**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

** **

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** **

**FORM 10-K/A**

** **

**AMENDMENTNo. 1**

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| **(MARK ONE)**                                                                                                |
|---------------------------------------------------------------------------------------------------------------|
| **x**                                                                                                         | ** ** | **ANNUAL  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                          | ** ** | ** ** |
| **For the fiscal year ended December 31, 2007**                                                          |
| ** **                                                                                                    |
| **OR**                                                                                                        |
| ** **                                                                                                    |
| **o**                                                                                                         | ** ** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF  THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                          |   |   |
| **FOR THE TRANSITION PERIOD FROM             TO** |
|                                                                                                               |  |  |  |  |

 

**Commissionfile number 0-26944**

 

**Silicon Storage Technology, Inc.**

(Exact name of Registrant asSpecified in its Charter)

 

| **California**(State or Other  Jurisdiction of Incorporation or Organization) | ** ** | **77-0225590**(I.R.S. Employer  Identification Number) |
|-------------------------------------------------------------------------------|------------|--------------------------------------------------------|

 

**1171 SonoraCourt**

**Sunnyvale,California 94086**

(Address of PrincipalExecutive Offices including Zip Code)

 

**(408) 735-9110**

(Registrant’s TelephoneNumber, Including Area Code)

 

Securities registeredpursuant to Section 12(b) of the Act:

 

| **Title of each class**    | ** ** | **Name of each exchange on which registered**        |
|----------------------------|------------|------------------------------------------------------|
| Common Stock, no par value |       | The NASDAQ Stock Market LLC   (NASDAQ Global Market) |

 

Securities registeredpursuant to Section 12(g) of the Act: **None**

 

Indicate by check mark if the registrant is a well-known seasonedissuer, as defined in Rule 405 of the Securities Act.  Yes  o No x

 

Indicate by check mark if the registrant is not required to file reportspursuant to Section 13 or Section 15(d) of the Act.  Yes o  No x

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x   No o

 

Indicate by check mark if disclosure of delinquent filers pursuant toItem 405 of Regulation S-K is not contained herein, and will not becontained, to the best of registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-K,or any amendment to this Form 10-K. x

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer or smaller reportingcompany. See definitions of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 
| Large  accelerated filer o |   | Accelerated  filer x |   | Non-accelerated  filer o |   | Smaller  reporting company o |
|----------------------------|--------|----------------------|--------|--------------------------|--------|------------------------------|

 

(do not check if a smallerreporting company)

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o   No x

 

The aggregate market value of the voting stock held by non-affiliates ofthe registrant as of June 30, 2007 was $340,880,237 based on the closingprice of the registrant’s common stock as reported on the NASDAQ Global Market.Shares of the registrant’s common stock held by each officer and director andaffiliated entities who own 5% or more of the outstanding common stock of theregistrant have been excluded in that such persons and entities may be deemedto be affiliates. This determination of affiliate status is not necessarily aconclusive determination for other purposes. This calculation does not excludeshares held by persons or entities whose ownership exceeds 5% of theregistrant’s common stock that have represented to the registrant that they areregistered investment advisers or investment companies registered undersection 8 of the Investment Company Act of 1940.

 

Number of shares outstanding of SST’s Common Stock, no par value, as ofthe latest practicable date February 29, 2008: 104,334,236.

**Documents Incorporated byReference:**None

 

 

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**SILICONSTORAGE TECHNOLOGY, INC.**

 

**EXPLANATORYNOTE**

 

We are filing this amendment to our Annual Report on Form 10-K,originally filed with the Securities and Exchange Commission on March 16,2008, solely for the purpose of amending and supplementing Part III of theAnnual Report on Form 10-K. This amendment changes our Annual Report onlyby including information required by Part III (Items 10, 11, 12, 13 and14). In addition, we are also including Exhibits 31.1 and 31.2 required by thefiling of this amendment.

 

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**Silicon Storage Technology, Inc.**

**Form 10-K/A**

**Forthe Year Ended December 31, 2007**

 

**TABLEOF CONTENTS**

 
|                  |   |                                                                                            | **Page** |
|-----------------------|--------|-------------------------------------------------------------------------------------------------|----------|
| **Part III.**    |   |                                                                                            |     |
| Item 10.              |   | Directors, Executive Officers and Corporate Governance                                          | 4        |
| Item 11.              |   | Executive Compensation                                                                          | 7        |
| Item 12.              |   | Security Ownership of Certain Beneficial  Owners and Management and Related Shareholder Matters | 21       |
| Item 13.              |   | Certain Relationships and Related  Transactions and Director Independence                       | 23       |
| Item 14.              |   | Principal Accountant Fees and Services                                                          | 24       |
|                  |   |                                                                                            |     |
| **Index to Exhibits** |   |
| **Signatures**        |   | 26                                                                                              |
|                       |        |                                                                                                 |          |  |

 

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**Item 10.****                            Directors,Executive Officers and Corporate Governance**

 

The following table lists the names, ages and positions of the membersof the Board of Directors as of April 28, 2008. There are no familyrelationships between any executive officer or member of the Board of Directorsof SST.  Information regarding ourexecutive officers is set forth in Item 1 – “Business” of our Annual Report on Form 10-Kfor the year ended December 31, 2007 filed with the Securities andExchange Commission on March 16, 2008.

 
| **Name**           | ** ** | **Age** | ** ** | **Position**                                          |
|--------------------|------------|---------|------------|-------------------------------------------------------|
| Bing Yeh           |       | 57      |       | Chairman, President and  Chief Executive Officer      |
| Yaw Wen Hu         |       | 58      |       | Executive Vice  President and Chief Operating Officer |
| Yasushi Chikagami  |       | 69      |       | Director                                              |
| Ronald D. Chwang   |       | 60      |       | Director                                              |
| Terry M. Nickerson |       | 68      |       | Director                                              |
| Tsuyoshi Taira     |       | 69      |       | Director                                              |
| Edward Yao-Wu Yang |       | 59      |       | Director                                              |

 

*Bing Yeh*, one of our co-founders, has servedas our President and Chief Executive Officer and has been a member of our Boardof Directors since our inception in 1989. In April 2004, he was appointedChairman of the Board of Directors. Prior to that, Mr. Yeh served as asenior research and development manager of Xicor, Inc., a nonvolatilememory semiconductor company. From 1981 to 1984, Mr. Yeh held programmanager and other positions at Honeywell Inc. From 1979 to 1981, Mr. Yehwas a senior development engineer of EEPROM technology of Intel Corporation. Hewas a Ph.D. candidate in Applied Physics and earned an Engineer Degree inElectrical Engineering from Stanford University. Mr. Yeh holds a M.S. anda B.S. in Physics from National Taiwan University.

 

*Yaw WenHu, Ph.D.*, joined us in July 1993 as Vice President, TechnologyDevelopment. In August 1999, he became Vice President, Operations andProcess Development. In January 2000, he was promoted to Senior VicePresident, Operations and Process Development. In April 2004, he waspromoted to Executive Vice President and Chief Operating Officer. Dr. Huhas been a member of our Board of Directors since September 1995. From1990 to 1993, Dr. Hu served as deputy general manager of technologydevelopment of Vitelic Taiwan Corporation. From 1988 to 1990, he served as FABengineering manager of Integrated Device Technology, Inc. From 1985 to1988, he was the director of technology development at Vitelic Corporation.From 1978 to 1985, he worked as a senior staff engineer in Intel Corporation’sTechnology Development Group. Dr. Hu holds a B.S. in Physics from NationalTaiwan University and a M.S. in Computer Engineering and a Ph.D. in AppliedPhysics from Stanford University.

 

*Yasushi Chikagami* has been amember of our Board of Directors since September 1995. In 1979, heco-founded GVC Corporation in Taiwan, a leading modem and wireless mobile phonemanufacturer, which was acquired by Lite-On IT Corporation in 1991. Mr. Chikagamicurrently serves on the Boards of several technology companies. He has been theChairman of Arise Corporation, operating in Taiwan, since March 1992. Mr. Chikagamifounded and has served as Chairman of Arise, Inc., operating in Japan,since 2000. He also serves on the Board of ANDevices, Inc., Arima DisplayCorporation, Everlight Chemical Industrial Corporation and Trident Microsystems, Inc.,and Syntax-Brillian Corporation. Mr. Chikagami holds a B.S. inAgricultural Engineering from National Taiwan University and an M.S. inEngineering from the University of Tokyo.

 

*Ronald D.Chwang, Ph.D.*, has been a member of our Board ofDirectors since June 1997. Since 1997, Dr. Chwang has been theChairman and President of iD Ventures America, a venture capital managementcompany (formerly known as Acer Technology Ventures) under the iD SoftCapitalGroup. Dr. Chwang also serves on the Board of Directors of iRobotCorporation. From 1986 to 1997, Dr. Chwang was with various Acer entities,serving in executive positions in leading business units engaged in ASICproducts, computer peripherals, and enterprise server systems. From 1992 to1997, he was President and Chief Executive Officer of Acer America Corporation.Before joining the Acer entities, Dr. Chwang worked in development andmanagement positions at Intel and Bell Northern Research. Dr. Chwang holdsa B.Eng. (with honors) in Electrical Engineering from McGill University inMontreal, Canada and a Ph.D. in Electrical Engineering from the University ofSouthern California.

 

*Terry M.Nickerson*has been a member of our Board of Directors since April 2005.From 2000 to 2005, Mr. Nickerson served as the Senior Vice President ofFinance and Chief Financial Officer of ATI Technologies, Inc., asemiconductor manufacturer. From 1988 to 1990, he served as Chief FinancialOfficer of Northern Telecom Ltd. While with Northern Telecom, he was alsoPresident of Northern Telecom Electronics, a subsidiary responsible forNorthern Telecom’s ASIC and Printed Circuit Board manufacturing. Mr. Nickersonspent over 18 years at IBM primarily in Finance and Planning 

 

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roles. He was alsoGeneral Manager of the IBM plant in Don Mills, Ontario, which later becameCelestica Inc. While with both IBM and Northern Telecom, he served oninternational assignments covering Asia, Europe, and Latin America. Mr. Nickersonis also a director of Miranda Technologies Inc. and Tundra SemiconductorCorporation. Mr. Nickerson has a B.Sc. in Metallurgy Engineering fromQueen’s University and an M.B.A. from Harvard University.

 

*Tsuyoshi Taira* has been a memberof our Board of Directors since July 1993. Since 1996, Mr. Taira hasserved as Chief Executive Officer of Tazan International Inc., a venturecapital and management consultancy firm. From 1986 to 1993, he was President ofSanyo Semiconductor Corporation. From 1993 to 1996, Mr. Taira served asChairman of Sanyo Semiconductor Corporation. He currently serves on the Boardof Directors of several private companies. Mr. Taira received an HonoraryDoctor of Humanities from Newport Asia Pacific University and holds a B.S. inElectrical Engineering from Tokyo Metropolitan University.

 

*Edward Yao-Wu Yang* has been amember of our Board of Directors since October 2007.  From 1998to 2005, Mr. Yang served as Vice President and Chief Technology Officer ofthe Personal Systems Group of the Hewlett-Packard Company, a hardware andsoftware technology company. From 1995 to 1998, Mr. Yang served as GroupR&D Manager for the Personal Systems Group of the Hewlett-Packard Company. Mr. Yangholds a B.S. in Electrical Engineering from the National Cheng-Kung University(Taiwan) and an M.S. in Electrical Engineering from Oregon State University.

