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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



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Form 10-Q

(Mark One)

|    |  |                                                                                         
|--- |  | ----------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the Quarterly Period Ended March 31, 2002

OR

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ____________ to ____________
Commission File Number 0-24758

MICRO LINEAR CORPORATION

(Exact name of Registrant as specified in its charter)


|                                                                                   |  |                                                   
|---------------------------------------------------------------------------------- |  | --------------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)            |  | 94-2910085
(I.R.S. Employer
Identification Number)
|2050 Concourse Drive
San Jose, California
(Address of principal executive offices) |  | 95131
(Zip Code)                                  

Registrants telephone number, including area code: (408) 433-5200

Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [   ]

The number of shares of the Registrants Common Stock outstanding as of
April 30, 2002, net of shares held in treasury, was 12,064,572.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                                |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS               
|                              |                                                                                               | UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   



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TABLE OF CONTENTS

|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | PAGE
|           |  |                                                                                                              |  |     
|PART I.    |  | FINANCIAL INFORMATION                                                                                        |  |     
|          
|Item 1.    |  | Financial Statements                                                                                         |  | 3   
|          
|           |  | Unaudited Consolidated Condensed Balance Sheets at March 31,
2002 and December 31, 2001                      |  | 3   
|          
|           |  | Unaudited Consolidated Condensed Statements of Operations for
the three months ended March 31, 2002 and 2001 |  | 4   
|          
|           |  | Unaudited Consolidated Condensed Statements of Cash Flows for
the three months ended March 31, 2002 and 2001 |  | 5   
|          
|           |  | Notes to Unaudited Consolidated Condensed Financial Statements                                               |  | 6   
|          
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition
and Results of Operations                        |  | 9   
|          
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 24  
|          
|PART II.   |  | OTHER INFORMATION                                                                                            |  |     
|          
|Item 1.    |  | Legal Proceedings                                                                                            |  | 25  
|          
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                                             |  | 25  
|          
|SIGNATURES |  | 26                                                                                                          

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PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)

|                                     |                                                                                                                   |                            |                                            |         |           |        |              |         |        |        | 
|------------------------------------ | ----------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | --------- | ------ | ------------ | ------- | ------ | ------ | 
|                                     |                                                                                                                   |                            |                                            |         | March 31, |        | December 31,
|                                     |                                                                                                                   |                            |                                            |         | 2002      |        | 2001        
|                                     |                                                                                                                   |                            |                                            |         |           |        |             
|Assets                               |                                                                                                                   |                            |                                            |         |           |        |              |        
|Current assets:                      |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     | Cash and cash equivalents                                                                                         |                            | $                                          | 14,174  |           |        | $            | 14,888  |       
|                                     | Short-term investments                                                                                            |                            |                                            | 9,921   |           |        |              | 13,018  |       
|                                     | Accounts receivable, less allowance for
doubtful accounts of $140 at
March 31, 2002 and $125 at December 31, 2001 |                            |                                            | 2,117   |           |        |              | 1,301   |       
|                                     | Inventories                                                                                                       |                            |                                            | 4,389   |           |        |              | 3,632   |       
|                                     | Other current assets                                                                                              |                            |                                            | 763     |           |        |              | 1,135   |       
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   | Total current assets       |                                            |         | 31,364    |        |              |         | 33,974 |       
|Property, plant and equipment, net   |                                                                                                                   |                            | 9,866                                      |         |           |        | 10,326       |        
|Other assets                         |                                                                                                                   |                            | 179                                        |         |           |        | 213          |        
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   |                            | Total assets                               |         | $         | 41,409 |              |         | $      | 44,513 | 
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|Liabilities and Stockholders Equity |                                                                                                                   |                            |                                            |         |           |        |              |        
|Current liabilities:                 |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     | Accounts payable                                                                                                  |                            | $                                          | 2,876   |           |        | $            | 2,361   |       
|                                     | Accrued compensation and benefits                                                                                 |                            |                                            | 1,688   |           |        |              | 1,679   |       
|                                     | Deferred income on shipments to distributors                                                                      |                            |                                            | 2,449   |           |        |              | 2,888   |       
|                                     | Accrued commissions                                                                                               |                            |                                            | 248     |           |        |              | 282     |       
|                                     | Other accrued liabilities                                                                                         |                            |                                            | 1,576   |           |        |              | 1,950   |       
|                                     | Current portion of long-term debt                                                                                 |                            |                                            | 239     |           |        |              | 239     |       
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   | Total current liabilities  |                                            |         | 9,076     |        |              |         | 9,399  |       
|Long-term debt                       |                                                                                                                   |                            | 2,248                                      |         |           |        | 2,308        |        
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   | Total liabilities          |                                            |         | 11,324    |        |              |         | 11,707 |       
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|Stockholders equity:                |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     | Preferred stock                                                                                                   |                            |                                            |        |           |        |              |        |       
|                                     | Common stock                                                                                                      |                            |                                            | 15      |           |        |              | 15      |       
|                                     | Additional paid-in capital                                                                                        |                            |                                            | 60,024  |           |        |              | 59,945  |       
|                                     | Notes receivable from stockholders                                                                                |                            |                                            | (6      | )         |        |              | (6      | )     
|                                     | Retained (deficit) earnings                                                                                       |                            |                                            | (9,745  | )         |        |              | (7,000  | )     
|                                     | Accumulated other comprehensive income                                                                            |                            |                                            | 30      |           |        |              | 85      |       
|                                     | Treasury stock                                                                                                    |                            |                                            | (20,233 | )         |        |              | (20,233 | )     
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   | Total stockholders equity |                                            |         | 30,085    |        |              |         | 32,806 |       
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        
|                                     |                                                                                                                   |                            | Total liabilities and stockholders equity |         | $         | 41,409 |              |         | $      | 44,513 | 
|                                     |                                                                                                                   |                            |                                            |         |           |        |              |        

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

|                           |                                     |                                                                 |                          |        |                    |       |       |        |        |       | 
|-------------------------- | ----------------------------------- | --------------------------------------------------------------- | ------------------------ | ------ | ------------------ | ----- | ----- | ------ | ------ | ----- | 
|                           |                                     |                                                                 |                          |        | THREE MONTHS ENDED
|                           |                                     |                                                                 |                          |        | MARCH 31,         
|                           |                                     |                                                                 |                          |        |                   
|                           |                                     |                                                                 |                          |        | 2002               |       | 2001 
|                           |                                     |                                                                 |                          |        |                    |       |      
|Net revenues               |                                     | $                                                               | 5,591                    |        |                    | $     | 3,423 |       
|Cost of revenues           |                                     |                                                                 | 2,471                    |        |                    |       | 1,462 |       
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           | Gross margin                        |                                                                 |                          | 3,120  |                    |       |       | 1,961  |       
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|Operating expenses:        |                                     |                                                                 |                          |        |                    |       |       |       
|                           | Research and development            |                                                                 |                          | 4,174  |                    |       |       | 3,496  |       
|                           | Selling, general and administrative |                                                                 |                          | 1,840  |                    |       |       | 2,354  |       
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           |                                     |                                                                 | Total operating expenses |        |                    | 6,014 |       |        |        | 5,850 | 
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           | Loss from operations                |                                                                 |                          | (2,894 | )                  |       |       | (3,889 | )     
|Interest and other income  |                                     |                                                                 | 295                      |        |                    |       | 865   |       
|Interest and other expense |                                     |                                                                 | (69                      | )      |                    |       | (183  | )     
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           | Loss before provision for taxes     |                                                                 |                          | (2,668 | )                  |       |       | (3,207 | )     
|Provision for income taxes |                                     |                                                                 | 77                       |        |                    |       |      |       
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           | Net loss                            |                                                                 | $                        | (2,745 | )                  |       | $     | (3,207 | )     
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|Basic:                     |                                     |                                                                 |                          |        |                    |       |       |       
|                           |                                     | Net loss per share                                              |                          | $      | (0.23              | )     |       | $      | (0.27  | )    
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           |                                     | Weighted average number of shares used
in per share computation |                          |        | 12,062             |       |       |        | 11,894 |      
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|Diluted:                   |                                     |                                                                 |                          |        |                    |       |       |       
|                           |                                     | Net loss per share                                              |                          | $      | (0.23              | )     |       | $      | (0.27  | )    
|                           |                                     |                                                                 |                          |        |                    |       |       |       
|                           |                                     | Weighted average number of shares used
in per share computation |                          |        | 12,062             |       |       |        | 11,894 |      
|                           |                                     |                                                                 |                          |        |                    |       |       |       

