Non-GAAP operating expenses declined versus Q1 due to a decrease in engineering expenses, which was partially offset by an increase in SG&A. The decline in engineering expenses was primarily due to a reduced level of third-party chip design costs. We expect these expenses to increase during the third quarter.

On a non-GAAP basis, tax and other expenses totaled approximately 90,000. This resulted in a non-GAAP net profit of 418,000 or $0.01 per share compared with a net loss of 484,000 or $0.01 per share in the first quarter of 2010. Our ending cash position of 17.8 million reflects a decrease of approximately 473,000 from the Q1 ending balance. Cash usage benefited from higher than expected total revenue, gross margins and lower than expected operating expenses.

Our Q2 a GAAP net loss was 215,000 or $0.01 per share. Our GAAP results include stock-based compensation charges of 633,000. Please see today's press release for detailed reconciliation of our GAAP to non-GAAP results.

I'll rejoin you in a few minutes to discuss our guidance for the third quarter, but first Tom will update you on the status of our strategic efforts.

Tom Hart

Thank you, Ralph. It's been a year of tremendous progress for QuickLogic. I'm extremely pleased with the traction we've developed and the fact that we reported non-GAAP profitability. These are early milestones in what we believe will be our future of sustained revenue growth and profit improvement.

As Ralph noted, constraints in our assembly, package and test subcontractor caused us to miss shipping roughly $200,000 of new products during Q2. Working closely with our customers, our subcontractor and our channel partners, we were able to prioritize product shipments so that none of our customers were negatively affected by CSSP shortages.

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