 stock plan are
generally not transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the optionee and only by such
optionee. Options granted under the 1999 stock plan must generally be exercised
within three months after the end of optionee's status as an employee, director
or consultant of QuickLogic, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term.

In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement shall grant QuickLogic a
repurchase option exercisable after the purchaser's employment or consulting
relationship with QuickLogic has ended 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 QuickLogic.
The repurchase option shall lapse at a rate determined by the administrator.

The exercise price of all incentive stock options granted under the 1999
stock 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 stock
purchase rights granted under the 1999 stock 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, the exercise price must be at least equal to the
fair market value of our 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 our outstanding capital stock, the exercise price of any incentive
stock option granted must at least equal 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 1999 stock plan may not
exceed ten years.

The 1999 stock plan provides that in the event that we merge with or into
another corporation, or sell substantially all of our assets, each option and
stock purchase right shall be assumed or an equivalent option substituted for by
the successor corporation. If the outstanding options and stock purchase rights
are not assumed or substituted for by the successor corporation, the option
holder will fully vest in and have the right to exercise the option or stock
purchase right as to all of the optioned stock, including shares as to which the
holder would not otherwise be entitled to exercise. If an option or stock
purchase right becomes exercisable in full in the event of a merger or sale of
assets, the administrator shall notify the optionee that the option or stock
purchase right shall be fully exercisable for a period of 15 days from the date
of such notice, and the option or stock purchase right will terminate upon the
expiration of such period.

1999 EMPLOYEE STOCK PURCHASE PLAN

Our 1999 employee stock purchase plan was adopted by our board of directors
in August 1999, and was approved by the stockholders in September 1999. A total
of 2,000,000 shares of our common stock has been reserved for issuance under the
1999 purchase plan, plus annual increases equal to the

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<PAGE>
lesser of: 1,500,000 shares, or 4% of the outstanding shares on such date or a
lesser amount as provided by the board. As of the date of this prospectus, no
shares have been issued under the 1999 purchase plan.

The 1999 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains consecutive, overlapping, twenty-four 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 April
1 and October 1 of each year, except for the first such offering period which
commences on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before September 30, 2001. The
Board has the power to change the duration of the offering periods.

Employees are eligible to participate if they are in our employ for at least
20 hours per week and more than five months in any calendar year. However,
employees may not be granted an option to purchase stock under the 1999 purchase
plan if they either:

- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or

- hold rights to purchase stock under all our employee stock purchase plan
which accrue at a rate which exceeds $25,000 worth of stock for each
calendar year.

The 1999 purchase plan permits participants to purchase our common stock
through payroll deductions of up to 20% of their total compensation. The maximum
number of shares a participant may purchase during a single purchase period is
20,000 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 1999 purchase plan is generally 85% of the lower of the fair
market value of the common stock either at the beginning or at the end of the
offering 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. 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 QuickLogic.

Rights granted under the 1999 purchase plan are not transferable by a
participant other than upon death or by a special determination by the plan
administrator. The 1999 purchase plan provides that if we merge with or into
another corporation or sell substantially all of our 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.

Our board of directors has the authority to amend or terminate the 1999
purchase plan, except that no such action may adversely affect any outstanding
rights to purchase stock under the 1999 purchase plan, provided that the board
of directors may terminate an offering period on any exercise date if the board
determines that the termination of the 1999 purchase plan is in the best
interests of QuickLogic and its stockholders. Notwithstanding anything to the
contrary, the board of directors may in its sole discretion amend the 1999
purchase plan to the extent necessary and desirable to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. Unless sooner terminated by our board of directors, the
1999 purchase plan will terminate automatically ten years from its effective
date.

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<PAGE>
CERTAIN TRANSACTIONS

SERIES F PREFERRED FINANCING

In November 1996 and January 1997, we sold 1,286,020 shares of our Series F
convertible preferred stock at a price of $6.96 per share. We sold the shares
pursuant to a preferred stock purchase agreement and a registration rights
agreement under which we 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 stock included the following principal
stockholders, directors and affiliated entities:

<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES SHARES PURCHASE PRICE
- -------------------------------------------------------------------------------------- ---------- --------------
<S> <C> <C>
Hua-Thye Chua......................................................................... 16,667 $ 116,000
Morgenthaler Venture Partners III..................................................... 92,014 640,416
New Enterprise Associates and affiliated funds........................................ 132,048 919,050
Sequoia Capital and affiliated funds.................................................. 35,920 250,000
Technology Venture Investors IV LP and affiliated funds............................... 143,679 1,000,000
U.S. Venture Partners and affiliated funds............................................ 86,207 600,000
Vertex Investments and affiliated funds............................................... 215,517 1,500,000
</TABLE>

All shares listed as held by Hua-Thye Chua are held in trust for his
children.

CYPRESS TRANSACTION

We entered into an agreement with Cypress in 1992 to obtain guaranteed
fabrication capacity and to secure a second source for our FPGA products. By
1997, wafer fabrication capacity was no longer scarce and we had established a
customer base and reputation. Accordingly, we determined that the agreement with
Cypress was no longer beneficial to us. In March 1997, we terminated the
agreement and entered into a wafer fabrication agreement and cross license
agreement. See "Business-- Manufacturing." In exchange for the termination and
the reversion of the rights to the intellectual property covered by that
agreement to us, we also paid Cypress $4.5 million in cash and agreed to issue
3,037,786 shares of our common stock to Cypress, resulting in a charge of
approximately $23.0 million in the first quarter of 1997.

In addition to the amounts paid in connection with the termination of the
1992 agreement, payments to Cypress in connection with our foundry agreements
were $7.6 million, $13.0 million, $2.7 million, and $1.4 million for 1996, 1997,
1998 and for the first six months of 1999, respectively.

Under the terms of the cross-license agreement, Cypress granted us a
royalty-free, non-exclusive, non-sublicensable license to make and sell
programmable logic products under patents that are currently issued to Cypress
or that issue prior to March 2007. We granted a reciprocal right to Cypress
under our patents, except that the license does not extend to programmable metal
FPGAs or products that are pin-compatible with our existing pASIC 1 and pASIC 2
products. In the event we are acquired, the license continues only as to those
products that were commercially available as of the acquisition or subsequently
become commercially available within one year after the acquisition. We also
licensed to each other rights to use the technology developed under the 1992
agreement. The shares we issued to Cypress in connection with the termination of
the 1992 agreement contained the same contractual rights as the shares of
preferred stock held by Cypress. We also granted the following registration
rights to Cypress that other holders of registration rights were not granted:

- Cypress may require us to use our best efforts to file a registration
statement with respect to all of the shares held by Cypress and not sold
in this offering, 180 days following this offering.

- Cypress may not be cut-back to less than one-third of the shares of common
stock to be registered by Cypress in subsequent public offerings.

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<PAGE>
- Our other stockholders do not have the right to have their shares included
in the Cypress registration. See "Description of Capital
Stock--Registration Rights."

LOANS TO EXECUTIVE OFFICER

We have made loans to John Birkner, Vice President, Chief Technical Officer.
Mr. Birkner's current loan obligation to us totals $121,000 plus accrued
interest of approximately $76,000 at annual rates ranging from 6.7% to 8.5%.
This loan is evidenced by demand promissory notes from Mr. Birkner to us,
secured by a pledge of shares of QuickLogic stock held by Mr. Birkner. The
largest principal amount outstanding under these loans during 1996, 1997, 1998
and the first six months of 1999 was $125,000. These loans were approved by our
board of directors.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information known to us with respect
to beneficial ownership of our common stock as of September 30, 1999, as
adjusted to reflect the sale of shares offered by:

- each person known by us to own beneficially more than 5% of our
outstanding stock, including the selling stockholder;

- each of our directors;

- each named executive officer; and

- all current executive officers and directors as a group.

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 held by that person that are currently
exercisable or exercisable within 60 days of September 30, 1999 are deemed
outstanding. Percentage of beneficial ownership is based upon 14,309,070 shares
of common stock outstanding prior to this offering and 17,642,570 shares of
common stock outstanding after this offering based on the number of shares
outstanding as of September 30, 1999. To our knowledge, except as set forth in
the footnotes to this table and subject to applicable community property laws,
each person named in the table has sole voting and investment power with respect
to the shares set forth opposite such person's name.