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

|                                      |                                                  |                                            |        |        |                              |   |        |        |        |   | 
|------------------------------------- | ------------------------------------------------ | ------------------------------------------ | ------ | ------ | ---------------------------- | - | ------ | ------ | ------ | - | 
|                                      |                                                  |                                            |        |        | Three Months Ended March 31,
|                                      |                                                  |                                            |        |        |                             
|                                      |                                                  |                                            |        |        | 2002                         |   | 2001  
|                                      |                                                  |                                            |        |        |                              |   |       
|Net cash used in operating activities |                                                  | $                                          | (3,664 | )      |                              | $ | (5,203 | )     
|Investing activities:                 |                                                  |                                            |        |        |                              |   |        |       
|                                      | Purchase of capital equipment                    |                                            |        | (87    | )                            |   |        | (804   | )     
|                                      | Proceeds from notes receivable                   |                                            |        |       |                              |   |        | 542    |       
|                                      | Purchases of short-term investments              |                                            |        | (500   | )                            |   |        | (6,466 | )     
|                                      | Sales of short-term investments                  |                                            |        | 3,597  |                              |   |        | 9,430  |       
|                                      |                                                  |                                            |        |        |                              |   |        |       
|                                      |                                                  | Net cash provided by investing activities  |        |        | 3,010                        |   |        |        | 2,702  |  
|Financing activities:                 |                                                  |                                            |        |        |                              |   |        |       
|                                      | Principal payments on debt                       |                                            |        | (60    | )                            |   |        | (55    | )     
|                                      | Proceeds from issuance of common stock           |                                            |        |       |                              |   |        |       |       
|                                      |                                                  |                                            |        |        |                              |   |        |       
|                                      |                                                  | Net cash used in financing activities      |        |        | (60                          | ) |        |        | (55    | )
|                                      |                                                  |                                            |        |        |                              |   |        |       
|                                      | Net decrease in cash and cash equivalents        |                                            |        | (714   | )                            |   |        | (2,556 | )     
|                                      | Cash and cash equivalents at beginning of period |                                            |        | 14,888 |                              |   |        | 17,664 |       
|                                      |                                                  |                                            |        |        |                              |   |        |       
|                                      |                                                  | Cash and cash equivalents at end of period |        | $      | 14,174                       |   |        | $      | 15,108 |  
|                                      |                                                  |                                            |        |        |                              |   |        |       

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Description of Business

Micro Linear Corporation supplies integrated circuits for a number of
applications in the communications market. Customers use these products to
create advanced solutions to high-speed networks supporting broadband digital
voice, data, and video transmission in the enterprise, small office/home office
(SOHO), and home markets. We sell our products to original equipment
manufacturers (OEMs) of data communication, telecommunication, industrial, and
consumer products, primarily in North America, Asia and Europe. We are
headquartered in San Jose, California and have two research centers, one in
Salt Lake City, Utah and the other in the United Kingdom. We operate in a
single industry segment.

2. Summary of Significant Accounting Policies

Fiscal Year

We report results of operations on the basis of fifty-two or fifty-three
week periods, ending on the Sunday closest to December 31. Fiscal year 2001
ended on December 30, 2001. The first quarter of 2002 ended on March 31, 2002.
For presentation purposes, the unaudited consolidated condensed financial
statements refer to the calendar month or year end of each period.

Principles of Consolidation

The consolidated financial statements include the accounts of Micro Linear
Corporation and our subsidiary in the United Kingdom. All significant
intercompany accounts and transactions have been eliminated.

Basis of Presentation

The financial information furnished herein is unaudited, but includes all
normal, recurring adjustments that we consider necessary for a fair
presentation of the results of operations for the periods indicated. The
results of operations for the first quarter of the current fiscal year are not
necessarily indicative of the results to be expected for the full year.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q, and therefore do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. The unaudited consolidated condensed
financial statements and notes should be read in conjunction with the
consolidated financial statements and notes in the Annual Report on Form 10-K
for the year ended December 30, 2001, filed with the Securities and Exchange
Commission on April 1, 2002.

Use of Estimates

In conformity with generally accepted accounting principles, we make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the

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reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

3. Financial Statement Details

Inventories consist of the following (in thousands):

|                |                   |   |           |       |              |   |       |       | 
|--------------- | ----------------- | - | --------- | ----- | ------------ | - | ----- | ----- | 
|                |                   |   | March 31, |       | December 31,
|                |                   |   | 2002      |       | 2001        
|                |                   |   |           |       |             
|Work-in-process |                   | $ | 2,277     |       |              | $ | 1,535 |      
|Finished goods  |                   |   | 2,112     |       |              |   | 2,097 |      
|                |                   |   |           |       |              |   |       |      
|                | Total inventories |   | $         | 4,389 |              |   | $     | 3,632 | 
|                |                   |   |           |       |              |   |       |      

Property, plant and equipment consist of the following (in thousands):

|                                          |                                   |   |           |        |              |   |        |        | 
|----------------------------------------- | --------------------------------- | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                                          |                                   |   | March 31, |        | December 31,
|                                          |                                   |   | 2002      |        | 2001        
|                                          |                                   |   |           |        |             
|Land                                      |                                   | $ | 2,850     |        |              | $ | 2,850  |       
|Buildings and improvements                |                                   |   | 5,519     |        |              |   | 5,519  |       
|Machinery and equipment                   |                                   |   | 14,192    |        |              |   | 14,105 |       
|Assets held for sale                      |                                   |   | 3,414     |        |              |   | 3,414  |       
|                                          |                                   |   |           |        |              |   |        |       
|                                          | Property, plant and equipment     |   | $         | 25,975 |              |   | $      | 25,888 | 
|Accumulated depreciation and amortization |                                   |   | 16,109    |        |              |   | 15,562 |       
|                                          |                                   |   |           |        |              |   |        |       
|                                          | Net property, plant and equipment |   | $         | 9,866  |              |   | $      | 10,326 | 
|                                          |                                   |   |           |        |              |   |        |       

Provision for Taxes

The provision for income taxes for the three months ended March 31, 2002
consists of taxes of our subsidiary in the United Kingdom. No benefit for
income taxes was recorded in the U.S., as we believe that the available
objective evidence creates sufficient uncertainty regarding the realizability
of the deferred tax assets such that we have recorded a full valuation allowance.

