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

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FORM 10-Q

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(Mark One)


xQUARTERLY REPORT PURSUANT TO SECTION 13 OR
     15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 26, 2009

OR



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 Incorporation or Organization) | (I.R.S. Employer Identification Number)

6800 Santa Teresa Boulevard
San Jose, California     95119

(408) 513-1500

Indicate by check mark whether the registrant (1) 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES    x NO     ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
    YES

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

|Large accelerated filer      ̈ | Accelerated filer     ̈ | Non-accelerated filer     ̈ (Do not check if a smaller reporting company) | Smaller reporting company    x
|----------------------------- | ---------------------- | ------------------------------------------------------------------------ | ------------------------------

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (Check one):
YES     ̈ NO    x Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section
12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.   
YES    x NO     ̈ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

|Class                                   | Outstanding at November 2, 2009
|--------------------------------------- | -------------------------------
|Common Stock, $0.01 par value per share | 17,310,123 shares              








Note:PDF provided as a courtesy

FORWARD-LOOKING STATEMENTS

Some of the statements under the sections entitled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-Q, constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by terminology such as
"may", "will", "should", "expects", "anticipates", "believes",
"estimates", "potential", "continue", or the negative terms or other comparable terminology.  These
statements include, without limitation:

- estimates of market growth;

- estimates of capital expenditures;

- the adequacy of available cash;

- the cost or outcome of any litigation pending or threatened;

- the impact on recent accounting pronouncements;

- any gross margin improvement resulting from our research and development effort; and

- the expected cost of compliance with environmental laws.

These statements relate to future events or our future financial performance and involve known and may involve unknown risks,
uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or implied by forward-looking statements including, but not
limited to, prospects for future market growth. Other factors that may cause or contribute to differences include, but are not limited to,
continued availability of third-party foundry, assembly and test services with commercially-reasonable quality and prices; under-absorption of
manufacturing costs in the remaining manufacturing support facilities from under-utilization of capacity; our distributors and customers
significantly reducing their existing inventories before ordering new products and the costs associated with the Microchip lawsuit. In
evaluating these statements, you should specifically consider various factors, including the risks outlined under "Risk Factors"
in our Form 10-K for the fiscal year ended March 31, 2009.

Although we believe that the expectations in the forward-looking statements contained in this Form 10-Q are reasonable, we cannot
guarantee future results, levels of activity, and performance achievements. These forward-looking statements are based on our current
expectations, and we disclaim any obligation to update these forward-looking statements for subsequent events or to explain why actual
results differ unless otherwise required by law. You should not place undue reliance on these forward-looking statements.

Unless otherwise specified as a forward-looking statement, the information contained in this report is historical in nature and speaks as of
the date of this report unless otherwise clearly indicated.  We disclaim any obligation to update this information for subsequent events.

Based in San Jose, California, we were incorporated in California in September 1973 and merged with a subsidiary of Exxon (which
subsidiary changed its name to ZiLOG, Inc.) in November 1981.  We were reacquired by an affiliate of Warburg Pincus and Management in
1989 and reincorporated in Delaware in April 1997. We were acquired by an affiliate of Texas Pacific Group in 1998 and we were reorganized
in bankruptcy in 2002. 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.  EZ80ACCLAIM!, ZiLOG, Z8, Z80, eZ80, Z8 ENCORE!, Encore!XP and Zneo are registered trademarks of
ZiLOG, Inc., in the United States and in other countries.  Other product and or service names mentioned herein may be trademarks of the
companies with which they are associated.

2

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ZILOG, INC.
                  QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 26, 2009
                  TABLE OF CONTENTS

|PART I. FINANCIAL INFORMATION                                                                                                                            | Page
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|Item 1.Financial Statements                                                                                                                              |     
|Unaudited Condensed Consolidated Statements of Operations for the three and six months ended
                 ended September 26, 2009 and June 28, 2008 | 4   
|Unaudited Condensed Consolidated Balance Sheets at September 26, 2009 and March 31, 2009                                                                 | 5   
|Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended 
                 ended September 26, 2009 and June 28, 2008          | 6   
|Unaudited Condensed Consolidated Statements of Stockholders' Equity for the six months
          ended September 26, 2009 and June 28, 2008              | 7   
|Notes to Unaudited Condensed Consolidated Financial Statements                                                                                           | 8   
|Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations                                                             | 19  
|Item 3.Quantitative and Qualitative Disclosures About Market
Risk                                                                                        | 27  
|Item 4.Controls and
Procedures                                                                                                                           | 28  
|                                                                                                                                                         |     
|PART II. OTHER INFORMATION                                                                                                                               |     
|Item 1.Legal Proceedings                                                                                                                                 | 28  
|Item 1A.Risk Factors                                                                                                                                     | 28  
|Item 2.Unregistered Sales of Equity Securities and Use of
Proceeds                                                                                       | 29  
|Item 3.Defaults Upon Senior Securities                                                                                                                   | 29  
|Item 4.Submission of Matters to a Vote of Security Holders                                                                                               | 29  
|Item 5.Other Information                                                                                                                                 | 29  
|Item 6.Exhibits                                                                                                                                          | 29  
|                                                                                                                                                         |     

3

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PART I
                  FINANCIAL INFORMATION

Item 1.  Financial Statements

ZILOG, INC.

                    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                          (in thousands, except per share data)

|                                                                                                |  | Three Months Ended |  |          | Six Months Ended
|----------------------------------------------------------------------------------------------- |  | ------------------ |  | -------- | ----------------
|                                                                                                |  | Sep. 26,           |  | Sep. 27, |                 
|                                                                                                |  | 2009               |  | 2008     |                 
|Net sales from continuing operations                                                            |  | $8,070             |  | $10,474  |                 
|Cost of sales from continuing operations                                                        |  | 4,386              |  | 6,086    |                 
|Gross margin from continuing operations                                                         |  | 3,684              |  | 4,388    |                 
|                                                                                                |  |                    |  |          |                 
|Operating expenses:                                                                             |  |                    |  |          |                 
|Research and development                                                                        |  | 1,179              |  | 1,757    |                 
|Selling, general and administrative                                                             |  | 2,370              |  | 5,723    |                 
|Special charges and credits                                                                     |  | 77                 |  | 554      |                 
|Amortization of intangible assets                                                               |  | -                  |  | 209      |                 
|Total operating expenses                                                                        |  | 3,626              |  | 8,243    |                 
|                                                                                                |  |                    |  |          |                 
|Operating income (loss) from continuing operations                                              |  | 58                 |  | (3,855)  |                 
|                                                                                                |  |                    |  |          |                 
|Other income:                                                                                   |  |                    |  |          |                 
|Other income (expense)                                                                          |  | 8                  |  | 253      |                 
|Interest income                                                                                 |  | 6                  |  | 49       |                 
|Income (loss) from continuing operations before provision for income taxes                      |  | 72                 |  | (3,553)  |                 
|Provision for income taxes                                                                      |  | 22                 |  | 62       |                 
|Net income (loss) from continuing operations                                                    |  | 50                 |  | (3,615)  |                 
|Net income from discontinued operations                                                         |  | 36                 |  | 2,058    |                 
|                                                                                                |  |                    |  |          |                 
|Gain from sale of discontinued operations, net of tax                                           |  | 1,547              |  | -        |                 
|Net income (loss)                                                                               |  | $1,633             |  | ($1,557) |                 
|                                                                                                |  |                    |  |          |                 
|Basic and diluted net income (loss) from continuing operations per share                        |  | $      -           |  | ($0.21)  |                 
|Basic and diluted net income from discontinued operations per share                             |  | -                  |  | 0.12     |                 
|Basic and diluted net income from gain on sale of discontinued operations, net of tax per share |  | 0.09               |  | -        |                 
|Basic and diluted net income (loss) per share                                                   |  | $0.09              |  | ($0.09)  |                 
|                                                                                                |  |                    |  |          |                 
|Weighted-average shares used in computing basic net income (loss) per share                     |  | 17,291             |  | 16,949   |                 
|Weighted-average shares used in computing diluted net income (loss) per share                   |  | 17,297             |  | 16,949   |                 

See accompanying notes to unaudited condensed consolidated financial statements.

