UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549




                                  Form 10-Q/A
                                Amendment No. 1



(Mark One)

 X                Quarterly Report Pursuant to Section 13 or 15(d) of the
----              Securities Exchange Act of 1934. For the quarterly period
                  ended June 30, 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: 001-13748


                                  ZiLOG, Inc.
            (Exact name of registrant as specified in its charter)


           Delaware                                              13-3092996
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                           Identification Number)


                 532 Race Street, San Jose, California, 95126
                   (Address of principal executive offices)

              Registrant's telephone number, including area code:
                                (408) 558-8500

Indicate by check mark whether the registrant (l) has filed all reports
required 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
                                    ---       ---

As of July 28, 2002, there were 29,953,045 shares of the Company's Common
Stock, $0.01 par value outstanding.

         This Report on Form 10-Q and other oral and written statements we
make contain and incorporate forward-looking statements regarding future
events and our plans and expectations that involve risks and uncertainties.
When used in this Report, the words "estimate," "project," "intend," "expect,"
"anticipate," "believe," "may," "will," and similar expressions are intended
to identify such forward-looking statements. Forward-looking statements in
this report include, but are not limited to, those relating to the general
direction of our business; the utilization of our manufacturing facilities;
our ability to sell or lease our MOD III facility; the effects of our chapter
11 reorganization; and our expected capital expenditures and expenses for
future periods. Although we believe our plans, intentions, and expectations
reflected in these forward-looking statements are reasonable, we can give no
assurance that these plans, intentions, or expectations will be achieved.
Actual results, performance, or achievements could differ materially from
those contemplated, express or implied, by the forward-looking statements
contained in this report. Factors that may cause or contribute to differences
include, but are not limited to: continued availability of third-party foundry
and assembly services at commercially reasonable quality and prices;
under-absorption of manufacturing costs in our wafer fabrication facilities
from under-utilization of production capacity; our distributors and customers
significantly reducing their existing inventories before ordering new
products; and those factors discussed in the sections entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Risk Factors," as well as those discussed elsewhere in this Report and in
other reports filed with the Securities and Exchange Commission. These factors
are not intended to represent a complete list of the general or specific
factors that affect us. Other factors, including general economic factors and
business strategies, may be significant, presently or in the future, and the
factors set forth in this report may affect us to a greater extent than
indicated. We caution the reader not to place undue reliance on the
forward-looking statements contained herein, which reflect our position as of
the date of this report. We undertake no obligation to publicly release
updates or revisions to these statements.

         Based in San Jose, California, we were incorporated in California in
October 1981 and reincorporated in Delaware in April 1997. In this report,
"ZiLOG," "the Company," "our," "us," "we," and similar expressions refer to
ZiLOG, Inc. and its subsidiaries. However, when these expressions are used
throughout this report in connection with ZiLOG, Inc.'s reorganization under
Chapter 11 of the U.S. bankruptcy code, they are referring only to the parent
company, ZiLOG, Inc., and not to any of its subsidiaries. ZiLOG and Z80 are
registered trademarks of ZiLOG, Inc.


Extreme Connectivity (C) ZiLOG, Inc. 1999.


<PAGE>


                                  ZiLOG, INC.
       QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2002
                               TABLE OF CONTENTS


<TABLE>

PART I.  FINANCIAL INFORMATION                                                                                Page

<S>      <C>                                                                                                   <C>
Item 1.  Financial Statements........................................................................          1

         Unaudited Condensed Consolidated Statements of Operations for the two months ended
         June 30, 2002, one month ended April 30, 2002 and three months ended June 30, 2001..........          1

         Unaudited Condensed Consolidated Statements of Operations for the two months ended
         June 30, 2002, four months ended April 30, 2002 and six months ended June 30, 2001..........          2

         Unaudited Condensed Consolidated Balance Sheets at June 30, 2002, May 1, 2002, April 30, 2002
         and December 31, 2001.......................................................................          3

         Unaudited Condensed Consolidated Statements of Cash Flows for the two months ended June 30,
         2002, four months ended April 30, 2002 and six months ended June 30, 2001...................          4

         Notes to Unaudited Condensed Consolidated Financial Statements..............................          5

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.......         17

Item 3.  Quantitative and Qualitative Disclosures About Market Risk..................................         37


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...........................................................................         38

Item 2.  Changes in Securities and Use of Proceeds...................................................         38

Item 3.  Defaults Upon Senior Securities.............................................................         38

Item 6.  Exhibits and Reports on Form 8-K............................................................         38

</TABLE>

<PAGE>

                                                        PART I
                                                 FINANCIAL INFORMATION
<TABLE>

Item 1.  Financial Statements
                                                     ZiLOG, INC.
                               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (in millions except per share data)
<CAPTION>


                                                   Successor Company  |         Predecessor Company
                                                 -------------------- | ------------------------------------------
                                                     Two Months       |     One Month             Three Months
                                                 Ended June 30, 2002  | Ended April 30, 2002   Ended June 30, 2001
                                                 -------------------  | --------------------   -------------------
                                                                      |
<S>                                                 <C>                       <C>                   <C>
Net sales.......................................    $   28.1          |       $   10.0              $   44.0
Cost of sales...................................        15.5          |            5.8                  35.5
Cost of sales - fresh-start inventory adjustment         3.9          |            --                    --
                                                 -------------------  |  --------------------   -------------------
Gross margin....................................         8.7          |            4.2                   8.5
Operating expenses:                                                   |
   Research and development.....................         3.2          |            1.5                   7.2
   Selling, general and administrative..........         7.2          |            2.7                  12.9
   Special charges and reorganization items.....         0.3          |            1.2                   8.1
   Amortization of intangible assets............         2.0          |            --                    --
   In-process research and development..........        18.7          |            --                    --
                                                 -------------------  |  --------------------   -------------------
       Total operating expenses.................        31.4          |            5.4                  28.2
                                                 -------------------  |  --------------------   -------------------
Operating loss..................................       (22.7)         |           (1.2)                (19.7)
Other income (expense):                                               |
   Fresh-start adjustments......................         --           |           83.7                   --
   Net gain on discharge of debt................         --           |          205.7                   --
   Interest income..............................         --           |            --                    0.3
   Interest expense (1).........................        (0.2)         |           (0.1)                 (7.3)
   Other, net...................................         0.1          |            --                    --
                                                 -------------------  |  --------------------   -------------------
Income (loss) before reorganization items,                            |
   income taxes and loss from equity method                           |
   investment...................................       (22.8)         |          288.1                 (26.7)
Reorganization items............................         --           |            0.3                   --
Provision for income taxes......................         0.6          |            --                    0.1
                                                 -------------------  |  --------------------   -------------------
Net income (loss) before equity method                                |
   investment...................................    $  (23.4)         |       $  287.8              $  (26.8)
Loss from equity method investment..............        --            |            --                   (0.3)
                                                 -------------------  |  --------------------   -------------------
Net income (loss)...............................    $  (23.4)         |       $  287.8              $  (27.1)
                                                 ===================  |  ====================   ===================
Preferred stock dividends accrued...............         --           |            0.5                   1.3
                                                 -------------------  |  --------------------   -------------------
Net loss (income) attributable to common                              |
   stockholders.................................    $  (23.4)         |       $  287.3              $  (28.4)
                                                 ===================  |  ====================   ===================
Basic and diluted net loss per share............    $   (0.82)        |
                                                 ===================  |
Weighted-average shares used in computing basic                       |
   and diluted net loss per share...............        28.5          |
                                                 ===================  |
                                                                      |
Stock-based compensation included in the above expense line-items:    |
                                                                      |
     Cost of sales..............................    $    0.1          |
     Research and development...................         0.1          |
     Selling, general and administrative........         1.9          |
                                                 -------------------  |
                                                    $    2.1          |
                                                 ===================  |

___________________________

(1)  Excludes contractual interest of $2.1 in the one month ended April 30,
     2002 not recorded during reorganization.


                                 See accompanying notes to condensed consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>

                                                  ZiLOG, INC.
                           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (in millions except per share data)
<CAPTION>


                                                     Successor Company   |           Predecessor Company
                                                    -------------------- |  ----------------------------------------
                                                        Two Months       |    Four Months            Six Months
                                                    Ended June 30, 2002  |  Ended April 30,2002   Ended June 30,2001
                                                    -------------------- |  -------------------   ------------------
                                                                         |
<S>                                                   <C>                    <C>                  <C>
Net sales........................................     $   28.1           |    $   46.0             $   88.2
Cost of sales....................................         15.5           |        26.1                 73.6
Cost of sales - fresh-start inventory adjustment.          3.9           |         --                   --
                                                    -------------------  |  -------------------    ------------------
Gross margin....................................           8.7           |        19.9                 14.6
Operating expenses:                                                      |
   Research and development.....................           3.2           |         6.8                 16.3
   Selling, general and administrative..........           7.2           |        10.8                 26.5
   Special charges and reorganization items.....           0.3           |         6.9                  8.1
   Amortization of intangible assets............           2.0           |         --                   --
   In-process research and development..........          18.7           |         --                   --
                                                    -------------------  |  -------------------    ------------------
       Total operating expenses.................          31.4           |        24.5                 50.9
                                                    -------------------  |  -------------------    ------------------
Operating loss..................................         (22.7)          |        (4.6)               (36.3)
Other income (expense):
   Fresh-start adjustments......................           --            |        83.7                  --
   Net gain on discharge of debt................           --            |       205.7                  --
   Interest income..............................           --            |         0.1                  0.8
   Interest expense (1).........................          (0.2)          |        (5.0)               (14.6)
   Other, net...................................           0.1           |         0.1                 (0.2)
                                                    -------------------  |  -------------------    ------------------
Income (loss) before reorganization items,
   income taxes and loss from equity method
   investment...................................         (22.8)          |       280.0                (50.3)
Reorganization items............................           --            |         4.0                 --
Provision for income taxes......................           0.6           |         0.1                  0.2
                                                    -------------------  |  -------------------    ------------------
Net income (loss) before equity method investment        (23.4)          |       275.9                (50.5)
Loss from equity method investment..............          --             |        --                    0.7
                                                    -------------------  |  -------------------    ------------------
Net (loss) income...............................      $  (23.4)          |    $  275.9             $  (51.2)
                                                    ===================  |  ===================    ===================
Preferred stock dividends accrued...............          --             |         1.9                  2.5
                                                    -------------------  |  -------------------    ------------------
Net loss (income) attributable to common                                 |
   stockholders.................................      $  (23.4)          |    $  274.0             $  (53.7)
                                                    ===================  |  ===================    ==================
Basic and diluted net loss per share............      $   (0.82)         |
                                                    ===================  |
                                                                         |
   Weighted-average shares used in computing basic                       |
     and diluted net loss per share.............          28.5           |
                                                    ===================  |
                                                                         |
Stock-based compensation included in the above                           |
   expense line-items:                                                   |
     Cost of sales..............................      $    0.1           |
     Research and development...................           0.1           |
     Selling, general and administrative........           1.9           |
                                                    -------------------  |
                                                      $    2.1           |
                                                    ===================  |
_____________________

(1)  Excludes contractual interest of $4.2 in the four months ended April 30, 2002 not recorded during reorganization.


                    See accompanying notes to condensed consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>

                                                  ZiLOG, INC.
                                UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (dollars in millions, except per share data)
<CAPTION>

                                                                       Successor Company       |        Predecessor Company
                                                                -----------------------------  |  ------------------------------
                                                                June 30, 2002     May 1, 2002  |  April 30, 2002   Dec. 31, 2001
                                                                -------------     -----------  |  --------------   -------------
<S>                                                              <C>              <C>                <C>             <C>
ASSETS                                                                                         |
Current assets                                                                                 |
    Cash and cash equivalents.................................   $     18.1       $    18.8    |     $   18.8        $    30.7
    Accounts receivable, less allowance for doubtful accounts                                  |
      of $0.7 at June 30, 2002, April 30 and May 1, 2002                                       |
      and $0.9 at December 31, 2001...........................         16.5            14.5    |         14.5             16.7
    Inventories...............................................         13.2            17.2    |         14.5             17.3
    Prepaid expenses and other current assets.................          3.2             3.8    |          3.8              3.9
                                                                -------------     -----------  |  --------------   -------------
        Total current assets..................................         51.0            54.3    |         51.6             68.6
                                                                -------------     -----------  |  --------------   -------------
MOD III, Inc. assets held for sale............................         30.0            30.0    |         30.0              --
Net property, plant and equipment.............................         24.1            25.0    |         11.9             45.8
Goodwill......................................................         26.7            26.7    |          --               --
Intangible assets, net........................................         24.1            26.2    |          --               --
In-process research and development...........................          --             18.7    |          --               --
Other assets..................................................          3.1             1.0    |          1.0              1.3
                                                                -------------     -----------  |  --------------   -------------
                                                                  $   159.0       $   181.9    |     $   94.5        $   115.7
                                                                =============     ===========  |  ==============   =============
                                                                                               |
LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY (DEFICIENCY)                           |
Current liabilities:                                                                           |
  Short-term debt.............................................    $     9.1       $     9.4    |     $    9.4        $    12.8
  Notes payable...............................................          --              --     |          --             280.0
  Interest payable on notes...................................          --              --     |          --              22.5
  Accounts payable............................................         13.1            12.1    |         13.2             13.4
  Accrued compensation and employee benefits..................          6.8             7.2    |          7.2              9.0
  Other accrued liabilities...................................          3.0             4.1    |          4.1              4.9
  Accrued special charges.....................................          1.4             4.1    |          4.1              9.7
  Dividends payable on preferred stock........................          --              --     |          --              16.6
  Deferred income on shipments to distributors................          6.2             4.9    |          6.1              6.6
                                                                -------------     -----------  |  --------------   -------------
     Total current liabilities................................         39.6            41.8    |         44.1            375.5
                                                                -------------     -----------  |  --------------   -------------
  Deferred income taxes.......................................          6.0             6.0    |          --               --
Other long-term liabilities...................................         14.6            14.1    |         14.1             14.3
Liabilities subject to compromise.............................          --              --     |        325.7              --
                                                                -------------     -----------  |  --------------   -------------
     Total liabilities........................................         60.2            61.9    |        383.9            389.8
                                                                -------------     -----------  |  --------------   --------------
                                                                                               |
Minority interest in MOD III assets...........................         30.0            30.0    |          --               --
                                                                                               |
Stockholders' equity (deficiency):                                                             |
  Preferred Stock.............................................          --              --     |         25.0             25.0
  Common Stock................................................          0.3             0.3    |          0.4              0.4
  Deferred stock compensation.................................         (5.9)            --     |         (0.5)            (0.6)
  Additional paid-in capital..................................         97.8            89.7    |         13.2             13.2
  Accumulated deficit.........................................        (23.4)            --     |       (327.5)          (312.1)
                                                                -------------     -----------  |  --------------   -------------
     Total stockholders' equity (deficiency)..................         68.8            90.0    |       (289.4)          (274.1)
                                                                -------------     -----------  |  --------------   -------------
Total liabilities and stockholders' equity....................    $   159.0       $   181.9    |    $   94.5        $   115.7
                                                                =============     ===========  |  ==============   =============


                    See accompanying notes to condensed consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
                                                  ZiLOG, INC.
                           UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (in millions)
<CAPTION>