All shares shown below for Messrs. Hart, Burger, Zimmerman, Ward, Simpson,
Beadle and Callahan represent shares issuable upon exercise of stock options. Of
the shares shown below for Messrs. Chan and Chua, 40,541 shares represent shares
issuable upon exercise of stock options for Mr. Chan and 11,458 shares represent
shares issuable upon exercise of stock options for Mr. Chua.

55
<PAGE>

<TABLE>
<CAPTION>
BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING NUMBER OF OWNED AFTER OFFERING
----------------------- SHARES BEING ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------------------- ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Cypress Semiconductor Corporation .................. 3,896,415 27.23% 3,333,500 562,915 3.19%
3901 N. First Street
San Jose, CA 95134

Technology Venture Investors (1) ................... 1,682,040 11.76% -- 1,682,040 9.53%
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025

U.S. Venture Partners (2) .......................... 1,406,615 9.83% -- 1,406,615 7.97%
2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025

Vertex Investments (3) ............................. 1,360,869 9.51% -- 1,360,869 7.71%
3 Lagoon Drive, Ste. 220
Redwood City, CA 94065

Sequoia Capital (4) ................................ 1,122,446 7.77% -- 1,122,447 6.31%
2480 Sand Hill Road, Suite 110
Menlo Park, CA 94025

New Enterprise Associates (5) ...................... 893,953 6.25% -- 893,953 5.07%
1119 St. Paul Street
Baltimore, MD 21202

Morganthaler Venture Partners (6) .................. 821,311 5.74% -- 821,311 4.66%
2780 Sand Hill Road, Suite 280
Menlo Park, CA 94025

E. Thomas Hart...................................... 514,063 3.47% -- 514,063 2.83%

Andrew K. Chan (7).................................. 207,208 1.44% -- 207,208 1.17%

Hua-Thye Chua (8)................................... 194,791 1.36% -- 194,791 1.10%

Scott D. Ward....................................... 79,688 * -- 79,688 *

Reynold W. Simpson.................................. 68,229 * -- 68,229 *

Ronald D. Zimmerman................................. 59,583 * -- 59,583 *

Donald P. Beadle.................................... 23,876 * -- 23,876 *

Michael J. Callahan................................. 22,313 * -- 22,313 *

Irwin Federman (9).................................. -- -- -- -- --

Michael Burger...................................... -- -- -- -- --

All current executive officers and directors as a
group (12 persons)................................ 1,193,397 7.88% -- 1,193,397 6.46%
</TABLE>

- ---------

* Less than 1% of the outstanding common stock.

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<PAGE>
(1) Includes 1,596,294 shares held by Technology Investors Group LLC-IV; 84,131
shares held by Technology Venture Investors IV LP-3, L.P.; and 1,615 shares
held by TVI Management-3, L.P. The general partners of Technology Investors
Group LLC--IV, Technology Venture Investors IV LP-3, L.P. and TVI
Management-3, L.P. are Burton McMurty, David Marquardt, John Johnston,
Robert Kagle and Mark Wilson, who share voting and investment power of the
shares. The general partners disclaim beneficial ownership of the shares,
except to the extent of their direct pecuniary interest in the shares.

(2) Includes 936,455 shares held by U.S. Venture Partners III; 359,874 shares
held by U.S.V. Entrepreneur Partners; 45,270 shares held by Second Ventures
II, L.P.; 29,264 shares held by Second Ventures Limited Partnership by BHMS
Partners III; 22,818 shares held by U.S. Venture Partners IV, L.P.; and
12,934 shares held by U.S.V.P. Entrepreneur Partners II, L.P. The general
partner of U.S. Venture Partners III, U.S.V. Entrepreneur Partners, Second
Ventures II, L.P. and Second Ventures Limited Partnership by BHMS Partners
III is BHMS Partners III, whose general partners consist of William K.
Bowes, Jr., Irwin Federman, Steve Krausz and Phil Young. The general partner
of U.S. Venture Partners IV, L.P. and U.S.V.P. Entrepreneur Partners II,
L.P. is Presidio Management Group IV, L.P., whose general partners consist
of William K. Bowes, Jr., Irwin Federman, Steve Krausz and Phil Young. These
general partners share voting and investment power of the shares and
disclaim beneficial ownership of the shares, except to the extent of their
direct pecuniary interest in the shares.

(3) Includes 1,026,303 shares held by Vertex Investment International III, Inc.;
214,824 shares held by Vertex Investment (II) Limited; 95,776 shares held by
Vertex Asia Limited; and 23,965 shares held by HWH Investment Pte. Ltd. The
general partners of Vertex Investment International III, Inc., Vertex
Investment (II) Limited, Vertex Asia Limited and HWH Investment Pte. Ltd.
are Joo Hock Chua, Joanna Chin, Frank Lee, Christina Lim, Karl Ma, Robert
Tsao and Henry Yong, who share voting and investment power of the shares and
disclaim beneficial ownership of the shares, except to the extent of their
direct pecuniary interest in the shares.

(4) Includes 1,019,887 shares held by Sequoia Capital V; 55,800 shares held by
Sequoia Technology Partners V; 17,990 shares hold by Sequoia XXI; 12,744
shares held by Sequoia XXIV; 7,751 shares held by Sequoia Capital XXI; 5,000
shares held by Sequoia XX; and 3,275 shares held by Sequoia XXIII. The
general partners of Sequoia Capital V, Sequoia Technology Partners V,
Sequoia XXI, Sequoia XXIV, Sequoia Capital XXI, Sequoia Capital XX and
Sequoia XXIII are Pierre Lamond, Gordon Russell, Don Valentine, Michael
Moritz and Tom Stephenson, who share voting and investment power of the
shares and disclaim beneficial ownership of the shares, except to the extent
of their direct pecuniary interest in the shares.

(5) Includes 858,033 shares held by New Enterprise Associates VI, Limited
Partnership and 35,920 shares held by New Venture Partners III L.P. The
general partner of New Enterprise Associates VI, Limited Partnership and New
Venture Partners III L.P. is NA Partners VI, whose general partners consist
of nine individuals who share voting and investment power of the shares and
disclaim beneficial ownership of the shares, except to the extent of their
direct pecuniary interest in the shares.

(6) The general partners of Morganthaler Venture Partners are fourteen
individuals who share voting and investment power of the shares and disclaim
beneficial ownership of the shares, except to the extent of their direct
pecuniary interest in the shares.

(7) Includes 146,667 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; 5,000 shares beneficially owned by Mr. Chan for
Michael P. Gamboa, Trustee under Erica H. Chan trust agreement dated May 14,
1992; 5,000 shares beneficially owned by Mr. Chan for Michael P. Gamboa,
Trustee under Rebecca H. Chan trust agreement dated May 14, 1992; 5,000
shares

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<PAGE>
beneficially owned by Mr. Chan for Michael P. Gamboa, Trustee under Vicki H.
Chan trust agreement dated May 14, 1992; 2,500 shares beneficially owned by
Mr. Chan for Clement Chan and Susie S.J. Chan, Trustees under Nicholas Chan
trust agreement dated July 3, 1997; 2,500 shares beneficially owned by Mr.
Chan for Clement Chan and Susie S.J. Chan, Trustees under Phillip Chan trust
agreement dated July 3, 1996.

(8) Includes 64,792 shares owned by Mr. Chua; 35,209 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; 20,833 shares beneficially owned by
Mr. Chua, as custodian for The Bryan Shyang-Ming Chua Trust dated December
19, 1975; 20,833 shares beneficially owned by Mr. Chua, as custodian for
Caroline Siok-Yau Chua Trust dated December 19, 1975; 20,833 shares
beneficially owned by Mr. Chua, as custodian for Cathleen Siok-Syuan Chua
Trust dated December 19, 1975; and 20,833 shares beneficially owned by Mr.
Chua, as custodian for Christine Siok-Pee Chua Trust dated December 19,
1975.

(9) Excludes 1,406,614 shares held by U.S. Venture Partners. Mr. Federman is a
general partner of U.S. Venture Partners. See footnote 2 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.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, we will be authorized to issue up to
110,000,000 shares, $0.001 par value, to be divided into two classes to be
designated, respectively, "common stock" and "preferred stock." Of such shares
authorized, 100,000,000 shares shall be designated as common stock, and
10,000,000 shares shall be designated as preferred stock.