4

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ZILOG, INC.

                     UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

                          (in thousands, except share data)

|                                                                  |  | Sep. 26,                  |  | Mar. 31,  
|----------------------------------------------------------------- |  | ------------------------- |  | ----------
|                                                                  |  | 2009                      |  | 2009      
|ASSETS                                                            |  |                           |  |           
|Current assets:                                                   |  |                           |  |           
|Cash and cash equivalents                                         |  | $35,998                   |  | $32,230   
|Accounts receivable, less allowance for doubtful accounts of $131 |  |                           |  |           
|at September 26, 2009 and $129 at March 31, 2009                  |  | 3,446                     |  | 1,698     
|Receivables under transition services agreement                   |  | 845                       |  | 1,696     
|Escrow receivable related to sold business                        |  | 1,550                     |  | 3,100     
|Inventories                                                       |  | 3,747                     |  | 4,022     
|Deferred tax assets                                               |  | 10                        |  | 10        
|Prepaid expenses and other current assets                         |  | 685                       |  | 1,199     
|Current assets associated with discontinued operations            |  | -                         |  | 960       
|Total current assets                                              |  | 46,281                    |  | 44,915    
|                                                                  |  |                           |  |           
|Long term investments                                             |  | 375                       |  | 1,100     
|Property, plant and equipment, net                                |  | 2,152                     |  | 2,347     
|Goodwill                                                          |  | 2,211                     |  | 2,211     
|Other assets                                                      |  | 1,173                     |  | 1,079     
|Total assets                                                      |  | $52,192                   |  | $51,652   
|                                                                  |  |                           |  |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                              |  |                           |  |           
|Current liabilities:                                              |  |                           |  |           
|Short term debt                                                   |  | $                       - |  | $      346
|Accounts payable                                                  |  | 2,722                     |  | 1,939     
|Payables under transition services agreement                      |  | 3,496                     |  | 275       
|Income taxes payable                                              |  | 170                       |  | 195       
|Accrued compensation and employee benefits                        |  | 1,373                     |  | 1,349     
|Other accrued liabilities                                         |  | 3,478                     |  | 3,828     
|Deferred income including remaining escrow                        |  | 5,022                     |  | 8,024     
|Current liabilities associated with discontinued business         |  | -                         |  | 1,256     
|Total current liabilities                                         |  | 16,261                    |  | 17,212    
|                                                                  |  |                           |  |           
|Deferred tax liability                                            |  | 10                        |  | 10        
|Other non-current liabilities                                     |  | 1,857                     |  | 2,804     
|Total liabilities                                                 |  | 18,128                    |  | 20,026    
|                                                                  |  |                           |  |           
|Stockholders' equity:                                             |  |                           |  |           
|Common stock, $0.01 par value; 60.0 million shares authorized:    |  |                           |  |           
|17.3 million and 17.1 million shares issued and outstanding at    |  |                           |  |           
|September 26, 2009 and March 31, 2009, respectively               |  | 186                       |  | 186       
|Additional paid-in capital                                        |  | 127,876                   |  | 127,436   
|Treasury stock                                                    |  | (7,563)                   |  | (7,563)   
|Other comprehensive income                                        |  | 185                       |  | 173       
|Accumulated deficit                                               |  | (86,620)                  |  | (88,606)  
|Total stockholders' equity                                        |  | 34,064                    |  | 31,626    
|Total liabilities and stockholders' equity                        |  | $52,192                   |  | $51,652   

See accompanying notes to unaudited condensed consolidated financial statements.

5

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ZILOG, INC.

               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                          (in thousands)

|                                                                                                               | Six Months Ended
|-------------------------------------------------------------------------------------------------------------- | ----------------
|                                                                                                               | Sep. 26,        
|                                                                                                               | 2009            
|Cash Flows from Operating Activities:                                                                          |                 
|Net income (loss) from continuing operations                                                                   | $     84        
|Adjustments to reconcile net income (loss) from continuing operations                                          |                 
|to net cash provided by (used in) continuing operating activities:                                             |                 
|Depreciation and other amortization                                                                            | 656             
|Disposition of operating assets                                                                                | -               
|Stock-based compensation                                                                                       | 431             
|Amortization of fresh-start intangible assets                                                                  | -               
|Changes in operating assets and liabilities:                                                                   |                 
|Accounts receivable, net                                                                                       | (1,748)         
|Receivable under transition services agreement                                                                 | 851             
|Escrow receivable related to sold business                                                                     | 1,550           
|Inventories                                                                                                    | 275             
|Prepaid expenses and other current and non-current assets                                                      | 432             
|Accounts payable                                                                                               | 783             
|Payables under transition services agreement                                                                   | 3,221           
|Accrued compensation and employee benefits                                                                     | 24              
|Deferred income from distributors and escrow                                                                   | (3,002)         
|Accrued and other current and non-current liabilities                                                          | (1,323)         
|Net cash provided by (used in) continuing operating activities                                                 | 2,234           
|Net cash provided by discontinued operating activities                                                         | 60              
|                                                                                                               |                 
|Cash Flows from Investing Activities:                                                                          |                 
|Redemption of long term investments                                                                            | 725             
|Capital expenditures                                                                                           | (461)           
|Net cash provided by continuing investing activities                                                           | 264             
|Net cash provided by sale of discontinued operations                                                           | 1,547           
|                                                                                                               |                 
|Cash Flows From Financing Activities:                                                                          |                 
|Proceeds from short term debt                                                                                  | -               
|Payments on short term debt                                                                                    | (346)           
|Proceeds from issuance of common stock under employee stock   
                purchase and stock option plans | 9               
|Net cash provided by (used in) continuing financing activities                                                 | (337)           
|Net cash provided by discontinued financing activities                                                         | -               
|                                                                                                               |                 
|Net increase in cash and cash equivalents                                                                      | 3,768           
|Cash and cash equivalents at beginning of period                                                               | 32,230          
|Cash and cash equivalents at end of period                                                                     | $35,998         
|                                                                                                               |                 
|Supplemental Disclosure of Non-Cash Investing and Financing Activities:                                       
|Purchase of development licenses through long term                                                             |                 
|payment arrangement                                                                                            | -               

See accompanying notes to unaudited condensed consolidated financial statements.

5

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ZILOG, INC.

               UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                    (in thousands)



|                                                                 |  | Common Stock |  |   | Additional
Paid-in |  |   | Treasury |  |   | Other
Comprehensive |  |   | Accumulated |  |   | Total
Stock-
holders'
|---------------------------------------------------------------- |  | ------------ |  | - | ------------------ |  | - | -------- |  | - | ------------------- |  | - | ----------- |  | - | ---------------------
|                                                                 |  | Shares       |  |   | Amount             |  |   | Capital  |  |   | Stock               |  |   | Income      |  |   | Deficit              
|Balance at March 31, 2008                                        |  | 16,923       |  | $ | 185                |  | $ | 125,838  |  | $ | (7,456)             |  | $ | 102         |  | $ | (91,790)             
|Issuance of common stock under stock option plans                |  | 5            |  |   | -                  |  |   | 18       |  |   | -                   |  |   | -           |  |   | -                    
|Cancellation of restricted shares                                |  | (13)         |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | -                    
|Issuance of common stock under employee stock      purchase plan |  | 28           |  |   | -                  |  |   | 75       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense - directors shares              |  | 18           |  |   | -                  |  |   | 56       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense                                 |  | -            |  |   | -                  |  |   | 359      |  |   | -                   |  |   | -           |  |   | -                    
|Comprehensive loss:                                              |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Net loss                                                         |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | (3,298)              
|Total comprehensive loss                                         |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | -                    
|Balance at September 27, 2008                                    |  | 16,961       |  | $ | 185                |  | $ | 126,346  |  | $ | (7,456)             |  | $ | 102         |  | $ | (95,088)             
|                                                                 |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Balance at March 31, 2009                                        |  | 17,111       |  | $ | 186                |  | $ | 127,436  |  | $ | (7,563)             |  | $ | 173         |  | $ | (88,606)             
|Issuance of common stock under employee stock      purchase plan |  | 4            |  |   | -                  |  |   | 9        |  |   | -                   |  |   | -           |  |   | -                    
|Restricted shares cancelled                                      |  | (7)          |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | -                    
|Restricted shares granted                                        |  | 167          |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Stock-based compensation expense - directors shares              |  | 24           |  |   | -                  |  |   | 28       |  |   | -                   |  |   | -           |  |   | -                    
|Stock-based compensation expense                                 |  | -            |  |   | -                  |  |   | 403      |  |   | -                   |  |   | -           |  |   | -                    
|Comprehensive income:                                            |  |              |  |   |                    |  |   |          |  |   |                     |  |   |             |  |   |                      
|Other comprehensive income                                       |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | 12          |  |   |                      
|Net income                                                       |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | 1,987                
|Total comprehensive income                                       |  | -            |  |   | -                  |  |   | -        |  |   | -                   |  |   | -           |  |   | -                    
|Balance at September 26, 2009                                    |  | 17,298       |  | $ | 186                |  | $ | 127,876  |  | $ | (7,563)             |  | $ | 185         |  | $ | (86,620)             

See accompanying notes to unaudited condensed consolidated financial statements.

7

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ZILOG, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.	BASIS OF PRESENTATIONThe 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 full fiscal year. These unaudited 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 2009 Annual Report filed on Form 10-K
(File Number 001-13748) for the fiscal year ended March 31, 2009, filed on June 29, 2009 with the Securities and Exchange Commission.

The Company's fiscal year ends March 31 with interim results based on fiscal quarters of approximately thirteen
weeks in duration ending on the closest Saturday to each calendar quarter end, with the exception of the fiscal fourth quarter, which ends on
March 31.  Certain reclassifications have been made to prior-period balances to present the consolidated financial statements on a consistent
basis with the current year presentation. Any reference to year pertains to the fiscal year unless otherwise indicated. The operating results for
any period are not necessarily indicative of results for any subsequent period or the full fiscal year.

The condensed consolidated balance sheet at March 31, 2009 was derived from audited financial statements at that date, but does not
include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial
statements.
NOTE 2.  	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company's significant accounting policies is described in Note 1 of "Notes to Consolidated
Statements" in its Annual Report for the 2009 fiscal year ended March 31, 2009, filed on Form 10-K with the Securities and Exchange
Commission on June 29, 2009. The Company's significant accounting policies remain unchanged from those disclosed on Form 10-K for the
fiscal year ended March 31, 2009.

Recent Accounting Pronouncements:

FASB Accounting Standards CodificationIn June 2009, the
Financial Accounting Standards Board"FASB"issued the authoritative guidance to eliminate
the historical GAAP hierarchy and establish only two levels of U.S. GAAP, authoritative and non-authoritative. When launched on July 1,
2009, the FASB Accounting Standards Codification (ASC) became the single source of authoritative, nongovernmental GAAP, except for
rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. The subsequent issuances of new
standards will be in the form of Accounting Standards Updates that will be included in the ASC. This authoritative guidance was effective for
financial statements for interim or annual reporting periods ended after September 15, 2009. The Company adopted the new codification in
the second quarter of fiscal 2010 and it did not have any impact on the Company's condensed consolidated financial statements.

In August 2009, the FASB
issued the authoritative guidance to provide additional guidance (including illustrative examples) in FASB ASC 2009-05

8

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NOTE 3.	FAIR VALUE MEASUREMENTS

In accordance with FASB ASC 825-10, "Financial Instruments Disclosure" the Company is required to disclose the fair value
of financial instruments for which it is practical to estimate fair value. To obtain fair values, observable market prices are used if available. In
some instances, observable market prices are not readily available and fair value is determined using present value or other techniques
appropriate for a particular financial instrument. These techniques involve judgment and as a result are not necessarily indicative of the
amounts the Company would realize in a current market exchange. The use of different assumptions or estimation techniques may have a
material effect on the estimated fair value amounts.

The estimated fair values of the Company's financial instruments are as follows (unaudited, in thousands):

|                                                |  | Sep. 26, 2009 |  | Mar. 31, 2009
|----------------------------------------------- |  | ------------- |  | -------------
|                                                |  | Carrying      |  | Fair         
|                                                |  | Value         |  | Value        
|Financial Assets                                |  |               |  |              
|Cash and cash equivalents                       |  | $35,998       |  | $35,998      
|Trade receivables, net                          |  | 3,446         |  | 3,446        
|Receivables under transition services agreement |  | 845           |  | 845          
|Escrow receivable, sale of businesses           |  | 1,550         |  | 1,550        
|Auction Rate Securities                         |  | 375           |  | 375          
|Financial Liabilities                           |  |               |  |              
|Short term debt                                 |  | -             |  | -            
|Accounts payable                                |  | 2,722         |  | 2,722        
|Payables under transition services agreement    |  | 3,496         |  | 3,496        
|Liabilities associated with disposal activities |  | 1,285         |  | 1,285        

Cash and cash equivalents, trade receivables, receivables under transition services agreement, short term debt, accounts payable and
payables under transition services agreement have carrying values that approximate fair values as all are short term maturing in 90 days or
less.

Escrow receivables are time based contractual receivables, 50% was received in the quarter ended September 26, 2009 and the
remaining 50% is due in February, 2010.

Auction rate securities are stated at par value based upon observable inputs.

Liabilities associated with disposal activities include accrued costs related to non-cancellable minimum payments for test commitments
associated with discontinued operations as well as accrued lease costs related to a portion of the Company's headquarters vacated at the
time the discontinued operations were sold.

In accordance with FASB ASC 820, "Fair Value Measurement and Disclosure" the following table represents
the Company's fair value hierarchy for its financial assets
(cash equivalents and available for sale investments) measured at fair value on a recurring basis as of September 26, 2009 (in thousands,
unaudited):

|                                  | Sep. 26, 2009
|--------------------------------- | -------------
|                                  | Fair Value   
|U.S. Treasury Bills, Treasury MMF | $30,354      
|Auction rate preferred securities | 375          
|Total                             | $30,729      

9

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Since February 2008, due to various factors including the tightening of liquidity in the financial market, regularly held auctions for Auction
Rate Preferred Securities ("ARPS"), have been unsuccessful. Following the failure of these auctions, the Company has received
$3.625 million from redemptions of its ARPS. The remaining ARPS balance of $0.375 million as of September 26, 2009, has been classified
as long-term investments and accrues interest pending their redemption or sale.