Comprehensive Income

For the three months ended March 31, 2002 and 2001, comprehensive income
(loss), which consists of the net loss for the periods and unrealized gain or
loss on short-term marketable securities, is as follows (in thousands):

|                                                     |                                                      |   |                    |     |      |   |        |    | 
|---------------------------------------------------- | ---------------------------------------------------- | - | ------------------ | --- | ---- | - | ------ | -- | 
|                                                     |                                                      |   | Three Months Ended
|                                                     |                                                      |   | March 31,         
|                                                     |                                                      |   |                   
|                                                     |                                                      |   | 2002               |     | 2001
|                                                     |                                                      |   |                    |     |     
|Net Loss                                             |                                                      | $ | (2,745             | )   |      | $ | (3,207 | ) 
|Accumulated Other Comprehensive Income (Loss):       |                                                      |   |                    |     |      |   |        |   
|                                                     | Unrealized gain (loss) on marketable securities, net |   |                    | (55 | )    |   |        | 39 | 
|                                                     |                                                      |   |                    |     |      |   |        |   
|Total Accumulated Other Comprehensive Income (Loss): |                                                      |   | (55                | )   |      |   | 39     |   
|                                                     |                                                      |   |                    |     |      |   |        |   
|Comprehensive Loss                                   |                                                      | $ | (2,800             | )   |      | $ | (3,168 | ) 
|                                                     |                                                      |   |                    |     |      |   |        |   

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Earnings Per Share

Following is a reconciliation of the basic and diluted loss per share
computations (in thousands, except per share amounts):

|                                                            |  |                              |        |               |  |              |        |             |  |               |       |              |  |   |        |   |  |  |        |  |  |   |       |  
|----------------------------------------------------------- |  | ---------------------------- | ------ | ------------- |  | ------------ | ------ | ----------- |  | ------------- | ----- | ------------ |  | - | ------ | - |  |  | ------ |  |  | - | ----- | -
|                                                            |  | Three Months Ended March 31,
|                                                            |  |                             
|                                                            |  | 2002                         |        | 2001         
|                                                            |  |                              |        |              
|                                                            |  | Loss                         |        | Shares        |  | Per-         |        | Loss        |  | Shares        |       | Per-        
|                                                            |  | (Numerator)                  |        | (Denominator) |  | Share Amount |        | (Numerator) |  | (Denominator) |       | Share Amount
|                                                            |  |                              |        |               |  |              |        |             |  |               |       |             
|Basic Loss Per Share:                                       |  |                              |        |               |  |              |        |             |  |               |       |              |  |   |        |   |  |  |        |  |  |   |       |  
|Net loss available to
common stockholders                   |  | $                            | (2,745 | )             |  |              | 12,062 |             |  | $             | (0.23 | )            |  | $ | (3,207 | ) |  |  | 11,894 |  |  | $ | (0.27 | )
|Diluted Loss Per Share:                                     |  |                              |        |               |  |              |        |             |  |               |       |              |  |   |        |   |  |  |        |  |  |   |       |  
|Net loss available to
common stockholders
assuming dilution |  | $                            | (2,745 | )             |  |              | 12,062 |             |  | $             | (0.23 | )            |  | $ | (3,207 | ) |  |  | 11,894 |  |  | $ | (0.27 | )

The number of shares used in the basic loss per share computation is the
weighted average number of common shares outstanding during the period.
Diluted earnings per share are computed using the treasury stock method for
stock options outstanding.

Options to purchase 3,778,718 shares of common stock were outstanding as
of March 31, 2002, and options to purchase 3,566,853 shares of common stock
were outstanding as of March 31, 2001. Outstanding options had no effect upon
the computation of diluted earnings per share for these periods. We recorded a
net loss in each period, and including the option shares would have been
anti-dilutive.

4. Operations by Geographic Regions

The following is a summary of operations by geographic regions (in thousands):

|                      |               |   |                    |        |      |   |        |        |  
|--------------------- | ------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                      |               |   | Three Months Ended
|                      |               |   | March 31,         
|                      |               |   |                   
|                      |               |   | 2002               |        | 2001
|                      |               |   |                    |        |     
|Net revenues:         |               |   |                    |        |      |   |        |       
|                      | United States |   | $                  | 905    |      |   | $      | 1,371  |  
|                      | Asia          |   |                    | 3,864  |      |   |        | 1,373  |  
|                      | Europe        |   |                    | 773    |      |   |        | 679    |  
|                      | Other         |   |                    | 49     |      |   |        |       |  
|                      |               |   |                    |        |      |   |        |       
|Consolidated          |               | $ | 5,591              |        |      | $ | 3,423  |       
|                      |               |   |                    |        |      |   |        |       
|Loss from operations: |               |   |                    |        |      |   |        |       
|                      | United States |   | $                  | (361   | )    |   | $      | (3,498 | )
|                      | Asia          |   |                    | (2,206 | )    |   |        |       |  
|                      | Europe        |   |                    | (308   | )    |   |        | (391   | )
|                      | Other         |   |                    | (19    | )    |   |        |       |  
|                      |               |   |                    |        |      |   |        |       
|Consolidated          |               | $ | (2,894             | )      |      | $ | (3,889 | )     
|                      |               |   |                    |        |      |   |        |       
|Capital expenditures: |               |   |                    |        |      |   |        |       
|                      | United States |   | $                  | 72     |      |   | $      | 799    |  
|                      | Europe        |   |                    | 15     |      |   |        | 5      |  

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|                               |               |   |                    |     |      |   |     |     | 
|------------------------------ | ------------- | - | ------------------ | --- | ---- | - | --- | --- | 
|                               |               |   | Three Months Ended
|                               |               |   | March 31,         
|                               |               |   |                   
|                               |               |   | 2002               |     | 2001
|                               |               |   |                    |     |     
|                               |               |   |                    |     |      |   |     |    
|Consolidated                   |               | $ | 87                 |     |      | $ | 804 |    
|                               |               |   |                    |     |      |   |     |    
|Depreciation and amortization: |               |   |                    |     |      |   |     |    
|                               | United States |   | $                  | 519 |      |   | $   | 483 | 
|                               | Europe        |   |                    | 28  |      |   |     | 29  | 
|                               |               |   |                    |     |      |   |     |    
|Consolidated                   |               | $ | 547                |     |      | $ | 512 |    
|                               |               |   |                    |     |      |   |     |    

Identifiable assets by geographic region are as follows (in thousands):

|                     |               |   |           |        |              |   |        |        | 
|-------------------- | ------------- | - | --------- | ------ | ------------ | - | ------ | ------ | 
|                     |               |   | March 31, |        | December 31,
|                     |               |   | 2002      |        | 2001        
|                     |               |   |           |        |             
|Identifiable assets: |               |   |           |        |              |   |        |       
|                     | United States |   | $         | 41,126 |              |   |        | 44,129 | 
|                     | Asia          |   |           | 35     |              |   |        |       | 
|                     | Europe        |   |           | 248    |              |   |        | 384    | 
|                     |               |   |           |        |              |   |        |       
|Consolidated         |               | $ | 41,409    |        |              | $ | 44,513 |       
|                     |               |   |           |        |              |   |        |       




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this report or incorporated by reference which are not
historical are forward-looking statements and include, without limitation,
statements under the caption, Managements Discussion and Analysis of
Financial Condition and Results of Operations. Terms such as may, will,
could, should, project, believe, anticipate, expect, plan,
estimate, forecast, potential, intend, continue and variations of
these words or similar expressions are intended to identify forward-looking
statements.

These forward-looking statements include, but are not limited to,
statements regarding: expected expenses, including those related to sales and
marketing, research and development and selling, general and administrative;
sources of revenue; the adequacy of our capital resources and the ability of
cash generated from operations to fund necessary purchases of capital equipment
and provide adequate working capital; our ability to compete effectively;
anticipated revenue from networking products; anticipated international
revenue; anticipated release of new products at higher prices; impact of new
products on our gross margins; and our belief that high levels of new product
development are critical to our success.

These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially from those discussed in the
forward-looking statements. Factors that could cause actual results to differ
materially include but are not limited to: our dependence on key products and
customers, changes in the demand for our products and seasonal factors
affecting certain of our products, our ability to attract and retain customers
and distribution partners for existing and new products, our ability to develop
and introduce new and enhanced products in a timely manner, our dependence on
international sales and risks associated with international operations, our
dependence on outside foundries and test subcontractors in the manufacturing
process and other outside suppliers, our ability to recruit and retain
qualified employees, and the strength of competitive offerings and the prices
being charged by those competitors.

Other factors that could cause results to vary materially from current
expectations are referred to elsewhere in this report, including under Factors
That May Affect Future Operating Results, Other Information  Legal
Proceedings, and the notes to the financial statements.

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These forward-looking statements are made only as of the date of this
report. We do not undertake to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise. We caution
you not to give undue weight to any of the forward-looking statements. You
should not regard the inclusion of forward-looking information as a
representation by us or any other person that we will achieve our objectives or
plans.

Overview

The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with our
audited financial statements and notes thereto found in our Annual Report on
Form 10-K for the fiscal year ended December 30, 2001, filed with the
Securities and Exchange Commission on April 1, 2002.