COMMON STOCK

As of September 30, 1999, there were 14,309,070 shares of common stock
outstanding that were held of record by approximately 263 stockholders (assuming
conversion of all shares of preferred stock outstanding as of September 30, 1999
into 9,911,665 shares of common stock). There will be 17,642,570 shares of
common stock outstanding (assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options) after giving
effect to the sale of common stock offered in this offering. As of September 30,
1999, there are outstanding options to purchase a total of 2,994,261 shares of
our common stock under our stock plans.

The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Our stockholders
do not have cumulative voting rights in the election of directors. Accordingly,
holders of a majority of the shares voting are able to elect all of the
directors. Subject to preferences that may be granted to any then outstanding
preferred stock, holders of common stock are entitled to receive ratably only
those dividends as may be declared by the board of directors out of funds
legally available therefor, as well as any distributions to the stockholders.
See "Dividend Policy." In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to share ratably in all of our assets
remaining after we pay our liabilities and distribute the liquidation preference
of any then outstanding preferred stock. Holders of common stock have no
preemptive or other subscription or conversion rights. There are no redemption
or sinking fund provisions applicable to the common stock.

PREFERRED STOCK

Our board of directors will have the authority, without further action by
the stockholders, to issue up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof. These rights, preferences and privileges include dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, any or all of which may be greater than the rights
of common stock. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of QuickLogic. We have no present plan to issue
any shares of preferred stock.

REGISTRATION RIGHTS

Following the closing of this offering, the holders of approximately
9,053,036 shares of our common stock will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. In the
event that we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders,
these holders are entitled to notice of such registration and are entitled to
include their common stock 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 these securities, or the holders of a lesser
percentage if the amount registered is greater than $5 million, have the right
to require us, 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

59
<PAGE>
common stock. We 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, these holders may require us
to register all or a portion of their shares on Form S-3, subject to certain
conditions and limitations.

In connection with our transaction with Cypress, we granted Cypress
registration rights in addition to those held by our other stockholders. See
"--Certain Transactions--Cypress Transaction."

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND
BYLAWS

Our certificate of incorporation provides for our board of directors to be
divided into three classes, with staggered three-year terms. When this
classification is effective, only one class of directors will be elected at each
annual meeting of our stockholders, with the other classes continuing for the
remainder of their respective three-year terms. However, until this
classification of our board of directors is effective, and because our
stockholders have no cumulative voting rights, our stockholders representing a
majority of the shares of common stock outstanding will be able to elect all of
the directors. Our certificate of incorporation and bylaws also provide that all
stockholder action must be effected at a duly called meeting of stockholders and
not by a consent in writing, and that only our board of directors, or special
committee thereof, may call a special meeting of stockholders.

The combination of the classification of our board of directors, when
effective, and lack of cumulative voting will make it more difficult for our
existing stockholders to replace our board of directors as well as for another
party to obtain control of QuickLogic by replacing our board of directors. Since
the board of directors has the power to retain and discharge our officers, these
provisions could also make it more difficult for existing stockholders or
another party to effect a change in management. In addition, the authorization
of undesignated preferred stock makes it possible for the board of directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of QuickLogic.

These provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of QuickLogic. These provisions are
intended to enhance the likelihood of continued stability in the composition of
our board of directors and in the policies approved by it and to discourage
certain types of transactions that may involve an actual or threatened change of
control of QuickLogic. These provisions are designed to reduce our vulnerability
to an unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such
provisions could have the effect of discouraging others from making tender
offers for our shares and, as a consequence, they also may inhibit fluctuations
in the market price of our shares that could result from actual or rumored
takeover attempts. Such provisions may also have the effect of preventing
changes in our management.

SECTION 203 OF THE DELAWARE CORPORATION LAW

We are subject to Section 203 of the Delaware Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, with the following
exceptions:

- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested holder;

- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of

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<PAGE>
determining the number of shares outstanding those shares owned by persons
who are directors and also officers and by certain employee stock plans;
or

- on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of the
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.

Section 203 defines business combinations to include the following:

- any merger or consolidation involving the corporation and the interested
stockholder;

- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;

- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;

- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or series of
the corporation beneficially owned by the interested stockholder; or

- the receipt by the interested stockholder of the benefit of any losses,
advances, guarantees, pledges or other financial benefits by or through
the corporation.

In general, Section 203 defines interested stockholder as an entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation or any entity or person affiliated with or controlling or controlled
by such entity or person.

NASDAQ NATIONAL MARKET LISTING

Our common stock has been approved for quotation on the Nasdaq National
Market under the symbol "QUIK."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.

61
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, we will have 17,642,570 shares of common
stock outstanding based on shares outstanding as of September 30, 1999. Of these
shares, the 6,667,000 shares sold in this offering will be freely transferable
without restriction under the Securities Act, unless they are held by our
"affiliates" as that term is used under the Securities Act and the regulations
promulgated thereunder.

Of these shares, the remaining 10,975,570 shares were sold by us in reliance
on exemptions from the registration requirements of the Securities Act, are
restricted securities within the meaning of Rule 144 under the Securities Act
and become eligible for sale in the public market as follows:

- beginning 90 days after the effective date, no shares will become eligible
for sale subject to the provisions of Rules 144 and 701 as a result of
agreements not to sell such shares entered into with us and the
underwriters, or lock-up agreements; and

- beginning 180 days after the date of this prospectus, 10,975,570
additional shares will become eligible for sale, subject to the provisions
of Rule 144, Rule 144(k) or Rule 701, upon the expiration of lock-up
agreements.

Beginning 180 days after the date of this prospectus, 1,399,188 additional
shares subject to vested options as of the date of completion of this offering
will be available for sale, subject to compliance with Rule 701, upon the
expiration of lock-up agreements. Any shares subject to lock-up agreements may
be released at any time without notice by the underwriters.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of completion of this
offering, a number of shares that does not exceed the greater of 1% of the then
outstanding shares of common stock (approximately 176,400 shares immediately
after this offering), or the average weekly trading volume in the common stock
during the four calendar weeks preceding such sale, subject to the filing of a
Form 144 with respect to such sale and certain other limitations and
restrictions. In addition, a person who is not deemed to have been an affiliate
of QuickLogic at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years, would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above.

Any of our employees, officers, directors or consultants who purchased his
or her shares prior to the date of completion of this offering or who holds
vested options as of that date pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the date of completion of this offering. However, we and certain
officers, directors and other stockholders have agreed not to sell or otherwise
dispose of any shares of our common stock for the 180-day period after the date
of this prospectus without the prior written consent of the underwriters. See
"Underwriting."

After this offering, we intend to file a registration statement on Form S-8
under the Securities Act to register outstanding options to purchase common
stock and shares of common stock reserved for issuance under the 1989 stock
option plan, 1999 stock option plan and 1999 employee stock purchase plan, thus
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act. Such registration statement will
become effective immediately upon filing. As of September 30, 1999, options to
purchase a total of 2,994,261 shares were outstanding and 5,000,000 shares were
reserved for future issuance under our 1999 stock option plan; 736,828 shares
were reserved but unissued under our 1989 stock option plan; and 2,000,000
shares were reserved for issuance under our employee stock purchase plan. All
such options are subject to lock-up agreements.

Prior to this offering, there has been no public market for our common
stock, and any sale of substantial amounts in the open market may adversely
affect the market price of our common stock offered hereby.