In determining fair value, the Company uses various valuation techniques, including market and income approaches to value available-for-sale
investments.  The availability of observable inputs can vary from instrument to instrument and to the extent that valuation is based on
inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. The degree of
judgment exercised by the Company's management in determining fair value is greatest for instruments categorized in Level 3. The Company
has maximized its use of observable inputs in determining the fair value of its ARPS holdings. The Company notes observable inputs that its
ARPS:

- have maintained AAA credit ratings
- are collateralized at greater than 100% of par value
- continue to pay interest in accordance with their contractual terms which are greater than applicable Libor or US treasury yields
- are stated at par value by the investment broker, and
- have a history of redemptions at par value. Over 90% of the Company's original ARPS have been redeemed at par

Accordingly, the remaining ARPS balance of $0.375 million is categorized as Level 2 for fair value measurement under FASB ASC 820
and has been recorded at full par value on the unaudited condensed consolidated balance sheet as of September 26, 2009. The Company
currently believes the ARPS values are not impaired and as such, no impairment has been recognized against the investment. If the issuers
are unable to successfully close future auctions and their credit rating deteriorates, the Company may be required to record an impairment
charge against the value of its ARPS.

NOTE 4.  DISCONTINUED OPERATIONS AND TRANSITION SERVICES

On February 18, 2009, the Company sold its universal remote control and secured transaction processor businesses to Maxim
Integrated Products Inc (Maxim) and Universal Electronics Inc for a total sale price of $31 million of which $3.1 million was placed in escrow.
In September 2009, $1.55 million of this escrow amount was received by the Company.  The remaining balance is scheduled to be received
in February 2010.

In accordance with FASB ASC 205 "Financial Statement Presentation" and FASB ASC 360-10-05 "Impairment or
Disposal of of Long-Lived Assets", the assets and liabilities, results of operations and cash flows related to the sold businesses, have
been classified as discontinued operations in the condensed consolidated financial statements for all periods presented through the date of
the sale.  Cash flows associated with the sold businesses have been segregated in the condensed consolidated statements of cash flows as
separate line items within operating, investing and financing activities.

The net income from discontinued operations of $36,000 and $0.356 million recorded for the three and six months ended September 26,
2009, respectively, reflects the recognition of certain distribution revenue, and associated gross margin, that was deferred income related to
distribution inventory prior to the sale of the discontinued businesses that were not sold as part of the sale transaction. Remaining deferred
income for distribution inventory related to the discontinued operations at September 26, 2009, is not material.

10

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The following table summarizes results from discontinued operations (unaudited, in thousands):

|                                                                |  | Three Months Ended |  | Six Months Ended
|--------------------------------------------------------------- |  | ------------------ |  | ----------------
|                                                                |  | Sep. 26,           |  | Sep. 27,        
|                                                                |  | 2009               |  | 2008            
|Net sales from discontinued operations                          |  | $47                |  | $8,552          
|Cost of sales                                                   |  | 11                 |  | 4,130           
|Gross margin                                                    |  | 36                 |  | 4,422           
|Other expenses and credits                                      |  | -                  |  | 2,314           
|                                                                |  |                    |  |                 
|Net income before provision for taxes ondiscontinued operations |  | 36                 |  | 2,108           
|Provision for income taxes                                      |  | -                  |  | 50              
|Net income from discontinued operations                         |  | $36                |  | $2,058          

In conjunction with the sale of the discontinued operations, the company entered into a Transition Services Agreement (TSA) with Maxim
to provide certain discontinued operations business support for up to 12 months from the date of the sale. These support activities include
manufacturing and shipment support, customer service and support, technical support, services including purchasing, invoicing, collections
and information systems. At September 26, 2009 receivables outstanding from Maxim under the TSA were $0.8 million and primarily related
to purchases of goods and services to manufacture and ship product to Maxim customers. Additionally, at September 26, 2009 payables
outstanding under the TSA were $3.5 million including $2.7 million payable to Maxim and $0.8 million payable to suppliers.

NOTE 5.  INTELLECTUAL PROPERTY SALE

On May 27, 2009, the Company sold certain intellectual property rights
associated with five of the Company's patents. The related patents are 5386469, 5588118, 5781784, 5805834 and 6154793. The patents
were sold and assigned to a non practicing entity ("NPE") for a cash payment of $1 million.
The Company may share in future revenue on these patents.
The transaction was recorded as a credit to other income. The terms and conditions of the agreement are
confidential. The Company currently believes that the terms and conditions of the agreement are not material to its future financial
performance.

NOTE 6.  DEFERRED INCOME

The Company ships products to distributors who generally have contractual terms and conditions including rights of return and/or
price protection on unsold merchandise held by them. As such, revenue and the associated product costs are deferred until products are
resold by the distributors to end users (sell-through method). Although revenue is deferred until it is resold, title of products sold to distributors
transfers upon shipment. Accordingly, shipments to distributors are reflected in the condensed consolidated balance sheets as accounts
receivable and a reduction of inventories at the time of shipment. Deferred revenue and the corresponding cost of sales on shipments to
distributors that may be unsold are reflected in the condensed consolidated balance sheets on a net basis as "Deferred
income".

On February 18, 2009, the Company sold its universal remote control and secured transactions processor businesses. Of the total
consideration $3.1 million was placed in escrow and recognized as deferred revenue pending resolution of post - transaction requirements.
As of September 26, 2009, $1.55 million remains in escrow to account and is due in February, 2010.  This remaining escrow amount is
included in current assets and deferred income on the condensed consolidated balance sheet at September 26, 2009.

11

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The following table represents the details of deferred income for the periods indicated (unaudited, in thousands):

|                                                        |  | Sep. 26, |  | Mar. 31,
|------------------------------------------------------- |  | -------- |  | --------
|                                                        |  | 2009     |  | 2009    
|Deferred gross income on shipments to distributors      |  | $5,711   |  | $7,899  
|Deferred cost associated with shipments to distributors |  | (2,239)  |  | (2,975) 
|Deferred income on shipments to                         |  |          |  |         
|distributors, net                                       |  | 3,472    |  | 4,924   
|                                                        |  |          |  |         
|Discontinued operations, deferred                       |  |          |  |         
|income on escrow                                        |  | 1,550    |  | 3,100   
|Total deferred income                                   |  | $5,022   |  | $8,024  

NOTE 7.	INVENTORIES

Inventories are stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market. Provisions, when
required, are made to reduce inventory values from cost to their estimated net realizable values. It is possible that estimates of net realizable
value can change in the short-term. Inventory reductions for excess or obsolete inventory are released only upon sale, scrap or other
disposition of the reduced inventory. Inventories, net of provisions, consist of the following (unaudited, in thousands):

|                 | Sep. 26, |  | Mar. 31,
|---------------- | -------- |  | --------
|                 | 2009     |  | 2009    
|Raw materials    | $188     |  | $234    
|Work-in-progress | 2,456    |  | 2,762   
|Finished goods   | 1,103    |  | 1,026   
|Inventory, net   | $3,747   |  | $4,022  

NOTE 8.      STOCK, OPTIONS AND STOCK-BASED COMPENSATION

Stock-based compensation. The Company has a stock-based compensation program that includes non-statutory stock
option awards and restricted stock awards ("RSAs").  Stock options are generally time-based, vesting 25% on the first anniversary
of the grant-date and monthly thereafter over the next three years and expire ten years from the grant-date. As of September 26, 2009, the
Company had 2,364,425 shares available for grant under all plans.