Micro Linear was founded in 1983. Until 2000, we were a supplier of
advanced analog and mixed signal integrated circuits to the computer,
communications, telecommunications, consumer and industrial markets. Our
products were used in a variety of applications, including local area networks,
video, telecommunications, power and battery management, motor control, and
data acquisition. We utilized a number of different Bipolar, BiCMOS, and CMOS
silicon process technologies in the design of these products and a number of
different silicon foundries for their manufacture.

During 2000, we divested our manufacturing test operation and our
non-communication product lines and focused our marketing, engineering and
product development on new communications products, including some wired
networking products, but most notably broadband wireless integrated circuits.
Using proprietary technologies together with advanced circuit design
methodologies, we are developing highly integrated, high performance RF
transceivers, baseband processors, and embedded software for a number of
emerging and established broadband wireless market applications. During 2001,
we established ourselves as a volume supplier of both 900MHz and 2.4GHz RF
transceivers to the digital cordless telephone segment of the communications
market. Wireless product revenues represented 47% of net revenues for the
three months ended March 31, 2002 and 15% of net revenues for the three months
ended March 31, 2001. We expect the revenue contribution from wireless
products to continue to increase as a percentage of total revenues.

Critical Accounting Policies

Our critical accounting policies are as follows:



| |  |  | Revenue recognition;                                               
| | - |  | -------------------------------------------------------------------
|
| |  |  | Estimating accrued liabilities and allowance for doubtful accounts;
|
| |  |  | Inventory valuation;                                               
|
| |  |  | Accounting for income taxes; and                                   
|
| |  |  | Valuation of long-lived and intangible assets                      

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Revenue Recognition

We recognize revenue on product shipped directly to OEM customers at the
time of shipment, provided that we have received a signed purchase order, the
price is fixed, title has transferred, and collection of the resulting
receivable is reasonably assured. We defer recognition of revenue from sale of
our products to authorized distributors under agreements that allow certain
rights of return and price adjustments on unsold inventory. The associated cost
of product on these sales to authorized distributors is deferred to inventory.
Revenue and cost of product is recognized when the distributor resells the
product to its customers.

Estimating Accrued Liabilities and Allowance for Doubtful Accounts

The preparation of financial statements requires us to make estimates and
assumptions that affect the reported amount of assets and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reported period.

We perform ongoing credit evaluation of our customers based on a number of
factors, including past transaction history and the creditworthiness of the
customer, as determined by an evaluation of the customers financial
statements, credit rating, bank and credit references. We do not generally
require collateral from the customer. Occasionally, particularly on
international sales, we obtain letters of credit or cash payments in advance of
shipment. Allowances for potential credit losses are established based on our
managements review. The accounts receivable balance was $2,117,000, net of
allowance for doubtful accounts of $140,000, as of March 31, 2002. An
unexpected material change in a major customers ability to meet its obligation
could have an adverse material effect on our financial position and results of
operations.

Inventories and Related Allowance for Obsolete and Excess Inventory

We value inventories at the lower of standard cost or market. Standard
costs are periodically adjusted to approximate actual costs on a first-in,
first-out basis. The value of inventories is reduced by an estimated allowance
for excess and obsolete inventories. This allowance for excess and obsolete
inventories is based upon our review of demand for our products in light of
projected sales, current market conditions, and market trends. If a significant
unanticipated decrease in demand of our products or technological developments
occurs, we may deem it necessary to provide for additional inventory reserves,
which would have a material adverse impact on our gross margin.

Accounting for Income Taxes

As part of the process of preparing the consolidated financial statements,
we are required to estimate income taxes in each of the jurisdictions in which
we operate. This process involves estimating actual current tax exposure
together with assessing temporary differences resulting from differing
treatment of items, such as deferred revenue, for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are
included within the consolidated balance sheet. We must then assess the
likelihood that deferred tax assets will be recovered from future taxable
income, and to the extent we believe that recovery is not likely, we must
establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must include an expense
within the tax provision in the statement of operations.

The provision for income taxes for the three months ended March 31, 2002
consists of taxes of our subsidiary in the United Kingdom. No benefit for
income taxes was recorded in the U.S., as we believe that the available
objective evidence creates

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sufficient uncertainty regarding the realizability of the deferred tax
assets such that we have recorded a full valuation allowance.

Significant judgment is required in determining the provision for income
taxes, deferred tax assets and liabilities and any valuation allowance recorded
against net deferred tax assets. The valuation allowance is based on estimates
of taxable income by jurisdiction in which we operate and the period over which
deferred tax assets will be recoverable. In the event that actual results
differ from these estimates or we adjust these estimates in future periods, we
may need to establish an additional valuation allowance, which could materially
impact our financial position and results of operations.

Valuation of Long-Lived and Intangible Assets

We assess the impairment of identifiable intangibles and long-lived assets
whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. We evaluate at each balance sheet date whether events
and circumstances have occurred that indicate possible impairment. We use an
estimate of the future undiscounted net cash flow of the related asset or asset
grouping over the remaining life in measuring whether the assets are
recoverable.

Three months ended March 31, 2002 compared with three months ended March 31, 2001

Results of Operations

Net Revenues

Net revenues for the first quarter of 2002 were $5.6 million compared to
net revenues of $3.4 million for the first quarter of 2001. The increase in
net revenues from the comparable first quarter of 2001 was due to increased
shipments of RF transceivers. Revenues of RF transceivers totaled $2.7
million, or 47% of net revenues, for the first quarter of 2002, compared to
$0.5 million, or 15% of net revenues, for the first quarter of 2001. Revenues
of networking products for the first quarter of 2002 totaled $2.9 million, or
53% of net revenues, compared to $2.9 million, or 85% of net revenues, for the
first quarter of 2001. In the first quarter of 2002, three customers each
accounted for 10% or more of our net revenues: Uniden Corporation accounted for
48% of net revenues, Allied Telesyn International accounted for 14% of net
revenues, and All American, a domestic distributor, accounted for 11% of net
revenues.

International revenues for the first quarter of 2002 totaled $4.7 million,
or 83% of net revenues, compared to $2.1 million, or 61% of net revenues, for
the first quarter of 2001. Domestic revenues were approximately 17% of net
revenues for the first quarter of 2002, compared to 39% for the first quarter
of 2001. The increase in international revenues as a percentage of total net
revenues is due to the sales of our RF transceiver wireless products to a large
international customer. We expect the higher percentage of international
revenues to continue.

Gross Margin

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Gross margin for the first quarter of 2002 was $3.1 million, or 55% of net
revenues, compared to $2.0 million for the first quarter of 2001, or 59% of net
revenues. The increase in gross margin dollars was due to the contribution of
increased revenue from sales of wireless products, mainly digital cordless
telephone RF transceivers. The lower gross margin percentage in the first
quarter of 2002 compared to the first quarter of 2001 was due to lower margins
on wireless products compared to networking products. Although the release of
new products at higher prices may have a favorable effect on margins, we expect
that the general trend in gross margins in the future may be downward, as we
expand our revenue base in competitive, consumer-oriented markets for digital
cordless telephones and other wireless networks.

Research and Development Expenses

Research and development expenses include costs associated with the
definition, design and development of new products. In addition, research and
development expenses include test development and prototype costs associated
with new product development. We expense wafers and new production mask sets
related to new products as research and development costs until products based
on new designs are fully characterized, support published data sheets and
satisfy reliability tests.

Research and development expenses were $4.2 million for the first quarter
of 2002 compared to $3.5 million for the first quarter of 2001. The increase
in product development expenses is the result of our engineering program to
develop highly integrated, high performance RF transceivers, baseband
processors, and embedded software for broadband wireless market applications.
We believe that continued high levels of new product development are critical
to our future success. Because of continued investment in broadband wireless
networking products, we anticipate that our research and development expenses
will continue at the same level in absolute dollars.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1.8 million for the
first quarter of 2002 compared to $2.4 million for the first quarter of 2001.
The decrease in expenses was primarily due to decreases in outside services and
consulting expenses and lower headcount. We believe that selling, general and
administrative expenses in the future will rise moderately, due mainly to
increases in variable selling costs associated with potential increases in
revenues, and higher marketing expenses incurred in connection with the
introduction of new products.