                                                                      Successor Company |          Predecessor Company
                                                                      ----------------- | ----------------------------------
                                                                        Two Months      |   Four Months        Six Months
                                                                          Ended         |      Ended             Ended
                                                                       June 30, 2002    |  April 30, 2002     June 30, 2001
                                                                      ----------------- | ----------------   ---------------
<S>                                                                   <C>                  <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                                   |
Net income (loss).................................................    $    (23.4)       |  $    275.9         $  (51.2)
Adjustments to reconcile net income (loss) to net                                       |
 cash used by operating activities:                                                     |
   In-process research and development............................          18.7        |         --               --
   Net gain on discharge of debt..................................           --         |      (205.7)             --
   Amortization of fresh-start adjustments........................           --         |       (83.7)             --
   Fresh-start inventory adjustment...............................           3.9        |         --               --
   Loss in equity method investment...............................           --         |         --               0.7
   Depreciation and amortization..................................           3.1        |         2.5             19.7
   Impairment of long lived assets................................           --         |         2.7              2.9
   Stock-based compensation.......................................           2.1        |          0.1             1.8
   Loss from disposition of equipment.............................           --         |         --               0.7
Changes in operating assets and liabilities:                                            |
   Accounts receivable............................................          (2.0)       |         2.1              9.6
   Inventories....................................................           1.3        |         2.9              8.5
   Prepaid expenses and other current and noncurrent assets.......          (1.5)       |         0.1              6.2
   Accounts payable...............................................           1.0        |        (0.1)            (2.8)
   Accrued compensation and employee benefits.....................          (0.4)       |        (1.8)           (17.8)
   Other accrued liabilities......................................          (3.1)       |        (0.2)            (5.7)
                                                                      ----------------- | ----------------   ---------------
     Net cash used by operations before reorganization items......          (0.3)       |        (5.2)           (27.4)
Reorganization items - professional fees paid.....................           --         |        (2.3)             --
                                                                      ----------------- | ----------------   ---------------
     Net cash used by operating activities........................          (0.3)       |        (7.5)           (27.4)
                                                                                        |
CASH FLOWS FROM INVESTING ACTIVITIES:                                                   |
   Capital expenditures...........................................          (0.1)       |        (1.0)            (3.7)
                                                                      ----------------- | ----------------   ---------------
     Cash used by investing activities............................          (0.1)       |        (1.0)            (3.7)
                                                                                        |
CASH FLOWS FROM FINANCING ACTIVITIES:                                                   |
   Proceeds from (repayments of) short-term debt..................          (0.3)       |        (3.4)            13.0
   Proceeds from issuance of common stock.........................           0.2        |         --               0.1
   Payments for stock redemptions.................................          (0.2)       |         --               --
                                                                      ----------------- | ----------------   ---------------
       Cash provided (used) by financing activities...............          (0.3)       |        (3.4)            13.1
                                                                      ----------------- | ----------------   ---------------
Decrease in cash and cash equivalents.............................          (0.7)       |       (11.9)           (18.0)
Cash and cash equivalents at beginning of period..................          18.8        |        30.7             40.7
                                                                      ----------------- | ----------------   ---------------
Cash and cash equivalents at end of period........................    $     18.1        |  $     18.8         $   22.7
                                                                      ================= | ================   ===============


                    See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>

                                  ZiLOG, INC.

        NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.       BASIS OF PRESENTATION

The accompanying interim financial information is unaudited. In the opinion of
ZiLOG, Inc.'s ("ZiLOG" or the "Company") management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of interim results have been included. The results for interim
periods are not necessarily indicative of results to be expected for the
entire year. These condensed consolidated financial statements and notes
should be read in conjunction with the Company's annual consolidated financial
statements and notes thereto contained in the Company's 2001 Annual Report
filed on Form 10-K Commission File Number 001-13748 for the fiscal year ended
December 31, 2001, filed on April 12, 2002. The Company's independent
auditors' report pertaining to ZiLOG's consolidated financial statements as of
and for the year ended December 31, 2001 indicated that there were
circumstances that existed that raised substantial doubt about ZiLOG's ability
to continue as a going concern and that no adjustments have been made to the
condensed consolidated financial statements to reflect the outcome of these
uncertainties.

Our interim results are based on fiscal quarters of thirteen weeks in duration
ending on the last Sunday of each calendar quarter. The first and second
fiscal month of each quarter is four weeks in duration and the final month is
five weeks. Each of our interim periods end on Sunday, except the last fiscal
period of each year which ends on December 31. However, for financial
reporting purposes, we have labeled our interim fiscal periods as ending on
calendar month-end. The operating results for any interim period are not
necessarily indicative of results for any subsequent period or the full fiscal
year.

The Company received confirmation from the United States Bankruptcy Court for
the Northern District of California of its and ZiLOG-MOD III, Inc.'s ("MOD
III, Inc.") joint reorganization plan (the "Reorganization Plan") filed
pursuant to Chapter 11 of the United States Bankruptcy Code. The
Reorganization Plan became effective on May 13, 2002. (See Note 2).

The condensed consolidated balance sheet at December 31, 2001 has been derived
from audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.

As a result of the courts confirmation of ZiLOG's Reorganization Plan, the
Company is required to adjust its financial statements as prescribed by the
American Institute of Certified Public Accountants Statement of Position 90-7,
"Financial Reporting By Entities in Reorganization Under the Bankruptcy Code"
(SOP 90-7). The reporting requirements of SOP 90-7 are referred to as
"fresh-start" reporting, which resulted in material changes to ZiLOG's
Consolidated Balance Sheet. This approach requires the recording of assets and
liabilities at fair values, the valuation of equity based on the
reorganization value of the ongoing business and the recording of intangible
assets including goodwill. (See Note 3).

NOTE 2.       FINANCIAL RESTRUCTURING AND REORGANIZATION

The Company has suffered recurring losses from operations, had a net
stockholders' deficiency and its business and financial growth have been
negatively affected by a difficult business climate. These conditions led to
the need to file for Chapter 11 bankruptcy protection in order to restructure
the Company's 9 1/2% Senior Secured Notes due 2005 (the "Notes").

ZiLOG filed the Reorganization Plan with the United States Bankruptcy Court
for the Northern District of California on February 28, 2002 and the
bankruptcy court confirmed the Reorganization Plan as described herein on
April 30, 2002. The Reorganization Plan became effective on May 13, 2002.

The Company operated its business under Chapter 11 in the ordinary course and
had obtained the necessary approvals from the bankruptcy court to pay
employees, trade, and certain other creditors in full and on time regardless
of whether their claims arose before or after the Chapter 11 filing. The
claims of employees, general unsecured creditors (including trade creditors,
licensors, and lessors) and secured creditors, other than holders of the Notes
and preferred stock, have not been compromised under the Reorganization Plan.

Under the Reorganization Plan, the Notes were cancelled. Each noteholder
received, in exchange for their Notes, their pro rata share of:

     o   28,000,000 shares of ZiLOG's newly-issued common stock. As of June
         30, 2002, this represented approximately 86% of the outstanding
         equity on a fully-diluted basis.

     o   100% of the newly-issued series A preferred stock issued by ZiLOG's
         subsidiary, ZiLOG-MOD III, Inc., which is called MOD III, Inc.
         Holders of MOD III, Inc. series A preferred stock are entitled to
         receive an aggregate liquidation preference of $30 million plus any
         accrued but unpaid dividends on the MOD III, Inc. series A preferred
         stock from the net proceeds from the sale of one of the Company's
         wafer fabrication plants located in Nampa, Idaho. This plant was
         transferred to MOD III, Inc. upon effectiveness of the Reorganization
         Plan. Dividends accrue on the MOD III, Inc. series A preferred stock
         at 9 1/2% per annum.

     o   50% of MOD III, Inc.'s newly-issued series B preferred stock. ZiLOG
         retains the remaining 50% of the new MOD III, Inc. series B preferred
         stock as well as 100% of the common stock. Holders of the new MOD
         III, Inc. series B preferred stock are entitled to receive the net
         sale proceeds from any sale of MOD III, Inc.'s assets in excess of
         the series A preferred stock liquidation preference.

The Reorganization Plan also provided for the cancellation of all of ZiLOG's
currently outstanding preferred and common stock and all options and warrants
related thereto. All accumulated dividends and any other obligations with
respect to the Company's outstanding preferred and common shares were also
extinguished. Each former holder of common stock received a pro rata share of
$50,000. Each holder of preferred stock received a pro rata share of $150,000.

The Reorganization Plan also provided for the payment in full, with interest
if appropriate, or reinstatement, as appropriate, of all employee and trade
claims. In order for the Reorganization Plan to have become effective, the
Company was required to, among other things, revise its charter and bylaws,
enter into a new secured financing agreement, and designate a new board of
directors.

Chapter 11 reorganization-related costs of $0.3 million and $4.0 million
included in the unaudited condensed consolidated statements of operations for
the one and four months ended April 30, 2002, respectively, relate primarily
to legal and other professional service fees.

Liabilities included in the unaudited condensed consolidated
debtor-in-possession balance sheet at April 30, 2002, which were subject to
compromise under the terms of the Reorganization Plan, are summarized as
follows (in millions):

         Notes payable........................................    $   280.0
         Accrued interest on Notes............................         27.2
         Dividends payable on preferred stock.................         18.5
                                                                  ----------
         Total liabilities subject to compromise..............    $   325.7
                                                                  ==========

NOTE 3.     FRESH-START REPORTING

On February 28, 2002, ZiLOG and its subsidiary, MOD III, Inc., filed the
Reorganization Plan with the United States Bankruptcy Court for the Northern
District of California under Chapter 11 of the U.S. Bankruptcy Code. The
bankruptcy court subsequently confirmed the Reorganization Plan by its order
entered on April 30, 2002. The plan of reorganization became effective of May
13, 2002. The Company prior to emergence from bankruptcy is referred to as the
"Predecessor Company" and the reorganized company is referred to as the
"Successor Company."

Pursuant to the Reorganization Plan, ZiLOG extinguished $325.7 million of
liabilities, which included $280.0 million principal amount of the Notes,
$27.2 million in accrued interest due on the Notes and $18.5 million of
dividends payable on the Company's previously outstanding series A preferred
stock. The former noteholders received substantially all of the Company's new
common stock and a liquidation preference on the net proceeds on the sale of
the assets held by MOD III, Inc. The former equity holders received an
aggregate $200,000 in cash. All debt and equity securities of the Predecessor
Company were cancelled. As a consequence of these events, the Predecessor
Company recorded a $205.7 million net gain on discharge of debt.

On May 1, 2002, ZiLOG adopted "fresh-start" accounting principles proscribed
by the American Institute of Certified Public Accountant's Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," or SOP 90-7. Fresh-start accounting was appropriate because
the Company's former noteholders received substantially all of the Company's
new common stock and the reorganization value of the assets of the Successor
Company were less than the total pre-petition liabilities plus post-petition
liabilities.

SOP 90-7 requires the Company to establish a reorganization value upon the
adoption of fresh-start reporting. ZiLOG's reorganization value was estimated
by an independent financial advisor using discounted projected cash flows,
precedent transactions and public company comparisons. These valuations
indicated an approximate range of reorganization values between $80.0 million
and $100.0 million. In agreement with the informal committee of noteholders
and with the approval of the bankruptcy court, management established a
reorganization equity value of $90.0 million as of May 1, 2002 for purposes of
applying fresh-start reporting.

Fresh-start reporting requires that the Company also record its assets and
liabilities at fair value upon adoption. Consequently, the Company engaged
independent appraisers to value its tangible and intangible assets. These
appraisals resulted in a $13.1 million increase in property, plant and
equipment and a $3.9 million increase in finished good inventories held by the
Company and its distributors to reflect fair values at May 1, 2002. The
appraisers also identified several separable intangible assets that were
valued and recorded as part of fresh-start reporting as follows (in millions):

                            Asset                           Value
         -----------------------------------------     --------------
         Existing technology.......................     $    17.0
         In-process research and development.......          18.7
         Brandname.................................          9.2
                                                       --------------
         Total.....................................     $    44.9
                                                       ==============

The Company recorded a gain of $83.7 million in the Predecessor Company's
financial statements in connection with the fresh-start adjustments referred
to above. Goodwill of $26.7 million was also recorded as part of fresh-start
reporting.

The Company's results of operations after April 30, 2002 and the consolidated
balance sheet at June 30, 2002 are not comparable to the results of operations
prior to April 30, 2002 and the historical balance sheet at December 31, 2001
due to our adoption of "fresh-start" reporting upon the Company's emergence
from bankruptcy.

The table below provides a reconciliation of the Predecessor Company's
consolidated balance sheet as of April 30, 2002 to that of the Successor
Company which presents the adjustments that give effect to the reorganization
and fresh-start reporting (in millions):

<TABLE>
<CAPTION>
                                               Predecessor                     Fresh-Start                        Successor
                                               Company at     Reorganization   Adjustments    Reclassifications   Company at
                                             April 30, 2002         (1)            (2)              (3)           May 1, 2002
                                             --------------   --------------   -----------    -----------------   -----------

ASSETS
<S>                                           <C>             <C>              <C>               <C>               <C>
Current assets                                $   51.6        $      --        $    2.7          $     --          $  54.3
MOD III, Inc. assets held for sale                30.0               --              --                --             30.0
Net property, plant and equipment                 11.9               --            13.1                --             25.0
Other assets                                       1.0               --              --                --              1.0
Fresh-start goodwill and intangibles               --                --            71.6                --             71.6
                                             --------------   --------------   -----------    -----------------   -----------
                                              $   94.5         $     --        $   87.4          $     --          $ 181.9
                                             ==============   ==============   ===========    =================   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities                               44.1               --            (2.3)               --             41.8
Other non-current liabilities                     14.1               --             6.0                --             20.1
Liabilities subject to compromise                325.7            (325.7)            --                --              --

Minority interest in MOD III, Inc. assets          --               30.0             --                --             30.0

Stockholders' equity (deficiency):                                                                                     --
     Preferred stock                              25.0               --              --              (25.0)            --
     Common stock                                  0.4               0.3             --               (0.4)            0.3
     Deferred stock compensation                  (0.5)              --              --                0.5             --
     Additional paid-in capital                   13.2              89.7             --              (13.2)           89.7
     Accumulated deficit                        (327.5)            205.7           83.7               38.1             --
                                             --------------   --------------   -----------    -----------------   -----------
Total stockholders' equity (deficiency)         (289.4)            295.7           83.7                --             90.0
                                             --------------   --------------   -----------    -----------------   -----------
Total liabilities and stockholders' equity    $   94.5         $     --        $   87.4          $     --          $ 181.9
                                             ==============   ==============   ===========    =================   ===========
</TABLE>

___________________________

(1)  Reorganization adjustments reflect consummation of the Reorganization
     Plan, including the elimination of liabilities subject to compromise and
     the reorganization of the Successor Company.
(2)  Fresh-start adjustments reflect the adoption of fresh-start reporting,
     including adjustments to record goodwill, identifiable tangible and
     intangible assets and liabilities at their estimated fair values.
     Management estimated the fair value of its assets using independent
     appraisals.
(3)  Reclassification reflects the elimination of Predecessor Company's
     stockholder's deficiency.



The Company's net gain upon discharge of debt and fresh-start adjustments was
comprised of the following elements (in millions):

    Extinguishment of debt                                        $  280.0
    Extinguishment of accrued interest                                27.2
    Extinguishment of dividends payable on preferred stock            18.5
    Minority interest in MOD III, Inc. assets                        (30.0)
    Reorganization equity value                                      (90.0)
                                                              ---------------
        Net gain on discharge of debt                             $  205.7
                                                              ===============

    Effect of fresh-start adjustments                            $    66.7
    Revaluation of fixed and tangible assets to fair value            17.0
                                                              ---------------
        Total fresh-start adjustments                            $    83.7
                                                              ===============

NOTE 4.   SIGNIFICANT ACCOUNTING POLICIES

Goodwill and Intangible Assets. Effective January 1, 2002, ZiLOG adopted the
provisions of FASB Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("FAS 142"). Under FAS 142, goodwill
and intangible assets with indefinite lives are not amortized, but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. Separable intangible assets that are not deemed to have indefinite
lives will continue to be amortized over their useful lives (but with no
maximum life). Intangible assets acquired prior to July 1, 2001 were being
amortized on a straight-line basis over lives ranging from three to five
years. In connection with the Company's fresh-start reporting, separable
intangible assets that are not deemed to have indefinite lives (primarily
existing technology and brandname) are being amortized utilizing the
pattern-of-use method over estimated useful lives ranging from 5 to 10 years.

