Silicon Storage Technology (SSTI)

16. Subsequent Events

1995 Non-Employee Directors Stock Option Plan

In July 2008, our Board of Directors terminated the 1995 Non-Employee Directors’ Stock Option Plan, or the Directors’ Plan, such that no further stock awards will be made pursuant the Directors’ Plan. As of the termination date, 498,498 shares were subject to outstanding stock awards and will remain subject to the terms of the Directors’ Plan until their exercise or expiration.

The following discussion may be understood more fully by reference to the consolidated financial statements, notes to the consolidated financial statements and management’s discussion and analysis of financial condition and results of operations contained in our Annual Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission on March 18, 2008.

The following discussion contains forward-looking statements, which involve risk and uncertainties. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors which are difficult to forecast and can materially affect our quarterly or annual operating results. Fluctuations in revenues and operating results may cause volatility in our stock price. Please also see Item 1A. “Risk Factors.”

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Table of Contents

20. Subsequent Events:

        On February 6, 2008, we announced that our Board of Directors authorized management to repurchase up to $30 million of our common stock at any time commencing February 11, 2008. We expect to use cash on hand to fund the repurchases. The program does not obligate us to acquire shares at any particular price per share and may be suspended at any time at our discretion. As of March 17, 2008, we have purchased 2.2 million shares for an aggregated cost of $6.2 million.

        On February 11, 2008, we announced our intention to conduct a tender offer to holders of certain stock options to allow them to cure the consequences of tax provisions associated with IRS section 409A and California Section 409A, adjusting the exercise price of the stock option. Holders will

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SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Subsequent Events: (Continued)

generally be eligible to participate in the tender offer if (a) any portion of the discounted options vested or may vest after December 31, 2004, (b) discounted options remain outstanding and unexercised throughout the duration of the tender offer, (c) the holder remains an SST employee throughout the duration of the tender offer, and (d) the holder may be subject to taxation in the U.S. in respect of that discounted option.

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SCHEDULE II

20. Subsequent Events:

        On February 6, 2008, we announced that our Board of Directors authorized management to repurchase up to $30 million of our common stock at any time
commencing February 11, 2008. We expect to use cash on hand to fund the repurchases. The program does not obligate us to acquire shares at any particular price per share and may be suspended at
any time at our discretion. As of March 17, 2008, we have purchased 2.2 million shares for an aggregated cost of $6.2 million.

        On
February 11, 2008, we announced our intention to conduct a tender offer to holders of certain stock options to allow them to cure the consequences of tax provisions associated
with IRS section 409A and California Section 409A, adjusting the exercise price of the stock option. Holders will

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SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Subsequent Events: (Continued)

generally
be eligible to participate in the tender offer if (a) any portion of the discounted options vested or may vest after December 31, 2004, (b) discounted options remain
outstanding and unexercised throughout the duration of the tender offer, (c) the holder remains an SST employee throughout the duration of the tender offer, and (d) the holder may be
subject to taxation in the U.S. in respect of that discounted option.

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SCHEDULE II

14. Subsequent Events:

        In the third quarter ended September 30, 2007, we made an additional cash investment, among other investing enterprises, of $10.3 million in Advanced Chip Engineering Technology, or ACET, a

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SILICON STORAGE TECHNOLOGY, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

14. Subsequent Events: (Continued)

privately held Taiwanese company. Our total investment now represents 38.5% of the outstanding equity of ACET at September 30, 2007.

        In the third quarter ended September 30, 2007, we determined our investment in GSMC had suffered an other-than-temporary decline in value based on an independent third party valuation of our investment in GSMC. Accordingly, we recorded a charge for the quarter ended September 30, 2007 of $19.4 million.

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14. Subsequent Events

        In the third quarter ended September 30, 2007, we made an additional cash investment, among other investing enterprises, of $10.3 million in Advanced Chip Engineering Technology, or ACET, a privately held Taiwanese company. Our total investment now represents 38.5% of the outstanding equity of ACET at September 30, 2007.

        In the third quarter ended September 30, 2007, we determined our investment in GSMC had suffered an other-than-temporary decline in value based on an independent third party valuation of our investment in GSMC. Accordingly, we recorded a charge for the quarter ended September 30, 2007 of $19.4 million.

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21. Subsequent Events:

        In the third quarter ended September 30, 2007, we made an additional cash investment, among other investing enterprises, of $10.3 million in ACET's common stock. Our total investment now represents 38.5% of the outstanding equity of ACET at September 30, 2007.

        In the third quarter ended September 30, 2007, we determined our investment in GSMC had suffered an other-than-temporary decrease in value based on an equity offering that was substantially lower than our carrying value. As a result, we recorded a charge for the quarter ended September 30, 2007 of $19.4 million.

165

SCHEDULE II

21. Subsequent Events:

        In the third quarter ended September 30, 2007, we made an additional cash investment, among other investing enterprises, of $10.3 million in ACET's
common stock. Our total investment now represents 38.5% of the outstanding equity of ACET at September 30, 2007.

        In
the third quarter ended September 30, 2007, we determined our investment in GSMC had suffered an other-than-temporary decrease in value based on an
equity offering that was substantially lower than our carrying value. As a result, we recorded a charge for the quarter ended September 30, 2007 of $19.4 million.

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SCHEDULE II

In January and February of 2006, we sold four million common shares of our investment in Powertech Technology, Incorporated, or PTI, for a pre-tax gain of approximately $12.2 million. We continue to own approximately 5.5 million shares of PTI at March 3, 2006.

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