Interest and Other Income and Interest Expense

Interest and other income was $0.3 million for the first quarter of 2002
compared to $0.9 million for the first quarter of 2001. The decrease in
interest and other income in the first quarter of 2002 compared to the first
quarter of 2001 is attributable to the changes in cash balances as well as
lower prevailing interest rates. Interest and other expense was $0.1 million
in the first quarter of 2002, compared to $0.2 million in the first quarter of
2001.

Provision for Income Taxes

The provision for income taxes for the three months ended March 31, 2002
consists of taxes of our subsidiary in the United Kingdom. No benefit for
income taxes was recorded in the U.S., as we believe that the available
objective evidence creates sufficient uncertainty regarding the realizability
of the deferred tax assets such that we have recorded a full valuation allowance.
The effective tax rate for the three months ended March 31, 2001 was 0%.

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Liquidity and Capital Resources

Net cash used in operating activities was $3.7 million for the first three
months of 2002, compared to cash used by operations of $5.2 million in the
first three months of 2001. Net cash used in operating activities during the
first quarter was due to a net operating loss of $2.7 million. Additional uses
of cash over the first quarter of 2001 were an increase in inventories of $1.9
million, as we increased production to fill our higher backlog, and an increase
in accounts receivable of $800,000 offset by an increase in total liabilities
of $700,000.

Net cash provided by investing activities was $3.0 million in the first
three months of 2002 and $2.7 million in the comparable period last year,
consisting primarily of net sales of short-term investments. Capital
expenditures decreased to $87,000 for the first 3 months of 2002 compared to
$804,000 for 2001.

Financing activities for the first three months of 2002 were
insignificant. Net cash used by financing activities during the first three
months of 2002 included payments on debt of $60,000.

Working capital amounted to $22.3 million as of March 31, 2002 compared to
$24.6 million as of December 31, 2001. Working capital at March 31, 2002
includes cash and cash equivalents of $14.2 million and short-term investments
of $9.9 million.

We anticipate that our existing cash resources and cash generated from
operations will fund necessary purchases of capital equipment and provide
adequate working capital for at least the next twelve months.

Factors That May Affect Future Operating Results

The risks and uncertainties described below are not the only ones we face.
If an adverse outcome of any of the following risks actually occurs, our
business, financial condition or results of operations could be materially and
adversely affected:

Our operating results are difficult to predict and are likely to fluctuate
significantly. They may fail to meet or exceed the expectations of securities
analysts or investors, causing our stock price to decline.

Our operating results are difficult to predict and have fluctuated
significantly in the past. They are likely to continue to fluctuate in the
future as a result of many factors, some of which are outside of our control.
Some of the factors that may cause these fluctuations include:



| |  |  | the level and timing of spending by our customers, both in the U.S.
and in foreign markets;
| | - |  | -------------------------------------------------------------------------------------------
|
| |  |  | changes in market demand, including seasonal and cyclical fluctuations;                    
|
| |  |  | timing, amount, cancellation or rescheduling of customer orders;                           
|
| |  |  | fluctuations in manufacturing yields;                                                      
|
| |  |  | timing of revenue from contracts, which may span several quarters;                         
|
| |  |  | competitive market conditions;                                                             
|
| |  |  | new product introductions;                                                                 
|
| |  |  | market acceptance of new or existing products;                                             
|
| |  |  | cost and availability of wafers, other components and testing services;                    
|
| |  |  | mix of products sold;                                                                      

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| |  |  | economic conditions specific to the networking and wireless
industries and markets, as well as general economic conditions;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | ability to hire and retain qualified technical and other personnel;                                                        
|
| |  |  | development of new industry standard communication protocols; and                                                          
|
| |  |  | availability and performance of advanced silicon process
technologies from foundry sources.                                

We believe that period-to-period comparisons of our operating results will
not necessarily be meaningful. You should not rely on these comparisons as an
indication of our future performance. If our operating results in one or more
future periods fail to meet or exceed the expectations of securities analysts
or investors, the trading price of our common stock may decline, possibly by a
significant amount.

The markets in which we operate are intensely competitive, and many competitors
are larger and more established. If we do not compete successfully, our
business could suffer.

Intense international and domestic competition, decreasing selling prices,
rapid technological change, short product life cycles and cyclical patterns
characterize the markets for our products. Competitors include significantly
larger corporations, such as National Semiconductor, Infineon, Philips, Texas
Instruments, Broadcom, Micrel, Intel, Intersil, and Agere. New entrants in
these markets could provide additional competition. Most of our competitors are
substantially larger and have greater financial, technical, marketing and other
resources than we do. Many of these large organizations are in a better
position to withstand any significant reduction in spending by customers in
these markets. They often have broader product lines and market focus, and will
therefore not be as susceptible to downturns in a particular market. In
addition, many competitors have focused on the broadband wireless local area
network market for longer than we have, and therefore have more long-standing
and established relationships with domestic and foreign customers.

The computer networking equipment and broadband wireless local area
network markets have undergone a period of rapid growth and consolidation in
recent years. We expect our dependence on sales to network equipment
manufacturers to continue. Our business and results of operations would be
materially and adversely affected in the event of a significant slowdown in the
computer networking equipment market. In addition, as a result of competitive
pricing pressures, we have experienced lower margins in some of our products.
Such pricing pressures will continue to have an adverse effect on our results
of operations, and our business could suffer unless they can be offset by
higher margins on other products or lower operating expenses.

We do not currently manufacture our own semiconductor wafers. As a
result, we are vulnerable to process technology advances competitors use to
manufacture products offering higher performance and lower cost. Larger
companies with wafer manufacturing facilities, broader product lines, greater
technical and financial resources and greater service and support capabilities
have an advantage in this market.

In addition, our products are generally sole-sourced to our customers. If
our customers were to develop other sources for our products, our operating
results would suffer.

The market for broadband wireless local area network applications is relatively
immature and characterized by rapid technological change. Our future success
depends on our ability to respond to these changes.

The broadband wireless local area network market remains relatively
immature. Rapidly changing technology, frequent product introductions and
evolving industry

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standards make it difficult to accurately predict the markets future
growth rate, size or technological direction. In view of the evolving nature of
this market, suppliers of broadband wireless local area networking products may
decide to adopt alternative standards or technologies that are incompatible
with our products. If we are unable to design, develop, manufacture and sell
products that are compatible with these new standards or technologies, our
business and operating results will suffer.

We need to develop and introduce new and enhanced products in a timely manner
to successfully compete in our industry.

Continuing technological advancement, changes in customer requirements and
evolving industry standards characterize the broadband wireless local area
networking and computer equipment networking markets. To compete successfully,
we must design, develop, manufacture and sell new or enhanced products that:



| |  |  | provide increasingly higher levels of performance and reliability; 
| | - |  | -------------------------------------------------------------------
|
| |  |  | meet performance or other objective specified parameters;          
|
| |  |  | are cost effective;                                                
|
| |  |  | are brought to market in a timely manner;                          
|
| |  |  | are in accordance with existing or evolving industry standards; and
|
| |  |  | achieve market acceptance.                                         

The development of these new circuits is highly complex. We have sometimes
experienced delays in completing the development of new products. Successful
product development and introduction depends on many factors, including:



| |  |  | proper new product definition;                                
| | - |  | --------------------------------------------------------------
|
| |  |  | timely completion and introduction of new product designs;    
|
| |  |  | availability of foundry capacity;                             
|
| |  |  | acceptable manufacturing yields; and                          
|
| |  |  | market acceptance of our products and our customers products.