Research and Development Expenses. ZiLOG's policy is to record all research
and development expenditures with no future alternative use as period expenses
when incurred. In-process research and development charges relate to partially
developed semiconductor product designs that had not reached technological
feasibility and have no alternative future use on the date they were acquired
or valued for fresh-start reporting. The nature of efforts required to develop
the in-process technology into commercially viable products primarily relates
to completion of design, prototyping and testing to ensure the products can be
produced to meet customer design specifications, including functions, features
and performance requirements. Factors we consider in valuing in-process
research and development include the stage of development of each project,
target markets and associated risks of achieving technological feasibility and
market acceptance of the products. The value of the in-process technology is
determined by estimating the projected net cash flows arising from
commercialization of the products. The resulting cash flows are then
discounted to their net present value.

Recent Accounting Pronouncements. In July 2002, FASB issued Statement of
Financial Accounting Standards of No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS No. 146 revises the accounting for
specified employee and contract terminations that are part of restructuring
activities. Companies will be able to record a liability for a cost associated
with an exit or disposal activity only when the liability is incurred and can
be measured at fair value. Commitment to an exit plan or a plan of disposal
expresses only management's intended future actions and therefore, does not
meet the requirement for recognizing a liability and related expense. This
statement only applies to termination benefits offered for a specific
termination event or a specified period. It will not affect accounting for the
costs to terminate a capital lease. We are required to adopt this statement
for exit or disposal activities initiated starting May 1, 2002.

NOTE 5.   RELATED PARTY TRANSACTIONS

In January 1999, ZiLOG entered into an agreement with P.T. Astra Microtronics
Technology, now known as Advanced Interconnect Technologies, or AIT, pursuant
to which AIT provides the Company with semiconductor assembly and test
services through January 2003. AIT is owned by Newbridge Asia, an affiliate of
Texas Pacific Group, which in turn is an affiliate of our former principal
stockholder. ZiLOG purchased services from AIT totaling approximately $1.1
million and $3.4 million during the four-month periods ended April 30, 2002,
and April 29, 2001, respectively. The Company had payments due to AIT of
approximately $0.4 million at April 30, 2002, and approximately $0.5 million
at December 31, 2001.

The Company's payment terms with AIT are net 30 days. As of the effective date
of the Reorganization Plan, Texas Pacific Group and its affiliates are no
longer significant stockholders of ZiLOG.

The Company sells products and engineering services to GlobeSpan, Inc., of
which Texas Pacific Group is a significant stockholder, which in turn is an
affiliate of ZiLOG's former principal stockholder. The Company's net sales to
GlobeSpan, Inc. totaled approximately $0.8 million and $3.7 million during the
four-month periods ended April 30, 2002 and April 29, 2001, respectively. The
Company had accounts receivable from GlobeSpan, Inc. of approximately $0.7
million and $0.3 million at April 30, 2002 and December 31, 2001,
respectively. As of the effective date of the Reorganization Plan, Texas
Pacific Group and its affiliates are no longer significant stockholders of
ZiLOG.

During 2001, the Company's present Chairman and Chief Executive Officer, James
M. Thorburn, was functioning as its Acting Chief Executive Officer pursuant to
a consulting agreement with Texas Pacific Group. Under the agreement, Mr.
Thorburn was paid $3,000 per day, plus out-of-pocket expenses. In 2001, the
Company paid Mr. Thorburn consulting fees of $574,000 pursuant to this
agreement.

In connection with the Reorganization Plan, ZiLOG entered into three
agreements with TPG Partners II, L.P., a Texas Pacific Group affiliate, each
of which was dated January 28, 2002. First, ZiLOG entered into a mutual
release agreement pursuant to which the Company and MOD III, Inc. released TPG
and its affiliates, and TPG and its affiliates released ZiLOG and MOD III,
Inc., from any respective claims that one may have against the other which
arose prior to the effective date of the plan of reorganization and which
relate to their relationship. Second, ZiLOG and TPG Partners II entered into a
non-solicitation and non-hire agreement with respect to James M. Thorburn,
ZiLOG's Chairman and Chief Executive Officer. Third, the Company entered into
a tax agreement in which TPG Partners II made acknowledgments and covenants
that preclude it from taking certain tax losses until 2002.

In addition to these agreements with Texas Pacific Group affiliates, the
Company has entered into employment agreements with each of its named
executive officers.

In May, 2002, the Company sold 90,580 shares of its common stock to Federico
Faggin, a member of its board of directors, for $2.76 per share, or an
aggregate $250,000.

NOTE 6.   INVENTORIES

Inventories are stated at the lower of cost, first-in-first-out basis, or
market and consisted of the following elements (in millions):

<TABLE>
                                       Successor Company      |            Predecessor Company
                               ------------------------------ | -------------------------------------
                               June 30, 2002    May 1, 2002*  | April 30, 2002      December 31, 2001
                               -------------    ------------- | --------------      -----------------
<S>                             <C>             <C>               <C>                <C>
  Raw materials..............   $      0.7      $       0.7   |   $      0.7         $       1.0
  Work-in-progress...........          8.5              9.3   |          9.3                10.3
  Finished goods.............          4.0              7.2   |          4.5                 6.0
                                ------------------------------|--------------------------------------
                                $     13.2      $      17.2   |   $     14.5         $      17.3
                                ======================================================================
</TABLE>

  *    The inventory elements have been recorded as of May 1, 2002 as follows.
       Finished goods at the estimated selling prices less the sum of the
       costs of disposal and a reasonable profit allowance for the selling
       effort. Work-in-process at the selling prices of finished goods less
       the sum of a) costs to complete, b) costs of disposal, and c) a
       reasonable profit allowance for completing and selling effort of the
       company. Raw materials have been recorded at their estimated current
       replacement costs.


NOTE 7.       SPECIAL CHARGES AND REORGANIZATION ITEMS

During the one-month ended April 30, 2002, ZiLOG classified $1.5 million of
costs as special charges and reorganization items. Approximately $0.3 million
of special charges taken both in the two-month period ended June 30, 2002 and
the one-month period ended April 30, 2002 relate to activities associated with
the closure of the MOD III eight-inch wafer fabrication facility in Idaho,
referred to as the "MOD III facility." These charges relate to post-closure
maintenance costs related to utilities, taxes, insurance and other maintenance
costs required to maintain the facility in a condition required for the sale
of the property. Lease termination costs of $0.7 million are related to the
closure and relocation of certain sales offices. Professional fees for debt
restructuring of $0.3 million represent third-party professional service fees
for legal and financial advisors who were assisting with the Company's debt
and equity restructuring activities. During the Chapter 11 filing of the
Reorganization Plan, such costs were classified as "Reorganization Items."
Additionally, $0.2 million of unamortized goodwill relating to our 2000
acquisition of PLC Corporation was deemed to be of no future value and was
written-off.

In the first quarter of 2002, the Company cancelled development of the
CarteZian family of 32-bit RISC microprocessors, which resulted in the closure
of the Company's Austin, Texas design center. Consequently, furniture,
fixtures and equipment with a book value of approximately $1.7 million were
abandoned, $0.8 million of computer aided design software was impaired and
severance and termination benefits of approximately $1.2 million were paid in
connection with the streamlining of ZiLOG's sales force. Additionally, in the
first quarter of 2002 in connection with the relocation of production
activities to alternative manufacturing sites and the closure of the MOD III
facility, the Company incurred $1.9 million of special charges.

During the second quarter of 2001, ZiLOG incurred special charges of $8.1
million for restructuring of operations comprised of severance-related
expenses of $4.0 million, including $1.7 million of non-cash stock-option
related expenses; fixed-asset related write-offs of $3.3 million, including
planning software and surplus test equipment; and $0.8 million relating to
consultants who assisted with the Company's restructuring plans. In connection
with this action, the Company eliminated approximately 200 positions worldwide
during the second quarter of 2001. As of June 30, 2001, approximately $1.1
million was reserved for future payments in connection with these special
charges.

The components of special charges are as follows (in millions):

<TABLE>

                                                         Successor   |
                                                          Company    |       Predecessor Company
                                                      -------------- | ------------------------------
                                                        Two Months   |   One Month      Three Months
                                                           Ended     |     Ended            Ended
                                                       June 30, 2002 | April 30, 2002   June 30, 2001
                                                      -------------- | --------------   -------------
<S>                                                          <C>              <C>            <C>
    Asset impairments:                                               |
        Austin, Texas assets                          $      --      |   $    --         $   --
        Internal use software                                --      |        --             1.6
        Goodwill write-offs                                  --      |        0.2            --
        Test and probe equipment written-off                 --      |        --             1.4
    Restructuring of operations:                                     |
        Employee severance and termination benefits          --      |        --             2.3
        MOD III closure costs                                0.3     |        0.3            0.3
        Lease termination costs                              --      |        0.7            --
        Stock-based compensation                             --      |        --             1.7
    Professional fees for debt restructuring                 --      |        0.3            0.8
                                                      -------------- | --------------   -------------
                                                        $    0.3     |   $    1.5        $   8.1
                                                      ============== | ==============   =============


                                                         Successor   |
                                                          Company    |      Predecessor Company
                                                      -------------- | ------------------------------
                                                        Two Months   |  Four Months      Six  Months
                                                           Ended     |    Ended            Ended
                                                       June 30, 2002 | April 30, 2002    June 30, 2001
                                                      -------------- | --------------   -------------
       Asset impairments:                                            |
           Austin, Texas assets                            $    --   |    $   1.7         $   --
           Internal use software                                --   |        0.8             1.6
           Goodwill write-offs                                  --   |        0.2             --
           Test and probe equipment written-off                 --   |        --              1.4
       Restructuring of operations:                                  |
           Employee severance and termination benefits          --   |        1.2             2.3
           MOD III closure costs                                0.3  |        2.2             0.3
           Lease termination costs                              --   |        0.7             --
           Stock-based compensation                             --   |        --              1.7
       Professional fees for debt restructuring                 --   |        4.0             0.8
                                                      -------------- | --------------   -------------
                                                           $    0.3  |    $  10.8         $   8.1
                                                      ============== | ==============   =============
</TABLE>


The following table summarizes activity in accrued special charges
(in millions):

<TABLE>
                                       Severance and                        Lease
                                        Termination         Debt         Termination       MOD III
                                          Benefits      Restructuring       Costs       Closure Costs     Total
                                       -------------    -------------    -----------    -------------   ----------
<S>                                     <C>             <C>              <C>            <C>             <C>
Balance at December 31, 2001..........  $     5.6       $       1.1      $     2.8      $      0.2      $    9.7
Charges to expense....................        1.2               4.0            0.7             2.5           8.4
Cash Payments.........................       (6.4)             (4.5)          (3.2)           (2.6)     $  (16.7)
                                       -------------    -------------    -----------    -------------   ----------
Balance at June 30, 2002..............  $     0.4       $       0.6      $     0.3      $      0.1      $    1.4
                                       =============    =============    ===========    =============   ==========
</TABLE>


NOTE 8.       GEOGRAPHIC AND SEGMENT INFORMATION

The Company operates in one operating segment and engages primarily in the
design, development, manufacture and marketing of semiconductor products. The
Company sells its products to distributors and original equipment
manufacturers (OEMs) in a broad range of market segments, performs on-going
credit evaluations of its customers and generally requires no collateral. The
Company's operations outside the United States consists of a final test
facility in the Philippines, sales and support centers and design centers in
certain foreign countries. Domestic operations are responsible for the design,
development and wafer fabrication of all products, as well as the coordination
of production planning and shipping to meet worldwide customer commitments.
The Philippine test facility is reimbursed in relation to value added with
respect to test operations and other functions performed, and certain foreign
sales offices receive a commission on export sales within their territory.
Accordingly, for financial statement purposes, it is not meaningful to
segregate sales or operating profits for the test and foreign sales office
operations.

Prior to the consummation of the Company's reorganization, there were two
reportable business segments called communications and embedded control. The
prior reporting structure was based on a previous operating and reporting
organization that was focused largely on development of new products targeted
on the communications and networking sectors. ZiLOG is now organized and
focused on its core business, which is based on 8-bit micrologic product
solutions. The Company operates in one reporting segment and engages primarily
in the design, development, manufacture and marketing of semiconductor
products. ZiLOG has two broad business lines called embedded control and
standard products.

The Company's two broad business lines are based on product technologies and
can be summarized as follows:

<TABLE>
   Products                                                                 Sample Uses
   --------                                                                 -----------
<S>                                                                         <C>
   Embedded control products include:
     Microcontrollers - based on our proprietary Z8 architecture            Security system, battery charger
     Microprocessors - based on our proprietary Z80                         POS terminal, motor control architecture

   Standard products include:
     Serial Communications Controllers                                      Telephone switch/PBX
     Modems                                                                 Satellite TV, POS card validation
     IrDA transceivers                                                      PDA's, cell phones
          Television and PC peripheral products                             TV, keyboard, pointing device
</TABLE>


ZiLOG's net sales by region, by channel, by business line in millions of
dollars, and ZiLOG's net sales to Pioneer Standard, one of the Company's
distributors, as a percentage of the Company's total net sales are summarized
as follows (in millions):

<TABLE>

                              Successor                                            Successor
                               Company            Predecessor Company               Company            Predecessor Company
                            -------------   ------------------------------      ---------------  ------------------------------
                             Two Months      One Month      Three Months         Two Months      Four Months      Six Months
                               Ended            Ended            Ended               Ended          Ended            Ended
                            June 30, 2002   April 30, 2002   June 30, 2001       June 30, 2002   April 30, 2002  June 30, 2001
                            -------------   --------------   -------------       -------------   --------------  -------------

Net sales by region:
<S>                             <C>             <C>             <C>                 <C>              <C>            <C>
Americas                        $ 16.9          $  5.4          $   25.7            $  16.9          $ 25.2         $   53.1
Asia                               8.0             2.9              12.4                8.0            13.8             23.3
Europe                             3.2             1.7               5.9                3.2             7.0             11.8
                            -------------   --------------   -------------       -------------   --------------  -------------
    Total                       $ 28.1          $ 10.0          $   44.0            $  28.1          $ 46.0         $   88.2
                            =============   ==============   =============       =============   ==============  =============

Net sales by channel:
OEM                             $ 15.6          $  5.9          $   27.4            $  15.6          $ 25.8         $   55.6
Distribution                      12.5             4.1              16.6               12.5            20.2             32.6
                            -------------   --------------   -------------       -------------   --------------  -------------
    Total                       $ 28.1          $ 10.0          $   44.0            $  28.1          $ 46.0         $   88.2
                            =============   ==============   =============       =============   ==============  =============

Net sales by business line:
Embedded Control                $ 19.0          $  6.0          $   24.2            $  19.0          $ 29.1         $   52.0
Standard Products                  9.1             4.0              19.8                9.1            16.9             36.2
                            -------------   --------------   -------------       -------------   --------------  -------------
    Total                       $ 28.1          $ 10.0          $   44.0            $  28.1          $ 46.0         $   88.2
                            =============   ==============   =============       =============   ==============  =============

Net sales to
Pioneer-Standard as a
percentage of total net
sales:                          18.0%           11.6%           10.4%               18.0%            10.5%          12.4%
                            =============   ==============   =============       =============   ==============  =============
</TABLE>



NOTE 9.       SHORT-TERM DEBT

Upon consummation of Reorganization Plan, ZiLOG entered into a senior secured
financing facility (the "Facility") with a commercial lender, dated May 13,
2002, for a new three-year $15.0 million senior secured revolving credit
facility. Borrowings on the Facility bear interest at a rate per annum equal,
at ZiLOG's option, to the commercial lender's stated prime rate or LIBOR, plus
2.5%. At June 30, 2002, the Company had borrowings outstanding of $9.1 million
at a LIBOR rate of 4.4% and no additional borrowing capacity under the
Facility. The Facility is scheduled to mature on May 13, 2004. As of June 30,
2002, the Company had $0.8 million of standby letters of credit issued to
vendors under the Facility.