62
<PAGE>
UNDERWRITING

The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., and SoundView
Technology Group, Inc. have severally agreed with QuickLogic, subject to the
terms and conditions set forth in the underwriting agreement, to purchase from
QuickLogic and the selling stockholder the number of shares of common stock set
forth opposite their names below. The underwriters are committed to purchase and
pay for all such shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
BancBoston Robertson Stephens Inc. and
BancBoston Robertson Stephens International Limited............................ 3,028,500
Bear, Stearns & Co. Inc. and Bear, Stearns International Limited................. 1,817,100
SoundView Technology Group, Inc.................................................. 1,211,400
Prudential Securities Incorporated............................................... 150,000
Kaufman Bros., L.P............................................................... 100,000
Moors & Cabot, Inc............................................................... 100,000
Needham & Company, Inc........................................................... 100,000
E*TRADE Securities, Inc.......................................................... 80,000
Suretrade Inc.................................................................... 80,000
----------
Total........................................................................ 6,667,000
----------
----------
</TABLE>

QuickLogic and the selling stockholder have been advised by the
representatives of the underwriters that the underwriters propose to offer the
shares of common stock to the public at the initial public offering price set
forth on the cover page of this prospectus and to certain dealers at such price
less a concession of not in excess of $0.42 per share, of which $0.10 may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No such reduction shall change the amount of proceeds to be
received by QuickLogic and the selling stockholder as set forth on the cover
page of this prospectus. The common stock is offered by the underwriters as
stated herein, subject to receipt and acceptance by them and subject to their
right to reject any order in whole or in part. The underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.

OVER-ALLOTMENT OPTION. QuickLogic and the selling stockholder have granted
to the underwriters an option, exercisable during the 30-day period after the
date of this prospectus, to purchase up to 1,000,050 additional shares of common
stock at the same price per share as QuickLogic and the selling stockholder will
receive for their 6,667,000 shares that the underwriters have agreed to
purchase. To the extent that the underwriters exercise this option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of common stock
to be purchased by it shown in the above table represents as a percentage of the
shares offered hereby. If purchased, such additional shares will be sold by the
underwriters on the same terms as those on which the 6,667,000 shares are being
sold. QuickLogic and the selling stockholder will be obligated, pursuant to the
option, to sell shares to the extent the option is exercised. The underwriters
may exercise such option only to cover over-allotments made in connection with
the sale of the shares of common stock offered hereby. If such option is
exercised in full, the total public offering price, underwriting discounts and
commissions, and proceeds to QuickLogic and the selling stockholder will be
$76,670,500, $5,366,935, $35,066,905 and $36,236,660, respectively.

63
<PAGE>
The following table summarizes the compensation and expenses we will pay.

<TABLE>
<CAPTION>
TOTAL
--------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
------------ -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by QuickLogic and the
selling stockholder............................................... $ 0.70 $ 4,666,900 $ 5,366,935
Expenses payable by us.............................................. $ -- $ 1,000,000 $ 1,000,000
</TABLE>

INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, QuickLogic and the selling stockholder against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.

LOCK-UP AGREEMENTS. Each of QuickLogic's executive officers, directors, and
1% stockholders has agreed with the representatives of the underwriters, for a
period of 180 days after the date of this prospectus, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock,
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of BancBoston Robertson Stephens
Inc. However, BancBoston Robertson Stephens Inc. may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to the lock-up agreements. There are no agreements between the representatives
and any of QuickLogic's stockholders providing consent by the representatives to
the sale of shares prior to the expiration of the lock-up period.

FUTURE SALES. In addition, we have agreed that during the lock-up period,
we will not, without the consent of BancBoston Robertson Stephens Inc., subject
to certain exceptions,

- consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period or

- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than QuickLogic's sale of shares in this offering, the
issuance of common stock upon the exercise of outstanding options, and the
issuance of options under existing stock option and incentive plans
provided such options do not vest prior to the expiration of the lock-up
period. See "Shares Eligible for Future Sale."

LISTING. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "QUIK."

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock of QuickLogic. Consequently, the initial public
offering price for the common stock offered hereby was determined through
negotiations between QuickLogic and the representatives of the underwriters.
Among the factors considered in such negotiations were prevailing market
conditions, certain financial information of QuickLogic, market valuations of
other companies that QuickLogic and the representatives believed to be
comparable to QuickLogic, estimates of the business potential of QuickLogic, the
present state of QuickLogic's development and other factors deemed relevant.

STABILIZATION. The representatives of the underwriters have advised
QuickLogic that, pursuant to Regulation M under the Securities Act, certain
persons participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids

64
<PAGE>
that may have the effect of stabilizing or maintaining the market price of the
common stock at a level above that which might otherwise prevail in the open
market. A "stabilizing bid" is a bid for or the purchase of the common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering transaction" is the bid for or the
purchase of the common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised
QuickLogic that such transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.

DIRECTED SHARE PROGRAM. At the request of QuickLogic, the underwriters have
reserved up to 333,000 shares of common stock to be issued by us and offered
hereby for sale, at the initial public offering price, to customers, sales
representatives and other business associates of QuickLogic. The number of
shares of common stock available for sale to the general public will be reduced
to the extent that such individuals purchase all or a portion of these reserved
shares. Any reserved shares which are not purchased will be offered by the
underwriters to the general public on the same basis as the shares of common
stock offered hereby.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Orrick, Herrington & Sutcliffe LLP, Menlo
Park, California. As of the date of this prospectus, WS Investment Company, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as well as certain individual attorneys of that firm, beneficially
own an aggregate of 18,884 shares of QuickLogic common stock.

EXPERTS

The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 appearing in
this prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including the exhibits, schedules and amendments to the
registration statement, under the Securities Act with respect to the shares of
common stock to be sold in this offering. This prospectus does not contain all
the information set forth in the registration statement. For further information
with respect to our company and the shares of common stock to be sold in this
offering, we refer you to the registration statement. Statements contained in
this prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance we refer you to
the copy of such contract, agreement or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference.

You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating

65
<PAGE>
fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our Securities and Exchange
Commission filings, including the registration statement, are also available to
you on the Commission's Web site at http://www.sec.gov.

As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act, and, in accordance therewith, will
file periodic reports, proxy statements and other information with the
Securities and Exchange Commission.

We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.

66
<PAGE>
QUICKLOGIC CORPORATION

INDEX TO CONSOLIDATED FINANCIAL SATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2

Consolidated Balance Sheet as of December 31, 1997, 1998 and June 30, 1999 (unaudited)..................... F-3

Consolidated Statement of Operations for the Years Ended December 31, 1996, 1997 and 1998 and the Six
Months Ended June 30, 1998 (unaudited) and 1999 (unaudited).............................................. F-4

Consolidated Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 1996, 1997 and
1998 and the Six Months Ended June 30, 1999 (unaudited).................................................. F-5

Consolidated Statement of Cash Flows for the Three Years Ended December 31, 1996, 1997 and 1998 and the Six
Months Ended June 30, 1998 (unaudited) and 1999 (unaudited).............................................. F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
QuickLogic Corporation

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity (deficit) and of
cash flows present fairly, in all material respects, the financial position of
QuickLogic Corporation and its subsidiary at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998, 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
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.

PricewaterhouseCoopers LLP
San Jose, California
June 7, 1999, except as to Note 13,
which is as of October 7, 1999

F-2
<PAGE>
QUICKLOGIC CORPORATION

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
---------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 7,331 $ 7,595 $ 8,185
Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $2,628, $3,272 and $2,340
(unaudited)....................................................... 2,892 2,031 4,505
Inventory........................................................... 5,869 2,877 2,613
Other current assets................................................ 286 730 898
---------- ---------- ----------
Total current assets.............................................. 16,378 13,233 16,201
Property and equipment, net........................................... 3,530 2,892 3,162
Other assets.......................................................... 43 43 43
---------- ---------- ----------
$ 19,951 $ 16,168 $ 19,406
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Trade payables...................................................... $ 2,801 $ 2,204 $ 4,117
Accrued liabilities................................................. 2,440 2,425 2,312
Deferred income on shipments to distributors........................ 5,996 4,737 5,617
Current portion of long-term obligations............................ 2,746 7,186 6,897
---------- ---------- ----------
Total current liabilities......................................... 13,983 16,552 18,943
Long-term obligations............................................... 7,724 591 161
---------- ---------- ----------
21,707 17,143 19,104
---------- ---------- ----------
Commitments and contingencies (Notes 11 and 12)
Stockholders' equity (deficit)
Preferred stock, $0.001 par value; 61,568 shares authorized; 9,912
shares outstanding; 10,000 authorized, none issued or outstanding
at June 30, 1999 on a pro forma basis (unaudited)................. 10 10 10 --
Common stock, $0.001 par value; 105,000 shares authorized; 1,159 and
4,279 and 4,301 (unaudited) shares outstanding; 100,000
authorized, 14,213 shares issued and outstanding at June 30, 1999
on a pro forma basis (unaudited).................................. 1 4 4 14
Common stock to be issued: 3,038 shares............................. 18,409 -- -- --
Additional paid-in capital.......................................... 43,435 61,388 61,730 61,730
Stockholder note receivable......................................... (121) (121) (121) (121)
Deferred compensation............................................... (2,073) (1,084) (1,136) (1,136)
Accumulated deficit................................................. (61,417) (61,172) (60,185) (60,185)
---------- ---------- ---------- ------------
Total stockholders' equity (deficit).............................. (1,756) (975) 302 302
---------- ---------- ---------- ------------
------------
$ 19,951 $ 16,168 $ 19,406
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