 

**Compliancewith the Reporting Requirements of Section 16(a)**

 

Section 16(a) of the Securities Exchange Actof 1934, as amended, requires our directors and executive officers, and personswho own more than ten percent of a registered class of our equity securities,to file with the SEC initial reports of ownership and reports of changes inownership of our common stock and other equity securities. Officers, directorsand greater than ten percent shareholders are required by SEC regulation tofurnish us with copies of all Section 16(a) forms they file.

 

To our knowledge, based solely on a review of suchreports furnished to us, during the year ended December 31, 2007, ourexecutive officers, directors and greater than ten percent shareholderscomplied with all applicable Section 16(a) filing requirements.

 

**Code of Conduct**

 

We have adopted the Silicon Storage Technology, Inc.Code of Conduct that applies to all of our officers, directors and employees.The Code of Conduct is available on our website at *http://www.sst.com.*If we make any substantive amendments to the Code of Conduct or grant anywaiver from a provision of the Code of Conduct to any of our executive officersor directors, we will promptly disclose the nature of the amendment or waiveron our website.

 

**Identification of Audit Committeeand Financial Expert**

 

During 2007 three directors comprised the AuditCommittee: Messrs. Taira and Nickerson and Dr. Chwang. The Board ofDirectors annually reviews the NASDAQ listing standards definition ofindependence for Audit Committee members and has determined that all members ofour Audit Committee are independent (as independence is currently defined in Rule 4350(d)(2)(A)(i) and(ii) of the NASDAQ listing standards). The Board of Directors has further determined that Mr. Nickersonqualifies as an “audit committee financial expert,” as defined in applicableSEC rules. The Board made a qualitative assessment of Mr. Nickerson’slevel of knowledge and experience based on a number of factors, including hisformal education and experience as Chief Financial Officer of both NorthernTelecom Ltd. and ATI Technologies Inc.

 

**Nominating Criteria andProcedures**

 

The Nominating and Corporate Governance Committeebelieves that candidates for director should have certain minimumqualifications, including being able to read and understand basic financialstatements, being over 21 years of age and having the highest personalintegrity and ethics. The Nominating and Corporate Governance Committee alsointends to consider such factors as possessing relevant expertise upon which tobe able to offer advice and guidance to management, having sufficient time to devoteto the affairs of SST, demonstrated excellence in his or her field, having theability to exercise sound business judgment and having the commitment torigorously represent the long-term interests of our shareholders. However, theNominating and Corporate Governance Committee retains the right to modify thesequalifications from time to time. Candidates for director nominees are reviewedin the context of the current composition of the Board, the operatingrequirements of SST and the long-term interests of shareholders. In conductingthis assessment, the Nominating and Corporate Governance Committee considersdiversity, age, skills, and such other factors as it deems appropriate given 

 

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the current needs of theBoard and SST, to maintain a balance of knowledge, experience and capability.In the case of incumbent directors whose terms of office are set to expire, theNominating and Corporate Governance Committee reviews such directors’ overallservice to SST during their term, including the number of meetings attended,level of participation, quality of performance, and any other relationships andtransactions that might impair such directors’ independence. In the case of newdirector candidates, the Nominating and Corporate Governance Committee alsodetermines whether the nominee must be independent for NASDAQ purposes, whichdetermination is based upon applicable NASDAQ listing standards, applicable SECrules and regulations and the advice of counsel, if necessary. TheNominating and Corporate Governance Committee conducts any appropriate andnecessary inquiries into the backgrounds and qualifications of possiblecandidates after considering the function and needs of the Board. TheNominating and Corporate Governance Committee meets to discuss and considersuch candidates’ qualifications and then selects a nominee for recommendationto the Board by majority vote. During 2007, the Nominating and CorporateGovernance Committee engaged Egon Zehnder International, a third-partyrecruiting firm, to assist it in the process of identifying and evaluating newdirector candidates. Egon Zehnder International identified Mr. Yang as apotential director candidate.

 

The Nominating and Corporate Governance Committee willconsider director candidates recommended by shareholders. The Nominating andCorporate Governance Committee does not intend to alter the manner in which itevaluates candidates, including the minimum criteria set forth above, based onwhether the candidate was recommended by a shareholder or not. Shareholders whowish to recommend individuals for consideration by the Nominating and CorporateGovernance Committee to become nominees for election to the Board of Directorsmay do so by delivering a written recommendation to the Nominating andCorporate Governance Committee at the following address: 1171 SonoraCourt, Sunnyvale, California 94086, attention: Nominating and CorporateGovernance Committee, generally at least 120 days prior to the anniversary dateof the last annual meeting of shareholders*.*  Submissions must include the full name of theproposed nominee, a description of the proposed nominee’s business experiencefor at least the previous five years, complete biographical information, adescription of the proposed nominee’s qualifications as a director and arepresentation that the nominating shareholder is a beneficial or record ownerof our stock. Any such submission must be accompanied by the written consent ofthe proposed nominee to be named as a nominee and to serve as a director ifelected.  On April 10, 2008,entities affiliated with Riley Investment Management LLC filed a preliminaryproxy statement on Schedule 14A with the Securities and Exchange Commission andon April 11, 2008, such entities delivered to us a notice of intent tonominate persons for election as directors. Other than such notice, to date, the Nominating and Corporate GovernanceCommittee has not received a timely director nominee from a shareholder orshareholders holding more than 5% of our voting stock.

 

**ShareholderCommunications with the Board of Directors**

 

The Board of Directors has adopted a formal process bywhich shareholders may communicate with the Board of Directors or any of itsdirectors. Shareholders who wish to communicate with the Board of Directors maydo so by sending written communications addressed to our Corporate Secretary at1171 Sonora Court, Sunnyvale, California 94086. All communications will becompiled by our Corporate Secretary and submitted to the Board of Directors orthe individual directors on a periodic basis. If no particular director isnamed, letters will be forwarded, depending on the subject matter, to the Chairof the Audit, Compensation, or Nominating and Corporate Governance Committee.

 

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**Item 11.****                            ExecutiveCompensation**

 

**COMPENSATIONDISCUSSION AND ANALYSIS**

 

The primary goals of theCompensation Committee of our Board of Directors with respect to executivecompensation are to attract and retain the most talented and dedicatedexecutives possible and to align executives’ incentives with shareholder valuecreation by implementing a cash incentive program designed to reward theachievement of corporate and individual objectives that promote growth in ourbusiness and, to a lesser extent historically, equity compensation. To achievethese goals, our Compensation Committee recommends executive compensationpackages to our Board of Directors that are generally based on a mix of salary,cash incentive payments and equity awards. In addition, the Compensation Committee has the ability at any time tomodify our compensation programs in response to market conditions.  Our Compensation Committee has not adoptedany formal guidelines for allocating total compensation between equitycompensation and cash compensation. We believe that performance andequity-based compensation are important components of the total executivecompensation package for maximizing shareholder value while, at the same time,attracting, motivating and retaining high-quality executives.

 

Our compensation philosophyis designed to help us attract talented individuals to manage and operate allaspects of our business, to reward these individuals fairly, and to retainthose individuals who continue to meet our high expectations and support theachievement of our business objectives. In this regard, during 2007, ourcompensation program was designed to:

 

·                  reward employees and executives for ouroverall performance and for the achievement of departmental and individualgoals and responsibilities;

 

·                  attract and retain talented individuals whoare capable of leading us in achieving our business objectives in an industrycharacterized by competitiveness, growth and a challenging businessenvironment; and

 

·                  provide a balanced focus on near term andlong term results.

 

The objectives of our compensation program are to:

 

·                  aligncompensation with our business objectives and individual performance;

 

·                  motivate andreward high levels of performance;

 

·                  recognize andreward the achievement of team and individual goals; and

 

·                  enable us toattract, retain and reward officers who contribute to our long-term success.

 

Our officer compensation philosophy is to tie asignificant portion of our compensation to our performance and attainment ofteam and individual goals and objectives by our officers and is based on thefollowing:

 

·                  The CompensationCommittee regularly compares our officer compensation practices with those ofother companies in the semiconductor industry and other technology-related industriesand sets our compensation guidelines based on this review. Our base annualsalaries for our officers are on average slightly below the 50thpercentile of those paid to officers of companies with comparable revenuetargets in the semiconductor and technology industries. The CompensationCommittee seeks, however, to provide our officers with opportunities for highercompensation through cash bonuses and stock options which, when we areprofitable, places total compensation in the 50th  percentile of comparable companies.  Due to our recent non-profitability and stockperformance, on average our executive compensation is generally below the 50thpercentile of comparable companies. Prior to 2007, we did not have any formal short-term incentive plan ortargets.

 

·                  The CompensationCommittee believes that an officer compensation program that ties our cashincentive program to performance and achievement of our stated goals servesboth as an influential motivator to its officers and as an effective instrumentfor aligning their interests with those of our shareholders.

 

·                  The CompensationCommittee also believes that a substantial portion of the compensation of ourofficers should be linked to the success of our common stock in themarketplace. The linkage is achieved through our stock option program, whichalso serves to more fully align the interests of management with those of ourshareholders.

 

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Annual compensation for our executive officersconsists of three principal elements: salary, cash bonus  and stock options.

 

The Compensation Committee sets the base annual salaryand levels of compensation for executive officers by reviewing compensation forcomparable positions in the market and the historical compensation levels ofour officers. Currently, the base annual salaries of our officers are at levelswhich the Compensation Committee believes are generally at or below the marketmedian of those of officers of companies with which we compare ourselves. TheCompensation Committee members participate in the deliberations of the annualsalaries for all officers. Increases in annual salaries are based on a reviewand evaluation of officer salary levels and the demonstrated capabilities ofthe officers in managing the key aspects of a fabless semiconductor company,including:

 

·                  corporatepartnering, patent strategy and technology collaborations;

 

·                  research anddevelopment;

 

·                  marketdevelopment and market penetration;

 

·                  financialmatters, including attracting capital and financial planning; and

 

·                  human resources.

 

**Roleof Our Compensation Committee**

 

Our Compensation Committeeapproves, administers and interprets our executive compensation and benefitpolicies. Our Compensation Committee was appointed by our Board of Directors,and consists entirely of directors who are “outside directors” for purposes of Section 162(m) and“non-employee directors” for purposes of Rule 16b-3 under the ExchangeAct.  During 2007, our CompensationCommittee was comprised of Messrs. Taira, Chikagami, Nickerson andYang and Dr. Chwang, and waschaired in 2007 by Mr. Taira. Mr. Yang assumed chairmanship in thefourth quarter of 2007.  Messrs. Tairaand Chikagami are retiring as members of the Board of Directors and are notstanding for re-election at the Annual Meeting.

 

Our Compensation Committeehas taken the following steps to ensure that our executive compensation andbenefit programs are consistent with our compensation philosophy:

 

·                  evaluated our compensation practices andassisted in developing and implementing the executive compensation program andphilosophy;

 

·                  developed recommendations with regard toexecutive compensation structures based on publicly available data relating tothe compensation practices and policies of other companies within and outsideour industry;

 

·                  established a practice, in accordance withthe rules of NASDAQ, of prospectively reviewing the performance anddetermining the compensation earned, paid or awarded to our chief executiveofficer independent of input from him;

 

·                  established a practice, in accordance withthe rules of NASDAQ, to review on an annual basis the performance of ourother executive officers with assistance from our chief executive officer anddetermining what we believe to be appropriate total compensation based oncompetitive levels; and

 

·                  established a policy to specify grant datesfor both new hire and annual retention equity awards as a public company.