The Company is subject to certain financial covenants under this Facility
including tangible asset and fixed charge coverage ratio if the total of the
Company's cash, cash equivalents and availability on the revolver are less
than $7.5 million at any month end.

NOTE 10.      CONTINGENCIES

On July 29, 1996, ZiLOG filed an action in the Superior Court of the State of
California in and for Santa Clara against Pacific Indemnity Company, Federal
Insurance Company and Chubb & Son Inc. In that action, the Company sought a
declaration that its former insurers, Pacific and Federal, had an
unconditional duty to defend and indemnify it in connection with two lawsuits
brought in 1994: (1) in Santana v. ZiLOG and, (2) in Ko v. ZiLOG. ZiLOG's
complaint in the Santa Clara County action also alleged that Chubb, which
handled the defense of Santana and Ko on behalf of Pacific and Federal, was
negligent. Pacific cross-complained against the Company, seeking reimbursement
of defense costs for both underlying lawsuits and a payment it contributed to
the settlement of Ko. According to its cross-complaint, Pacific sought a total
of approximately $6,300,000, plus interest and costs of suit. On February 26,
2002, ZiLOG agreed to make a payment of $300,000 to fully settle these
lawsuits. The Company paid $150,000 of this amount as of June 30, 2002. The
balance is to be paid in 2 equal installments by February 26, 2003. The
outstanding balance accrues interest at 6% per annum.

ZiLOG has been notified by several parties that it may be infringing certain
patents. In addition, four of the Company's customers have notified it that
they have been approached by patent holders who claim that they are infringing
certain patents. The customers have asked the Company for indemnification. The
Company has had no further communications about any of the claims from our
customers for at least 13 months. In the event that the Company determines,
however, that any such notice may involve meritorious claims, it may seek a
license. Based on industry practice, the Company believes that in most cases
any necessary licenses or other rights could be obtained on commercially
reasonable terms. However, no assurance can be given that licenses could be
obtained on acceptable terms or that litigation will not occur. The failure to
obtain necessary licenses or other rights or the advent of litigation arising
out of such claims could have a material adverse effect on the Company's
financial condition. See "Risk Factors - We could be subject to claims of
infringement of third-party intellectual property rights, which could be time
consuming and expensive for us to defend."

The Company is participating in other litigation and responding to claims
arising in the ordinary course of business. ZiLOG intends to defend itself
vigorously in these matters. The Company's management believes that it is
unlikely that the outcome of these matters will have a material adverse effect
on its financial statements, although there can be no assurance in this
regard.

NOTE 11.      PREFERRED STOCK DIVIDENDS

As described in Note 9 to the Consolidated Financial Statements of the
Company's 2001 Annual Report on Form 10-K, before ZiLOG's Series A Cumulative
Preferred Stock ("Series A Stock") was cancelled pursuant to the
Reorganization Plan, these shares accumulated dividends at a rate of 13.5% per
annum, with dividends payable quarterly at the election of the Board of
Directors. Unpaid dividends are recognized as a charge to accumulated deficit
and as an increase in the liquidation preference of the Series A Stock. As of
April 30, 2002, the Company had not paid any dividends on the Series A Stock
and the corresponding accrued dividends are approximately $18.5 million were
included, in liabilities subject to compromise. During the four-month period
ended April 30, 2002, $1.9 million of dividends on Series A Stock were accrued
and charged to accumulated deficit. As of the effective date of the
Reorganization Plan, all accumulated dividends were extinguished in accordance
with the plan.

NOTE 12.      INCOME TAXES

         As of December 31, 2001, the Company had federal and California net
operating loss carryforwards of approximately $213.0 million and $63.0
million, respectively, which will expire beginning in years 2004 through 2021,
if not utilized. Since December 31, 2001, the Company's net operating losses
have increased reflecting operating losses for the period commencing January
1, 2002 and ending with and including April 30, 2002. The debt discharge
resulted in a taxable gain which will require the Company to utilize a
significant portion of its net operating loss carryforwards and adjust the tax
attributes of certain of its assets. For the period subsequent to April 30,
2002, through year-end, the Company anticipates that it will use certain net
operating loss carryforwards to offset its taxable income, thereby reducing or
eliminating the federal income tax liability of the Company for such period.
The Company does, however, expect to record book tax expense for the period
subsequent to April 30, 2002, through year-end at an effective tax rate of
approximately 38% because benefits realized from pre-confirmation net
operating losses will be recorded as a reduction in goodwill rather than an
income tax benefit under fresh-start reporting.

Commencing January 1, 2003, and as a result of the debt discharge that the
Company realized in the reorganization, the Company will be required, for
federal income tax purposes, to reduce a significant portion, or all, of its
net operating loss carryforwards and may be required to reduce the tax basis
in its assets as well. In addition, the utilization by the Company of its
remaining net operating loss carryforwards, if any, will be substantially
limited under the federal income tax section 382 ownership change rules.
Consequently, commencing January 1, 2003, the Company expects that it will be
taxable for federal income tax purposes.

ZiLOG's provision for income taxes in the first six months of 2001 reflects
foreign income taxes for the jurisdictions in which the Company was profitable
as well as foreign withholding taxes and state minimum taxes. Based on
available evidence, including our cumulative losses to date, the Company was
provided a full valuation allowance against its net deferred tax assets.

NOTE 13.      STOCKHOLDERS' EQUITY

2002 Omnibus Stock Incentive Plan:

Common Stock. In May 2002, the 2002 Omnibus Stock Incentive Plan (the "Omnibus
Plan") was adopted by the Board. Subject to adjustment pursuant to the terms
of the Omnibus Plan, the committee may grant options to purchase up to an
aggregate 2,116,279 shares of common stock under the Omnibus Plan. Stock
options granted under the Omnibus Plan may be: (1) incentive stock options or
non-qualified stock options; (2) EBITDA-linked options and or non-EBITDA
linked options. The term of an option is determined by the committee at the
time of grant, but will not exceed ten years.

Each EBITDA-Linked option will be immediately exercisable on the date of
grant, and will vest no later than May 15, 2008. The vesting provisions are
subject to acceleration based on the Company meeting certain adjusted "EBITDA"
targets based on the Company reports for the immediately preceding 12 months.
As of June 30, 2002, one-third of the EBITDA-Linked options were vested, which
represent options to purchase 555,689 shares of common stock out of a total of
1,668,736 EBITDA-Linked options granted.

In general, non-EBITDA-linked options granted pursuant to the Omnibus Plan
will be exercisable at such time or times, and subject to such other terms and
conditions (including the vesting schedule, period of exercisability and
expiration date) as the committee determines, in the applicable award
agreements or thereafter. The exercise price per share payable upon the
exercise of an option will be established by the committee, in its sole
discretion, at the time of grant.

Restricted Stock. The Company may grant up 2,441,861 restricted shares of
common stock under the Omnibus Plan. The restricted shares contain
restrictions that lapse as to 25% of the shares on the date of grant and that
lapse as to an additional 25% on each of the first, second and third
anniversaries of such grant date. These restricted shares generally may be
repurchased by the Company, until the restrictions have lapsed, at $0.01 per
share if the grantee ceases to be employed by the Company; and also may be
repurchased by the Company at fair market value even after the restrictions
lapse under certain circumstances.

The Omnibus Plan authorizes the committee to make loans available to
participants (other than executive officers and directors) with respect to
certain restricted stock awards for the payment of any federal or state income
tax attributable to the restricted stock subject to the award. As of June 30,
2002, we had loaned an aggregate of $2.2 million to recipients of restricted
stock grants, which included loans to executive officers and directors. In the
future, loans with respect to restricted stock will be made only to
non-executive officer and non-director participants. While the committee will
award restricted stock upon a participant's early exercise of an option,
recipients of these shares of restricted stock are not eligible to receive the
loans.

As of June 30, 2002 there were 571,475 shares of common stock subject to
repurchase at fair value and 1,290,990 shares subject to repurchase at the
greater of the outstanding loan amount or $0.01 per share.

NOTE 14.      MINORITY INTEREST

As of June 30, 2002, minority interests of approximately $30.0 million are
recorded on the condensed consolidated balance sheet in order to reflect the
share of the net assets of MOD III, Inc. held by minority investors. The
minority interest share represents their entitlement to receive an aggregate
liquidation preference of the first $30.0 million plus any accrued but unpaid
dividends on the MOD III, Inc. series A preferred stock from the net proceeds
from the sale of the MOD III, Inc. assets currently held for sale.

NOTE 15.      NET LOSS PER SHARE

The following table presents the calculation of basic and diluted net loss per
share of common stock (in millions, except per share data):

                                                            Successor Company
                                                            -----------------
                                                            Two Months Ended
                                                              June 30, 2002
                                                            -----------------

    Net loss...............................................     $  23.4
                                                            =================
    Weighted-average shares outstanding....................        29.5
    Less: Weighted-average shares subject to repurchase....        (1.0)
                                                            -----------------
    Weighted-average shares used in computing basic
        and diluted net loss per share.....................        28.5
                                                            =================
    Basic and diluted net loss per share...................     $   0.82
                                                            =================


At June 30, 2002, options to purchase approximately 2.0 million shares of
common stock are excluded from the determination of diluted net loss per
share, as the effect of such shares is anti-dilutive.

NOTE 16.  SUBSEQUENT EVENT

On August 5, 2002, ZiLOG reached a settlement agreement, mutual release of
claims and indemnity agreement with one of its vendors relating to a 1997
purchase of wafer fabrication equipment that ZiLOG believed was defective. The
Company had recorded accounts payable of $1.1 million reflecting this disputed
liability. Under the terms of the agreement, ZiLOG received $200,000 in cash
and was released from all claims by the vendor. The May 1, 2002 financial
statements have been adjusted to reflect the elimination of this liability and
the corresponding reduction of fresh-start goodwill.


Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         We are a worldwide supplier of semiconductor products. We design,
develop, manufacture and market various families of products in support of
this semiconductor market segment. Using proprietary technology that we have
developed over our 27-year operating history, we continue to provide
semiconductor integrated circuit devices that our customers design into their
end products. Our devices, which often include related application software,
typically combine a microprocessor and/or digital signal processor, memory,
and input and output functions on a single device. Our embedded control
devices enable a broad range of consumer and industrial electronics
manufacturers to control the functions and performance of their products. For
example, some typical applications include devices that control such functions
as the speed of a motor, an infrared remote control and the charging cycle of
a battery charger. Similarly, our standard products have a wide variety of
uses including the processing and transmission of information for data
communications, telecommunications and consumer electronics companies. These
devices include serial communication controllers, modems, IrDA transceivers,
television display controllers and personal computer peripheral devices.
Standard products also include wafer fabrication foundry services for
third-party integrated circuit designs.

Overview

         The information presented below should be read in conjunction with
the interim condensed consolidated financial statements included elsewhere
herein. Our interim results are based on fiscal quarters of thirteen weeks in
duration ending on the last Sunday of each calendar quarter. However, for
financial reporting purposes, we have labeled our interim fiscal periods as
ending on calendar month-end. The operating results for any interim period are
not necessarily indicative of results for any subsequent period or the full
fiscal year, which ends on December 31 of each year.

         We have prepared the accompanying unaudited interim condensed
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with GAAP have been condensed or omitted in our unaudited interim financial
statements pursuant to such rules and regulations. Although our management
believes that the disclosures are adequate to make the information presented
not misleading, it is suggested that these interim condensed consolidated
financial statements be read in conjunction with our most recent audited
consolidated financial statements and related notes. In the opinion of
management, all adjustments necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods
presented have been made.

2002 Financial Restructuring and Reorganization

         On February 28, 2002, we and our subsidiary, ZiLOG-MOD III, Inc.,
which we call MOD III, Inc., filed voluntary petitions with the United States
Bankruptcy Court for the Northern District of California for reorganization
under Chapter 11. The bankruptcy court subsequently confirmed the
reorganization plan by its order entered on April 30, 2002. Our plan of
reorganization became effective of May 13, 2002. We refer to the company prior
to emergence from bankruptcy as the "Predecessor Company" and to the
reorganized company as the "Successor Company."

         Pursuant to our reorganization plan, we extinguished $325.7 million
of liabilities, which included $280.0 million principal amount of our 9 1/2%
Senior Secured Notes due 2005, $27.2 million in accrued interest due on the
notes and $18.5 million of dividends payable on our former series A preferred
stock. The former noteholders received substantially all of our new common
stock and a liquidation preference in the net proceeds on the sale of the
assets held by MOD III, Inc. The former equity holders received an aggregate
$200,000 in cash. All debt and equity securities of the Predecessor Company
were cancelled. As a consequence of these events, the Predecessor Company
recorded a $205.7 million net gain on discharge of debt.

         On May 1, 2002, we adopted "fresh-start" accounting principles
proscribed by the American Institute of Certified Public Accountant's
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," or SOP 90-7. Fresh-start accounting was
appropriate because our former noteholders received substantially all of our
new common stock and the reorganization value of the assets of the Successor
Company were less than the total pre-petition liabilities plus post-petition
liabilities.

         SOP 90-7 required us to establish a reorganization value upon our
adoption of fresh-start reporting. Our reorganization value was estimated by
an independent financial advisor using discounted projected cash flows,
precedent transactions and public company comparisons. These valuations
indicated a range of reorganization values between $80 million and $100
million. In agreement with the informal committee of noteholders and with the
approval of the bankruptcy court, we established a reorganization equity value
of $90.0 million as of May 1, 2002 for purposes of applying fresh-start
reporting.

         Fresh-start reporting requires that we also record our assets and
liabilities at fair value upon adoption. Consequently, we engaged independent
appraisers to value our tangible and intangible assets. These appraisals
resulted in a $13.1 million increase in property, plant and equipment and a
$3.9 million increase in inventories held by the Company and its distributors
to reflect fair value at May 1, 2002. The appraisers also identified several
separable intangible assets that were valued and recorded as part of our
fresh-start reporting, as follows (in millions):

                                Asset                           Value
             ------------------------------------------    -------------
             Existing technology.......................     $    17.0
             In-process research and development.......          18.7
             Brandname.................................           9.2
                                                           -------------
             Total separable intangible assets.........     $    44.9
                                                           =============

         We recorded a gain of $83.7 million in the Predecessor Company's
financial statements in connection with the fresh-start adjustments referred
to above. Goodwill of $26.7 million was also recorded as part of fresh-start
reporting.

         The in-process research and development was expensed on May 1, 2002.
The inventory was amortized over two months consistent with the turnover of
our inventory. The brandname and existing technology was amortized using the
pattern-of-use method consistent with underlying discounted cash flows
supporting the assets. The goodwill will not be amortized but will be subject
to ongoing impairment reviews consistent with SFAS No. 142. See the section
entitled "Recent Accounting Pronouncements" below for more information on SFAS
No. 142.

Critical Accounting Policies

     We  believe our critical accounting policies are as follows:

     o   fresh-start reporting;

     o   estimating sales returns and allowances;

     o   estimating allowance for doubtful accounts;

     o   estimating write-downs of excess and obsolete inventories; and

     o   asset impairments.

         A brief description of each of these policies is set forth below.

         On an on-going basis, we evaluate our estimates, including those
related to sales returns, allowance for doubtful accounts, inventory
write-downs and asset impairments. We base our estimates on historical trends
and various other assumptions that we believe to be reasonable at the time the
estimates are made. Actual results could differ from those estimates.