Additionally, the Company has an Employee Stock Purchase Plan ("ESPP") that allows employees to purchase shares of
common stock at 85% of the fair market value at the lower of either the date of enrollment or the date of purchase. In addition to the shares
available for issuance under the stock option and restricted stock plans, the
Company had approximately 923,228 shares of common stock reserved for future issuance under its ESPP plan as of September 26,
2009.

The Company records stock-based compensation in accordance with the provisions of  FASB ASC 718 "Compensation - Stock
Compensation" which establishes valuation and accounting resulting in the Company's recognition of expense related to the fair value
of its stock-based compensation awards.

During the three and six month periods ended September 26, 2009, the Company recorded $0.2 million and $0.4 million in stock
compensation expense for continuing operations which includes the applicable compensation expenses for the Company's Fiscal 2009
employee stock incentive plan, respectively.  In comparison, during the three and six month periods ended September 27, 2008, the
Company recorded $0.3 million and $0.7 million in stock compensation expense  for continuing operations, which included the applicable
compensation expenses for the Company's fiscal 2009 stock incentive plan, respectively.

12

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The following table sets forth the total non-cash stock-based compensation expense resulting from equity plans and incentive programs
included in the Company's unaudited condensed consolidated statements of operations (unaudited, in thousands)

|                                       |  |  |  | Three Months Ended |          | Six Months Ended
|-------------------------------------- |  |  |  | ------------------ | -------- | ----------------
|                                       |  |  |  |                    | Sep. 26, |                 
|                                       |  |  |  |                    | 2009     |                 
|Cost of sales                          |  |  |  |                    | $19      |                 
|Research and development               |  |  |  |                    | 20       |                 
|Selling, general and administrative    |  |  |  |                    | 167      |                 
|Total stock-based compensation expense |  |  |  |                    | $206     |                 

The fair value of stock-based awards expense resulting from equity plans was estimated on the date of grant using the Black-Scholes
valuation pricing model with the following weighted-average assumptions:



|Stock Options                                       |  |  | Three Months Ended |  |  | Six Months Ended
|--------------------------------------------------- |  |  | ------------------ |  |  | ----------------
|                                                    |  |  | Sep. 26,           |  |  | Sep. 27,        
|                                                    |  |  | 2009               |  |  | 2008            
|Expected life (in years)                            |  |  | 4.1                |  |  | 4.8             
|Interest rate                                       |  |  | 2.1%               |  |  | 3.3%            
|Volatility                                          |  |  | 53.1%              |  |  | 49.1%           
|Dividend yield                                      |  |  | -                  |  |  | -               
|Weighted-average per share fair value at grant date |  |  | $1.01              |  |  | $1.53           



|Employee Stock Purchase Plan                        |  |  | Three Months Ended |  |  | Six Months Ended
|--------------------------------------------------- |  |  | ------------------ |  |  | ----------------
|                                                    |  |  | Sep. 26,           |  |  | Sep. 27,        
|                                                    |  |  | 2009               |  |  | 2008            
|Expected life (in years)                            |  |  | 0.6                |  |  | 0.7             
|Interest rate                                       |  |  | 0.25%              |  |  | 1.9%            
|Volatility                                          |  |  | 61.8%              |  |  | 64.7%           
|Dividend yield                                      |  |  | -                  |  |  | -               
|Weighted-average per share fair value at grant date |  |  | $0.63              |  |  | $0.91           

The computation of expected volatility for the three and six months ended September 26, 2009 and September 27, 2008 is based on
historical implied volatility. The computation of expected life is based on a combination of historical and expected exercise patterns. The
interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

13

---

Stock option activity for the six months ended September 26, 2009, is as follows (unaudited):

Weighted-Weighted-

AverageAverage

Remaining

AggregateExercise Price

Contractual Term

Intrinsic ValueShares

(per share)

(years)

(000's)Outstanding at March 31, 2009


1,814,646

$              4.87Grants


79,625

$              2.33Forfeitures or expirations


(355,372)

$              5.73Outstanding at September 26, 2009


1,538,899

$              4.54

6.9

$                   15Outstanding Vested and Expected to Vestat September 26, 2009


1,458,483

$              4.60Exercisable at September 26, 2009


1,049,948

$              5.02The aggregate intrinsic value in the table above represents the total pretax intrinsic value, that is, the difference
between the Company's closing stock price on the last trading day of the period and the exercise price times the number of shares that would
have been received by the option holders had all option holders exercised their options on September 26, 2009. This amount will change
based on fluctuations of the fair market value of the Company's stock. The total intrinsic value of options vested and expected to vest is
approximately $12,700 at September 26, 2009.

There were no stock option exercisesduring the six months ended September 26, 2009. The weighted-average exercise price of options
granted for the six months ended September 26, 2009 and September 27, 2008 was $2.33 and $3.41 per share, respectively.

No income tax benefit was realized from stock option exercises during the three and six months ended September 26, 2009 and
September 27, 2008. In accordance with FASB ASC 718 "Compensation - Stock Compensation", the Company presents excess
tax benefits from the exercise of stock options, if any, as financing cash flows rather than operating cash flows.

As of September 26, 2009, $0.74 million of total unrecognized compensation costs related to stock options is expected to be recognized
over a weighted-average remaining period of 1.89 years.  The total unrecognized compensation cost related to restricted shares granted as
of September 26, 2009 is $0.31 million, which is expected to be recognized over a weighted-average remaining period of 1.4 years.

NOTE 9.	SPECIAL CHARGES AND CREDITS

The components of special charges and credits are as follows (unaudited, in thousands):

|                                                   |  | Three Months Ended |  |  | Six Months Ended
|-------------------------------------------------- |  | ------------------ |  |  | ----------------
|                                                   |  | Sep. 26,           |  |  | Sep. 27,        
|                                                   |  | 2009               |  |  | 2008            
|Restructuring of operations:                       |  |                    |  |  |                 
|Reorganization, severance and termination benefits |  | $     77           |  |  | $   554         
|Total special charges and credits                  |  | $77                |  |  | $554            

14

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During the three and six months ended September 26, 2009 the Company incurred special charges of $0.1 million and $0.2 million,
respectively.  These charges include remaining severance and other costs related to the Company's workforce reductions in December 2008
and January 2009 associated with lower demand and sales affected by the global economic crisis. Additionally, the Company incurred
additional costs and expenses associated with its consolidation activities following the sale of the discontinued operations including facility
lease costs and supplier commitment expenses.

During the three and six months ended September 27, 2008, the Company incurred $0.6 million and $1.1 million, respectively, in special
charges.  Special charges include severance and other costs related to the Company's test outsourcing activities.

The following table summarizes activity in accrued special charges which is included in other accrued liabilities on the condensed
consolidated balance sheets (unaudited, in thousands):

|                          |   | Accrued
|------------------------- | - | -------
|                          |   | Special
|                          |   | Charges
|Balance at March 31, 2009 | $ | 638    
|Accruals                  |   | 229    
|Cash payments             |   | (362)  
|Balance at Sep. 26, 2009  | $ | 505    

NOTE 10.	GEOGRAPHIC AND SEGMENT INFORMATION

Segment Information. The Company's business is comprised of one operating segment. The Company engages primarily
in the design, development, manufacture and marketing of semiconductor products. The Company sells its products to distributors and direct
customer accounts including original equipment manufacturers ("OEMs") and original design manufacturers ("ODMs")
in a broad range of market segments. The Company's operations outside the United States consist of a test development and global support
facility in the Philippines as well as sales and support centers in certain foreign countries. U.S. domestic operations are responsible for the
design, development and marketing of the Company's products. The Philippine facility is reimbursed in relation to its value added with respect
to test development and global support 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 global support
and foreign sales office operations.