 

In 2007, our CompensationCommittee met without the Chief Executive Officer present to review anddetermine the compensation of our Chief Executive Officer, with input from himon his annual salary and cash incentive compensation for the year. For allother executive officers in 2007, the Compensation Committee met with our ChiefExecutive Officer to consider and determine executive compensation, based onrecommendations by our Chief Executive Officer.

 

**AnnualReview of Cash and Equity Compensation**

 

We conduct an annual reviewof the aggregate level of our executive compensation, as well as the mix ofelements used to compensate our executive officers. In determining the amountand mix of compensation elements and whether each element provides the correctincentives and rewards for performance consistent with our short and long-termgoals and 

 

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objectives,the Compensation Committee relies on its judgment about each individual ratherthan adopting a formulaic approach to compensatory decisions it believes aretoo narrowly responsive to short-term changes in business performance. As aresult, the Compensation Committee does not utilize a fixed weighting systembetween compensation elements for each executive officer, but rather assesseseach executive officer’s overall contribution to the business, scope of theexecutive officer’s responsibilities and the executive officer’s historicalperformance to determine that executive officer’s annual compensation. We onlybegan benchmarking our executive compensation against our peer companies in2007 and we have never used tally sheets. Our Compensation Committee intends toretain the services of third-party executive compensation specialists from timeto time, as it sees fit, in connection with the establishment of cash andequity compensation and related policies going forward.

 

In 2007, the CompensationCommittee engaged Compensia, a third-party compensation consultant to reviewthe competitiveness of current total compensation and alignment of ourexecutive compensation program with our objectives.  Our peer companies for 2007, include:

 
| · Integrated Device Technology, Inc. |   | · QLogic Corporation            |   | · Spansion Inc.                     |
|------------------------------------------------|--------|--------------------------------------|--------|------------------------------------------|
|                                           |   |                                 |   |                                     |
| · Intersil Corporation                    |   | · SanDisk Corporation           |   | · Standard Microsystems Corporation |
|                                           |   |                                 |   |                                     |
| · Microsemi Corporation                   |   | · Silicon Laboratories Inc.     |   | · TriQuint Semiconductor, Inc. |
|                                           |   |                                 |   |                                     |
| · Omnivision Technologies, Inc.      |   | · Simple Tech, Inc.        |   | · Zoran Corporation                 |
|                                           |   |                                 |   |                                     |
| · PMC-Sierra, Inc.                   |   | · Skyworks Solutions, Inc. |   |                                     |

 

In addition, Compensiareviewed and presented data from the October 2006 Radford High-TechExecutive Survey for comparable semiconductor and technology companies withsimilar revenue.

 

**Elementsof Compensation**

 

The compensation received byour executive officers consists of the following elements:

 

*Base Salary*

 

Base salaries for our executive officers areestablished based on the scope of their responsibilities, historicalperformance and individual experience. Base salaries are reviewed annually, andadjusted from time to time. In establishing the 2007 base salaries of our executiveofficers, our Compensation Committee took into account a number of factors,including the executive’s position and functional role and level ofresponsibility, performance-based factors as well as competitive conditions. Wedo not apply specific formulas to determine increases. Based on theCompensation Committee’s review, the base salaries of the named executiveofficers were not increased in 2007 or in 2008.

 

*2007 Executive Bonus Plan*

 

In April 2007, the Compensation Committeeapproved a cash incentive plan, or the Executive Bonus Plan, for ourexecutive officers and other members of senior management. Payouts under theExecutive Bonus Plan are conditioned upon the achievement of a performance gateand then based upon individually weighted metrics to be achieved by theparticipants. The Executive Bonus Plan has three levels (threshold, target andmaximum) depending upon the level of metric achievement. The specific metrics,weighting and payout levels can vary among individual participants and from yearto year.

 

The Compensation Committee believes that a performancegate linked to positive operating income, which is an important indicator ofthe success of our business, is an appropriate component of the Executive BonusPlan.  Therefore, the payment of theincentive bonus for 2007 was conditioned upon our achievement of positiveoperating income for 2007 as adjusted for expenses associated with theindependent review of our historical stock option practices and for non-cashstock based compensation expense.  Afteradjustment, the Compensation Committee determined that we had achieved positiveoperating income for 2007.

 

For each executive officer, other than Mr. Kinzie,the Executive Bonus Plan had three specific individual metrics: (1) netrevenue, (2) new business, and (3) organizational development, whichwere weighted 40%, 40%, and 20%, respectively. Mr. Kinzie’s metrics were weighted 30% to net revenue and 70% tospecific individual goals, including but not limited to serving as our interimchief financial officer and efforts related to the restatement of ourhistorical financial 

 

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statements.  The net revenue metric is the same for eachparticipant, while the new business and organizational development metrics varydepending upon the participant.

 

For 2007, the net revenue metric was $452.0 millionand we achieved net revenue of $411.7 million. The Compensation Committee considered the 2007 net revenue metric to bedifficult but achievable based on our performance in 2006.  New business metrics were primarily comprisedof new product introductions and design wins and organizational developmentmetrics were primarily comprised of succession planning and organizationstructuring.  We are not disclosing specificnew business metrics because it would signal our strategic focus areas and webelieve impair ability to leverage these areas for competitive advantage.  Furthermore, we believe that disclosing suchmetrics would give our competitors insight to market dynamics and ourstrategies to address such dynamics that could be used against us bycompetitors targeting existing customers.

 

The net revenue metric could be adjusted based uponactual achievement within a range of 80% to 120%.  For example, if 80% of the target net revenuemetric was achieved then the weighting would be 20%.  If 120% or greater of the target net revenuemetric was achieved, then the weighting would be 60%.  If it was determined that less than 80% ofthe net revenue metric was achieved then the weighting would be reduced tozero.  As we achieved 91.1% of the netrevenue metric, the weighting for 2007 was 31.1%.

 

The other metrics of new business and organizationaldevelopment were evaluated by the Compensation Committee for each executiveofficer based upon a subjective assessment of the achievement of thegoals.  The new business metriccould  range from 0% to 60%, while theorganizational development could range from 0% to 30%.

 

For 2007, the Compensation Committee determined, afterconsidering the recommendations of our chief executive officer, the followingachievement percentages, for the named executive officers other than Mr. Kinzie.  As Mr. Kinzie was not an executiveofficer at the time of determination, our chief executive officer determinedhis bonus.  The maximum aggregate of themetrics was 150%, calculated as: 60% (net revenue) plus 60% (new business) plus30% (organizational).

 
| **Name**              | ** ** | **Net Revenue** | ** ** | **New Business** | ** ** | **Organizational/  Other** | ** ** | **Aggregate  Percentage  Achievement  (before gross  margin  multiplier)** | ** ** |
|-----------------------|------------|----------------------|------------|-----------------------|------------|----------------------------|------------|---------------------------------------------------------------------------------|------------|
| Bing Yeh              |       | 31.1                 | %          | 14.0                  | %          | 6.0                        | %          | 51.1                                                                            | %          |
| Yaw Wen Hu            |       | 31.1                 |       | 16.0                  |       | 14.0                       |       | 61.1                                                                            |       |
| Michael S. Briner     |       | 31.1                 |       | 19.6                  |       | 6.0                        |       | 56.7                                                                            |       |
| Derek J. Best         |       | 31.1                 |       | 24.0                  |       | 6.0                        |       | 61.1                                                                            |       |
| James B. Boyd         |       | 31.1                 |       | 22.0                  |       | 4.0                        |       | 57.1                                                                            |       |
| William R. Kinzie     |       | 23.3                 |       | —                |       | 49.7                       |       | 73.0                                                                            |       |
| Arthur O. Whipple (1) |       | —               |       | —                |       | —                     |       | —                                                                          |       |

 

----

(1)          Mr.  Whipple was not a participant inthe Executive Bonus Plan.

 

The Compensation Committee also believes that grossmargin is an important indicator of the success of our business and toencourage our executive officers to improve our gross margins implemented agross margin multiplier against the aggregate percentage achievement in thecalculation of the incentive bonus. Senior management participants who were not executive officers were noteligible for the gross margin multiplier. The gross margin multiplier would be 100% if our gross margin fellbetween 26.7% and 27.8% and could be increased to 110% or decreased to 90%depending on actual results.  Our actualgross margin for 2007 was 29.2% resulting in a multiplier of 110%.  The Compensation Committee considered the2007 gross margin range to be difficult but achievable based upon historicalresults.  The Compensation Committeedetermined; however, not to apply the gross margin multiplier to Mr. Yeh’saggregate percentage achievement in light of the company’s overall performancein 2007.

 

10

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Ournamed executive officers had the following target bonuses, achievement andpayouts for 2007:

 
| **Name and Title** | ** ** | **Target as a  Percentage of  Base Salary (1)** | ** ** | **Target Bonus  ($)(1)** | ** ** | **Aggregate  Percentage  Achievement  (with gross  margin  multiplier of  110%)** | ** ** | **Actual  Incentive  Bonus($)** | ** ** |
|------------------------------|------------|--------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------------------------------------------------------------------------------|------------|---------------------------------|------------|
| Bing Yeh                     |       | 80                                                                       | %          | $                             | 380,000    |                                                                                        | 51.1       | %(3)                            | $          | 194,161 |   |
| Yaw Wen Hu                   |       | 60                                                                       | %          | 198,000                       |       | 67.2                                                                                        |       | 133,065                         |       |
| Michael S. Briner            |       | 50                                                                       | %          | 135,000                       |       | 62.4                                                                                        |       | 84,467                          |       |
| Derek J. Best                |       | 50                                                                       | %          | 134,000                       |       | 67.2                                                                                        |       | 89,728                          |       |
| James B. Boyd (2)            |       | 50                                                                       | %          | 70,000                        |       | 62.8                                                                                        |       | 43,963                          |       |
| William R. Kinzie            |       | 25                                                                       | %          | 48,563                        |       | 73.0                                                                                        | (3)        | 35,641                          |       |
| Arthur O. Whipple (4)        |       | —                                                                   |       | —                        |       | —                                                                                      |       | —                          |       |
|                              |            |                                                                          |            |                               |            |                                                                                             |            |                                 |            |  |  |

 

----

(1)          Thetarget as a percentage of base salary was designed to achieve a targetincentive equal to the 50th percentile of comparable companies.  Aparticipant’s actual incentive bonus was calculated as follows:

 

IncentiveBonus = (Base Salary x Participant Target Percentage) x (Gross MarginMultiplier Percentage x Aggregate Individual Metrics Percentage)

 

(2)          Mr. Boyd was appointed Chief FinancialOfficer and Senior Vice President of Finance effective June 20, 2007 andhis target bonus represents 50% of his salary of $280,000 on a pro rata basisfor six months.

 

(3)          No gross margin multiplier was applied to Mr. Yehor Mr. Kinzie’s aggregate percentage achievement.

 

(4)           Mr. Whipple was not a participant inthe Executive Bonus Plan.

 

Under the Executive Bonus Plan, the Compensation Committee retained thediscretion to increase, reduce, or eliminate compensation awards or make awardseven if the objectives were not achieved. The Compensation Committee exercised this discretion and reduced the compensationwith respect to the determination of the 2007 incentive payment to our chiefexecutive officer.