         Fresh-start reporting. Upon emerging from Chapter 11 proceedings, we
adopted fresh-start reporting in accordance with SOP 90-7. Accordingly, for
financial reporting purposes, we valued our assets and liabilities at fair
value. With assistance of financial advisors and in reliance upon various
valuation methods, including discounted projected cash flow analysis and other
applicable ratios and economic industry information relevant to our industry
and through negotiations with various creditor parties in interest, we
estimated our equity value to be $90.0 million and we recorded increases in
the carrying value of our assets of $83.7 million on a basis which is
substantially consistent with the purchase method of accounting. Results would
have varied under different assumptions or conditions.

         Estimating sales returns and allowances. Our net sales from OEM
customers consists of gross product sales reduced by expected future sales
returns and allowances. To estimate sales returns and price allowances, we
analyze historical returns and allowance activity to establish a baseline
reserve level. Then we evaluate whether there are any underlying product
quality or other customer specific issues that require additional specific
reserves above the baseline level. Because the reserve for sales returns and
allowances is based on our judgments and estimates, our reserves may not be
adequate to cover actual sales returns and other allowances. If our reserves
are not adequate, our net revenues and accounts receivable could be adversely
affected.

         Allowance for doubtful accounts. We maintain an allowance for losses
we may incur as a result of our customers' inability to make required
payments. Any increase in the allowance results in a corresponding increase in
our general and administrative expenses. In establishing this allowance, and
then evaluating the adequacy of the allowance for doubtful accounts, we
consider historical bad debts, customer concentrations, customer
credit-worthiness and, to a lesser extent, current economic trends and changes
in our customer payment terms. Historically, we have not experienced material
bad debt write-offs. If the financial condition of one or more of our
customers unexpectedly deteriorated, resulting in their inability to make
payments, or if we otherwise underestimate the losses we incur as a result of
our customers' inability to pay us, we could be required to increase our
allowance for doubtful accounts which could adversely affect our operating
results.

         Estimating write-downs of excess and obsolete inventories. Each
inventory component is assessed for excess or obsolescence by using an
algorithm that we established. This algorithm is based on historical trends,
demand forecasts and inventory age. We review the result of this algorithm and
generally write-off all work-in-process inventory more than one year old and
finished goods inventory quantities in excess of our current backlog.
Write-offs of excess and obsolete inventories are reflected as a reduction to
inventory values in the accompanying consolidated balance sheets, and an
increase in cost of sales. If actual market conditions are less favorable than
our assumptions, we may be required to take further write-downs of our
inventory value, which could adversely impact our cost of sales and operating
results.

         Asset impairments. Beginning in 2002, we apply the provisions of
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets." We
assess the impairment of long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important which could trigger an impairment review include the
following:

     o   significant changes in the manner of our use of the acquired assets;

     o   significant changes in the strategy for our overall business; and

     o   significant negative industry or economic trends.

         When we determine that the carrying value of long-lived assets may
not be recoverable based upon the existence of one or more of the above
indicators of impairment, and the undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying value, the
carrying value of the assets are reduced to their estimated fair value. The
estimated fair value is usually determined based on an estimate of future
discounted cash flows. Asset impairments are recorded as a reduction in the
asset value in our consolidated balance sheets and as special charges in our
consolidated statements of operations.

         The intangible assets created by the adoption of fresh-start
accounting on our emergence from bankruptcy consist of existing technology,
brandname as well as excess enterprise value, or goodwill. The existing
technology and brandname are being amortized based on a pattern-of-use method
in proportion to the discounted cash flows from such assets. The goodwill is
not subject to amortization.

         We evaluate the existing technology and brandname at each reporting
period to determine whether events and circumstances continue to support the
current carrying value as well as the remaining useful life. Additionally,
goodwill is tested for impairment at least annually and more often if events
and circumstances indicate that its fair value may be less than its carrying
value.

         Adjustments to record impairment of long-lived assets or intangible
assets could have a material adverse impact on our financial condition and
results of operations in the period or periods in which such impairment is
identified.

Reporting Segments

         Beginning in May 2002, we have consolidated our business segments
into one segment to reflect the manner in which our new chief operating
decision maker allocates resources and assesses the performance of our
business.

Period Comparisons

         Our results of operations after April 30, 2002 and our consolidated
balance sheet at June 30, 2002 are not comparable to the results of operations
prior to April 30, 2002 and the historical balance sheet at December 31, 2001
due to our adoption of "fresh-start" reporting upon our emergence from
bankruptcy. However, such differences in our results of operations relate
solely to depreciation of property, plant and equipment, amortization of
tangible and intangible assets, in-process research and development, interest
expense and restructuring and reorganization expenses. Additionally, these
differences in our balance sheets relate solely to property, plant and
equipment, intangible assets, conversion of senior notes to common stock, and
minority interest. Certain figures, such as net sales and certain expenses
were not affected by our adoption of fresh-start accounting and, accordingly,
we believe them to be comparable. To provide a more meaningful analysis, in
the following discussion we have compared the three and six-month periods
ended June 30, 2002 and to the similar periods in 2001.

Results of Operations

During the past two years, we have implemented a series of business
restructuring programs aimed at refocusing our operations on our core 8-bit
micrologic product portfolio. In connection with these actions, we have
eliminated a significant amount of fixed costs from our business operations.
Additionally, pursuant to our plan of reorganization, which became effective
on May 13, 2002, we extinguished $280.0 in million principal amount of our 9
1/2% Senior Secured Notes due 2005, which required $13.3 million in interest
payments each March 15 and September 15. Based in part on these
restructurings, our cash used by operations during the six months ended June
30, 2002 improved by $19.6 million or 72%, compared to the $27.4 million of
cash used by operations in the six months ended June 30, 2001.

Six-Month Periods Ended June 30, 2002 and June 30, 2001

         Net Sales. Overall, similar to the semiconductor industry as a whole,
we have been experiencing weakness in demand for many of our products that has
persisted through the first six months of 2002. Our net sales of $74.1 million
in the first six months of 2002 represents a decrease of 16.0% from net sales
of $88.2 million in the first six months of 2001. This decrease in net sales
was attributable primarily to lower unit shipments of standard products. In
the first six months of 2002, net sales in our standard products decreased
28.2% to $26.0 million, compared to $36.2 million in the same period in 2001.
This decrease reflects weak overall market conditions in the
telecommunications and consumer sectors that resulted in lower unit shipments
of serial communication, wireless connectivity and peripherals products,
offset partially by higher unit sales of modem products. Net sales of our
embedded control products declined 7.5% to $48.1 million in the six months of
2002 compared to $52.0 in the same period of 2001. This decline was primarily
the result of lower unit shipments of Z80 microcontrollers.

         Gross Margin. Our cost of sales primarily represents the cost of our
wafer fabrication, assembly and test operations. Cost of sales fluctuates,
depending on materials and services prices from our vendors, manufacturing
productivity, product mix, equipment utilization and depreciation. Gross
margin as a percent of net sales increased to 38.7% in the first six months of
2002, up from 16.6% in the same period of 2001. During the six-month period
ended June 30, 2002, our gross margin was adversely impacted by the
amortization of a fresh-start reporting inventory adjustment of $3.9 million.
Exclusive of this one-time charge, our gross margin, as adjusted was 43.9% of
sales for the six months ended June 30, 2002. The improvement in our gross
margin during 2002 is primarily the result of rationalizing our manufacturing
cost structure. A key element of this strategy was the closure of our
underutilized MOD III wafer fabrication facility in January 2002. The savings
in MOD III spending were partially offset by higher spending in our five-inch
manufacturing facility and from purchases of manufactured wafers from outside
foundries. However, our five-inch wafer manufacturing factory utilization
improved to 64% of capacity in the first six months of 2002, compared to 33%
in the same period of 2001, which also helped to improve gross margin.
Additionally, during 2001 we implemented a multi-source assembly program with
a number of Asian semiconductor assembly service providers, we moved our wafer
probe operations from Idaho to the Philippines and we streamlined our final
test operations. These actions also contributed to our improved gross margin
in the first six months of 2002.

         Research and Development Expenses. Research and development expenses
were $10.0 million in the first six months of 2002, reflecting a 38.7% decrease
from the $16.3 million of research and development expenses reported in the
first six months of 2001. The decrease in research and development expense
primarily reflects lower payroll-related costs as a result of headcount
reductions. During the first six months 2002, research and development expense
also declined as a result of closing our Austin, Texas design center and the
related termination of all product development activities in connection with
our CarteZian line of 32-bit microprocessors. Additionally, in the first six
months of 2002, we renegotiated certain software license agreements and we
wrote-off other surplus tools so that our design software suite is now more
closely aligned with the forecast needs of our product development projects.
We expect further reductions in research and development spending during 2002
as a consequence of the closure of our Austin, Texas design center.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $18.0 million in the first six months of
2002 from $26.5 million in the first six months of 2001. The decrease in our
selling, general and administrative spending in the first six months of 2002
reflects lower payroll-related costs as a result of lower headcount,
elimination of outside sales representative commissions and reduced incentive
compensation and commissions commensurate with lower sales levels. Also in
January 2002, we relocated our corporate headquarters to a smaller, lower-cost
facility. Excluding the cost of terminating our old lease and relocation
expenditures, we expect that this move will result in savings of approximately
$4.5 million in 2002 operating costs versus 2001.


         Special Charges.  Special charges for each period indicated were as
follows (in millions):

<TABLE>
                                                           Three Months Ended      Six Months Ended June
                                                                June 30,*                   30,*
                                                          ----------------------   -----------------------
                                                            2002         2001        2002         2001
                                                          ---------   ----------   ---------    ----------
Asset impairments:
<S>                                                         <C>        <C>         <C>           <C>
    Austin, Texas assets.................................   $  --      $    --     $     1.7     $   --
    Internal use software................................      --         1.6            0.8        1.6
    Goodwill write-offs..................................      0.2          --           0.2         --
    Test and probe equipment written.....................      --         1.4           --          1.4
Restructuring of operations:
    Employee severance and termination benefits..........      --         2.3            1.2        2.3
    MOD III closure costs ...............................      0.6        0.3            2.5        0.3
    Lease termination costs..............................      0.7          --           0.7          --
    Stock compensation...................................      --         1.7           --          1.7
Professional fees for debt restructuring.................      0.3        0.8            4.0        0.8
                                                          ---------   ----------   ---------    ----------
                                                             $ 1.8     $  8.1      $    11.1     $  8.1
                                                          =========   ==========   =========    ==========
</TABLE>
____________________

*   The period ended June 30, 2002 reflects combined results of the
    Predecessor Company and the Successor Company. Figures for the June 30,
    2001 period reflect only the Predecessor Company.



         In connection with the closure of our Austin, Texas design center in
the first six months of 2002, we abandoned furniture, fixtures and equipment
with a book value of approximately $1.7 million. Also in connection with this
action and the streamlining of our sales force, we paid severance and
termination benefits of approximately $1.2 million in the first six months of
2002. Approximately $0.8 million of computer aided design software was
impaired in the first six months of 2002 as a result of our decision to cancel
development of the CarteZian family of 32-bit RISC microprocessors.
Additionally, we incurred $2.5 million of special charges during the first six
months of 2002 in connection with the closure of our MOD III eight-inch wafer
fabrication facility in Idaho as well as $0.7 million of lease termination
costs related to the closure and relocation of certain sales offices. These
costs include relocation of production to alternative manufacturing sites and
the cost of closing of the facility. Chapter 11 reorganization-related costs
of $4.0 million for the six months ended June 30, 2002 relate primarily to
legal and other professional service fees. Finally, $0.2 million of
unamortized goodwill relating to our 2000 acquisition of PLC Corporation was
deemed to be of no future value and was written off.

         During the six months ended June 30, 2001, we incurred special
charges of $8.1 million for restructuring of operations comprised of
severance-related expenses of $4.0 million, including $1.7 million of non-cash
stock-option related expenses; fixed-asset related write-offs of $3.0 million,
including planning software and surplus test equipment; $0.8 million relating
to financial advisors who were assisting with our reorganization and
restructuring plans; and $0.3 million of costs associated with the closure of
MOD III. In connection with this action, we eliminated approximately 200
positions worldwide during the second quarter of 2001.

         Stock-Based Compensation. We record stock-based compensation within
various categories of operating expenses. During the first six months of 2002,
we recognized $2.1 million for stock based compensation in connection with the
award of restricted stock to certain executives and consultants. Our right to
repurchase these shares for $0.01 per share generally lapses 25% on the award
date and 25% on each of the first three anniversaries following the award
date. Compensation expense for employee stock awards was measured on the award
date and will be recognized over each of the next three years as these
restrictions lapse. Charges for stock awards to consultants will be measured
as the awards vest and will be recognized over the periods that the
restrictions lapse. Based on the employee stock and option awards we made
during May 2002, we anticipate that we will recognize stock compensation
charges of $3.1 million, $1.9 million and $1.7 million for the years ending
December 31, 2002 through 2004, respectively.

         In-Process Research and Development. During the first six months of
2002, we recorded an $18.7 million charge for in-process research and
development relating to our fair value allocation computed by an independent
appraiser. The projects related to the research and development (partially
developed semiconductor product designs), had not reached technological
feasibility as of the effective date of our reorganization and have no
alternative future use. The nature of efforts required to develop the
in-process technology into commercially viable products primarily relates to
completion of design, prototyping and testing to ensure the products can be
produced to meet customer design specifications, including functions, features
and performance requirements. There can be no assurance that these products
will ever achieve commercial viability.

         Factors considered in valuing in-process research and development
included the stage of development of each project, target markets and
associated risks of achieving technological feasibility and market acceptance
of the products. The value of the in-process technology was determined by
estimating the projected net cash flows after deducting the costs to complete
the projects arising from commercialization of the products over periods
ranging from four to six years. These cash flows were then discounted to their
net present value using a discount rate of 25%. The estimated stage of
completion was applied to the net present value of future discounted cash
flows to arrive at the in-process research and development amount that was
immediately expensed subsequent to the adoption of fresh-start reporting.

         Amortization of Intangible Assets. In connection with fresh-start
reporting, we recorded identifiable intangible assets aggregating $26.2
million (excluding goodwill of $26.7 million and in-process research and
development of $18.7 million) consisting of existing technology of $17.0
million and brandname of $9.2 million. We evaluate these assets for impairment
at each reporting period. We are amortizing these assets based on the
pattern-of-use method. The anticipated amortization schedule for these assets
is as follows (in millions):

         Year          Amortization Amount    Current Technology     Brand Name
    ------------       -------------------    ------------------     ----------
    2002                   $     7.9             $    6.8          $    1.1
    2003                         6.8                  5.5               1.3
    2004                         4.2                  2.9               1.3
    2005                         2.2                  1.1               1.1
    2006                         1.4                  0.4               1.0
    Thereafter                   3.7                  0.3               3.4
                        -------------------------------------------------------
    Total                  $    26.2             $   17.0          $    9.2
                        =======================================================

         Interest Expense. Our interest expense decreased to $5.2 million for
the first six months of 2002 compared to $14.6 million in the same period of
2001. Interest expense in both years relates primarily to interest due on our
former senior notes. The decrease in our interest expense in the first six
months of 2002 compared to the first six months of 2001 primarily reflects
cessation of further interest accruals on our notes payable subsequent to our
filing of Chapter 11 bankruptcy on February 28, 2002, which would have totaled
approximately $4.2 million, and the cancellation of the notes upon the
effectiveness of our plan of reorganization.

         Income Taxes. As of December 31, 2001, we had federal and California
net operating loss carryforwards of approximately $213.0 million and $63.0
million, respectively, which will expire beginning in years 2004 through 2021,
if not utilized. Since December 31, 2001, our net operating losses have
increased reflecting operating losses for the period commencing January 1,
2002 and ending with and including April 30, 2002. The debt discharge resulted
in a taxable gain which will require us to utilize a significant portion of
our net operating loss carryforwards and adjust the tax attributes of certain
of our assets. For the period subsequent to April 30, 2002, through year-end,
we anticipate that we will use certain net operating losses to offset our
taxable income, thereby reducing or eliminating our federal income tax
liability for such period. We expect to record book tax expense for the period
subsequent to April 30, 2002, through year-end at an effective tax rate of
approximately 38% because benefits realized from pre-confirmation net
operating losses will be recorded as a reduction in goodwill rather than an
income tax benefit under fresh-start reporting.