The following table summarizes the Company's net sales by region and by channel (unaudited, in thousands):

|                      |  |  | Three Months Ended |  |  | Six Months Ended
|--------------------- |  |  | ------------------ |  |  | ----------------
|                      |  |  | Sep. 26,           |  |  | Sep. 27,        
|                      |  |  | 2009               |  |  | 2008            
|Net sales by region:  |  |  |                    |  |  |                 
|Americas              |  |  | $3,629             |  |  | $3,783          
|Asia, including Japan |  |  | 3,471              |  |  | 4,900           
|Europe                |  |  | 970                |  |  | 1,791           
|Total net sales       |  |  | $8,070             |  |  | $10,474         
|                      |  |  |                    |  |  |                 
|Net sales by channel: |  |  |                    |  |  |                 
|Direct                |  |  | $2,310             |  |  | $2,404          
|Distribution          |  |  | 5,760              |  |  | 8,070           
|Total net sales       |  |  | $8,070             |  |  | $10,474         

15

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Major customers:  For the three months ended September 26, 2009, one distributor and one customer each individually
accounted forgreater than 10% of the Company's total net sales from continuing operations.  The distributor and customer
accounted for approximately 40% and 11%, respectively, of total net sales from continuing operations during the three months ended
September 26, 2009.

For the six months ended September 26, 2009, two distributors and one customer each individually accounted forgreater
than 10% of the Company's total net sales from continuing operations.  The two distributors and one customer accounted for approximately
40%, 13% and 10%, respectively, of total net sales from continuing operations.

For the three months ended September 27, 2008, three distributors each individually accounted forgreater than 10% of the Company's total net sales from continuing operations.  The distributors accounted for approximately 43%,
10% and 10% of total net sales from continuing operations, respectively.

For the six months ended September 27, 2008, two distributors each individually accounted forgreater than 10% of the
Company's total net sales from continuing operations. The distributors accounted for approximately 43% and 10% of total net sales from
continuing operations, respectively.

NOTE 11.	CONTINGENCIES

On August 11, 2005, Microchip Technology, Inc. ("Microchip") filed a patent infringement claim against the
Company in the U.S. District Court of Arizona (case number CV05-2406-PHX-MHM). Microchip alleges that the Company has infringed, and
currently infringes, its patents numbered 5,847,450, 6,696,316 and 6,483,183. Microchip claims that unspecified products of the company,
including the Z8 Encore! XP 4K Series of products, infringe these patents and is seeking preliminary and permanent injunctive relief,
unspecified damages and costs, including attorneys' fees. The Company filed a response to the claims on September 15, 2005
generally denying the claims and challenging the validity of the patents. On January 10, 2006, the Company filed a request for patent re-
examination with the U.S. PTO, which was granted in February and March 2006 for all 3 patents. On April 11, 2008, the Company received a
notice that all of Microchip's claims under these three patents have been rejected by the U.S. PTO. After this favorable ruling, Microchip filed
appeal notices in the U.S. PTO in May 2008.  The Company does not believe it is feasible to predict or determine the outcome or resolution of
this litigation at this time. The Company believes it has meritorious defenses and will defend itself against these claims vigorously. The
Company may incur substantial expenses in its defense against these claims. In the event of a determination adverse to the Company, it may
incur substantial monetary liabilities and be required to change its business practices. Either of these could have a material adverse effect on
its financial position, results of operations and/or cash flows.

The Company is participating in other litigation and responding to other claims arising in the ordinary course of business.  The Company
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 the Company's financial statements, although there can be no assurance in this regard.

From time to time the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of
intellectual property rights and patents arising from the use of its products. During the ordinary course of business, in certain limited
circumstances, the Company has agreed to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally
parties with which the Company has commercial relations, in connection with certain intellectual property infringement claims by any third
party with respect to its products and services. The Company has indemnification arrangements that limit its net contingent obligation to pay
for defense costs, if any, up to a maximum of $2 million. To date, there have not been any costs incurred in connection with such
indemnification arrangements; therefore, there is no accrual of such amounts at September 26, 2009. The Company discloses
indemnification liabilities according to FASB ASC 460 "Guarantees". Under FASB ASC 450  " Contingencies" , a claim
would be accrued when a loss is probable and the amount can be reasonably estimated. At September 26, 2009, no such amounts are
accrued.

In connection with the lease in July 2007 for its corporate headquarters located in San Jose, California, the Company established an
Irrevocable Letter of Credit in the amount of $0.3 million with its bank.

16

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NOTE 12.	INCOME TAXES

The Company adopted the provisions of FASB ASC 740 "Income Taxes" as they relate to the accounting for the uncertainty in
income taxes effective April 1, 2007. In connection with the adoption, the Company has analyzed filing positions in all of the federal and state
jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.

As of September 26, 2009, the total amount of unrecognized tax benefits was approximately $5.6 million of which $4.6 million is recorded
as a deferred tax asset that is fully offset by a valuation allowance and $1.0 million which if recognized would affect the Company's effective
tax rate. The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations.
Management assesses the Company's tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the
countries in which the Company does business.

A valuation allowance is required to be recorded if in management's judgment, based on available evidence, it is more likely than not that
some portion or all of the deferred tax assets will not be realized.  Based on available evidence, management has concluded that a
valuation allowance is necessary to reduce the net deferred tax asset.  Accordingly, deferred tax assets have been recognized only to
the extent of deferred tax liabilities.

The Company recognizes interest in accordance with FASB ASC 740 and recognizes penalties in accordance with FASB ASC 740 which
are classified as part of income taxes.  For the six months ended September 26, 2009, accrued interest and penalties related to uncertain tax
positions was not material.

The Company is subject to taxation in the United States and various states and foreign jurisdictions.  There are no ongoing examinations
by taxing authorities at this time.  The Company's various tax years beginning in fiscal 2001 through fiscal 2010 remain open in various taxing
jurisdictions.

During the three and six months ended September 26, 2009, the Company's income tax provision was $0.02 million and $0.06 million,
respectively, which primarily reflects provisions for taxes in certain profitable foreign jurisdictions. During the three and six months ended
September 27, 2008, the Company's income tax provision was $0.1 million and $0.2 million, respectively, which primarily reflects amortization
of deferred charges and provisions for taxes in certain profitable foreign jurisdictions.

The Company provides for income tax expense in foreign jurisdictions where its foreign subsidiaries operations generate profits that are
taxable.  The Company's income tax expense reflects the estimated annual effective tax rate at that time based on projections of operations.
Tax authorities may challenge the allocation of profits between the Company's subsidiaries and may challenge certain tax benefits claimed on
its tax returns, and the Company may not prevail in any such challenge.  If the Company were not to prevail, it could be subject to
higher tax rates or lose certain tax benefit that could result in a higher tax rate.

17

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NOTE 13.   RETIREMENT AND BENEFIT PLANS

U.S. 401(k) retirement plan: The Company has an employee savings plan that qualifies as a deferred salary arrangement
under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Under the 401(k) Plan, participating U.S. employees may
defer a portion of their pretax earnings, up to the Internal Revenue Service annual contribution limit. The Company may make matching
contributions on behalf of each participating employee in an amount equal to 100% of the participant's deferral contribution, up to 1.5% of the
participant's compensation on a quarterly basis. The Company may also make additional discretionary contributions to the 401(k) Plan.
Matching contributions to the 401(k) Plan were less than $0.1 million for the six months ended September 26, 2009 and the six months ended
September 27, 2008, respectively. There were no discretionary contributions made in the six months ended September 26, 2009 and the six
months ended September 27, 2008, respectively.