See Notes to Consolidated Financial Statements

F-3
<PAGE>
QUICKLOGIC CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................................................ $ 23,758 $ 28,460 $ 30,007 $ 14,078 $ 18,425
Cost of revenue........................................ 11,158 16,855 14,303 6,803 7,958
--------- ---------- --------- --------- ---------
Gross profit........................................... 12,600 11,605 15,704 7,275 10,467

Operating expenses:
Research and development............................. 4,642 6,235 6,294 2,932 3,567
Selling, general and administrative.................. 7,730 10,981 9,368 4,648 6,000
Contract termination and legal....................... 4,125 28,309 -- -- --
--------- ---------- --------- --------- ---------
Net operating income (loss)........................ (3,897) (33,920) 42 (305) 900
Interest expense..................................... (60) (162) (161) (86) (49)
Interest income and other, net....................... 360 434 364 202 136
--------- ---------- --------- --------- ---------
Net income (loss)...................................... $ (3,597) $ (33,648) $ 245 $ (189) $ 987
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Net income (loss) per share:
Basic................................................ $ (4.66) $ (10.41) $ 0.06 $ (0.05) $ 0.23
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted.............................................. $ (4.66) $ (10.41) $ 0.02 $ (0.05) $ 0.07
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Weighted average shares:
Basic................................................ 772 3,232 4,231 4,200 4,286
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted.............................................. 772 3,232 14,645 4,200 15,042
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Pro forma net income per share:
Basic (unaudited).................................... $ 0.02 $ 0.07
--------- ---------
--------- ---------
Diluted (unaudited).................................. $ 0.02 $ 0.07
--------- ---------
--------- ---------
Pro forma weighted average shares:
Basic (unaudited).................................... 14,143 14,198
--------- ---------
--------- ---------
Diluted (unaudited).................................. 14,645 15,042
--------- ---------
--------- ---------
</TABLE>

See Notes to Consolidated Financial Statements

F-4
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
--------------- ---------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 8,622 $ 9 638 $ 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 190 --
Issuance of Series E preferred stock in exchange for
services........................................... 4 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 1,167 1 -- --
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Net loss............................................. -- -- -- --
------ ------ ------ ------
Balance at December 31, 1996........................... 9,793 10 828 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 331 --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 119 -- -- --
Common stock to be issued in exchange for contract
termination........................................ -- -- -- --
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Note receivable from stockholder..................... -- -- -- --
Net loss............................................. -- -- -- --
------ ------ ------ ------
Balance at December 31, 1997........................... 9,912 10 1,159 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 82 --
Common stock issued in exchange for contract
termination........................................ -- -- 3,038 3
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Net income........................................... -- -- -- --
------ ------ ------ ------
Balance at December 31, 1998........................... 9,912 10 4,279 4
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ -- -- 22 --
Deferred compensation, net of terminations
(unaudited)........................................ -- -- -- --
Amortization of deferred compensation (unaudited).... -- -- -- --
Net income (unaudited)............................... -- -- -- --
------ ------ ------ ------
Balance at June 30, 1999 (unaudited)................... 9,912 $10 4,301 $ 4
------ ------ ------ ------
------ ------ ------ ------

<CAPTION>
COMMON STOCK
TO BE ISSUED ADDITIONAL STOCKHOLDER
---------------- PAID-IN NOTE DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION DEFICIT
------ -------- ---------- ----------- ------------ -----------
<S> <C>
Balance at December 31, 1995 -- $ -- $31,430 $(119) $ -- $(24,172)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 99 -- -- --
Issuance of Series E preferred stock in exchange for
services........................................... -- -- 15 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... -- -- 8,089 -- -- --
Deferred compensation, net of terminations........... -- -- 851 -- (851) --
Amortization of deferred compensation................ -- -- -- -- 43 --
Net loss............................................. -- -- -- -- -- (3,597)
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1996........................... -- -- 40,484 (119) (808) (27,769)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 280 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... -- -- 781 -- -- --
Common stock to be issued in exchange for contract
termination........................................ 3,038 18,409 -- -- -- --
Deferred compensation, net of terminations........... -- -- 1,890 -- (1,890) --
Amortization of deferred compensation................ -- -- -- -- 625 --
Note receivable from stockholder..................... -- -- -- (2) -- --
Net loss............................................. -- -- -- -- -- (33,648)
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1997........................... 3,038 18,409 43,435 (121) (2,073) (61,417)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 110 -- -- --
Common stock issued in exchange for contract
termination........................................ (3,038) (18,409) 18,406 -- -- --
Deferred compensation, net of terminations........... -- -- (563) -- 563 --
Amortization of deferred compensation................ -- -- -- -- 426 --
Net income........................................... -- -- -- -- -- 245
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1998........................... -- -- 61,388 (121) (1,084) (61,172)
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ -- -- 55 -- -- --
Deferred compensation, net of terminations
(unaudited)........................................ -- -- 287 -- (287) --
Amortization of deferred compensation (unaudited).... -- -- -- -- 235 --
Net income (unaudited)............................... -- -- -- -- -- 987
------ -------- ---------- ----------- ------------ -----------
Balance at June 30, 1999 (unaudited)................... -- $ -- $61,730 $(121) $(1,136) $(60,185)
------ -------- ---------- ----------- ------------ -----------
------ -------- ---------- ----------- ------------ -----------

<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
Balance at December 31, 1995 $ 7,149
Common stock issued under stock option plan, net of
repurchases........................................ 99
Issuance of Series E preferred stock in exchange for
services........................................... 15
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 8,090
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 43
Net loss............................................. (3,597)
-------------
Balance at December 31, 1996........................... 11,799
Common stock issued under stock option plan, net of
repurchases........................................ 280
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 781
Common stock to be issued in exchange for contract
termination........................................ 18,409
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 625
Note receivable from stockholder..................... (2)
Net loss............................................. (33,648)
-------------
Balance at December 31, 1997........................... (1,756)
Common stock issued under stock option plan, net of
repurchases........................................ 110
Common stock issued in exchange for contract
termination........................................ --
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 426
Net income........................................... 245
-------------
Balance at December 31, 1998........................... (975)
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ 55
Deferred compensation, net of terminations
(unaudited)........................................ --
Amortization of deferred compensation (unaudited).... 235
Net income (unaudited)............................... 987
-------------
Balance at June 30, 1999 (unaudited)................... $ 302
-------------
-------------
</TABLE>