         Commencing January 1, 2003, and as a result of the debt forgiveness
that we realized in the reorganization, we will be required, for federal
income tax purposes, to reduce a significant portion, or all, of our net
operating loss carryforwards and may be required to reduce the tax basis in
certain assets as well. In addition, our utilization of our remaining net
operating loss carryforwards, if any, will be substantially limited under the
federal income tax section 382 ownership change rules. The practical
implication of our U.S. income tax situation is that we expect that we will be
taxable for federal income tax purposes.

         Based on available evidence, including our cumulative losses to date,
we have provided a full valuation allowance against our net deferred tax
assets.

Three-Month Periods Ended June 30, 2002 and June 30, 2001

         Net Sales. Overall, our net sales during the three months ended June
30, 2002 were $38.1 million, which represents a 13.4% decline from our $44.0
million of net sales in the same period of 2001. This decline reflects lower
unit shipments in our standard products group, particularly television, serial
communication controller and foundry business. We expect continuing sales
declines in our standard products group reflecting reductions of our
de-emphasized television and peripheral products. Net sales of embedded
control products during the three months ended June 30, 2002 increased 3%
compared to the same period in 2001, reflecting higher unit shipments of Z8
microcontrollers.

         Gross Margin. Our cost of sales represents the cost of our wafer
fabrication, assembly and test operations. For the three-month period ended
June 30, 2002 our cost of sales also included $3.9 million of amortization
related to a one-time inventory adjustment in connection with our fresh-start
reporting. Our gross margin as a percentage of net sales increased to 33.9% in
second quarter of 2002 as compared to 19.3% in the same period of 2001.
Excluding the one-time effect of fresh-start reporting, our gross margin in
the quarter ended June 30, 2002 was $16.8 million or 44.1% of net sales. The
improvement in our gross margin as a percentage of sales for the three months
ended June 30, 2002 as compared to the same period in 2001 reflects
substantial reduction in manufacturing spending and a marked improvement in
factory utilization as a result of the closure of our MOD III wafer production
facility during the first quarter of 2002. We also experienced reductions in
unit sales in our lower-margin television, peripherals and foundry businesses
in the second quarter of 2002, compared to the same period in 2001.

         Research and Development Expenses. Research and development expenses
were $4.7 million in the second quarter of 2002, reflecting a 34.7% decrease
from the $7.2 million of research and development expense we incurred in the
same period of 2001. This decrease in research and development expense was
primarily due to the closure of our Austin, Texas design center and the
related cancellation of our CarteZian product development activities during
the first quarter of 2002.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to $9.9 million in the second quarter of
2002, reflecting a 23.3% decrease from the $12.9 million in the second quarter
of 2001. This reduction in our sales, general and administrative expenses
primarily reflects reduced payroll and commission costs associated with
reduced headcount in our sales and marketing groups and due to overall lower
sales levels in the second quarter of 2002, compared to the same period in
2001. In addition, the second quarter of 2002 selling, general and
administrative expenses reflect $1.9 million of non-cash stock-based
compensation expense that was not present in the second quarter of 2001
results.

         Special Charges. During the one-month ended April 30, 2002, ZiLOG
classified $1.5 million of costs as special charges and reorganization items.
Approximately $0.3 million of special charges taken both in the two-month
period ended June 30, 2002 and the one-month period ended April 30, 2002
relate to activities associated with the closure of the MOD III eight-inch
wafer fabrication facility in Idaho. These charges relate to post-closure
maintenance costs related to utilities, taxes, insurance and other maintenance
costs required to maintain the facility in a condition required for the sale
of the property. Lease termination costs of $0.7 million are related to the
closure and relocation of certain sales offices. Professional fees for debt
restructuring of $0.3 million represent third-party professional service fees
for legal and financial advisors who were assisting with the Company's debt
and equity restructuring activities. During the Chapter 11 filing of the
voluntary petition for reorganization, such costs were classified as
"Reorganization Items." Additionally, $0.2 million of unamortized goodwill
relating to our 2000 acquisition of PLC Corporation was deemed to be of no
future value and was written-off.

         During the second quarter of 2001, we incurred special charges of
$8.1 million for restructuring of operations comprised of severance-related
expenses of $4.0 million, including $1.7 million of non-cash stock-option
related expenses; fixed-asset related impairments of $3.3 million, including
planning software and surplus test equipment; and $0.8 million of professional
fees relating to advisors who were assisting us with our reorganization. In
connection with these actions, we eliminated approximately 200 positions
worldwide during the second quarter of 2001.

         Stock-Based Compensation, In-Process Research and Development, and
Amortization of Intangible Assets for the three-month period ended June 30,
2002 related to our fresh-start accounting and are described in the previous
section entitled "Six-Month Periods Ended June 30, 2002 and June 30, 2001."

         Other Income/(Expense), Net. During the quarter ended June 30, 2002,
our other income and expense was primarily comprised of $83.7 million of
fresh-start adjustments and $205.7 million of net gain on discharge of debt.
These items are described in the previous section entitled "Six-Month Periods
Ended June 30, 2002 and June 30, 2001". During the three months ended June 30,
2001, our other income and expense was primarily comprised of $7.3 million of
interest expense that was almost entirely related to our 9 1/2% senior secured
notes payable that were outstanding at the time.

         Income Taxes. As of December 31, 2001, we had federal and California
net operating loss carryforwards of approximately $213.0 million and $63.0
million, respectively, which will expire beginning in years 2004 through 2021,
if not utilized. Since December 31, 2001, our net operating losses have
increased reflecting operating losses for the period commencing January 1,
2002 and ending with and including April 30, 2002. The debt discharge resulted
in a taxable gain which will require us to utilize a significant portion of
our net operating loss carryforwards and adjust the tax attributes of certain
of our assets. For the period subsequent to April 30, 2002, through year-end,
we anticipate that we will use certain net operating losses to offset our
taxable income, thereby reducing or eliminating our federal income tax
liability for such period. We expect to record book tax expense for the period
subsequent to April 30, 2002, through year-end at an effective tax rate of
approximately 38% because benefits realized from pre-confirmation net
operating losses will be recorded as a reduction in goodwill rather than an
income tax benefit under fresh-start reporting.

Liquidity and Capital Resources

         As a result of the economic downturn and decline in our results of
operations that began in 2000, we became unable to continue servicing the
interest on our debt. As noted previously, on February 28, 2002, we filed a
voluntary prepackaged plan of reorganization pursuant to Chapter 11 of the
United States Bankruptcy Code. The bankruptcy court confirmed our
reorganization plan on April 30, 2002. The plan of reorganization became
effective on May 13, 2002 and resulted in the extinguishment of $325.7 million
of liabilities.

         As of June 30, 2002, we had cash and cash equivalents of $18.1
million, compared to $30.7 million at December 31, 2001.

         Upon emergence from bankruptcy, we entered into a new credit facility
with the same commercial lender as our previous credit facility. The new
facility is a three-year $15.0 million senior secured revolving credit
facility. The new facility is on substantially similar terms as our previous
revolving credit facility, except that borrowings will bear interest at a rate
per annum equal, at our option, to the commercial lender's stated prime rate
or LIBOR, plus 2.5%. We have elected the LIBOR interest rate option which as
of June 30, 2002 bore interest at 4.4%. The previous revolving credit facility
and capital expenditure line was cancelled. As of June 30, 2002, we had
outstanding borrowings of $9.1 million and there was no additional borrowing
capacity under the facility. Our ability to borrow under the facility is based
on a monthly borrowing base calculation that is determined as a percentage of
eligible accounts receivable. In the first six months of 2002, our
availability has decreased and we have made repayments on our revolving credit
facility totaling $3.7 million. If our borrowing base continues to decline, we
will be required to make further repayments on our revolving credit facility.
We are subject to certain financial covenants under this facility, including
tangible asset and fixed charge coverage ratios if the total of our cash, cash
equivalents and availability on the revolving credit facility are less than
$7.5 million at any month end.

         Cash used by operating activities was $7.8 million for the six months
ended June 30, 2002, compared to $27.4 million for the six months ended June
30, 2001. The use of cash by operating activities in the first six months of
2002 primarily reflects our net loss of $35.7 million (after adjusting for net
gain on discharge of debt of $205.7 million and fresh-start adjustments of
$83.7 million), adjusted for depreciation and amortization of $5.6 million.
During the six-month period ended June 30, 2002, our significant use of
operating cash included cash payments for special charges of $16.7 million.
The use of cash by operating activities in the first six months of 2001
primarily reflects our net loss of $51.2 million, adjusted by depreciation and
amortization of $19.7 million, a decrease in accrued compensation and employee
benefits of $17.8 million, and an decrease in other accrued liabilities of
$5.7 million, offset by decreases in accounts receivable and inventories of
$9.6 million and $8.5 million, respectively. Included in the change in other
accrued liabilities for the first six months of 2001 was $13.3 million for a
payment of interest on the notes. Additionally, we paid $10.3 million to our
former Chief Executive Officer in the first six months of 2001, pursuant to a
previously accrued contractual obligation.

         Cash used by investing activities was $1.1 million for the six months
ended June 30, 2002 and was $3.7 million for the same period in 2001. Cash
used for investing activities in both periods reflects capital expenditures.
In the first six months of 2002, capital expenditures related primarily to
furniture and fixtures for our new San Jose headquarters and replacements of
manufacturing equipment. Capital expenditures in the first six months of 2001
primarily related to equipment in our MOD III wafer manufacturing facility.
Cash used for financing activities in the first six months of 2002 was $3.7
million primarily representing repayments on our revolving line of credit. In
the first six months of 2001, $13.1 million of cash was provided by investing
activities primarily from borrowings under our revolving line of credit.

         The EBITDA figures presented below reflect a non-GAAP measure of our
liquidity. These figures reflect our net income adjustment for non-cash items,
interest and income taxes. Our management uses separate "adjusted EBITDA"
calculations for purposes of determining certain employees' incentive
compensation and, subject to meeting specified adjusted EBITDA amounts, for
accelerating the vesting of EBITDA-linked stock options. This measure of
adjusted EBITDA was approved as part of our plan of reorganization. Adjusted
EBITDA, as we define it, excludes interest, income taxes, effects of changes
in accounting principles and equity adjustments and non-cash charges such as
depreciation, amortization, in-process research and development, and
stock-based compensation expense. It also excludes cash and non-cash charges
associated with reorganization items and special charges, which represent
operational restructuring charges, including asset write-offs, employee
termination costs, and lease termination costs. The differences between the
EBITDA figures below and our adjusted EBITDA relate to the following
cash-settled reorganization and special items that are added-back in our
adjusted EBITDA computations:

     o   Employee retention bonuses, severance pay and termination benefits;

     o   Professional fees for debt restructuring;

     o   Lease termination costs;

     o   Termination and exit charges, and

     o   MOD III closure costs.

         Our EBITDA, reconciled to cash provided (used) by operations (the
most directly comparable measure of liquidity under generally accepted
accounting principles) for each period presented, is as follows (in millions):

<TABLE>

                                                                   Three Months Ended           Six Months Ended
                                                                        June 30,*                June  30,*
                                                                   ---------------------      ---------------------
                                                                     2002         2001          2002        2001
                                                                   --------    ---------      --------     --------
<S>                                                                 <C>          <C>          <C>          <C>










Reconciliation of cash provided (used) by operations to EBITDA:
     Cash flow from operations................................         $1.7      $ (3.6)      $ (7.8)      $ (27.4)
     Interest paid............................................          0.1         0.3          0.7          13.6
     Income taxes paid........................................          0.1         0.2          0.2           0.3
     Change in operating assets and liabilities...............          2.6        (1.8)         8.9           1.5
                                                                   --------    ---------      --------     --------
EBITDA........................................................      $   4.5      $ (4.9)      $  2.0       $ (12.0)
                                                                   ========    =========      ========     ========

________________________

*   The period ended June 30, 2002 reflects combined results of the
    Predecessor Company and the Successor Company. Figures for the June 30,
    2001 period reflect only the Predecessor Company.
</TABLE>



         Our cash needs for the balance of 2002 include working capital,
professional fees incurred in connection with the preparation of this
registration statement and capital expenditures. Our restructuring of
operations and reorganization activities are substantially complete and, based
on our current plans, except for costs that we will incur in connection with
filing a registration statement on Form S-1 pursuant to the terms of our plan
of reorganization, we do not expect to incur significant expenditures for
these items in the foreseeable future. The 2002 business climate is expected
to continue to be difficult. However, we currently anticipate that available
cash and cash provided by operating activities will be adequate to satisfy our
cash requirements for at least the next twelve months.

         We expect fiscal 2002 capital expenditures will total approximately
$1.5 million to $2.0 million, primarily for manufacturing equipment, building
improvements and internal use software. Decisions related to how much cash is
used for investing are influenced by the expected amount of cash to be
provided by operations.

Effects of Inflation and Changing Prices

         We believe that inflation and/or deflation had a minimal impact on
our overall operations during the six months ended June 30, 2002.

Seasonality

         Sales typically peak in the third quarter caused by increased holiday
demand from our customers in the home entertainment and consumer products
markets. Our revenues are generally lower in the first and second quarters
compared to the rest of the year. We believe that this historical seasonal
trend could be impacted by general economic conditions and reduction in sales
of our previously emphasized products.

Recent Accounting Pronouncements

         In accordance with the early adoption provisions of SOP 90-7, on May
1, 2002, we adopted the following Statements of Financial Accounting
Standards: SFAS No. 143, "Accounting for Asset Retirement Obligations;" SFAS
No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections Business Combinations; and SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
We adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill
and Other Intangible Assets," on January 1, 2002. The adoption of these
statements had no impact on our consolidated financial statements.

         The principal provisions of SFAS No. 141 require that all business
combinations be accounted for by the purchase method of accounting and
identifiable intangible assets be recognized apart from goodwill.

         The principal provisions of SFAS No. 142 require that goodwill and
other intangible assets deemed to have an indefinite useful life not be
amortized but rather tested annually for impairment. Under SFAS No. 142,
intangible assets that have finite useful lives will continue to be amortized
over their useful lives. SFAS No. 142 requires companies to test intangible
assets that will not be amortized for impairment at least annually by
comparing the fair value of those assets to their recorded amounts.

         The principal provisions of SFAS No. 143 address financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and for the associated asset retirement costs. SFAS No. 143
requires an enterprise to record the fair value of an asset retirement
obligation as a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets that result from
the acquisition, construction, development and or normal use of the assets.
The enterprise also is to record a corresponding increase to the carrying
amount of the related long-lived asset (i.e., the associated asset retirement
costs) and to depreciate that cost over the life of the asset. The liability
is changed at the end of each period to reflect the passage of time (i.e.,
accretion expense) and changes in the estimated future cash flows underlying
the initial fair value measurement. Because of the extensive use of estimates,
most enterprises will record a gain or loss when they settle the obligation.

         SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, SFAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." SFAS No.
145 also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers," and amends SFAS No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS No. 145 also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions.

         SFAS No. 146 revises the accounting for specified employee and
contract terminations that are part of restructuring activities. Companies
will be able to record a liability for a cost associated with an exit or
disposal activity only when the liability is incurred and can be measured at
fair value. Commitment to an exit plan or a plan of disposal expresses only
management's intended future actions and therefore, does not meet the
requirement for recognizing a liability and related expense. This statement
only applies to termination benefits offered for a specific termination event
or a specified period. It will not affect accounting for the costs to
terminate a capital lease. We are required to adopt this statement for exit or
disposal activities initiated starting May 1, 2002.