We must be able to adjust to changing market conditions quickly and
cost-effectively to compete successfully. Furthermore, we must introduce new
products in a timely manner, and achieve market acceptance for these products.
In addition, our customers products which incorporate our products must be
introduced in a timely manner and achieve market acceptance. If we or our
customers fail to develop and introduce new products successfully, our business
and operating results will suffer.

To successfully develop and market certain of our planned products, we may
need to enter into technology development or licensing agreements with third
parties. If we cannot enter into such agreements on acceptable terms, our
ability to develop and market new products could suffer, and our business and
operating results would be adversely affected.

Customers typically take a long time to evaluate our new products. It
takes 3 to 6 months or more for customers to test new products, and at least an
additional 3 to 12 months until customers begin significant production of
products incorporating our products. We may therefore experience a lengthy
delay between product development and the generation of revenues from new
products. Delays inherent in such a long sales cycle raise additional risks of
customer decisions to cancel or change their product plans. Such changes could
result in the loss of anticipated sales. Our business, financial condition, and
results of operations would suffer if customers reduce or delay orders, or
choose not to release products incorporating our products.

If we do not effectively manage the realignment of our business, our operations
and financial results could be harmed.

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As a result of the sale of our power management, bus interface, and video
product lines to Fairchild in September 2000, our products and markets are
narrower than in previous years. This has had a significant effect on our
revenues, profitability, and cash. We expect the change in the focus of our
business to broadband wireless local area networks to continue to place a
significant strain on personnel, management and other resources, including
financial reserves. During the realignment of our business, revenue will be
lower than in prior years, and we anticipate we will operate at a loss. Our
ability to manage our business effectively in the future will require:



| |  |  | successful attraction, training, motivation and management
of new employees;
| | - |  | ----------------------------------------------------------------------------
|
| |  |  | integration of new employees into our operations;                           
|
| |  |  | retention of key employees; and                                             
|
| |  |  | continual improvement in our operational, financial and
management systems. 

If we fail to manage the realignment of our business and our future growth
effectively, our operations and financial results could be harmed.

We have a history of losses and, because of continued investment in product
development, expect to incur losses in the future. We may not become
profitable.

We have incurred net losses from June 2000 through the three months ended
March 31, 2002. Because of those losses, we had an accumulated deficit of
$9,745,000 as of March 31, 2002.

Successful engineering development and market penetration in the product
areas we have chosen require high levels of engineering and product development
expense. We intend to continue to spend significant amounts on new product and
technology development. Our networking products are reaching maturity, and
revenue from this product line is expected to decline. We anticipate that our
existing cash will fund any anticipated operating losses, purchases of capital
equipment, and provide adequate working capital for at least the next 12
months. Although our revenues and gross margin increased in the first quarter
of 2002 over the first quarter of 2001, we expect to incur losses in the future
and may not achieve our additional goals of positive net income and cash flow.

We depend on local area network and telecommunications spending for our
revenue. Any decrease or delay in spending in these industries would
negatively impact future operating results and financial condition.

Demand for our products in the future will depend on the amount and timing
of spending by local area network providers and telecommunications equipment
suppliers. Spending in these areas depends upon a variety of factors, including
competitive pressures, discretionary consumer spending patterns, and general
economic conditions.

During 2001, new orders slowed, customers cancelled or placed holds on
existing orders, and orders dropped from prior periods, due to developments in
the general economy and capital markets. This situation could recur in the
future. Because the majority of our revenues come from sales to a few
customers, a delay in orders from one customer could have a significant
negative effect on future revenues.

Relatively short product life cycles characterize the computer network
equipment and digital cordless telephone markets. If one or more of our
significant customers were to select circuits manufactured by a competitor for
future products, our business will suffer. The loss of one or more of our
current customers, failure to attract new

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customers, or disruption of our sales and distribution channels would
adversely affect our business and operating results.

Our customer base is concentrated. The loss of one or more key customers or
distributors would harm our business.

A significant majority of our revenues come from sales to relatively few
customers. Sales to the ten largest customers, excluding domestic distributors,
accounted for approximately 83% of net revenues for the three months ended
March 31, 2002 and approximately 75% of net revenues in 2001. Sales to
domestic distributors for the three months ended March 31, 2002 accounted for
approximately 12% of net revenues and 13% of net revenues in 2001. We
anticipate that a limited number of key customers and distributors will
continue to provide a significant portion of our net revenues for the
foreseeable future. Our future success depends on our ability to retain our
current customers and attract new customers. A reduction, delay or
cancellation of orders from one or more significant customers could materially
and adversely affect our operating results. In addition, our operating results
could be adversely affected if one or more of our major customers were to
develop other sources for the products we now supply them.

Customers may generally cancel or reschedule orders to purchase standard
products without significant penalty until 30 days prior to shipping.
Customers frequently revise delivery schedules, and the quantities of products
to be delivered, to reflect changes in their needs. Since backlog can be
canceled or rescheduled, our backlog at any time is not necessarily indicative
of future revenue.

We depend on international sales and are subject to the risks associated with
international operations, which may negatively affect our business.

Sales to customers outside of the United States represented 84% of net
revenues for the three months ended March 31, 2002 and 81% of net revenues in
2001. We expect that international sales will continue to generate a
substantial proportion of net revenues for the foreseeable future. Our
international operations are subject to a number of risks, including:



| |  |  | changes in foreign government regulations and telecommunications
standards;                                                                                        
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | import and export legislation and license requirements, tariffs,
taxes, quotas and other trade barriers;                                                           
|
| |  |  | compliance with foreign laws, treaties and technical standards;                                                                                                    
|
| |  |  | delays resulting from difficulty in obtaining export licenses for
certain technology;                                                                              
|
| |  |  | fluctuations in currency exchange rates;                                                                                                                           
|
| |  |  | difficulty in collecting accounts receivable;                                                                                                                      
|
| |  |  | difficulty in staffing and managing foreign operations;                                                                                                            
|
| |  |  | loss of one or more international distributors;                                                                                                                    
|
| |  |  | geo-political risks, changes in diplomatic and trade relationships
and economic instability; and                                                                   
|
| |  |  | the effects of the terrorist attacks on the United States, the
United States war on international terrorism and any related conflicts
or similar events worldwide.

Substantially all of our international sales must be licensed by the
Office of Export Administration of the U.S. Department of Commerce. To date we
have not experienced any material difficulties in obtaining export licenses.

Our international sales are typically denominated in U.S. dollars.
Fluctuations in currency exchange rates could cause our products to become
relatively more expensive to customers in a particular country, while
competitors products denominated in local

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currencies become less expensive. This may lead to a reduction in sales
or profitability in that country, which could adversely affect our business.

Gains and losses on the conversion to U.S. dollars of accounts receivable,
accounts payable and other international assets and liabilities may contribute
to fluctuations in operating results. In addition international customers
typically take longer to pay for purchases than customers in the United States.
If foreign markets do not continue to develop, or foreign sales cycles prove
unpredictable, our revenue and business may be adversely affected.

Selling prices for networking and wireless products typically decrease, which
could lead to lower operating results.

Average selling prices for products in the networking and wireless markets
have rapidly declined due to many factors, including:



| |  |  | rapidly changing technologies;                
| | - |  | ----------------------------------------------
|
| |  |  | price-performance enhancements;               
|
| |  |  | product introductions by competitors;         
|
| |  |  | price pressure from significant customers; and
|
| |  |  | product maturity and obsolescence.            

The decline in the average selling prices of our products may cause substantial
fluctuations in our operating results. We continue to develop and market new
products that incorporate valued new features and sell at higher prices.
Failure to deliver new products offering increased value would result in a
decline in both revenues and margins, harming our business, financial
condition, and results of operations.

We face product return, product liability, and product defect risks.

Complex products such as ours frequently contain errors, defects, and bugs
upon release. Despite thorough testing by Micro Linear, our test houses and
customers, these errors, defects and bugs are sometimes discovered after we
begin to ship products. We expend significant resources to remedy these
problems, but occasionally have faced legal claims by customers and others.
Product defects can also cause interruptions, delays or cancellations of sales
to customers, in addition to claims against us.