See Notes to Consolidated Financial Statements

F-5
<PAGE>
QUICKLOGIC CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ (3,597) $ (33,648) $ 245 $ (189) $ 987
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and other non-cash charges................ 235 817 1,322 614 761
Provision for doubtful accounts and sales returns...... 3,250 6,001 5,031 3,325 3,399
Amortization of deferred compensation.................. 43 625 426 221 235
Gain on disposal of assets............................. -- -- (5) (5) --
Contract termination and other......................... 4,125 28,309 -- -- --
Changes in assets and liabilities:
Accounts receivable.................................. (3,179) (6,284) (4,170) (1,661) (5,873)
Inventory............................................ (1,924) (1,225) 2,992 1,222 264
Prepaid and other assets............................. (4,555) (253) (444) (25) (168)
Accounts payable..................................... 1,434 (243) (597) (557) 1,913
Accrued liabilities and other........................ (409) 4,453 (2,477) (1,798) 767
--------- ---------- --------- --------- ---------
Net cash provided by (used for) operating
activities....................................... (4,577) (1,448) 2,323 1,147 2,285
--------- ---------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures for property and equipment, net of
dispositions........................................... (1,478) (2,639) (679) (174) (1,031)
Proceeds on sale of investments.......................... 4,000 -- -- -- --
--------- ---------- --------- --------- ---------
Net cash provided by (used for) investing
activities....................................... 2,522 (2,639) (679) (174) (1,031)
--------- ---------- --------- --------- ---------
Cash flows from financing activities:
Payment of debt obligations.............................. (124) (1,473) (1,490) (980) (832)
Proceeds from issuance of common stock, net.............. 99 280 110 85 55
Proceeds from issuance of preferred stock, net........... 8,090 781 -- -- --
Note receivable from stockholder......................... -- (2) -- -- --
Borrowings from bank..................................... 470 1,496 -- -- 113
--------- ---------- --------- --------- ---------
Net cash provided by (used for) financing
activities....................................... 8,535 1,082 (1,380) (895) (664)
--------- ---------- --------- --------- ---------
Net increase (decrease) in cash............................ 6,480 (3,005) 264 78 590
Cash at beginning of period................................ 3,856 10,336 7,331 7,331 7,595
--------- ---------- --------- --------- ---------
Cash at end of period...................................... $ 10,336 $ 7,331 $ 7,595 $ 7,409 $ 8,185
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Non-cash transactions:
Inventory acquired in exchange for note payable.......... $ -- $ 1,396 $ -- $ -- $ --
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
</TABLE>

See Notes to Consolidated Financial Statements

F-6
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED 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 operates in a single industry segment
where it designs, develops, markets and supports advanced field programmable
gate array semiconductors ("FPGAs"), embedded standard products ("ESPs") and
associated software tools.

The Company's fiscal year ends on the Sunday closest to December 31. The six
month periods end on the Sunday closest to June 30. For presentation purposes,
the financial statements and notes have been presented as ending on the last day
of the nearest calendar month.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, QuickLogic International, Inc. All significant
intercompany accounts and transactions are eliminated in consolidation.

USES 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 as of 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, and product obsolescence.

INTERIM RESULTS (UNAUDITED)

The accompanying balance sheet as of June 30, 1999, the statements of
operations and of cash flows for the six months ended June 30, 1998 and 1999 and
the statement of stockholders' equity (deficit) for the six months ended June
30, 1999 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, 1999 are not necessarily indicative of the results that may be
expected for the full year.

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

All highly-liquid investments purchased with a remaining maturity of three
months or less are considered cash equivalents. 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.

F-7
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value 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 value of all financial instruments
at December 31, 1997 and 1998, approximate the amounts presented in the balance
sheet.

INVENTORY

Inventory is stated at the lower of cost or market, cost being determined
under the first-in, first-out method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the asset's estimated
useful life of two 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.

LONG-LIVED ASSETS

The Company reviews the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. No such impairment losses have
been identified by the Company.

REVENUE RECOGNITION

The Company sells to certain distributors under agreements which allow
certain rights of return and price adjustments on unsold inventory. 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, deferred
income on shipments to distributors, until the inventory is resold by the
distributor. Reserves for estimated returns and distributor price adjustments
are provided against accounts receivable. Revenue to all other customers is
recognized upon shipment. Software revenue is recognized when persuasive
evidence of an agreement exists, delivery of the software has occurred, no
significant Company obligations with regard to implementation or integration
exist, the fee is fixed or determinable and collectibility is probable. Software
revenues typically amount to less than 5% of total revenues.

STOCK-BASED COMPENSATION

The Company has elected 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 Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."

F-8
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (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, 1998, accounts receivable from two customers both of which
were distributors of the Company's products represent 18% and 15% of the
Company's accounts receivable. At December 31, 1997, accounts receivable from
the same two customers represented 24% and 29%, respectively, of the Company's
accounts receivable.

LITIGATION LIABILITIES

The Company accrues for the cost of litigation in the period that costs
become estimable and occurrence is determined to be probable. Accrued litigation
liabilities of $8,203,000 and $6,500,000 at December 31, 1997 and 1998,
respectively, include estimated settlement costs and related legal fees (see
Notes 4 and 12).

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 the insignificant development costs incurred during
the short time period between the establishment of technological feasibility and
general availability.

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 9,912,000
shares of preferred stock outstanding into 9,912,000 shares of common stock. The
pro forma effect of this transaction has been reflected in the accompanying
unaudited pro forma stockholders' equity as if such conversion had occurred as
of June 30, 1999.

NET INCOME (LOSS) PER SHARE

Basic EPS is computed by dividing net income available to common
stockholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS is computed using the
weighted average number of common shares and dilutive potential common shares
outstanding during the period. In computing diluted EPS, the average stock price
for the period is used in determining the number of share assumed to be
purchased from the exercise of stock

F-9
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
options. A reconciliation of the numerators and denominators of the basic and
diluted per share computations is as follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)............................... $ (3,597) $ (33,648) $ 245 $ (189) $ 987
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Denominator:
Common stock.................................... 794 1,005 3,490 2,710 4,294
Common stock to be issued....................... -- 2,278 759 1,519 --
Less: Unvested common stock option exercises.... (22) (51) (18) (29) (8)
--------- ---------- --------- --------- ---------
Weighted average shares outstanding for basic... 772 3,232 4,231 4,200 4,286
--------- ---------- --------- --------- ---------
Convertible preferred stock..................... -- -- 9,912 -- 9,912
Stock options and warrants...................... -- -- 484 -- 836
Unvested common stock option exercises.......... -- -- 18 -- 8
--------- ---------- --------- --------- ---------
Weighted average shares outstanding for
diluted....................................... 772 3,232 14,645 4,200 15,042
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Net income (loss) per share
Basic......................................... $ (4.66) $ (10.41) $ 0.06 $ (0.05) $ 0.23
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted....................................... $ (4.66) $ (10.41) $ 0.02 $ (0.05) $ 0.07
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
</TABLE>

As a result of the net losses incurred by the Company during fiscal years
1996 and 1997 and for the six months ended June 30, 1998, all potential common
shares were anti-dilutive and have been excluded from the diluted net loss per
share calculation. For fiscal year 1998 and the six months ended June 30, 1999,
stock options with an exercise price that equals or exceeds the average fair
market value of the Company's common stock have been excluded from the
computation of diluted net income per share as they would be anti-dilutive. The
following table summarizes total securities outstanding as of each period end,
on an as-converted basis, which were not included in the calculation of diluted
net loss per share since their inclusion would have been anti-dilutive.

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preferred stock...................................... 9,793 9,912 -- 9,912 --
Unvested common stock subject to repurchase.......... 22 51 -- 29 --
Stock options........................................ 1,284 2,006 -- 1,983 --
Preferred stock warrants............................. 22 22 -- 22 --
</TABLE>

F-10
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET INCOME PER SHARE (UNAUDITED)

Pro forma basic net income per share for the year ended December 31, 1998
and six months ended June 30, 1999 is computed using the weighted average number
of common shares outstanding, including the conversion of the Company's
Convertible Preferred Stock outstanding into shares of the Company's common
stock effective upon the closing of the Company's initial public offering as if
such conversion occurred on January 1, 1998 and January 1, 1999, respectively.
Pro forma diluted net income per share is computed using the pro forma weighted
average number of common and potential common shares outstanding. Pro forma
potential common shares consist of Common Stock subject to repurchase and stock
options and warrants using the treasury stock method.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 established a model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of Effective Date of FASB Statement No. 133," is effective for all
fiscal quarters and years beginning after June 15, 2000. The Company does not
currently, nor does it plan to, enter into, forward exchange contracts to hedge
exposures denominated in foreign currencies or any other derivative financial
instruments for trading or speculative purposes.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The Company does not expect
that the adoption of SOP No. 98-1 will have a material impact on its
consolidated financial statements.

INCOME TAXES

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax liabilities and assets are determined based
on the differences between the financial statements and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.

OTHER COMPREHENSIVE INCOME (LOSS)

Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income
(loss) and its components in financial statements. Comprehensive income (loss)
as defined, includes all changes in equity (net assets) during a period from
nonowner sources. No items were included in other comprehensive income (loss)
during 1996, 1997 and 1998.