 

*2007 Discretionary Bonuses*

 

*Yaw Wen Hu.*  In December 2007,we paid Dr. Hu a discretionary bonus of $80,940, which was equal to thewithholding tax due on the gain between the exercise price and the market priceof certain non-qualified stock options exercised by Dr. Hu that were dueto expire during 2007.  The stock optionswere originally incentive stock options but were reclassified to non-qualifiedstatus due to a change in their measurement date as a result of our review ofour historical stock option practices. Dr. Hu was unable to sell theshares he received upon exercise due to our inability to file our periodicreports with the Securities and Exchange Commission during 2007.  We were required to withhold and remit theseamounts pursuant to the Internal Revenue Code of 1986, as amended, and theregulations thereunder.

 

*William R. Kinzie*.  In May 2007,in recognition of his service as our interim chief financial officer from February 2007to June 2007, Mr. Kinzie was awarded a discretionary bonus of$15,000.  In addition, in the firstquarter of 2008, in recognition of his efforts with respect to the restatementof our historical financial statements, Mr. Kinzie was awarded adiscretionary bonus of $25,000.

 

*Equity Compensation*

 

Total compensation at the executive officer level alsoincludes long-term incentives provided by stock awards issued under our 1995Equity Incentive Plan. Stock awards are designed to align the long-terminterests of our employees with those 

 

11

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of our shareholders andto assist in the retention of employees. The size of an individual stock awardis generally intended to reflect the employee’s position with, and his or herimportance to us, and past and future anticipated contributions to ourbusiness, and how many years of future service for which the employee hasnon-vested options.  Award size is alsoinfluenced by the individual executive officer’s performance over the prioryear.  Under the 1995 Equity IncentivePlan the exercise price of stock option grants is 100% of the fair market valueon the date of grant. Options are generally subject to vesting over a four orfive year period in order to encourage key employees to continue in our employ.As required under our 1995 Equity Incentive Plan, the exercise price of stockoption grants for executive officers who own more than 10% of the shares of ouroutstanding stock is set at 110% of the fair market value on the date of grant.

 

The Compensation Committee administers the 1995 EquityIncentive Plan for our executive officers. The Board of Directors has delegatedthe administration of the 1995 Equity Incentive Plan for all of our otheremployees for option grants of not more than 36,000 shares per option grant tothe Non-Officer Stock Award Committee.

 

We believe that long-termperformance is achieved through an ownership culture that encourages suchperformance by our executive officers through the use of equity-based awards.Our equity benefit plans have been established to provide certain of ouremployees, including our executive officers, with incentives to help alignthose employees’ interests with the interests of our shareholders. OurCompensation Committee believes that the use of equity-based awards offers thebest approach to achieving our compensation goals. We have not adopted stockownership guidelines and our equity benefit plans have provided the principalmethod for our executive officers to acquire equity or equity-linked interestsin SST.

 

Authority to make equitygrants to executive officers rests with our Compensation Committee, although,our Compensation Committee considers the recommendations of our President andChief Executive Officer for executive officers other than himself.  The size of the awards reflect pastindividual and company performance, expected future contribution, the retentionvalue of unvested stock options held by our executive officers and theestimated value of the awards compared with equity awards offered to executivesin similar positions by companies within and outside our industry.  In 2007, due to the restatement of ourhistorical financial statements our named executive officers were not awardedany stock options, other than James B. Boyd, our Chief Financial Officer andSenior Vice President of Finance who joined us in June 2007.  Mr. Boyd’s stock option grant wasapproximately at the market median for our peer companies.

 

The Compensation Committeegranted stock options in February 2008 to all our executive officers,except Mr. Boyd, as no stock options were granted in 2007.  Such stock options were initially reviewed bythe Compensation Committee in mid-2007 and reflect our 2006 performance butwere not granted during 2007 due to the restatement of our historical financialstatements.  The number of shares grantedto each executive officer represents an increase from our recent historicalgrants and were intended to approximate the 25th percentile for ourpeer companies.

 
| **Name**              | ** ** | **Option Awards (#)** | ** ** | **Exercise Price ($)(1)** | ** ** |
|-----------------------|------------|---------------------------------|------------|-------------------------------------|------------|
| Bing Yeh              |       | 150,000                         |       | $                                   | 2.838      |   |
| James B. Boyd         |       | —                          |       | —                              |       |
| Yaw Wen Hu            |       | 78,000                          |       | 2.58                                |       |
| Michael S. Briner     |       | 65,000                          |       | 2.58                                |       |
| Derek J. Best         |       | 65,000                          |       | 2.58                                |       |
| William R. Kinzie     |       | 3,531                           |       | 2.58                                |       |
| Arthur O. Whipple (2) |       | —                          |       | —                              |       |
|                       |            |                                 |            |                                     |            |  |

 

----

(1)   The exercise price equals the closing priceof our common stock on the trading day immediately prior to the date of grantas reported on the NASDAQ Global Market, except for the stock option grant to Mr. Yehwhich exercise price is equal to 110% of such closing price.  Each option will vest as to 25% of the sharesthereunder on July 1, 2008 and the remaining 75% will vest monthlythereafter over the next three years.

 

(2)   Mr. Whippleresigned as Vice President, Finance, Chief Financial Officer and Secretaryeffective February 9, 2007.

 

12

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*Stock Appreciation Rights*

 

Our 1995 EquityIncentive Plan authorizes us to grantstock appreciation rights, or SARs. To date, no SARs have been awarded to anyof our executive officers. However, our Compensation Committee, in itsdiscretion, may in the future elect to make such grants to our executiveofficers if it deems it advisable.

 

*Severance and Change of Control Benefits*

 

We have not entered into severance orchange-in-control arrangements with any of our executive officers.  Our 1995 Equity Incentive Plan provides that,in the event of our dissolution or liquidation, a specified type of merger orother corporate reorganization, each a change in control to the extentpermitted by law, any surviving corporation will be required to either assumeawards outstanding under the 1995 Equity Incentive Plan or substitute similarawards for those outstanding under the plan, or such outstanding awards willcontinue in full force and effect. In the event that any surviving corporationdeclines to assume or continue awards outstanding under the plan, or tosubstitute similar awards, then, with respect to awards held by persons thenperforming services as employees, directors, or consultants, the time duringwhich such awards may be exercised will be accelerated and the awardsterminated if not exercised during such time. The acceleration of an award in the event of an acquisition or similarcorporate event may be viewed as an anti-takeover provision, which may have theeffect of discouraging a proposal to acquire or otherwise obtain control ofus.  We believe that the terms of the1995 Equity Incentive Plan are consistent with industry practice.

 

*Restricted Stock Grants orAwards*

 

Our Compensation Committeedid not authorize the grant of restricted stock or restricted stock awardspursuant to our equity benefit plans to any of our executive officers in 2007.However, our Compensation Committee, in its discretion, may in the future electto make such grants to our executive officers if it deems it advisable.

 

*OtherCompensation*

 

In addition, consistent withour compensation philosophy, we intend to continue to maintain the current benefitsand perquisites for our executive officers; however, our CompensationCommittee, in its discretion, may in the future revise, amend or add to thebenefits and perquisites of any executive officer if it deems it advisable.  We currently offer limited to no perquisitesto our executive officers.

 

*Benefits*

 

Wealso provide the following benefits to our named executive officers, generallyon the same basis provided to all of our employees:

 

·                  health, dental insurance and vision;

 

·                  life insurance;

 

·                  employee stock purchase plan;

 

·                  medical and dependant care flexible spendingaccount;

 

·                  health club dues reimbursement;

 

·                  short-and long-term disability, accidentaldeath and dismemberment; and

 

·                  a 401(k) plan.

 

We believe these benefitsare consistent with companies with which we compete for employees.

 

**Accountingand Tax Considerations**

 

Section 162(m) limitsthe amount that we may deduct from our taxes for compensation paid to our chiefexecutive officer and three most highly compensated officers (other than ourchief financial officer) to $1,000,000 per person per year, unless certainrequirements are met. Section 162(m) provides exceptions from theapplication of the $1,000,000 limit for certain forms of “performance-based”compensation as well as for gain recognized by an officer upon the exercise ofqualifying compensatory stock options. We believe that the stock options wehave granted in the past have satisfied the 

 

13

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exceptionsprovided under Section 162(m) from the $1,000,000 limit. While theCompensation Committee has not adopted a formal policy regarding the taxdeductibility of compensation paid to our officers, the Compensation Committeeintends to consider the tax deductibility of compensation under Section 162(m) asa factor in future compensation decisions.

 

We adopted SFAS No. 123(R) onJanuary 1, 2006. SFAS No. 123(R) establishes accounting forstock-based awards exchanged for employee services. Accordingly, stock-basedcompensation cost is measured at grant date, based on the fair value of theawards, and is recognized as an expense over the requisite employee serviceperiod. The Compensation Committee has determined to retain for the foreseeablefuture our stock option program as the sole component of its long-termcompensation program, and, therefore, to record this expense on an ongoingbasis according to SFAS No. 123(R).

 

**Summaryof Compensation**

 

The following table shows for the year ended December 31,2007, compensation awarded or paid to, or earned by our Chief ExecutiveOfficer, our Chief Financial Officer, our interim Chief Financial Officer, ourformer Chief Financial Officer and our three other most highly compensated executiveofficers during 2007.

 

**SummaryCompensation Table**

 
| **Name and Principal Position**                  | ** ** | **Year** | ** ** | **Salary ($)** | ** ** | **Bonus  ($)** | ** ** | **Option   Awards  ($)(1)** | ** ** | **Non-Equity  Incentive Plan  Compensation  ($)** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total ($)** | ** ** |
|-----------------------------------------------------------------|------------|----------|------------|---------------------|------------|----------------|------------|----------------------------------|------------|--------------------------------------------------------|------------|---------------------------------------|------------|--------------------|------------|
|                                                            |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| Bing Yeh                                                        |       | 2007     |       | $                   | 475,000    |           | $          | 1,158                            | (2)        | $                                                      | 31,347     |                                  | $          | 194,161            |       | $ | 4,822 | (10) | $ | 706,488 |   |
| *President and Chief Executive Officer*                         |       | 2006     |       | 475,000             |       | 80,706         | (3)        | 73,637                           |       | —                                                 |       | 4,822                                 | (10)       | 634,165            |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| James B.  Boyd (17)                                             |       | 2007     |       | 137,847             |       | —         |       | 131,042                          |       | 43,963                                                 |       | 3,398                                 | (11)       | 316,250            |       |
| *Chief Financial Officer and Senior Vice  President of Finance* |       | 2006     |       | —              |       | —         |       | —                           |       | —                                                 |       | —                                |       | —             |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| Yaw Wen Hu                                                      |       | 2007     |       | 330,000             |       | 81,348         | (4)        | 108,586                          |       | 133,065                                                |       | 4,822                                 | (10)       | 657,821            |       |
| *Executive Vice President and Chief  Operating Officer*         |       | 2006     |       | 330,000             |       | 37,964         | (5)        | 237,218                          |       | —                                                 |       | 4,822                                 | (10)       | 610,004            |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| Michael S.  Briner                                              |       | 2007     |       | 270,883             |       | 250            | (2)        | 62,612                           |       | 84,467                                                 |       | 5,909                                 | (12)       | 424,121            |       |
| *Senior Vice President, Application Specific  Product Group*    |       | 2006     |       | 270,883             |       | 26,300         | (6)        | 133,257                          |       | —                                                 |       | 4,822                                 | (10)       | 435,262            |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| Derek J.  Best                                                  |       | 2007     |       | 267,030             |       | —         |       | 59,871                           |       | 89,728                                                 |       | 2,322                                 | (13)       | 418,951            |       |
| *Senior Vice President, Sales and Marketing*                    |       | 2006     |       | 267,030             |       | 25,372         | (7)        | 101,951                          |       | —                                                 |       | 2,322                                 | (13)       | 396,675            |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| William R.  Kinzie (18)                                         |       | 2007     |       | 191,167             |       | 40,000         | (8)        | 29,726                           |       | 35,641                                                 |       | 4,480                                 | (14)       | 301,014            |       |
| *Controller (Interim Chief Financial  Officer)*                 |       | 2006     |       | —              |       | —         |       | —                           |       | —                                                 |       | —                                |       | —             |       |
| * *                                                        |       |     |       |                |       |           |       |                             |       |                                                   |       |                                  |       |               |       |
| Arthur O.  Whipple (19)                                         |       | 2007     |       | 41,087              |       | —         |       | 43,928                           |       | —                                                 |       | 2,189                                 | (15)       | 87,204             |       |
| *Former Vice President, Finance and Chief  Financial Officer*   |       | 2006     |       | 245,000             |       | 4,532          | (9)        | 84,035                           |       | —                                                 |       | 4,177                                 | (16)       | 337,744            |       |
|                                                                 |            |          |            |                     |            |                |            |                                  |            |                                                        |            |                                       |            |                    |            |  |  |  |  |  |  |