The cyclical nature of the semiconductor industry affects our business.

The semiconductor industry experiences significant downturns and wide
fluctuations in supply and demand. The industry also experiences significant
fluctuations in anticipation of changes in general economic conditions. This
causes significant variances in product demand and production capacity, and
aggravates selling price fluctuations. These cyclical patterns, which we expect
to continue, significantly affect our business, financial condition, and
results of operations.

We must be able to manage expenses and inventory risks associated with meeting
the demand of customers.

We regularly request indications from customers as to their future plans
and requirements, to ensure that we will be prepared to meet production demand
for our products. However, we may not receive anticipated purchase orders for
our products. We must be able to effectively manage the expenses and inventory
risks associated with meeting potential demand. If we fail to meet customers
supply expectations, we may lose business from such customers. If we expend
resources and purchase materials, or
19Table of Contents

enter into commitments to acquire materials and manufacture products, and
customers do not purchase these products, business and operating results will
suffer.

Design wins, which require significant expenditures, often precede the
generation of volume sales by a year or more. The value of any design win will
largely depend upon the commercial success of the customers product, and on
the extent to which the design of the customers product accommodates
components manufactured by our competitors. We cannot assure that we will
achieve design wins, or that any design win will result in significant future
revenues.

We rely on a limited number of outside foundries and test subcontractors in the
manufacturing process.

We utilize outside foundries for all wafer production. We believe that
utilizing outside foundries enables us to focus on our design strengths,
minimize fixed costs and capital expenditures and access diverse manufacturing
technologies. We currently intend to continue to rely exclusively upon our
outside foundries for our wafer fabrication requirements. However, there are
significant risks associated with the reliance on outside foundries, including
the lack of assured wafer supply and control over delivery schedules, delays in
obtaining access to key process technologies, and limited control over
manufacturing yields and production costs.

The manufacture of integrated circuits is a highly complex and technically
demanding process. We have diversified our sources of wafer supply and have
worked closely with our foundries to minimize the likelihood of reduced
manufacturing yields. However, our foundries have sometimes experienced lower
than anticipated manufacturing yields, particularly in connection with the
introduction of new products and the installation and start-up of new
processes. Reduced yields have at times negatively affected our operating
results, a situation which may recur in the future.

Dependence on foundries located outside of the United States subjects us
to numerous risks, including exchange rate fluctuations, export and import
restrictions, trade sanctions, political instability and tariff increases. Our
main foundries are located in Taiwan and Singapore, which involves specific
risks due to political instability in that region.

We purchase wafers from outside foundries pursuant to customers purchase
orders. We generally do not have a guaranteed level of wafer capacity or wafer
costs at our foundries. Our wafer suppliers could prioritize capacity for other
uses, or reduce or eliminate deliveries to us on short notice. In addition, we
depend upon a limited number of foundries for our wafer requirements. Any
sudden demand for an increased amount of wafers, or sudden reduction or
elimination of any source of wafers, could result in a material delay in the
shipment of products. Disruptions in supply, which have occurred in the past,
may occur in the future. If such a disruption occurred, and we were unable to
qualify alternative manufacturing sources for our products in a timely manner,
or if such sources were unable to produce wafers with acceptable manufacturing
yields, our business and operating results would be materially and adversely
affected.

We rely on two outside test service subcontractors to test our products.
The same risks described in the paragraph above, concerning guaranteed
capacity, dependence upon a limited number of test service subcontractors, and
disruptions in service, also apply to our test and assembly subcontractors.

Rapid technological change and frequent new product introductions
characterize the markets for our products. To remain competitive, we must
develop or obtain access to new semiconductor process technologies in order to
reduce die size, increase die performance and functional complexity, and
improve manufacturing yields. If we are
20Table of Contents

unable to obtain access to advanced wafer processing technologies,
limiting our ability to introduce competitive products on a timely basis, our
future operating results may suffer.

The manufacture of integrated circuits is a highly complex and precise
process. Minute levels of contaminants in the manufacturing environment,
defects in the masks used to print circuits on a wafer, difficulties in the
fabrication process and other factors can cause a substantial percentage of
wafers to be rejected or a significant number of die on each wafer to be
nonfunctional. Many of these manufacturing problems are difficult to diagnose
and time consuming or expensive to remedy. Our foundries have at times
experienced lower than anticipated yields, which have adversely affected
production and operating results.

The manufacturing processes utilized by our foundries are continuously
being improved in order to increase yield and product performance. Process
changes can, however, result in interruptions in production or significantly
reduced yields. New process technologies or new products are especially
susceptible to wide variations in manufacturing yields and efficiency.
Irregularities, adverse yield fluctuations or other manufacturing problems at
our foundries could result in production interruption or delivery delays,
adversely affecting our business and results of operations.

We have granted nontransferable, limited process licenses to some of our
foundries to utilize our processes to manufacture and sell wafers to other
customers. We protect our proprietary technology, particularly our design
methodology, but may not be able to prevent its misappropriation by our
foundries or others.

The manufacturing processes of our foundries and subcontractors use hazardous
chemicals.

Our wafer suppliers and test and assembly subcontractors are subject to a
variety of U.S. and foreign government regulations related to the discharge or
disposal of toxic, volatile or otherwise hazardous chemicals used in their
manufacturing processes. Failure by our suppliers or subcontractors to comply
with environmental regulations could result in fines, suspension of production
or cessation of operations. Environmental regulations could also require our
suppliers or subcontractors to acquire equipment or incur other expenses to
comply with environmental regulations. If our suppliers or subcontractors incur
substantial additional expenses, product costs could significantly increase,
adversely affecting our results of operations.

We are also subject to a variety of environmental regulations relating to
our operations. If we fail to comply with present and future regulations, the
government could impose fines on us, or compel us to suspend or cease
operations. If we or our suppliers or subcontractors fail to control the use or
discharge of hazardous substances, we could be subject to civil or criminal
liabilities, which could have a material adverse effect on our business and
operating results.

Because competition for qualified personnel is intense, we may not be
successful in attracting and retaining personnel, which could have an impact
upon the development or sales of our products.

Our future success will depend to a significant extent on our ability to
attract, retain and motivate personnel, especially those with engineering
design experience and expertise. Competition for qualified technical and other
personnel is intense in the San Francisco Bay area, and we may not be
successful in attracting and retaining such personnel.

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Competitors may attempt to recruit our employees. While employees are
required to sign standard agreements concerning confidentiality and ownership
of inventions, we do not have employment contracts or non-competition
agreements with most of our personnel. The loss of the services of key
employees, the inability to attract or retain qualified personnel, or delays in
hiring personnel, particularly engineers and other technical personnel, could
negatively affect our business and prevent us from achieving our business
goals.

Our success depends on our ability to protect our intellectual property and
proprietary rights.

We own six U.S. patents, and have eight U.S. patent applications and ten
foreign patent applications pending. Through a sale of a portion of our assets,
we maintain a royalty-free license to 45 U.S. patents, three foreign patents,
seven U.S. patent applications, and three foreign patent applications.

We attempt to protect our intellectual property rights through patents,
trademarks, copyrights, licensing arrangements, maintaining certain technology
as trade secrets and other measures. However, any patent, trademark, copyright
or other intellectual property rights we own may be invalidated, circumvented
or challenged. We cannot be certain that our intellectual property rights
will provide competitive advantages, or that any pending or future patent
applications will be issued with the scope of the claims sought by us.
Competitors may develop technologies that are similar or superior to our
technology, duplicate our technology or design around the patents that we own.
In addition, effective patent, copyright and trade secret protection may be
unavailable or limited in certain foreign countries in which we do business.

We believe that the future success of our business will depend on our
ability to translate technological expertise and innovation into new and
enhanced products. We enter into confidentiality or license agreements with our
employees, consultants, vendors and customers, and limit access to and
distribution of our proprietary information. Nevertheless, we may not be able
to prevent misappropriation of our technology.