                                 RISK FACTORS

                      Risks Related to the Restructuring

We recently effectuated a reorganization pursuant to a prepackaged plan under
Chapter 11 of the United States Bankruptcy Code, which does not assure our
continued success.

         On February 28, 2002, we filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code. The
United States Bankruptcy Court for the Northern District of California
confirmed our prepackaged plan of reorganization on April 30, 2002 and we
emerged from bankruptcy on May 13, 2002. Pursuant to the financial
restructuring, our formerly publicly traded 9 1/2% Senior Secured Notes due
2005, accrued interest related to such notes, and all of our previously
existing equity securities were canceled. Our completion of bankruptcy
proceedings does not assure our continued success.

Our new revolving credit facility restricts our ability to take certain
actions that we may determine to be in our best interests.

         In connection with our reorganization, we replaced our previous
credit facility with a three-year $15.0 million senior secured revolving
credit facility. Borrowings under this credit facility are secured by
substantially all of our assets. This facility places various restrictions on
us, including, but not limited to, restrictions on our ability to incur
indebtedness and engage in certain corporate transactions, and requires us to
maintain financial ratios. As of June 30, 2002, we had no additional borrowing
capacity under this facility. This credit facility is scheduled to mature on
May 13, 2005, at which time we may be required to renew, refinance, or modify
the credit facility with our lender or locate alternative financing. These
restrictions and provisions could have an adverse impact on our future
liquidity and ability to implement our business plan.

Our reorganization may have negatively affected some of our relationships with
our customers, suppliers and employees.

         The effect, if any, of our Chapter 11 case and plan of reorganization
may have had, and may continue to have, upon our continued operations cannot
be predicted or quantified. Some entities may be uncomfortable doing business
with a company that has recently emerged from bankruptcy. Our Chapter 11 case
could adversely affect our relationships with our customers, suppliers and
employees.

As a result of the adoption of "fresh-start" accounting, you will not be able
to compare our historical financial statements with the financial results
disclosed in this quarterly report.

         As a result of the consummation of our plan of reorganization and the
transactions contemplated thereby, we are operating our business under a new
capital structure. In addition, we adopted fresh-start reporting in accordance
with the American Institute of Certified Public Accountants Statement of
Position 90-7 upon emerging from bankruptcy. Because SOP 90-7 requires us to
reset our assets and liabilities to current fair values, our financial
condition and results of operations disclosed in future filings will not be
comparable to the financial condition or results of operations reflected in
our historical financial statements contained in this quarterly report.


                   Risk Related to Our Business and Industry

Our quarterly operating results are likely to fluctuate and may fail to meet
expectations, which may cause the price of our securities to decline.

         Our quarterly operating results have fluctuated in the past and will
likely continue to fluctuate in the future. Our future operating results will
depend on a variety of factors and they may fail to meet expectations. Any
failure to meet expectations could cause the price of our securities to
fluctuate or decline significantly. In addition, high proportions of our costs
are fixed, due in part to our significant sales, research and development and
manufacturing costs. Therefore, small declines in revenue could
disproportionately affect our operating results in a quarter. A variety of
factors could cause our quarterly operating results to fluctuate, including:

         o    our ability to introduce and sell new products and technologies
              on a timely basis, such as our eZ80 Webserver and Z8 product
              families;

         o    any shortage of wafer or assembly manufacturing capacity at our
              third-party vendors;

         o    changes in the prices of our products;

         o    technological change and product obsolescence;

         o    changes in product mix or fluctuations in manufacturing yields;

         o    variability of our customers' product life cycles;

         o    the level of orders that we receive and can ship in a quarter,
              customer order patterns and seasonality;

         o    increases in the cost or availability of raw materials; and

         o    gain or loss of significant customers.

We are currently experiencing a downturn in the business cycle and our
revenues, cash generation and profitability are being adversely affected.

         The semiconductor industry is highly cyclical and has experienced
significant economic downturns at various times in the last three decades,
characterized by diminished product demand, erosion of average selling prices
and production over-capacity. In the fourth quarter of 2000, another downturn
in our business cycle began and continues today. The terrorist acts of
September 2001 in New York City, Washington, D.C. and Pennsylvania, and the
United States' military response, have exacerbated the downturn and created an
uncertain economic environment. We cannot predict the impact of these events,
any subsequent terrorist acts or of any related military action, on our
customers or business. We believe that, in light of these events, some of our
customers have curtailed and may in the future delay or further curtail
spending on technology, which could also negatively affect our quarterly
results or financial condition in the future.

         We are experiencing a decline in revenues, as our customers are not
ordering product from us in the quantities that they previously ordered in
1999 and 2000. This decline in revenue has been accentuated by our decision in
2000 to deemphasize certain product offerings in television and PC peripheral
markets. We are uncertain how long this decline will last. Additionally, we
may be required to reduce selling prices in response to competition, which
could lower our gross margin. Such a decline in selling prices would have a
negative impact on our financial condition. As a result of our
under-utilization of our manufacturing capacity, in January 2002 we closed one
of our two wafer fabrication facilities. We are currently, and will likely in
the future experience substantial period-to-period fluctuations in future
operating results that are attributable to general industry conditions or
events occurring in the general economy. Any economic downturn could pressure
us to reduce our prices and decrease our revenues, cash generation and
profitability.

We have a history of losses, and we may not be profitable in the future.

         We have a history of losses for each of our last four years ended
December 2001, 2000, 1999 and 1998, and for the six months ended June 30,
2002, excluding the accounting effects of our reorganization. If our new
business plan is not successful, we may not be profitable in the future.

We have implemented significant cost cutting measures, and we may be required
to implement additional cost cutting measures depending upon our future
revenues and operating results.

         Similar to other semiconductor companies, we have implemented
significant cost cutting measures in the past. These cost cutting efforts have
included:

         o    restructuring our manufacturing operations, which included
              consolidating our wafer fabrication facilities, outsourcing
              significant wafer and assembly operations and consolidating
              probe and final test operations at our Philippines site;

         o    refocusing of strategic priorities;

         o    reallocating personnel and responsibilities to better utilize
              human resources;

         o    reducing research and development and capital expenditure
              spending;

         o    reducing our workforce; and

         o    instituting temporary office and facility shutdowns.

         Cost cutting measures may not increase our efficiency or future
profitability and our reduction in research and development spending could
harm our ability to introduce new products in the future. If our revenue or
operating results significantly decline in the future, we may be required to
institute further cost reduction measures.

If we are unable to implement our business strategy, our revenues and future
profitability may be harmed materially.

         Our future financial performance and success are largely dependent on
our ability to implement our business strategy. We may be unable to implement
our business strategy and, even if we do implement our strategy successfully,
our results of operations may fail to improve.

         In addition, although the semiconductor micrologic market has grown
in prior years, it is currently in a significant downturn. Our revenues and
future profitability could be harmed seriously. It is uncertain for how long
this slowdown will last.

We may not be able to introduce and sell new products, and our inability to do
so may harm our business materially.

         Our operating results depend on our ability to introduce and sell new
products. Rapidly changing technologies and industry standards, along with
frequent new product introductions, characterize the industries that are
currently the primary end-users of semiconductors. As these industries evolve
and introduce new products, our success will depend on our ability to adapt to
such changes in a timely and cost-effective manner by designing, developing,
manufacturing, marketing and providing customer support for new products and
technologies.

         Our ability to introduce new products successfully depends on several
factors, including:

         o    development of support tools and collateral literature that make
              complex products easy for engineers to understand and use;

         o    proper new product selection;

         o    timely completion and introduction of new product designs;

         o    support from foundry services;

         o    complexity of the new products to be designed and manufactured;
              and

         o    market acceptance of our products and our customers' products.

         We cannot assure you that the design and introduction schedules for
any new products or any additions or modifications to our existing products
will be met, that these products will achieve market acceptance or that we
will be able to sell these products at prices that are favorable to us.

Acts of war or terrorism could harm our business.

         The September 11, 2001 terrorist attacks on the United States created
immediate significant economic and political uncertainty. The long-term
effects of such attacks on the world economy and our business are unknown, but
could be material to our business. Further terrorists acts or acts of war,
whether in the United States or abroad, also could cause damage or disruption
to our business, our suppliers, or customers, or our customers, or could
create political or economic instability, any of which could have a material
adverse effect on our business. Escalated tensions between India and Pakistan
particularly pose an increased risk to our design operations in India, which
could be disrupted in the event of the outbreak of war between the two
countries.

Our industry is highly competitive and we cannot assure you that we will be
able to compete effectively.

         The semiconductor industry is intensely competitive and is
characterized by price erosion, rapid technological change and heightened
competition in many markets. The industry consists of major domestic and
international semiconductor companies, many of which have substantially
greater financial and other resources than we do with which to pursue
engineering, manufacturing, marketing and distribution of their products.
Emerging companies are also increasing their participation in the
semiconductor industry. Our current and future products compete with, or may
compete with, products offered by Advanced Micro Devices, ARM, Atmel,
Conexant, Intel, Lucent Technologies, Microchip, Motorola, NEC, Philips,
Sharp, ST Microelectronics, Texas Instruments and Toshiba, among others. Our
ability to compete successfully in our markets depends on factors both within
and outside of our control, including:

         o    our ability to design and manufacture new products that
              implement new technologies, including our eZ80 Webserver and Z8
              product families;

         o    our ability to protect our products by effectively utilizing
              intellectual property laws;

         o    our product quality, reliability, ease of use and price;

         o    the diversity of product line and our efficiency of production;

         o    the pace at which customers incorporate our devices into their
              products; and

         o    the success of our competitors' products and general economic
              conditions.

         To the extent that our products achieve market acceptance,
competitors typically seek to offer competitive products or embark on pricing
strategies, which, if successful, could harm our results of operations and
financial condition materially.

Unless we maintain manufacturing efficiency and avoid manufacturing
difficulties, our future profitability could be harmed.

         Our semiconductors are highly complex to manufacture and our
production yields are sensitive. Our production yields may be inadequate in
the future to meet our customers' demands. Production yields are sensitive to
a wide variety of factors, including the level of contaminants in the
manufacturing environment, impurities in the materials used and the
performance of personnel and equipment. From time to time, we have experienced
difficulties in effecting transitions to new manufacturing processes and have
suffered delays in product deliveries or reduced yields. We may experience
similar difficulties or suffer similar delays in the future, and our operating
results could be harmed as a result.

         For example, we may experience problems that make it difficult to
manufacture the quantities of our products that we anticipate producing in our
wafer fabrication facility. These difficulties may include:

         o    equipment not performing as expected;

         o    process technology changes not operating as expected; and

         o    production personnel not operating equipment as expected.

If we are unable to obtain adequate production capacity, our business will be
harmed.

         We rely on independent third-party foundry manufacturers to fabricate
an increasing percentage of our products. Industry-wide shortages in foundry
capacity could harm our financial results. For example, a significant amount
of our sales are of products which cannot be manufactured at our Nampa, Idaho
wafer fabrication facility. Should we be unable to obtain the requisite
foundry capacity to manufacture our complex new products, or should we have to
pay high prices to foundries in periods of tight capacity, our ability to
increase our revenues might be impaired. Any delay in initiating production at
third-party facilities, any inability to have new products manufactured at
foundries or any failure to meet our customers' demands could damage our
relationships with our customers and may decrease our sales.

         Other significant risks associated with relying on these third-party
manufacturers include:

         o    reduced control over the cost of our products, delivery
              schedules and product quality;

         o    the warranties on wafers or products supplied to us are limited;

         o    increased exposure to potential misappropriation of our
              intellectual property; and

         o    the cost and consumption of time associated with switching
              foundries.

We depend on third-party assemblers and the failure of these third parties to
continue to provide services to us on sufficiently favorable terms could harm
our business.

         We use outside contract assemblers for packaging our products. If we
are unable to obtain additional assembly capacity on sufficiently favorable
terms, our ability to achieve continued revenue growth might be impaired.
Shortages in contract assembly capacity could cause shortages in our products
and could also result in the loss of customers. Because we rely on these third
parties, we also have less control over our costs, delivery schedules and
quality of our products and our intellectual property is at greater risk of
misappropriation.

Our international operations subject us to risks inherent in doing business in
foreign countries that could impair our results of operations.

         Approximately 59% of our net sales for the six months ended June 30,
2002 and 55% of our net sales for the year ended December 31, 2001 were to
foreign customers and we expect that international sales will continue to
represent a significant portion of our net sales in the future. We maintain
significant operations or rely on a number of contract manufacturers in the
Philippines, Indonesia, Taiwan and India. We cannot assure you that we will be
successful in overcoming the risks that relate to or arise from operating in
international markets. Risks inherent in doing business on an international
level include:

         o    economic and political instability;

         o    changes in regulatory requirements, tariffs, customs, duties and
              other trade barriers;

         o    transportation delays;

         o    power supply shortages and shutdowns;

         o    difficulties in staffing and managing foreign operations and
              other labor problems;

         o    existence of language barriers and cultural distinctions;

         o    taxation of our earnings and the earnings of our personnel; and

         o    other uncertainties relating to the administration of, or
              changes in, or new interpretation of, the laws, regulations and
              policies of the jurisdictions in which we conduct our business.

         In addition, our activities outside the United States are subject to
risks associated with fluctuating currency values and exchange rates, hard
currency shortages and controls on currency exchange. While our sales are
primarily denominated in U.S. dollars, worldwide semiconductor pricing is
influenced by currency rate fluctuations, and such fluctuations could harm our
operating results materially.

         The risks inherent in our international operations have been
increased by the terrorist attacks of September 2001. These attacks, coupled
with the international military response, have created an uncertain economic
environment and we cannot predict the impact of these events, any subsequent
terrorist acts or of any related military action, on our customers or our
business.

The lease of the facility housing our Philippines operations expires in March
2004; if we are unable to negotiate an extension of this lease or relocate
these operations on commercially reasonable terms, our results of operations
could be harmed.

         The majority of our final product testing, inventory warehousing and
logistics operations reside in a 54,000 square foot facility located in the
Philippines. We have occupied this site with inexpensive rental payments since
1979 and the lease is presently due to expire on March 31, 2004. Accordingly,
if we are unable to negotiate an extension of the lease or effectively
relocate these operations to another site on commercially reasonable terms,
our results of operations could be harmed.

A significant amount of our revenues comes from relatively few of our
customers and distributors, and any decrease of revenues from these customers
and distributors, or the loss of their business, could significantly harm our
financial results.

         Historically we have been, and we expect to continue to be, dependent
on a relatively small number of customers and distributors for a significant
portion of our revenues. We depend on third-party distributors to market and
sell our products and these third-party distributors accounted for
approximately 40% of our sales in 1999, 40% of our sales in 2000 and 39% of
our sales in 2001, and 44% of our net sales for the six months ended June 30,
2002. Our distributors may not continue to effectively market, sell or support
our products. Our ten largest customers, including our distributors, accounted
for approximately 48% of our net sales in 1999, approximately 49% of our net
sales in 2000 and 55% of our net sales in 2001 and 54% for the six months
ended June 30, 2002. Arrow Electronics accounted for approximately 13% of our
net sales in 1999 and Pioneer-Standard accounted for approximately 12% of our
net sales in 2000, 13% of our net sales in 2001 and 13% of our net sales for
the six months ended June 30, 2002. Concentration of revenue to particular
customers may change from period to period, but we expect that sales to a
limited number of customers will continue to account for a significant
percentage of our revenues in any particular period for the foreseeable
future. The loss of one or more major customers or any reduction, delay or
cancellation of orders by any of these customers or our failure to market
successfully to new customers could harm our business materially.