 

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(1)    The dollar amount in this column representsthe compensation cost for 2006 and 2007 of stock option awards granted in andprior to 2006 and 2007, respectively for financial reporting purposes. Theseamounts have been calculated in accordance with SFAS No. 123R,ignoring estimates of forfeiture, using the Black-Scholes option-pricing modelto estimate the expense associated with stock option awards over the life ofsuch awards. The assumptions made in the valuation of the option are discussedin footnote 8, “Stock-based Compensation” to our consolidated financialstatements contained in our Annual Report on Form 10-K for the year ended December 31,2007.  These amounts do not representamounts actually paid to or realized by our named executive officers.

 

(2)    Represents a cash bonus in recognition of anintellectual property award.

 

(3)    Includes a cash bonus of $375 in recognitionof an intellectual property award, $10,331 in profit sharing and a cash bonusof $70,000.

 

(4)    Includes a cashbonus of $80,940, which was equal to the withholding tax due on the gainbetween the exercise price and the market price of certain non-qualified stockoptions exercised by Dr. Hu that were due to expire during 2007.  We were required to withhold and remit theseamounts pursuant to the Internal Revenue Code of 1986, as amended, and theregulations thereunder.  See *Compensation Discussion and Analysis – Discretionary Bonuses*.  Also includes a cash bonus of $408 inrecognition of an intellectual property award.

 

14

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(5)    Includes a cash bonus of $1,041 in recognitionof an intellectual property award, $6,923 in profit sharing and a cash bonus of$30,000.

 

(6)    Includes a cash bonus of $875 in recognitionof an intellectual property award, $5,425 in profit sharing and a cash bonus of$20,000.

 

(7)    Includes $5,372 in profit sharing and a cashbonus of $20,000.

 

(8)    Represents a cash bonus.

 

(9)    Represents profit sharing.

 

(10)  Includes $2,322 in life insurance premiums and$2,500 for 401(k) contribution match.

 

 

(11)  Includes $898 in life insurance premiums and$2,500 for 401(k) contribution match.

 

(12)  Includes $3,409 in life insurance premiums and$2,500 for 401(k) contribution match.

 

(13)  Represents life insurance premiums.

 

(14)  Includes $1,980 in life insurance premiums and$2,500 for 401(k) contribution match.

 

(15)  Includes $193 in life insurance premiums and$1,996 for 401(k) contribution match.

 

(16)  Includes $1,677 in life insurance premiums and$2,500 for 401(k) contribution match.

 

(17)  Mr. Boyd was appointed Chief FinancialOfficer and Senior Vice President of Finance effective June 20, 2007.  Mr. Boyd’s annual salary is $280,000.

 

(18)  Mr. Kinzie served as interim ChiefFinancial Officer from February 12, 2007 until Mr. Boyd joined us on June 20,2007.  Mr. Kinzie was not anexecutive officer during 2006 and therefore compensation for 2006 has beenexcluded.

 

(19)  Mr. Whipple resigned as Vice President,Finance, Chief Financial Officer and Secretary effective February 9, 2007.

 

**Grantsof Plan-Based Awards**

 

The following tables show for the year ended December 31,2007, information regarding options granted to, exercised by, and held at yearend by the named executive officers and estimated future payouts under ourExecutive Bonus Plan.

** **

**2007 Grants of Plan-Based Awards**

 
| ** **                           | ** ** | ** **          | ** ** | **Estimated  Future Payouts  Under Non-Equity Incentive  Plan Awards(1)** | ** ** | ** **    | ** ** | ** **    | ** ** | **Grant Date Fair   ** | ** ** |
|--------------------------------------|------------|---------------------|------------|---------------------------------------------------------------------------|------------|---------------|------------|---------------|------------|-------------------------------------------------|------------|
| **All Other Option ** |
| **Awards: Number **        |
| ** **                           | ** ** | ** **          | ** ** | ** **                                                                | ** ** | ** **    | ** ** | ** **    | ** ** | **of Securities **                    | ** ** | **Exercise or Base ** | ** ** | **Value of Stock ** | ** ** |
| ** **                           | ** ** | ** **          | ** ** | ** **                                                                | ** ** | ** **    | ** ** | ** **    | ** ** | ** Underlying **                      | ** ** | **Price of Option** | ** ** | **and Option** | ** ** |
| ** **                           | ** ** | ** **          | ** ** | **Threshold**                                                             | ** ** | **Target**    | ** ** | **Maximum**   | ** ** | **Options**                                     | ** ** | **Awards** | ** ** | **Awards** | ** ** |
| **Name**                             | ** ** | **Grant Date** | ** ** | ** ($)**                                                             | ** ** | ** ($)** | ** ** | ** ($)** | ** ** | **(#)**                                         | ** ** | **($/Sh)(2)** | ** ** | **$ (3)** | ** ** |
| ** **                           | ** ** | ** **          | ** ** | ** **                                                                | ** ** | ** **    | ** ** | ** **    | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Bing Yeh                             |       |                |       | —                                                                    |       | $             | 380,000    |          | $          | 627,000                                         |       | — |   | — |   | — |   |
| James B. Boyd (5)                    |       |                |       | —                                                                    |       | 70,000        |       | 115,500       |       | —                                          |       | — |   | — |   |
|                                 |       | 06/29/2007          |       |                                                                      |       |          |       |          |       | 180,000                                         | (4)        | $ | 3.73 |   | $ | 445,335 |   |
| Yaw Wen Hu                           |       |                |       | —                                                                    |       | 198,000       |       | 326,700       |       | —                                          |       | — |   | — |   |
| Michael S. Briner                    |       |                |       | —                                                                    |       | 135,000       |       | 222,750       |       | —                                          |       | — |   | — |   |
| Derek J. Best                        |       |                |       | —                                                                    |       | 134,000       |       | 221,100       |       | —                                          |       | — |   | — |   |
| William R. Kinzie  (6)               |       |                |       | —                                                                    |       | 48,563        |       | 72,845        |       | —                                          |       | — |   | — |   |
| Arthur O.  Whipple(7)                |       |                |       | —                                                                    |       | —        |       | —        |       | —                                          |       | — |   | — |   |
|                                      |            |                     |            |                                                                           |            |               |            |               |            |                                                 |            |  |  |  |  |  |  |  |  |

 

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(1)      These columns representpotential target and maximum annual cash incentive payment for 2007 under ourExecutive Bonus Plan for each of our named executive officers.  The maximum annual cash incentive paymentequals the target payment x 1.5 (maximum achievement) x 1.1 (maximum marginmultiplier).  Mr. Kinzie was not eligible for the grossmargin multiplier.  The actual cash incentive payment earned for 2007for each of our named executive officers is set forth in the *Summary Compensation Table*. As such, the amounts set forth in these columns do not representadditional compensation earned by our named executive officers for 2007.  There was no threshold cash incentive paymentunder our Executive Bonus Plan.  For moreinformation regarding our Executive Bonus Plan and the cash incentive paymentsmade to our named executive officers in 2007, please see *Compensation Discussion and Analysis.*

 

15

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(2)      Each stock option was granted with an exerciseprice equal to the closing price of our common stock for the trading sessionending immediately prior to the time of grant, as reported on the NASDAQ GlobalMarket.  The exercise price may be paidin cash, in shares of our common stock valued at fair value on the exercisedate or through a cashless exercise procedure involving a same-day sale of thepurchased shares.

 

(3)    The dollar value shown for a stock option isbased on the fair value as of the grant date. These amounts have been calculated in accordance with SFAS No. 123R,using the Black-Scholes option-pricing model. The assumptions made in thevaluation of the option are discussed in footnote 8, “Stock-based Compensation”to our consolidated financial statements contained in our Annual Report on Form 10-Kfor the year ended December 31, 2007.

 

(4)    The shares subject to the stock option vest asto 25% upon the first year anniversary of Mr. Boyd’s hire date, with theremaining 75% vesting monthly thereafter over the next three years.  Vesting is contingent upon continued service.

 

(5)    Mr. Boyd was appointed Chief FinancialOfficer and Senior Vice President of Finance effective June 20, 2007.

 

(6)    Mr. Kinzie served as interim ChiefFinancial Officer from February 12, 2007 until Mr. Boyd joined us on June 20,2007.

 

(7)    Mr. Whipple resigned as Vice President,Finance, Chief Financial Officer and Secretary effective February 9, 2007.

 

**Outstanding Equity Awards as of December 31, 2007**

 

The following tables show for the year ended December 31,2007, information regarding outstanding equity awards at year end for the namedexecutive officers.