In addition, we have taken legal action to enforce our patents and other
intellectual property rights, protect our trade secrets, determine the validity
and scope of the proprietary rights of others, and defend against claims of
infringement or invalidity. If a third party makes a valid claim, and we cannot
obtain a license to the technology on reasonable terms, our operations could be
adversely affected.

We may be subject to legal proceedings and claims from time to time in the
ordinary course of our business, including claims of alleged infringement of
the proprietary rights and other intellectual property rights of third parties.
Intellectual property litigation is expensive and time-consuming, and could
divert our managements attention away from running our business.

We could be the target for costly disputes and litigation.

In December 1995, Pioneer Magnetics, Inc. (Pioneer) filed a complaint in
the Federal District Court for the Central District of California alleging that
certain of our integrated circuits violate a Pioneer patent. Pioneer sought
monetary damages and an injunction against the alleged patent violation. The
District Court concluded that Micro Linear did not infringe on Pioneers
patent. Pioneer then appealed the District Courts decision to the Court of
Appeals for the Federal Circuit, which affirmed the District Courts Judgment.
In May 2001, Pioneer filed a petition for appeal with the Supreme Court. The
Supreme Court has not yet rendered its decision on whether to hear the appeal.
Part II of this filing contains greater detail about this case.

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From time to time we have received correspondence from vendors,
distributors, customers or end-users of our products regarding disputes with
respect to contract rights, product performance or other matters that occur in
the ordinary course of business. Some of these disputes may involve us in
costly litigation or other actions, the outcome of which cannot be determined
in advance and may adversely affect our business.

Our stock price has been and will likely continue to be volatile, and you may
be unable to resell your shares at or above the price you paid.

Our stock price has been and is likely to continue to be highly volatile.
For example, between January 1, 2002 and March 31, 2002, our stock price has
traded as high as $3.35 on January 31, 2002, and as low as $2.05 on March 6,
2002. Our stock price could fluctuate significantly due to a number of
factors, including:



| |  |  | variations in our actual or anticipated operating results;                                                        
| | - |  | ------------------------------------------------------------------------------------------------------------------
|
| |  |  | sales of substantial amounts of our stock;                                                                        
|
| |  |  | announcements about us or about our competitors,
including technological innovation or new products;              
|
| |  |  | litigation and other developments relating to our patents
or other proprietary rights or those of our competitors;
|
| |  |  | conditions in the computer networking equipment and
broadband wireless local area network markets;                
|
| |  |  | governmental regulation and legislation; and                                                                      
|
| |  |  | changes in securities analysts estimates of our
performance, or our failure to meet analysts expectations.      

Many of these factors are beyond our control. In addition, the stock
markets in general, and the Nasdaq National Market and the market for
technology companies in particular, have experienced extreme price and volume
fluctuations recently. These fluctuations often have been unrelated or
disproportionate to the operating performance of these companies. These broad
market and industry factors may decrease the market price of our common stock,
regardless of our actual operating performance. In the past, companies that
have experienced volatility in the market prices of their stock have been the
object of securities class action litigation. If we were the object of
securities class action litigation, it could result in substantial costs and a
diversion of managements attention and resources, which could affect our
financial performance.

Our Certificate of Incorporation and Bylaws, Stockholder Rights Plan and
Delaware law contain provisions that could discourage a change in control, even
if the change in control would be beneficial to our stockholders.

Provisions of our Amended and Restated Certificate of Incorporation,
Bylaws, the 1998 Shareholder Rights Plan, our stock option plans and Delaware
law could make it more difficult for a third party to acquire us, even if doing
so would be beneficial to our stockholders. These provisions could limit the
price that investors might be willing to pay in the future for shares of our
common stock.

Under the Shareholder Rights Plan, adopted in August 1998, each share of
our outstanding common stock carries one Right to purchase 1/1000 of a share of
Series A Participating Preferred Stock at an exercise price of $30.00 per
Right. If someone

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acquires 15% or more of our common stock, each Right not owned by a holder
of 15% or more of our common stock entitles the holder, upon payment of the
$30.00 exercise price, to receive common stock having a current market value of
$60.00. This issuance of additional common stock would significantly reduce
the percentage of common stock held by a potential acquiror. The Rights expire
in August 2008.

In addition, Section 203 of the Delaware General Corporation Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of our company. Specifically, Section 203 prohibits a Delaware
corporation from engaging in any business combination with an interested
stockholder for three years after the date the stockholder became an interested
stockholder unless specific conditions are met. Also, in the event outstanding
options granted pursuant to certain of our stock option plans are not assumed
by an acquiring corporation, the unvested portion of such options may be
accelerated upon a change of control. In addition, some individual stock
option grants provide for the partial or complete acceleration of vesting upon
a change of control.

We rely on a continuous power supply to conduct our operations. An energy
crisis in California could disrupt operations and increase our expenses.

California has recently experienced energy alerts and rolling blackouts,
which can disrupt our operations and increase our expenses. If blackouts
interrupt our power supply or the power supply of any of our customers, we or
our customers may be temporarily unable to operate. A prolonged interruption in
our operations could delay the development of or interfere with the sales of
our products. Interruptions in our power supply could harm our ability to
retain existing customers and obtain new customers, resulting in lost revenue
and substantially harming our business and results of operations.

The deregulation of the energy industry instituted in 1996 by the
California government, and shortages in wholesale electricity supplies, have
caused power prices to increase. If wholesale prices continue to increase, our
operating expenses will increase, as our headquarters and most of our employees
are in California.




ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

As of March 31, 2002, our investment portfolio consisted of U.S.
government obligations and commercial paper of $24.1 million, typically with
maturities of less than 12 months. These securities are subject to interest
rate risk, and will decline in value if market interest rates increase. We
intend to hold our fixed income investments until maturity and therefore do not
expect to recognize an adverse impact from interest rate changes on income or
cash flows.

Foreign Currency Exchange Risk

We have international sales and research and development facilities and
are therefore subject to foreign currency rate exposure. We limit our foreign
currency risks principally by maintaining minimal foreign currency balances. To
date our exposure related to exchange rate volatility has not been significant.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

In December 1995, Pioneer Magnetics, Inc. (Pioneer) filed a complaint in
the Federal District Court for the Central District of California alleging that
certain of our integrated circuits violate a Pioneer patent. Pioneer sought
monetary damages and an injunction against such alleged patent violation. We
denied any infringement and filed a counter-claim seeking invalidity of the
patent. The court held hearings on November 9, 1998 and July 19, 1999. The
court issued a decision favorable to Micro Linear, conceding that Micro Linear
did not infringe on Pioneers patent. Pioneer then appealed the District
Courts decision to the Court of Appeals for the Federal Circuit. The hearing
on appeal took place on October 5, 2000. On January 23, 2001 the Court of
Appeals issued an opinion affirming the District Courts Judgment. On May 23,
2001, Pioneer filed a petition for appeal with the Supreme Court. Micro Linear
filed its opposition to the petition on June 25, 2001. The Supreme Court has
not yet rendered its decision on whether to hear the appeal.

From time to time we have received correspondence from vendors,
distributors, customers or end-users of our products regarding disputes with
respect to contract rights, product performance or other matters that occur in
the ordinary course of business. Some of these disputes may result in costly
litigation or other actions involving Micro Linear.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits
| | --- |  | --------

None



| | (b) |  | Reports on Form 8-K
| | --- |  | -------------------

None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|                   |  |                          |  |                                                                                                
|------------------ |  | ------------------------ |  | -----------------------------------------------------------------------------------------------
|                   |  | MICRO LINEAR CORPORATION
|Date: May 15, 2002 |  | By:                      |  | /s/ David L. Gellatly                                                                          
|                   |  |                          |  |                                                                                                
|                   |  |                          |  | David L. Gellatly
Chairman, Chief Executive Officer
and President
(Principal Executive Officer)
|                   |  | By:                      |  | /s/ Michael Schradle                                                                           
|                   |  |                          |  |                                                                                                
|                   |  |                          |  | Michael Schradle
Chief Financial Officer
(Principal Financial and Accounting Officer)          

26