F-11
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--BALANCE SHEET COMPONENTS

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Inventory:
Raw materials............................................. $ 441 $ 56 $ 136
Work-in-process........................................... 4,926 2,611 2,426
Finished goods............................................ 502 210 51
--------- --------- -----------
$ 5,869 $ 2,877 $ 2,613
--------- --------- -----------
--------- --------- -----------
Property and equipment:
Equipment................................................. $ 4,326 $ 4,733 $ 5,584
Software.................................................. 991 1,059 1,231
Furniture and fixtures.................................... 766 761 770
Leasehold improvements.................................... 554 564 563
--------- --------- -----------
6,637 7,117 8,148
Accumulated depreciation.................................... (3,107) (4,225) (4,986)
--------- --------- -----------
$ 3,530 $ 2,892 $ 3,162
--------- --------- -----------
--------- --------- -----------
Accrued liabilities:
Accrued employee compensation............................. $ 739 $ 935 $ 1,091
Other liabilities......................................... 1,701 1,490 1,221
--------- --------- -----------
$ 2,440 $ 2,425 $ 2,312
--------- --------- -----------
--------- --------- -----------
</TABLE>

NOTE 4--LONG-TERM OBLIGATIONS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Installment notes payable to bank.......................... $ 1,743 $ 966
Installment notes payable to vendor........................ 295 --
Litigation accrual......................................... 8,203 6,500
Other...................................................... 229 311
--------- ---------
10,470 7,777
Current portion of long-term obligations................... (2,746) (7,186)
--------- ---------
Long-term obligations...................................... $ 7,724 $ 591
--------- ---------
--------- ---------
</TABLE>

At December 31, 1997 and 1998, the Company had outstanding bank installment
notes totaling $1,743,000 and $966,000, respectively. The notes bear interest at
prime plus 0.25% (8.0% as of December 31, 1998), 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 1999 and 2000. At December 31,
1998, the Company was in violation of its bank covenants. Subsequently, the
Company obtained a waiver for the covenants. In the quarter ended June 30, 1999,
the Company entered into an extension to borrow up to $250,000 using bank
installment notes which are secured by the specific

F-12
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--LONG-TERM OBLIGATIONS (CONTINUED)
equipment financed. At June 30, 1999, the Company had borrowed $113,000 under
this facility. These notes mature in 2002. At June 30, 1999, the Company was in
compliance with its covenants.

At December 31, 1997, the Company had a $6.0 million bank facility which
includes a $1.0 million export/import revolving line of credit and a $5.0
million domestic revolving line of credit. At December 31, 1997, no borrowings
were outstanding against the revolving lines of credit. The Company elected not
to renew the revolving lines of credit which expired in October 1998.

In March 1997, the Company entered into an agreement to purchase certain
inventory from Cypress Semiconductor Corporation payable under nine month
interest-free notes. Purchases totaled approximately $1.4 million. The notes
were fully paid by March 1998.

In August 1998, the Company settled its lawsuit with Actel Corporation. The
obligation for settlement and legal costs is payable quarterly through August
2001, subject to acceleration upon the completion of the Company's initial
public offering. Management intends to complete such an initial public offering
during 1999 and, accordingly, such obligations have been classified as current
at December 31, 1998 (see Note 12).

NOTE 5--STOCKHOLDERS' EQUITY

CONVERTIBLE PREFERRED STOCK

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1997 1998 1999
----- ----- ---------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
Series A, $0.001 par value; 418 shares designated, issued and
outstanding..................................................... $ -- $ -- $ --
Series B, $0.001 par value; 1,713 shares designated, issued and
outstanding..................................................... 2 2 2
Series C, $0.001 par value; 2,018 shares designated, 1,996 issued
and outstanding................................................. 2 2 2
Series D, $0.001 par value; 520 shares designated, issued and
outstanding..................................................... -- -- --
Series E, $0.001 par value; 3,979 shares designated, issued and
outstanding..................................................... 4 4 4
Series F, $0.001 par value; 1,581 shares designated, 1,286 issued
and outstanding................................................. 2 2 2
--- --- ---
$ 10 $ 10 $ 10
--- --- ---
--- --- ---
</TABLE>

The holders of the outstanding Series A, Series B, Series C, Series D,
Series E and Series F preferred stock are entitled to annual dividends of
$0.198, $0.0246, $0.384, $0.384, $0.42 and $0.696 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, 1998.

F-13
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--STOCKHOLDERS' EQUITY (CONTINUED)
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series F preferred stock are entitled to receive $6.96 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 are entitled to receive $1.998, $2.478, $3.84, $3.84
and $4.20 per share, respectively, plus declared but unpaid dividends thereon,
prior to any distribution to holders of common stock. As of December 31, 1998,
the liquidation preference of Series A, Series B, Series C, Series D, Series E
and Series F preferred stock is approximately $40.4 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
million, at a per share issuance price of at least $19.98 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 at least two-thirds of the holders of such
outstanding preferred shares, voting together as a single class, 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 January 1992, in conjunction with the issue of Series C preferred stock,
the Company issued warrants to purchase 21,875 shares of Series C preferred
stock at $3.84 per share. The warrants expired unexercised in January 1999.

COMMON STOCK

In March 1997, in conjunction with the issuance of Series F preferred stock,
the Company authorized an additional 20,000,000 shares of common stock for a
total authorized amount of 105,000,000 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, 1996 and 1997 as the Company incurred operating losses
during these periods. No provision for federal or state income taxes has been
recorded for the year ended December 31, 1998 and the six-month period ended
June 30, 1999 (unaudited) as the Company had the ability to utilize federal and
state net operating loss carryforwards.

F-14
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--INCOME TAXES (CONTINUED)
A rate reconciliation between income tax provisions at the US federal
statutory rate and the effective rate reflected in the Statement of Operations
is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Provision at statutory rate.................................................. (34)% (34)% 34
Utilization of operating loss and credit carryforwards....................... -- -- (34)
Future benefit of deferred tax assets not recognized......................... 34 34 --
--------- --------- ---------
--% --% --%
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company did not have any significant foreign tax liability during the
periods presented.

Deferred tax balances are comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................................ $ 7,252 $ 15,728
Contract termination charge............................................ 7,389 --
Accruals and reserves.................................................. 7,509 5,970
Credit carryforward.................................................... 1,951 2,351
Capitalized research and development................................... 449 633
--------- ---------
24,550 24,682
Valuation allowances..................................................... (24,550) (24,682)
--------- ---------
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, 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, 1998, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $44 million and $21
million, respectively. These carryforwards, if not utilized to offset future
taxable income and income taxes payable, will expire in the years 1999 through
2013.

F-15
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--INCOME TAXES (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. Since inception, the Company believes cumulative
changes in ownership have invoked the loss carryforward deduction limitation
under IRC Section382. However, the Company believes that such limitations will
not have a material effect on the future utilization of the losses.

NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS

1989 STOCK OPTION PLAN

In July 1996, the 1989 Stock Plan (the "Plan") was amended to allow options
to be exercised prior to vesting. Unvested shares are deposited to an escrow
agent and the Company has a right to repurchase unvested shares at the original
issuance price if the employee is terminated. In April 1999, an additional
1,333,000 shares were authorized for issuance. The Plan provides for the
issuance of incentive and nonqualified options for the purchase of up to
4,617,000 shares of Common Stock. Options may be granted to employees, directors
and consultants to the Company. The fair value of the Company's common stock was
determined by the Board of Directors considering operating results, current
legal developments, product life cycle, general market conditions, independent
valuations and other relevant factors.

The following table summarizes all of the Company's stock option activity
and related weighted average exercise price for each of the years ended December
31, 1996, 1997 and 1998 and the six month period ended June 30, 1999:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
--------------- -----------
<S> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1995....................................... 1,373 $ 0.60
Granted.......................................................... 369 0.84
Canceled......................................................... (233) 0.60
Exercised........................................................ (225) 0.54
-----
Balance at December 31, 1996....................................... 1,284 0.66
Granted.......................................................... 1,636 4.53
Canceled......................................................... (558) 5.30
Exercised........................................................ (356) 0.88
-----
Balance at December 31, 1997....................................... 2,006 2.49
Granted.......................................................... 1,151 4.50
Canceled......................................................... (703) 3.26
Exercised........................................................ (89) 1.30
-----
Balance at December 31, 1998....................................... 2,365 3.26
Granted (unaudited).............................................. 395 5.41
Canceled (unaudited)............................................. (186) 4.33
Exercised (unaudited)............................................ (25) 2.31
-----
Balance at June 30, 1999 (unaudited)............................... 2,549 3.55
-----
-----
</TABLE>

F-16
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)
As of December 31, 1998, 223,000 shares were available for grant, 18,000
unvested shares had been exercised and remain subject to the Company's buyback
rights and options to purchase 1,601,000 shares were vested.