 

**2007 Outstanding Equity Awards**

 
| ** **         | ** ** | **Option Awards**                                                        | ** ** |
|--------------------|------------|-------------------------------------------------------------------------------|------------|
| **Name**           | ** ** | **Number of  Securities  Underlying   Unexercised Options  (#)  Exercisable** | ** ** | **Number  of   Securities  Underlying  Unexercised Options  (#)   Unexercisable** | ** ** | **Option  Exercise Price  ($)(1)** | ** ** | **Option  Expiration Date** | ** ** |
|               |       |                                                                          |       |   |   |   |   |   |   |
| Bing Yeh           |       | 30,000                                                                        |       | — |   | $ | 4.048 |   | 01/20/08 |   |
|               |       | 19,583                                                                        |       | 417 | (2) | 13.332 |   | 01/19/09 |   |
|               |       | 19,583                                                                        |       | 5,417 | (3) | 13.332 |   | 01/19/09 |   |
|               |       | 10,625                                                                        |       | 4,375 | (4) | 5.357 |   | 02/14/10 |   |
|               |       |                                                                          |       |   |   |   |   |   |   |
| James B. Boyd (17) |       | —                                                                        |       | 180,000 | (5) | 3.73 |   | 06/29/17 |   |
|               |       |                                                                          |       |   |   |   |   |   |   |
| Yaw Wen Hu         |       | 45,786                                                                        |       | — |   | 0.95 |   | 07/06/08 |   |
|               |       | 30,000                                                                        |       | — |   | 1.00 |   | 01/11/09 |   |
|               |       | 38,406                                                                        |       | — |   | 2.36 |   | 07/01/09 |   |
|               |       | 30,000                                                                        |       | — |   | 4.42 |   | 09/24/09 |   |
|               |       | 90,000                                                                        |       | — |   | 9.85 |   | 01/06/10 |   |
|               |       | 30,000                                                                        |       | — |   | 9.85 |   | 03/13/10 |   |
|               |       | 27,321                                                                        |       | — |   | 18.60 |   | 08/02/10 |   |
|               |       | 17,454                                                                        |       | — |   | 4.46 |   | 10/01/11 |   |
|               |       | 12,059                                                                        |       | — |   | 3.65 |   | 10/15/12 |   |
|               |       | 11,485                                                                        |       | — |   | 11.17 |   | 12/23/13 |   |
|               |       | 9,400                                                                         |       | 2,600 | (3) | 12.12 |   | 01/19/14 |   |
|               |       | 55,000                                                                        |       | 5,000 | (6) | 16.34 |   | 04/19/14 |   |
|               |       | 11,512                                                                        |       | — |   | 6.66 |   | 10/18/14 |   |
|               |       | 13,750                                                                        |       | 1,250 | (7) | 5.02 |   | 10/11/15 |   |
|               |       | 8,125                                                                         |       | 6,875 | (8) | 5.02 |   | 10/11/15 |   |
|               |       | —                                                                        |       | 8,751 | (9) | 4.80 |   | 10/16/16 |   |
|               |       |                                                                          |       |   |   |   |   |   |   |
| Michael S. Briner  |       | 120,000                                                                       |       | — |   | 1.04 |   | 12/31/07 |   |
|               |       | 30,000                                                                        |       | — |   | 9.85 |   | 01/06/10 |   |
|               |       | 18,842                                                                        |       | — |   | 18.60 |   | 08/02/10 |   |
|               |       | 35,000                                                                        |       | — |   | 8.63 |   | 03/29/11 |   |
|               |       | 15,047                                                                        |       | — |   | 4.46 |   | 10/01/11 |   |
|               |       | 11,529                                                                        |       | — |   | 3.65 |   | 10/15/12 |   |
|               |       | 10,196                                                                        |       | — |   | 11.17 |   | 12/23/13 |   |
|               |       | 7,833                                                                         |       | 2,167 | (3) | 12.12 |   | 01/19/14 |   |
|               |       | 9,514                                                                         |       | — |   | 6.66 |   | 10/18/14 |   |
|               |       | 18,125                                                                        |       | 11,875 | (10) | 4.35 |   | 07/18/15 |   |
|               |       | 1,597                                                                         |       | 8,403 | (11) | 5.02 |   | 10/11/15 |   |
|                    |            |                                                                               |            |  |  |  |  |  |  |  |

 

16

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| ** **             | ** ** | **Option Awards**                                                        | ** ** |
|------------------------|------------|-------------------------------------------------------------------------------|------------|
| **Name**               | ** ** | **Number of  Securities  Underlying   Unexercised Options  (#)  Exercisable** | ** ** | **Number  of   Securities  Underlying  Unexercised Options  (#)   Unexercisable** | ** ** | **Option  Exercise Price  ($)(1)** | ** ** | **Option  Expiration Date** | ** ** |
|                   |       | 5,417                                                                         |       | 4,583 | (8) | 5.02 |   | 10/11/15 |   |
|                   |       | —                                                                        |       | 7,955 | (12) | 4.80 |   | 10/16/16 |   |
|                   |       |                                                                          |       |   |   |   |   |   |   |
| Derek J. Best          |       | 30,000                                                                        |       | — |   | 9.85 |   | 01/06/10 |   |
|                   |       | 54,000                                                                        |       | — |   | 25.27 |   | 06/29/10 |   |
|                   |       | 25,437                                                                        |       | — |   | 18.60 |   | 08/02/10 |   |
|                   |       | 8,477                                                                         |       | — |   | 4.46 |   | 10/01/11 |   |
|                   |       | 10,079                                                                        |       | — |   | 11.17 |   | 12/23/13 |   |
|                   |       | 7,833                                                                         |       | 2,167 | (3) | 12.12 |   | 01/19/14 |   |
|                   |       | 8,721                                                                         |       | 793 | (13) | 6.66 |   | 10/18/14 |   |
|                   |       | —                                                                        |       | 12,500 | (14) | 5.02 |   | 10/11/15 |   |
|                   |       | 6,771                                                                         |       | 5,729 | (8) | 5.02 |   | 10/11/15 |   |
|                   |       | —                                                                        |       | 7,955 | (15) | 4.80 |   | 10/16/16 |   |
|                   |       |                                                                          |       |   |   |   |   |   |   |
| William R. Kinzie (18) |       | 15,000                                                                        |       | 15,000 | (16) | 5.07 |   | 12/30/15 |   |
|                   |       |                                                                          |       |   |   |   |   |   |   |
| Arthur O. Whipple (19) |       | 13,750                                                                        |       | — |   | 3.72 |   | 03/13/08 |   |
|                   |       | 9,375                                                                         |       | — |   | 4.69 |   | 03/13/08 |   |

 

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(1)    Each stock option was granted with an exerciseprice equal to the closing price of our common stock for the trading sessionending immediately prior to the time of grant, as reported on the NASDAQ GlobalMarket.

 

(2)    The shares subject to the option vested as to25% on January 19, 2005 and 2.083% per month thereafter for three years.

 

(3)    The shares subject to the option vested as to20% on January 19, 2005 and 1.666% per month thereafter for four years.

 

(4)    The shares subject to the option vest as to25% on February 14, 2006 and 2.083% per month thereafter for three years.

 

(5)    The shares subject to the option will vest asto 25% of the shares on June 20, 2008 and 2.083% per month thereafter forthree years.

 

(6)    The shares subject to the option vested as to25% on April 19, 2005 and 2.083% per month thereafter for three years.

 

(7)    The shares subject to the option vested as to8.33% on October 16, 2007 and 8.33% per month thereafter for 11 months.

 

(8)    The shares subject to the option vested as to25% on October 11, 2006 and 2.083% per month thereafter for three years.

 

(9)    The shares subject to the option vested as to8.33% on October 16, 2008 and 8.33% per month thereafter for 11 months.

 

(10)  The shares subject to the option vested as to25% on July 18, 2006 and 2.083% per month thereafter for three years.

 

(11)  The shares subject to the option vested as to8.33% on November 23, 2007 and 8.33% per month thereafter for 11 months.

 

(12)  The shares subject to the option vested as to8.33% on November 23, 2008 and 8.33% per month thereafter for 11 months.

 

(13)  The shares subject to the option vested as to8.33% on June 2, 2007 and 8.33% per month thereafter for 11 months.

 

(14)  The shares subject to the option vest as to8.33% on June 2, 2008 and 8.33% per month thereafter for 11 months.

 

(15)  The shares subject to the option vested as to8.33% on June 2, 2009 and 8.33% per month thereafter for 11 months.

 

(16)  The shares subject to the option vested as to25% on December 30, 2006 and 2.083% per month thereafter for three years.

 

(17)  Mr. Boyd was appointed Chief FinancialOfficer and Senior Vice President of Finance effective June 20, 2007.

 

(18)  Mr. Kinzie served as interim ChiefFinancial Officer from February 12, 2007 until Mr. Boyd joined us on June 20,2007.

 

(19)  Mr. Whipple resigned as Vice President,Finance, Chief Financial Officer and Secretary effective February 9, 2007,but due to the restatement of our historical financial statements his vestedexercisable stock options were outstanding as of December 31, 2007.  Such stock options expired in March 2008.

 

17

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**Option Exercises and Stock Vested in 2007**

 

The following tables show for the year ended December 31,2007, information regarding option exercises during 2007 for the namedexecutive officers.  None of our namedexecutive officers hold stock awards or restricted stock subject to vesting.

 
| ** **            | ** ** | **Option Awards**                                          | ** ** |
|-----------------------|------------|-----------------------------------------------------------------|------------|
| **Name**              | ** ** | **Number of  Shares  Acquired  on Exercise (#)** | ** ** | **Value Realized  on Exercise ($)****(1)** | ** ** |
| Bing Yeh              |       | —                                                          |       | — |   |
| James B. Boyd (2)     |       | —                                                          |       | — |   |
| Yaw Wen Hu            |       | 36,920                                                          |       | $ | 145,465 |   |
| Michael S. Briner     |       | —                                                          |       | — |   |
| Derek J. Best         |       | —                                                          |       | — |   |
| William R. Kinzie (3) |       | —                                                          |       | — |   |
| Arthur O. Whipple (4) |       | —                                                          |       | — |   |
|                       |            |                                                                 |            |  |  |  |

 

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(1)          Calculated by determining the difference between the closing price ofour common stock on the date of exercise as reported on the NASDAQ GlobalMarket and the exercise price of the options.

 

(2)          Mr. Boyd was appointed Chief Financial Officer and Senior VicePresident of Finance effective June 20, 2007.

 

(3)          Mr. Kinzie served as interim Chief Financial Officer from February 12,2007 until Mr. Boyd joined us on June 20, 2007.

 

(4)          Mr. Whipple resigned as Vice President, Finance, Chief FinancialOfficer and Secretary effective February 9, 2007.

 

**Pension Benefits**

 

Our named executive officers did not participate in, or otherwise receive any benefitsunder, any pension or retirement plan sponsored by us during the year ended December 31,2007.

 

**Nonqualified Deferred Compensation**

 

Our named executive officers did not earn any nonqualified compensation benefits fromus during the year ended December 31, 2007.

 

**Severanceand Change of Control Arrangements**

 

We have not entered intoseverance or change-in-control arrangements with any of our executiveofficers.  Our 1995 EquityIncentive Plan provides that, in the event of our dissolution or liquidation, aspecified type of merger or other corporate reorganization, each a change incontrol to the extent permitted by law, any surviving corporation will berequired to either assume awards outstanding under the 1995 Equity IncentivePlan or substitute similar awards for those outstanding under the plan, or suchoutstanding awards will continue in full force and effect. In the event thatany surviving corporation declines to assume or continue awards outstandingunder the plan, or to substitute similar awards, then, with respect to awards heldby persons then performing services as employees, directors, or consultants,the time during which such awards may be exercised will be accelerated and theawards terminated if not exercised during such time.  Assuming that a change in control occurred asof December 31, 2007 that resulted in all unvested stock options fullyvesting and using the closing sales price of our common stock of $2.99 asreported on the NASDAQ Global Market on December 31, 2007, the lasttrading day of 2007, none of the unvested stock options held by our namedexecutive officers would have been in the money and resulted in any gain to thenamed executive officers.

 

18

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**Compensation Committee Interlocks AndInsider Participation**

 

During 2007, theCompensation Committee of the Board of Directors was composed of Messrs. Taira,Chikagami, Nickerson, Yang and Dr. Chwang. No current member of the Compensation Committee and none of ourexecutive officers serve as a member of a board of directors or compensationcommittee of any entity that has one or more executive officers serving as amember of our Board of Directors or Compensation Committee.