Philippine defined benefit plan: The Company's Philippines subsidiary maintains a defined benefit pension plan for local
employees, which is consistent with local statutes and practices. The Company has adopted the provisions of FASB ASC 715
"Compensation - Retirement Benefits".  As of September 26, 2009 based on the Plan's actuarial report, the pension plan was
over-funded by approximately $0.3 million which is classified as other assets on the consolidated balance sheet.  During the six months
ended September 26, 2009, the net periodic benefit costs were not material.

NOTE 14.   NET INCOME (LOSS) PER SHARE

The following table presents the calculation of basic and diluted net loss per share of common stock for the periods indicated (in
thousands, except per share data):.

|                                              |  |  | Three Months Ended |  | Six Months Ended
|--------------------------------------------- |  |  | ------------------ |  | ----------------
|                                              |  |  | Sep. 26,           |  |                 
|                                              |  |  | 2009               |  |                 
|Net income (loss)                             |  |  | $1,633             |  |                 
|                                              |  |  |                    |  |                 
|Weighted-average shares outstanding - basic   |  |  | 17,291             |  |                 
|Weighted-average shares outstanding - diluted |  |  | 17,297             |  |                 
|Basic and diluted net loss per share          |  |  | $0.09              |  |                 

At September 26, 2009, and September 27, 2008, options to purchase 1.5 million and 2.1 million shares of common stock, respectively,
are excluded from the determination of diluted net income (loss) per share, as the effect of such shares is anti-dilutive.

NOTE 15.   SUBSEQUENT EVENTS

The Company has evaluated all events or transactions that occurred after September 26, 2009 through the filing date of this
document and did not have any material recognizable and unrecognizable subsequent events.

18

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

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including
those set forth in the section entitled "Risk Factors" in our Form 10-K for the year ended March 31, 2009 and in other sections of
this quarterly report.

Overview

The following is management's discussion and analysis of financial condition and results of our operations and those of our
subsidiaries for the fiscal three-month and six-month periods ended September 26, 2009 and September 27, 2008.  This discussion and
analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere
herein and in our 2009 annual report on Form 10-K.  Management's discussion and analysis provides information concerning our
business environment, consolidated results of operations and liquidity and capital resources.

Our fiscal year ends on March 31 with interim results based on fiscal quarters of approximately thirteen weeks in duration ending
on the closest Saturday to each calendar quarter end, with the exception of the fourth quarter, which ends on March 31.  The
operating results for any interim period are not necessarily indicative of results for any subsequent period or the full fiscal year.

During fiscal 2009, we experienced a significant reduction in sales reflecting lower demand for product and the global worldwide
recession. Following a review of our strategy in light of an anticipated continuation of contraction in the market place, on February 18, 2009,
we sold our universal remote control and secured transaction processor businesses to Maxim and UEI for approximately $31 million in cash
including $3.1 million that was held in escrow and classified as deferred revenue to satisfy any losses incurred by Maxim or UEI that may
result from inaccuracies in our representations and warranties in the acquisition agreement or our failure to fulfill certain obligations in the
acquisition agreement. The escrow was scheduled to be released 50% on August 16, 2009 or $1.55 million, which has been received and
recorded as gain on sale of discontinued operations for the three and six months ended September 26, 2009 and the remaining 50% on
February 18, 2010. A gain on the sale of the businesses of $21.6 million was recorded in the twelve months ended March 31, 2009. In
accordance with FASB ASC 205 "Presentation of Financial Statements" and FASB ASC 360-10-05 "Impairment or Disposal
of Long Lived Assets", the assets and liabilities, results of operations and cash flows related to the sale businesses, have been
classified as discontinued operations in the condensed consolidated financial statements for all periods presented. Cash flows associated
with the discontinued operations have been segregated in the condensed consolidated statements of cash flows as separate line items within
operating, investing and financing activities. As a result, our historical financial statements have been restated to exclude assets, liabilities
and results of operations and cash flows related to the sale business which are reflected as discontinued operations. Restatement of these
balances may make reconciliation or reference to previously filed financial statements difficult.

Critical Accounting Estimates

Our critical accounting policies are disclosed on pages 32-34 of the Annual Report on Form 10-K for the fiscal year ended March
31, 2009 and have not changed materially as of September 26, 2009.

On an on-going basis, we evaluate our estimates and assumptions, including those related to sales returns, allowance
for doubtful accounts, inventory write-downs, asset impairments, stock-based compensation expense and deferred taxes.  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.  The Company's critical accounting estimates are described in detail in our Form 10-K for the 2009
fiscal year ended March 31, 2009, filed on June 29, 2009.

19

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Reporting Segments

We conduct our business in one reportable segment to reflect the manner in which our chief operating decision-maker allocates
resources and assesses the performance of our business.

Results of Operations

O

|                      |  |  | Three Months Ended |  |  | Six Months Ended
|--------------------- |  |  | ------------------ |  |  | ----------------
|                      |  |  | Sep. 26,           |  |  | Sep. 27,        
|                      |  |  | 2009               |  |  | 2008            
|Net sales by region:  |  |  |                    |  |  |                 
|Americas              |  |  | $3,629             |  |  | $3,783          
|Asia, including Japan |  |  | 3,471              |  |  | 4,900           
|Europe                |  |  | 970                |  |  | 1,791           
|Total net sales       |  |  | $8,070             |  |  | $10,474         
|                      |  |  |                    |  |  |                 
|Net sales by channel: |  |  |                    |  |  |                 
|Direct                |  |  | $2,310             |  |  | $2,404          
|Distribution          |  |  | 5,760              |  |  | 8,070           
|Total net sales       |  |  | $8,070             |  |  | $10,474         

Key Metrics

Other key indices relevant in understanding our business and financial performance include the following metrics (unaudited):

|                                          |  |  | Three Months Ended
|----------------------------------------- |  |  | ------------------
|                                          |  |  | Sep. 26,          
|                                          |  |  | 2009              
|Days sales outstanding                    |  |  | 38                
|Net sales to inventory ratio (annualized) |  |  | 8.6               
|Weeks of inventory at distributors        |  |  | 12                
|Current ratio                             |  |  | 2.8               

We calculate each of these key metrics based on annualized quarterly results of operations data and balance sheet data as of the end of
the period indicated. Each of these key metrics is described below:

Days sales outstanding, DSO, is a common metric used to analyze how quickly our customers pay us. This metric is influenced largely by
the timing of our customer billings, collections, and individual payment terms. At September 26, 2009, our DSO was 38 days as compared to
22 days at September 27, 2008. The increase in DSO is largely due to the non linearity of our shipments in September 2009 as a result of
higher new order levels from higher demand resulting in higher receivables on a percentage basis versus the comparable quarter a year ago.

Net sales to inventory ratio is a metric we use to analyze how quickly our investment in inventories is recovered by our sales and is
calculated by dividing ending inventory into sales for the quarter annualized. This metric may not be comparable to other companies who use
inventory ratios to analyze inventory and is not the same as a typical inventory turns ratio. Our net sales to inventory ratio increased to 8.6
from 7.5 in the fiscal quarter ended September 26, 2009 compared to the fiscal quarter ended September 27, 2008 reflecting lower inventory
levels versus the sales level.

Weeks of inventory at distributors measures how quickly our distributors sell the inventories that we sell to them.