On October 20, 1997, the Company repriced options to purchase 316,000 shares
of common stock that were issued to employees at exercise prices of $6.00 to
$9.00 between April and September 1997 to an exercise price of $4.50. The
original vesting terms of these options remained unchanged.

Related weighted average exercise price and contractual life information at
December 31, 1998 are as follows:

<TABLE>
<CAPTION>
OPTIONS WITH OUTSTANDING AND REMAINING
EXERCISE PRICES OF: EXERCISABLE SHARES LIFE (YEARS)
- -------------------------------------------------------------- ------------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
$0.30......................................................... 15 1.1
$0.60......................................................... 450 6.0
$0.90......................................................... 110 7.8
$1.80......................................................... 10 8.1
$3.00......................................................... 426 8.1
$4.50......................................................... 1,354 9.3
-----
2,365
-----
-----
</TABLE>

The weighted average estimated grant date fair values, as defined by SFAS
123, for options granted during 1996, 1997 and 1998 was $3.18, $2.52 and $1.02
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 1996, 1997 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected life (years)............................................... 5.0 5.3 5.3
Risk-free interest rate............................................. 6.05% 6.20% 4.99%
Volatility.......................................................... -- -- --
Dividend yield...................................................... -- -- --
</TABLE>

F-17
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)
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
plans, the Company's pro forma net loss would have been as follows for the years
ended December 31, 1996, 1997 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 1998
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Pro forma net loss............................................ $ (3,676) $ (33,953) $ (663)

Pro forma net loss per share:
Basic....................................................... $ (4.76) $ (10.51) $ (0.16)
Diluted..................................................... $ (4.76) $ (10.51) $ (0.16)
</TABLE>

DEFERRED COMPENSATION

During the year ended December 31, 1996, 1997, 1998 and the six months ended
June 30, 1999, the Company granted options and recorded related deferred
compensation of $851,000, $1,890,000, $204,000 and $332,000 (unaudited),
respectively, net of reversals associated with unvested shares of terminated
employees. Such deferred compensation is being 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 wafers under this agreement during 1996 and 1997.

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 3,037,786 shares of Common Stock to Cypress, resulting in a
charge of approximately $23.0 million in the first quarter of 1997. The
Company's revenue and net income were not measurably enhanced by the termination
of the Existing Agreement nor the reversion of the related rights to the
Company-developed intellectual property. The 3,037,786 shares of Common Stock
were issued to Cypress on April 1, 1998. 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 an initial public offering.
The parties also entered into a new foundry agreement and a cross-license
agreement.

F-18
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES RECEIVABLE FROM STOCKHOLDER

As of December 31, 1998, the Company had $121,000 of demand promissory notes
due from a 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--MANUFACTURING AGREEMENT

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 fluctuation in the New Taiwan Dollar exchange rate greater than
5%. The Company has committed to purchase approximately $2.8 million under this
agreement in 1999. Purchases under this agreement totaled $202,000 and $1.0
million in 1997 and 1998, respectively.

NOTE 10--INFORMATION CONCERNING BUSINESS SEGMENTS AND MAJOR CUSTOMERS

INFORMATION ABOUT GEOGRAPHIC AREAS

All of the Company's sales are originated in the United States. Shipments to
some of the Company's distributors are made to centralized purchasing and
distributing locations, which in turn sell through to other locations. As a
result of these factors, the Company believes that sales to certain geographic
locations might be higher or lower, though accurate data is difficult to obtain.

The following is a breakdown of revenues by shipment destination for the
years ended 1996, 1997 and 1998:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................................ $ 17,759 $ 16,222 $ 15,784
Germany...................................................... 2,419 1,451 1,800
Other........................................................ 3,580 10,787 12,423
--------- --------- ---------
$ 23,758 $ 28,460 $ 30,007
--------- --------- ---------
--------- --------- ---------
</TABLE>

The countries comprising the "other" category include Japan, the UK, Korea
and other countries in western Europe and Asia, none of which individually
comprise more than 10% of the Company's sales.

Three customers, distributors of the Company's products, accounted for
approximately 27%, 10% and 10% of revenues in 1998. Three customers,
distributors of the Company's products, accounted for approximately 20%, 15% and
13% of revenue in 1997. Four customers, distributors of the Company's

F-19
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--INFORMATION CONCERNING BUSINESS SEGMENTS AND MAJOR CUSTOMERS
(CONTINUED)
products, accounted for 19%, 14%, 12% and 12% of revenue in 1996. All sales are
made from the United States and are denominated in U.S. dollars.

Less than 10% of the Company's long-lived assets, including property and
equipment and other assets, were located outside the United States.

NOTE 11--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 certificate of deposit which matures in 1999.
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $358,000, $478,000 and $531,000, respectively.

The Company also leases certain equipment and leasehold improvements under
capital leases which expire in 2003. At December 31, 1998 and 1997, $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:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Year Ending December 31,
1999................................................................... $ 594 $ 67
2000................................................................... 632 67
2001................................................................... 638 67
2002................................................................... 664 66
2003 and thereafter.................................................... 590 47
----------- -----
$ 3,118 314
-----------
-----------
Less amount representing interest........................................ (75)
-----
Present value of capital lease obligations............................... 239
Less current portion..................................................... (40)
-----
Long term portion of capital lease obligations........................... $ 199
-----
-----
</TABLE>

NOTE 12--LITIGATION SETTLEMENT

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. The Company countersued alleging that Actel's
products infringed on the Company's patents. During 1995 and 1996, Actel's suit
was amended to include a trade misappropriation claim and additional patent
infringement claims. Actel and the Company settled their litigation in August
1998. The Company and Actel have granted each other non-exclusive, royalty free,
worldwide, perpetual cross licenses of their existing technology, excluding only
certain SRAM technology owned by Actel. The Company has made quarterly payments
to Actel since the settlement date. The remainder of the settlement will be paid
to Actel immediately after the Company's initial public offering. The agreement
also includes certain

F-20
<PAGE>
QUICKLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--LITIGATION SETTLEMENT (CONTINUED)
assignment and adverse monetary provisions in the event of a change in ownership
of either party. The accrual of $6.5 million at December 31, 1998 (Note 4)
represents the remaining obligation under the settlement.

NOTE 13--SUBSEQUENT EVENTS

In October 1999 the Company reincorporated in Delaware and, in conjunction
with such reincorporation, effected a 6-for-1 reverse stock split (the "Reverse
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 Reverse Stock Split. The Board of Directors also
approved a recapitalization that authorized 100 million shares of common stock
and ten million shares of undesignated preferred stock.

The 1999 Stock Plan was adopted by the Board of Directors in August 1999 and
was approved by the stockholders in September 1999. The total number of shares
of common stock reserved for issuance under this plan is 5,000,000 shares of
common stock, the shares of common stock which have been reserved but unissued
under the 1989 Stock Option Plan as of the effective date of the initial public
offering (736,828 as of September 30, 1999) and any shares returned to the 1989
plan as a result of the termination of options under the 1989 plan. In addition,
commencing January 2000, an annual increase will be added to the 1999 stock plan
equal to the lesser of 5,000,000 shares or 5% of the outstanding shares on such
date. Unlike the 1989 Stock Plan, the 1999 Stock Plan does not allow for the
exercise of stock options prior to vesting.

The 1999 Employee Stock Purchase Plan was adopted by the Board of Directors
in August 1999 and was approved by the stockholders in September 1999. The total
number of shares of common stock reserved for issuance under this plan is
2,000,000 plus annual increases equal to the lesser of 1,500,000 shares or 4% of
the outstanding shares on such date.

F-21
<PAGE>
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