 

**Equity Compensation PlanInformation**

 

We have three shareholder approved equity compensationplans: the 1995 Equity Incentive Plan, 1995 Non-Employee Directors’ StockOption Plan and 1995 Employee Stock Purchase Plan. The following table providescertain information with respect to all of our equity compensation plans ineffect as of December 31, 2007:

 
| **Plan Category**                                      | ** ** | **Number of securities to  be issued upon exercise  of outstanding options,  warrants and rights (a)** | ** ** | **Weighted-average  exercise price of  outstanding options,  warrants and rights** | ** ** | **Number of securities  remaining available for  issuance under equity  compensation plans  (excluding securities  reflected in column (a))** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation plans approved by security holders(1)   |       | 11,549,081                                                                                                                                                    |       | $                                                                                                           |  6.86 | (2)                                                                                                                                                                                                  | 3,053,089  |   |
| Equity compensation plans not approved by  security holders |       | —                                                                                                                                                        |       |                                                                                                        |       | —                                                                                                                                                                                               |       |
| Total                                                       |       | 11,549,081                                                                                                                                                    |       | $                                                                                                           | 6.86       | (2)                                                                                                                                                                                                  | 3,053,089  |   |

 

----

(1)                                  The plans included in this row include our1995 Equity Incentive Plan, 1995 Non-Employee Directors’ Stock Option Plan and1995 Employee Stock Purchase Plan.

 

(2)                                  Represents the weighted average exercise priceof outstanding stock options only.

 

**CompensationCommittee Report(1)**

 

The Compensation Committeeof the Board of Directors oversees the compensation programs of Silicon StorageTechnology, Inc. on behalf of the Board of Directors. In fulfilling itsoversight responsibilities, the Compensation Committee reviewed and discussedwith management the Compensation Discussion and Analysis included in thisAnnual Report on Form 10-K.

 

In reliance on the reviewand discussions referred to above, the Committee Compensation recommended tothe Board that the Compensation Discussion and Analysis be included in theAnnual Report on Form 10-K of Silicon Storage Technology, Inc. forthe year ended December 31, 2007 and in the proxy statement.

 

**CompensationCommittee**

 

Edward Yao-Wu Yang(Chairman)

Tsuyoshi Taira

Yasushi Chikagami

Ronald D. Chwang

Terry M. Nickerson

 

----

(1)          The material in this report is furnished butnot deemed “filed” with the Securities and Exchange Commission and is notdeemed to be incorporated by reference in any of our filings under theSecurities Act or the Exchange Act whether made before or after the date hereofand irrespective of any general incorporation language in any such filing,expect to the extent specifically incorporated by referenced therein.

 

19

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**Compensationof Directors**

 

In April 2005, our Board of Directors, upon therecommendation of the Compensation Committee, approved the Non-EmployeeDirector Cash Retainer Program, or the Director Retainer Program. Pursuant tothe Director Retainer Program, our non-employee directors are entitled toreceive between $20,000 and $30,000 annually and $800 and $1,500 per meeting,based on their position on the Board of Directors, in connection with theirattendance of board and committee meetings. In addition, they are reimbursedfor certain travel-related expenses in connection with attendance at Board andcommittee meetings in accordance with our policy. Members of our Board ofDirectors who are also employees of SST do not receive any cash compensationfor their services as members of our Board of Directors.

 

Each of our non-employee directors receives stockoption grants under our 1995 Non-Employee Directors’ Stock Option Plan, or theDirectors’ Plan.  The Directors’ Plan hasan indefinite life and will terminate once all shares reserved for issuanceunder the Directors’ Plan have been issued. Pursuant to the Directors’ Plan, upon each non-employee director’sinitial election or appointment to the Board, such new non-employee directorreceives an initial stock option grant for 45,000 shares of common stock.Pursuant to the Directors’ Plan, each initial stock option grant vests as to25% of the shares subject to the grant on the yearly anniversary of the grantdate. Prior to April 2005, each such initial stock option was fully vestedand exercisable upon grant. In addition, pursuant to the Directors’ Plan, eachnon-employee director annually receives a fully vested annual stock optiongrant for 12,000 shares of common stock on the date of our annual meeting.  Stock option grants under the Directors’ Planhave a 10 year life.

 

The following table shows certain information withrespect to the compensation of all non-employee directors for the year ended December 31,2007.

 

**Director Compensation for 2007**

 
| **Name**           | ** ** | **Fees Earned or  Paid in Cash  ($)****(1)** | ** ** | **Option  Awards  ($)****(2)(3)** | ** ** | **Total  ($)** | ** ** |
|--------------------|------------|------------------------------------------------------------------|------------|-----------------------------------|------------|----------------|------------|
|               |       |                                                             |       |                              |       |           |       |
| Yasushi Chikagami  |       | $                                                                | 25,600     |                              | —     |           | $          | 25,600 |   |
| Ronald D. Chwang   |       | 33,800                                                           |       | —                            |       | 33,800         |       |
| Terry M. Nickerson |       | 58,400                                                           |       | $                                 | 16,063     |           | 74,463     |   |
| Tsuyoshi Taira     |       | 32,520                                                           |       | —                            |       | 32,520         |       |
| Edward Yao-Wu Yang |       | 6,000                                                            |       | 9,224                             |       | 15,224         |       |
|                    |            |                                                                  |            |                                   |            |                |            |  |  |  |

 

----

(1)             Reflects retainer fees, meeting fees andcommittee chair fees.

 

(2)             The dollar amount in this column represent thecost for 2007 of stock option awards granted prior to 2007. In 2007, due to the restatement of ourhistorical financial statements and the inability to hold an annual meeting,our non-employee directors did not receive an annual grant of 12,000 sharesunder the Directors’ Plan.  Eachnon-employee director other than Mr. Yang, will receive a stock optiongrant for 12,000 shares in 2008.  Theassumptions made in the valuation of options are discussed in footnote 8, “Stock-basedCompensation” to our consolidated financial statements contained in our AnnualReport on Form 10-K for the year ended December 31, 2007. Each stockoption was granted with an exercise price equal to the closing price of ourcommon stock for the trading session ending immediately prior to the time ofgrant, as reported on the NASDAQ Global Market.

 

(3)             As of December 31, 2007, (a) Mr. Tairaheld stock options to purchase 116,570 shares of common stock; (b) Mr. Chikagamiheld  stock options to purchase 96,000shares of common stock; (c) Dr. Chwang held stock options to purchase78,000 shares of common stock; (d) Mr. Nickerson held stock optionsto purchase 58,512 shares of common stock; and (e) Mr. Yang held astock option to purchase 45,000 shares of common stock.

 

20

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**Item12. Security Ownership of CertainBeneficial Owners and Management and Related Shareholder Matters**

 

The following table sets forth certain informationregarding the ownership of our common stock as of April 1, 2008 by:

 

·                  each of thenamed executive officers listed in the Summary Compensation Table;

 

·                  each director;

 

·                  all of ourofficers and directors as a group; and

 

·                  all those knownby us to be beneficial owners of more than five percent of our common stock.

 

Beneficial ownership is determined in accordance withthe rules of the SEC and generally includes voting or investment powerwith respect to securities.  The tablebelow is based upon information provided to us by our executive officers anddirectors and upon information about principal shareholders known to us basedon Schedules 13G and 13D filed with the SEC. Unless otherwise indicated in therelevant footnote to this table and subject to community property laws whereapplicable, we believe that each of the shareholders named in the table hassole voting and investment power with respect to the shares indicated asbeneficially owned. Beneficial ownership also includes shares of common stocksubject to options that are currently exercisable or exercisable within 60 daysof April 1, 2008. These shares, however, are not deemed outstanding forthe purposes of computing the percentage ownership of each other person.Percentage of ownership is based on 102,155,979 shares of common stockoutstanding on April 1, 2008. Unless otherwise indicated, the address ofeach of the individuals named below is: c/o Silicon Storage Technology, Inc.,1171 Sonora Court, Sunnyvale, California 94086.

 
| ** **                                                    | ** ** | **Beneficial Ownership**                                                                                                   | ** ** |
|---------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------|------------|
| **Name**                                                      | ** ** | **Shares Issuable  Pursuant to Options  Exercisable Within  60 Days of  April 1, 2008** | ** ** | **Number of Shares  (Including Number  Shown in First  Column)** | ** ** | **Percentage of  Total** | ** ** |
| **Officers and Directors**                                    |       |                                                                                                                            |       |   |   |   |   |
| Bing Yeh(1)                                                   |       | 53,854                                                                                                                          |       | 10,761,854 |   | 10.5 | % |
| James B. Boyd                                                 |       | —                                                                                                                          |       | — |   | — |   |
| Yaw Wen Hu                                                    |       | 437,861                                                                                                                         |       | 1,370,959 | (6) | 1.3 | % |
| Michael S. Briner(2)                                          |       | 171,920                                                                                                                         |       | 819,222 |   |   | * |
| Derek J. Best                                                 |       | 153,453                                                                                                                         |       | 153,809 |   |   | * |
| William R. Kinzie                                             |       | 18,125                                                                                                                          |       | 18,125 |   |   | * |
| Arthur O. Whipple(3)                                          |       | —                                                                                                                          |       | 2,000 |   |   | * |
| Tsuyoshi Taira                                                |       | 116,570                                                                                                                         |       | 116,570 |   |   | * |
| Yasushi Chikagami                                             |       | 96,000                                                                                                                          |       | 96,000 |   |   | * |
| Ronald D. Chwang                                              |       | 78,000                                                                                                                          |       | 239,613 |   |   | * |
| Terry M. Nickerson                                            |       | 47,262                                                                                                                          |       | 47,262 |   |   | * |
| Edward Yao-Wu Yang                                            |       | —                                                                                                                          |       | — |   |   | * |
| All officers and directors as a  group (14 persons) |       | 1,484,876                                                                                                                       |       | 14,314,594 |   | 13.8 | % |
|                                                          |       |                                                                                                                            |       |   |   |   |   |
| **5% Shareholders**                                           | ** ** | ** **                                                                                                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Dimensional Fund Advisors LP(4)                               |       | —                                                                                                                          |       | 8,600,268 |   | 8.4 | % |
| Entities affiliated with Riley Investment  Management LLC (5) |       | —                                                                                                                          |       | 5,598,626 |   | 5.5 | % |
|                                                               |            |                                                                                                                                 |            |  |  |  |  |  |

 

----

*                                       Representsbeneficial ownership of less than 1% of the outstanding shares of our commonstock.

 

(1)                                Includes(1) 3,038,163 shares held by the Yeh Family Trust U/D/T dated August 14,1995, of which Mr. Yeh and his wife are trustees, (2) 7,579,837shares held by Golden Eagle Capital L.P. of which Mr. Yeh and his wife are

 

21

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general partners and (3) 90,000 shares held in anIRA account in the name of Bing Yeh. Mr. Yeh disclaims beneficialownership of the shares held by Golden Eagle Capital L.P. except to the extentof his pecuniary interest therein.

 

(2)                                  Includes24,000 shares and 14,000 shares held by Tammy Briner, custodian of JeffreyDaniel Briner and Katherine M. Briner under the Uniform TRFS to Minors Act/CA,respectively.

 

(3)                                  Mr. Whippleresigned as Vice President, Finance, Chief Financial Officer and Secretaryeffective February 9, 2007.