         We have very few long-term contracts with our customers and, like us,
our customers typically compete in cyclical industries. In the future, these
customers may decide not to purchase our products at all, to purchase fewer
products than they did in the past, or to alter their purchasing patterns,
particularly because substantially all of our sales are made on a purchase
order or sales order acknowledgment basis, which permits our customers to
cancel, change or delay product purchase commitments upon 30 days notice for
standard products and 60 days notice for custom products. Customers may still
cancel or reschedule within these time periods, however they routinely incur a
cancellation or rescheduling charge. This risk is increased because our
customers can purchase some similar products from our competitors.

Changes in technologies or consumption patterns could reduce the demand for
our products.

         As a result of technological changes, from time to time our customers
design our product out of some devices. Any resulting decreased sales could
reduce our profitability. For example, in 1999 and 2000, a number of our
customers changed the designs of computer mouse pointing devices that they
manufacture, and as a result, these devices no longer contain our products.
Because we do not have long-term supply contracts with most of our customers,
changes in the designs of their products can have sudden and significant
impacts on our sales. For example, net sales of our computer mouse pointing
devices and other computer peripheral products decreased substantially from
approximately $28.2 million in 1999 to approximately $15.4 million in 2000, to
approximately $4.9 million in 2001, and to approximately $1.3 million for the
six months ended June 30, 2002. These reduced sales due to design changes have
harmed us in the past and additional design changes could harm our operating
results in the future.

We depend on key personnel, and the loss of our current personnel or our
failure to hire and retain additional personnel could affect our business
negatively.

         We depend on our ability to attract and retain highly skilled
technical and managerial personnel. We believe that our future success in
developing marketable products and achieving a competitive position will
depend in large part on our ability to identify, recruit, hire, train, retain
and motivate highly skilled technical, executive, managerial, marketing and
customer service personnel. Competition for these personnel is intense,
especially in Northern California, where our headquarters are located, and we
may not be able to successfully recruit, assimilate or retain sufficiently
qualified personnel. Our failure to recruit and retain necessary technical,
executive, managerial, merchandising, marketing and customer service personnel
could harm our business and our ability to obtain new customers and develop
new products. In addition, our current financial condition could have a
negative impact on our ability to recruit and retain employees.

         In January 2002, we entered into an employment agreement with James
M. Thorburn, our Chairman and Chief Executive Officer, pursuant to which we
will make grants of restricted stock on each of May 13, 2003, May 13, 2004 and
May 13, 2005. We intended to loan Mr. Thorburn the funds to pay the income
taxes due with respect to these grants, as we have done with other employees
that received grants of restricted stock. In July 2002, however, Congress
enacted the Sarbanes-Oaxley Act of 2002, which prohibits these loans. As a
result of this development, we may need to revisit the terms of our employment
arrangement with Mr. Thorburn, and we may not be able to reach an agreement
acceptable to both parties.

We may fail to protect our proprietary rights and the cost of protecting those
rights, whether we are successful or not, may harm our ability to compete.

         The measures we take to protect our intellectual property rights may
be inadequate to protect our proprietary technologies and processes from
misappropriation, and these measures may not prevent independent third party
development of competitive products. We may not be able to detect the
unauthorized use of, or take appropriate steps to enforce our intellectual
property rights. Despite our efforts to protect our proprietary rights in both
the United States and in foreign countries, existing intellectual property
laws in the United States provide only limited protection and, in some cases,
the laws of foreign countries provide even less protection.

         Litigation may be necessary in the future to enforce our intellectual
property rights, to protect our trade secrets or to determine the validity and
scope of our proprietary rights or the proprietary rights of others. Any such
litigation could require us to incur substantial costs and divert significant
valuable resources, including the efforts of our technical and management
personnel, which may harm our business materially.

We could be subject to claims of infringement of third-party intellectual
property rights, which could be time-consuming and expensive for us to defend.

         The semiconductor industry is characterized by frequent claims and
related litigation regarding patent and other intellectual property rights.
Third parties may assert claims or initiate litigation against us, our
licensors, our foundries, our service providers, or our customers with respect
to existing or future products. Any intellectual property litigation initiated
against us could subject us to significant liability for damages and
attorneys' fees, invalidation of our proprietary rights, injunctions or other
court orders that could prevent us from using specific technologies or
engaging in specific business activities. These lawsuits, regardless of their
success, would likely be time-consuming and expensive to resolve and would
divert management's time and attention from our business. Any potential
intellectual property litigation could also force us to do one or more of the
following:

         o    pay substantial damages;

         o    cease using key aspects of our technologies or processes that
              incorporate the challenged intellectual property;

         o    cease the manufacture, use, sale, offer for sale and importation
              of infringing products;

         o    alter our designs around a third party's patent;

         o    obtain licenses to use the technology that is the subject of the
              litigation from a third party;

         o    expend significant resources to develop or obtain non-infringing
              technology;

         o    create new brands for our services and establish recognition of
              these new brands; or

         o    make significant changes to the structure and the operation of
              our business.

         Implementation of any of these alternatives could be costly and
time-consuming and might not be possible at all. An adverse determination in
any litigation to which we were a party could harm our business, our results
of operations and financial condition. In addition, we may not be able to
develop or acquire the technologies we need, and licenses to such
technologies, if available, may not be obtainable on commercially reasonable
terms. Any necessary development or acquisition could require us to expend
substantial time and other resources.

         If an infringement against us is successful and we are unable to
license the infringed technology, our business and operating results would be
harmed significantly.

We may engage in acquisitions that could adversely affect our operating
results, dilute our stockholders' equity, or cause us to incur additional debt
or assume contingent liabilities.

         Acquisitions involve a number of risks that could harm our business
and result in the acquired business not performing as expected, including:

         o    insufficient experience with technologies and markets in which
              the acquired business is involved that may be necessary to
              successfully operate and integrate the business;

         o    problems integrating the acquired operations, personnel,
              technologies or products with the existing business and
              products;

         o    diversion of management time and attention from our core
              business and to the acquired business;

         o    potential failure to retain key technical, management, sales and
              other personnel of the acquired business;

         o    difficulties in retaining relationships with suppliers and
              customers of the acquired business; and

         o    acquired assets, including intangible assets, may subsequently
              become impaired.

         In addition, acquisitions could require investment of significant
financial resources and may require us to obtain additional equity financing,
which may dilute our stockholders' equity, or to incur additional
indebtedness.

Our reported financial results may be adversely affected by changes in
accounting principles generally accepted in the United States.

         We prepare our financial statements in conformity with accounting
principles generally accepted in the United States. These accounting
principles are subject to interpretation by the Financial Accounting Standards
Board, the American Institute of Certified Public Accountants, the Securities
and Exchange Commission and various bodies formed to interpret and create
appropriate accounting policies. A change in these policies or interpretations
could have a significant effect on our reported financial results, and could
affect the reporting of transactions completed before the announcement of a
change.

We are subject to a variety of environmental laws and regulations and our
failure to comply with present or future laws and regulations could harm our
business materially.

         Our manufacturing processes require us to use various hazardous
substances and, as a result, we are subject to a variety of governmental laws
and regulations related to the storage, use, emission, discharge and disposal
of such substances. Our failure to comply with present or future laws and
regulations or the loss of any permit required to conduct our business could
result in fines being imposed on us, the limitation or suspension of
production or cessation of our operations. Compliance with any future
environmental laws and regulations could require us to acquire additional
equipment or to incur substantial other expenses. Any failure by us to control
the use of, or adequately restrict the discharge of, hazardous materials could
subject us to future liabilities that could materially harm our business. In
addition, we may be required to incur significant expense in connection with
governmental investigations and/or environmental employee health and safety
matters.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Interest Rate Risk

         Our exposure to market risk for changes in interest rates relates
primarily to our short-term investment portfolio and borrowings under our
revolving credit facility. We do not use derivative financial investments in
our investment portfolio. Our primary investment objectives are to preserve
capital and maintain liquidity. These objectives are met by investing in
high-quality credit issuances and limiting the amount of credit exposure to
any one company. Our policy is to mitigate default risk by investing in only
the highest quality securities and monitoring the credit ratings of such
investments. As of June 30, 2002, our cash equivalents were invested in bank
time deposits and money market funds. We have no significant cash flow
exposure due to rate changes for our cash equivalents as these instruments are
short-term.

         The table below presents principal amounts and related average rates
by year of maturity for our cash equivalents and debt obligations as of June
30, 2002 (dollars in millions):

                                           Carrying Value        Fair Value
                                           --------------        ----------
      Cash Equivalents:

          Fixed rate                       $    17.5             $  17.5

          Average interest rate                  1.23%               --

      Short-Term Debt:

          Variable-rate debt               $     9.1             $   9.1

          Interest rate                          4.4%                --



<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 1.  Legal Proceedings

         We have been notified by several parties that we may be infringing
certain patents. In addition, four of our customers have notified us that they
have been approached by patent holders who claim that they are infringing
certain patents. The customers have asked us for indemnification. We have had
no further communications about any of the claims from our customers for at
least 13 months. In the event that we determine, however, that any such notice
may involve meritorious claims, we may seek a license. Based on industry
practice, we believe that in most cases any necessary licenses or other rights
could be obtained on commercially reasonable terms. However, no assurance can
be given that licenses could be obtained on acceptable terms or that
litigation will not occur. The failure to obtain necessary licenses or other
rights or the advent of litigation arising out of such claims could have a
material adverse effect on our financial condition. See the section entitled
"Risk Factors -- We could be subject to claims of infringement of third-party
intellectual property rights, which could be time-consuming and expensive for
us to defend."

         We are participating in other litigation and responding to claims
arising in the ordinary course of business. We intend to defend ourselves
vigorously in these matters. Our management believes that it is unlikely that
the outcome of these matters will have a material adverse effect on our
financial statements, although there can be no assurance in this regard.

Item 2.  Changes in Securities and Use of Proceeds

         In connection with our plan of reorganization, which became effective
on May 13, 2002, we cancelled all of our previously outstanding debt and
equity securities. We amended our articles of incorporation and our bylaws to
define the rights associated with our newly-issued shares of common stock, par
value $0.01 per share. See Note 2 to the unaudited condensed consolidated
financial statements for more information on our financial restructuring and
reorganization.

         We are restricted from paying any cash dividends on our common stock
by the terms of the amended and restated credit agreement governing our
revolving credit facility as described under the section entitled
"Management's Discussion and Analysis of Financial Condition and Result of
Operations--Liquidity and Capital Resources."

         On May 17, 2002, we sold 90,580 shares of our common stock to
Federico Faggin for $2.76 per share, or an aggregate of $250,000.80. This
issuance was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof on the basis that the transaction did not
involve a public offering. We intend to use the proceeds from this sale for
general corporate purposes.

Item 3.  Defaults Upon Senior Securities

         We did not make our scheduled semi-annual interest payments of $13.3
million on our former 9 1/2% Senior Secured Notes due 2005 that were due on
September 4, 2001 and March 1, 2002. Our default on the interest payment due
on the notes, and the expiration of the applicable grace period on October 4,
2001, constituted an event of default under our former capital expenditure and
revolving credit facility. Pursuant to our plan of reorganization, which was
made effective on May 13, 2002, these notes and the accrued interest were
cancelled, and our credit facilities were replaced. See the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for more information.

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits are filed or incorporated herein by reference as indicated below:

Exhibit Number                        Description
--------------  ---------------------------------------------------------------
  2.1 (a)       Joint Reorganization Plan, as confirmed by order of the
                U.S. Bankruptcy Court for the Northern
                District of California, dated April 30, 2002.
  3.1 (b)       Amended and Restated Certificate of Incorporation of ZiLOG, Inc.
  3.2 (b)       Amended and Restated Bylaws of ZiLOG, Inc.
  4.1           Form of Restricted Stock Purchase Agreement.
  4.2           Form of Non-Qualified EBITDA-Linked Option Grant Agreement.
  4.3           Form of Non-Qualified Non-EBITDA-Linked Option Grant Agreement.
 10.1           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Gerald Corvino.
 10.2           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Perry Grace.
 10.3           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Daniel M. Jochnowitz.
 10.4           Financing Agreement, dated May 13, 2002, between CIT
                Financing and ZiLOG, Inc.
 10.5           Contribution Agreement, dated May 13, 2002, between
                ZiLOG, Inc. and ZiLOG-MOD III, Inc.
 10.6           Services Agreement, dated May 13, 2002, between ZiLOG Inc.
                and ZiLOG-MOD III, Inc.
 10.7           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Michael D. Burger.
 10.8           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Thomas Vanderheyden.
 10.9           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Norman G. Sheridan.
 10.10          Consulting Agreement, dated May 17, 2002, between
                ZiLOG, Inc. and Federico Faggin.
 10.11          Amendment Number 1 to Employment Agreement, dated
                May 23, 2002, between ZiLOG, Inc. and James M. Thorburn.

_____________________________

(a)  Incorporated herein by reference to Exhibit 99.1 to the Company's current
     report on Form 8-K filed with the Commission on May 15, 2002.

(b)  Incorporated herein by reference to the item of the same name filed as an
     exhibit to the Company's registration statement on Form S-8 (File No.
     333-88416) filed with the Commission on May 15, 2002.



(b) Reports on Form 8-K:

The Company filed a current report on Form 8-K on May 15, 2002, reporting that
the United States Bankruptcy Court for the Northern District of California
confirmed its joint "prepackaged" reorganization plan on April 30, 2002.



<PAGE>


                                  ZiLOG, Inc.

                                  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.



                                  ZiLOG, Inc.
                                  (Registrant)


                                  /s/ Perry Grace
                                  -------------------------------------------
                                  Vice President and Chief Financial Officer
                                  (Duly Authorized Officer)

                                  /s/ James M. Thorburn
                                  ----------------------------------------------
                                  Chairman, Chief Executive Officer and Director
                                  (Duly Authorized Officer)



Date:  April 14, 2003


<PAGE>

                                 EXHIBIT INDEX
Exhibit Number                        Description
--------------  ---------------------------------------------------------------
  2.1 (a)       Joint Reorganization Plan, as confirmed by order of the
                U.S. Bankruptcy Court for the Northern
                District of California, dated April 30, 2002.
  3.1 (b)       Amended and Restated Certificate of Incorporation of ZiLOG, Inc.
  3.2 (b)       Amended and Restated Bylaws of ZiLOG, Inc.
  4.1           Form of Restricted Stock Purchase Agreement.
  4.2           Form of Non-Qualified EBITDA-Linked Option Grant Agreement.
  4.3           Form of Non-Qualified Non-EBITDA-Linked Option Grant Agreement.
 10.1           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Gerald Corvino.
 10.2           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Perry Grace.
 10.3           Employment Agreement, dated April 9, 2002, between
                ZiLOG, Inc. and Daniel M. Jochnowitz.
 10.4           Financing Agreement, dated May 13, 2002, between CIT
                Financing and ZiLOG, Inc.
 10.5           Contribution Agreement, dated May 13, 2002, between
                ZiLOG, Inc. and ZiLOG-MOD III, Inc.
 10.6           Services Agreement, dated May 13, 2002, between ZiLOG Inc.
                and ZiLOG-MOD III, Inc.
 10.7           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Michael D. Burger.
 10.8           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Thomas Vanderheyden.
 10.9           Employment Agreement, dated May 14, 2002, between
                ZiLOG, Inc. and Norman G. Sheridan.
 10.10          Consulting Agreement, dated May 17, 2002, between
                ZiLOG, Inc. and Federico Faggin.
 10.11          Amendment Number 1 to Employment Agreement, dated
                May 23, 2002, between ZiLOG, Inc. and James M. Thorburn.

_______________________

(a)  Incorporated herein by reference to Exhibit 99.1 to the Company's current
     report on Form 8-K filed with the Commission on May 15, 2002.

(b)  Incorporated herein by reference to the item of the same name filed as an
     exhibit to the Company's registration statement on Form S-8 (File No.
     333-88416) filed with the Commission on May 15, 2002.