 

(4)                                  Thisinformation is based on a report on Schedule 13G dated December 31, 2007and filed with the SEC on February 6, 2008.  Dimensional Fund Advisors LP is an investmentadvisor registered under Section 203 of the Investment Advisors Act of1940, furnishes investment advice to four investment companies registered underthe Investment Company Act of 1940, and serves as investment manager to certainother commingled group trusts and separate accounts, or the Funds.  In its role as investment advisor or manager,Dimensional possesses investment and/or voting power over the shares that areowned by the Funds, and may be deemed to be the beneficial owner of suchshares. However, Dimensional disclaims beneficial ownership of such shares. Theaddress of Dimensional Fund Advisors LP is 1299 Ocean Avenue, Santa Monica, CA90401

 

(5)                                  Thisinformation is based on a Schedule 13D dated April 10, 2008 and filed withthe SEC on April 10, 2008 by Riley Investment Partners Master Fund, L.P.,Riley Investment Management LLC, B. Riley & Co. Retirement Trust, B.Riley and Co., LLC, and Bryant R. Riley. Because Riley Investment Management LLC has sole voting and investmentpower over security holdings of Riley Investment Partners Master Fund, L.P.’sand certain managed accounts of its investment advisory clients and Mr. Riley,in his role as the sole manager of Riley Investment Management LLC, controlsits voting and investment decisions, each of Riley Investment Partners MasterFund, L.P., Riley Investment Management LLC, and Mr. Riley may be deemedto have beneficial ownership of the 495,788 shares of Common Stock held byRiley Investment Partners Master Fund, L.P. and 759,674 shares held in managedaccounts by its investment advisory clients. Riley Investment Management LLC has shared voting and dispositive powerover 3,711,290 shares of Common Stock held in accounts of its investmentadvisory clients, 3,216,290 of which are held in accounts indirectly affiliatedwith Mr. Riley or Riley Investment Partners Master Fund, L.P.  Includes 50,000 shares held by the B. Riley &Co. Retirement Trust, of which Mr. Riley is the trustee.  Includes63,786 shares held by B. Riley & Co., LLC over which Mr. Rileyhas sole voting and dispositive power. B. Riley & Co., LLC Inc. has shared voting and dispositivepower over 1,005,088 shares of Common Stock held by a managed account, withwhich it is indirectly affiliated.  Mr. Riley is the Chairman andsole indirect equity owner of B. Riley & Co., LLC.  Includes 8,000 shares held by Mr. Riley’schildren.  The address of the entitiesaffiliated with Riley Investment Management LLC is 11100 Santa Monica Blvd., Suite 810,Los Angeles, CA 90025

 

(6)                                  Includes30,000 shares held by Dr. Hu’s children.

 

22

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**Item 13.****                            CertainRelationships and Related Transactions, and Director Independence**

 

**Policiesand Procedures for Review of Related Party Transactions**

 

Pursuant to the charter of our Audit Committee, unlesspreviously approved by another independent committee of our Board of Directors,our Audit Committee reviews and, if determined appropriate, approves allrelated party transactions, other than those in the ordinary course of businesssuch as sales transactions from our customers involving the sales of ourproducts and procurement transactions from our vendors for the purchase ofinventory for sale. It is management’s responsibility to bring related persontransactions to the attention of the members of the Audit Committee.

 

Our Code of Conduct provides that our employees, whichfor the purposes of the Code of Conduct, includes our officers and directors,should avoid conflicts of interest that occur when their personal interests mayinterfere in any way with the performance of their duties or the best interestsof SST. Our Code of Conduct also addresses specific types of related persontransactions and how they should be addressed. All of our employees, includingour officers and directors, are expected and required to adhere to the Code ofConduct. If an officer or director has any questions regarding whether apotential transaction would be in violation of the Code of Conduct, they arerequired to bring this to the attention of our Compliance Officer. If thepotential transaction is a related person transaction, it would be recognizedas such and brought to the Audit Committee for pre-approval.

 

Further, each of our officers and directors isknowledgeable regarding the requirements of obtaining approval of relatedperson transactions and is responsible for identifying any related-persontransaction involving such officer or director or his or her affiliates andimmediate family members and seeking approval from our Audit Committee beforehe or she or, with respect to immediate family members, any of theiraffiliates, may engage in the transaction.

 

Our Audit Committee will take into account allrelevant factors when determining whether to approve or disapprove of anyrelated person transaction.

 

**Related Party Transactions**

** **

The following is a summaryof transactions in 2007 to which we have been a party in which the amountinvolved exceeded $120,000 and in which any of our executive officers,directors or beneficial holders of more than 5% of our capital stock had or will have a direct orindirect material interest, other than compensation arrangements which are describedunder the section entitled *Compensation Discussionand Analysis*.

 

*Purchase and Sale Transactions*

 

Please see Item 7.“Managements Discussion and Analysis of Financial Condition and Results ofOperations-Related Party Transactions” in our Annual Report on Form 10-Kfiled with the Securities and Exchange Commission on March 16, 2008.

 

23

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*IndemnityAgreements*

 

We have entered into indemnity agreements with each ofour executive officers and directors which provide, among other things, that wewill indemnify these persons, under the circumstances and to the extentprovided for therein, for expenses, damages, judgments, fines and settlementshe or she may be required to pay in actions or proceedings which he or she isor may be made a party by reason of his or her position as our director,officer or agent, and otherwise to the full extent permitted under Californialaw and our bylaws.

 

**Independenceof the Board of Directors**

 

As required under NASDAQ listing standards, a majorityof the members of a listed company’s board of directors must qualify as “independent,”as affirmatively determined by the board of directors. Our Board of Directorsconsults with our outside legal counsel to ensure that its determinations areconsistent with all relevant securities and other laws and regulationsregarding the definition of “independent,” including those set forth inpertinent NASDAQ listing standards, as in effect time to time.

 

Consistent with these considerations, after review ofall transactions or relationships between each director, or any of his familymembers, and SST, our senior management and our independent registered publicaccounting firm, the Board has affirmatively determined that all of ourdirectors are independent directors within the meaning of the applicable NASDAQlisting standards, except for Mr. Yeh, our President, Chief ExecutiveOfficer and Chairman of the Board, and Dr. Hu, our Executive VicePresident and Chief Operating Officer. In making this determination, the Board found that none of thesedirectors had a material disqualifying relationship with us.

 

**Item 14.****                            PrincipalAccountant Fees and Services**

 

**Fees ofPricewaterhouseCoopers LLP**

 

PricewaterhouseCoopers LLP fees for the years ended December 31,2006 and 2007 are as follows:

 
| ** **         | ** ** | **2006** | ** ** | **2007** | ** ** |
|--------------------|------------|----------|------------|----------|------------|
| Audit fees         |       | $        | 4,486,000  |     | $          | 1,429,000 |   |
| Audit-related fees |       | —   |       | —   |       |
| Tax fees           |       | —   |       | 94,000   |       |
| All other fees     |       | —   |       | —   |       |
| Total              |       | $        | 4,486,000  |     | $          | 1,523,000 |   |

 

**Audit Fees:**  This category includes fees for the audit of our annual financial statements,review of the financial statements included in our quarterly reports on Form 10-Q,services provided in connection with the annual audit of SST’s internal controlover financial reporting, as required by Section 404 of the Sarbanes-OxleyAct of 2002 and services that are normally provided by the independentregistered public accounting firm in connection with statutory and regulatoryfilings or engagements for those years. This category also includes advice onaudit and accounting matters that arose during, or as a result of, the audit orthe review of interim financial statements and statutory audits required bynon-U.S. jurisdictions.  Audit fees for2006 include approximately $3.0 million of fees relating to the restatement ofour historical financial statements as a result of the findings of the reviewof our historical stock option grant process as disclosed in our Annual Reporton Form 10-K for the year ended December 31, 2006.

 

**Audit-Related Fees:**  This category consists of assurance and related services byPricewaterhouseCoopers LLP that are reasonably related to the performance ofthe audit or review of our financial statements and are not reported aboveunder “Audit Fees.”

 

**Tax Fees:**  This category consists of professional services rendered byPricewaterhouseCoopers LLP for tax compliance and tax advice. The services forthe fees disclosed under this category include tax return preparation andtechnical tax advice.

 

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**All Other Fees:**  This category consists of fees for advice on compliance with certain foreigninvestment rules.

 

All of the fees for 2006 and 2007 described above werepre-approved by the Audit Committee. The Audit Committee has determined therendering of non-audit services by PricewaterhouseCoopers LLP is compatiblewith maintaining their independence.

 

**Pre-ApprovalPolicies and Procedures**

 

The Audit Committee pre-approves all audit andnon-audit services and has delegated authority to pre-approve all audit andpermissible non-audit services provided by PricewaterhouseCoopers LLP to Mr. Nickerson.The Audit Committee is to be informed of such pre-approved services at a meetingof the Audit Committee following such pre-approval. PricewaterhouseCoopers LLPperiodically reports to the Audit Committee regarding the extent of theservices provided by PricewaterhouseCoopers LLP in accordance with thispre-approval, and the fees for the services performed to date.

 

25

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**SIGNATURES**

 

Pursuant to the requirements of Section 13or 15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized, in the City of Sunnyvale, County of Santa Clara, State ofCalifornia, on the 29th day of April, 2008.

 
|   | SILICON STORAGE TECHNOLOGY, INC. |
|--------|----------------------------------|
|   |                             |   |
|   | By:                              | /s/ BING YEH |
|   |                             | Bing Yeh*President and Chief Executive Officer  (Principal Executive Officer)* |

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities and on thedates indicated.

 
| **Signature**          | ** ** | **Title**                                                          | ** ** | **Date**            |
|------------------------|------------|--------------------------------------------------------------------|------------|---------------------|
| ** **             | ** ** | ** **                                                         | ** ** | ** **          |
| /s/ BING YEH           |       | President, Chief Executive Officer and                             |       | April 29, 2008 |
| Bing Yeh               |       | Chairman of the Board (*Principal Executive  Officer*)             |       |                |
|                   |       |                                                               |       |                |
| /s/ JAMES B. BOYD      |       | Chief Financial Officer and Senior Vice                            |       | April 29, 2008 |
| James B. Boyd          |       | President, Finance (*Principal Financial and  Accounting Officer*) |       |                |
|                   |       |                                                               |       |                |
| */s/YAW WEN HU         |       | Director                                                           |       | April 29, 2008 |
| Yaw Wen Hu             |       |                                                               |       |                |
|                   |       |                                                               |       |                |
| */s/ TSUYOSHI TAIRA    |       | Director                                                           |       | April 29, 2008 |
| Tsuyoshi Taira         |       |                                                               |       |                |
|                   |       |                                                               |       |                |
| */s/ RONALD CHWANG     |       | Director                                                           |       | April 29, 2008 |
| Ronald Chwang          |       |                                                               |       |                |
|                   |       |                                                               |       |                |
| */s/ YASUSHI CHIKAGAMI |       | Director                                                           |       | April 29, 2008 |
| Yasushi Chikagami      |       |                                                               |       |                |

 

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|                         |   |     |   |                |
|------------------------------|--------|----------|--------|---------------------|
| */s/ TERRY NICKERSON         |   | Director |   | April 29, 2008 |
| Terry Nickerson              |   |     |   |                |
|                         |   |     |   |                |
| */s/ EDWARD YAO-WU YANG      |   | Director |   | April 29, 2008 |
| Edward Yao-Wu Yang           |   |     |   |                |
|                         |   |     |   |                |
| *By:   /s/ BING YEH     |   |     |   |                |
| Bing Yeh

*Attorney-in-Fact* |   |     |   | April 29, 2008 |

 

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**Exhibit Index**

 
| **Exhibit  Number** | ** ** | **Description of Document**                                                                                                                                       |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                |       | Certification of President and Chief Executive Officer as required by  Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.                         |
| 31.2                |       | Certification of Chief Financial Officer and Senior Vice President of  Finance as required by Rule 13a-14(a) of the Securities Exchange  Act of 1934, as amended. |

 

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