20

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We do not recognize
revenue on shipments to distributors until our distributors resell our products. Although our distributors in various regions of the world
maintain

Current ratio represents current assets divided by current liabilities and is commonly used to assess a company's liquidity. We use this
ratio to make spending determinations on discretionary items.  Our current ratio as of September 26, 2009 was 2.8, an increase from 1.6 as
of September 27, 2008. This increase is primarily due to an increase in cash and cash equivalents including the proceeds from the sale of
our remote control and secured transaction businesses.
This has been offset by the reclassification of our ARPS from long-term investments to cash and cash equivalents as ARPS have
been redeemed by issuers and by the reduction in current assets related to discontinued operations, the reduction in short term loans and the
decline in deferred income on shipments to our distributors as their inventory levels decreased.

Three Months Ended September 26, 2009 Compared to Three Months Ended September 27, 2008

Net Sales.  Net sales from continuing operations were $8.1 million for the fiscal quarter ended September 26, 2009, as
compared to net sales from continuing operations of $10.5 million for the fiscal quarter ended September 27, 2008.

Our net sales declined 23% for the fiscal quarter ended September 26, 2009, as compared to the fiscal quarter ended September 27,
2008, reflecting the impact of the recessionary trends in the worldwide economy that affected the demand for our products both regionally
and within market applications including consumer and industrial type products. The decline primarily reflects a reduction in both the sales of
our classic microcontroller products where markets and applications are broad based and significantly impacted by the global reduction in
demand as well as declines in our embedded flash microcontroller products including power management solutions for consumer market
applications such as digital voice communication and portable consumer products. This decline was partially offset by the increase in
royalties received on licensed products.  These royalties were $1.0 million for the three months ended September 26, 2009 as compared to
$0.5 million in the comparable quarter a year ago.

Gross Margin.  Cost of sales primarily represents manufacturing costs relating to wafer fabrication, package assembly, product
testing operations and logistics costs. 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 was 45.6% of sales for the fiscal
quarter ended September 26, 2009 as compared to gross margin percent of 41.9% for the fiscal quarter ended September 27, 2008.  The
increase in gross margin percent of sales reflects higher sales mix of higher margin classic products and improvements in margins of our
embedded flash products.  Overall gross margin dollars were lower in the quarter than for the comparable quarter a year ago reflecting lower
shipment volumes and lower revenues. Costs and associated margins can be influenced by the variation in the mix of products sold.

Research and Development Expenses.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses related to continuing operations
decreased to $2.4 million for the fiscal quarter ended September 26, 2009 from $5.7 million for the fiscal quarter ended September 27, 2008.
Spending on sales and marketing as well as general and administrative costs decreased reflecting savings from the significant workforce
reduction and consolidation implemented in December

21

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2008 and January 2009. We have also streamlined our global distribution and sales
representation support activities, reduced marketing activities including trade shows and advertising, and streamlined third party consulting
activities in line with global demand and targeted markets and applications.

Special Charges and Credits.  Special charges and credits for the periods indicated were as follows (unaudited, in thousands):

|                                                   |  | Three Months Ended |  |  | Six Months Ended
|-------------------------------------------------- |  | ------------------ |  |  | ----------------
|                                                   |  | Sep. 26,           |  |  | Sep. 27,        
|                                                   |  | 2009               |  |  | 2008            
|Restructuring of operations:                       |  |                    |  |  |                 
|Reorganization, severance and termination benefits |  | $     77           |  |  | $   554         
|Total special charges and credits                  |  | $77                |  |  | $554            

During the fiscal quarter ended September 26, 2009, special charges totaled $0.1 million related to remaining severance and other costs
related to the Company's workforce reductions in December 2008 and January 2009 associated with lower demand and sales affected by the
global economic downturn. Additionally, the Company incurred costs and expenses associated with its consolidation activities following the
sale of the discontinued operations.

Special charges of $0.5 million for the fiscal quarter ended September 27, 2008, primarily related to severance and other costs related to
the Company's test outsourcing activities which were completed in October 2008.

Amortization of Intangible Assets.

Separable intangible assets that are deemed to have defined lives have been amortized over their useful lives. These intangible assets
have been amortized utilizing the pattern-of-use method over their estimated useful lives of six years for current technology and ten years for
brand name. During our annual impairment test made during the March 31, 2009 quarter, our intangible assets were deemed to be impaired
resulting in the write-off of the remaining balance of $1.7 million at that time.

Interest and Other Income (Expense).  Interest income relates to interest earned on our cash and cash equivalents included in
our short-term investment portfolio and auction rate preferred securities.  The cash equivalents are primarily invested in U.S. treasury bills
with maturities of 90 days or less. Interest income for the fiscal quarter ended September 26, 2009, was $6,000 as compared to $49,000 for
the fiscal quarter ended September 27, 2008

Other income for the fiscal quarter ended September 26, 2009 of $8,000 primarily reflects foreign exchange gains as compared to other
income of $253,000 for the fiscal quarter ended September 27, 2009, which reflected foreign exchange gains, other income related to the
sale of excess equipment and other miscellaneous income.

Income Taxes.  For the fiscal quarter ended September 26, 2009, our income tax provision $0.02 million reflects provisions for
taxes in certain profitable foreign jurisdictions.  For the fiscal quarter ended September 27, 2008, the income tax provision of $0.06 million
reflects provisions for taxes in certain profitable foreign jurisdictions. We presently estimate and anticipate no significant taxable income for
U.S. tax purposes for the fiscal year ending March 31, 2010. We provide for income tax expense in foreign jurisdictions where the foreign
subsidiaries' operations generate profits that are expected to be taxable.

22

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Deferred tax assets have been recorded net of valuation allowances. A valuation allowance is required to be recorded if in
management's judgment, and based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not
be realized.  Based on available evidence, we have concluded that a valuation allowance is necessary and have reduced our net
deferred tax assets to the extent of our deferred tax liabilities.

Six Months Ended September 26, 2009 Compared to Six Months Ended September 27, 2008

Net Sales.  Net sales from continuing operations were $15.3 million for the six months ended September 26, 2009, as compared
to net sales from continuing operations of $20.1 million for the six months ended September 27, 2008.

Our net sales declined 24% for the six months ended September 26, 2009, as compared to the six months ended September 27, 2008,
reflecting the impact of the recessionary trends in the worldwide economy that affected the demand for our products both regionally and
within market applications including consumer and industrial type products. The decline primarily reflects a reduction in both the sales of our
classic microcontroller products where markets and applications are broad based and significantly impacted by the global reduction in
demand as well as declines in our embedded flash microcontroller products including power management solutions for consumer market
applications such as digital voice communication and portable consumer products. This decline was partially offset by the increase in
royalties received on licensed products.  These royalties were $1.6 million for the six months ended September 26, 2009 as compared to $1.0
million for the comparable period a year ago.

Gross Margin. Cost of sales primarily represents manufacturing costs relating to wafer fabrication, package assembly, product
testing operations and logistics costs. 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 was 41.8% of sales for the fiscal
quarter ended September 26, 2009 as compared to gross margin percent of 43.4% for the fiscal quarter ended September 27, 2008.  The
decrease in gross margin percent of sales reflects impact of lower shipment volumes offset by cost reductions and improved efficiencies in
the six months ended September 26, 2009.  Additionally, gross margin percent of sales in fiscal 2010 was favorably impacted by the higher
licensing royalties received. Overall gross margin was lower in the six months ended September 26, 2009 than for the comparable six month
period a year ago reflecting lower shipment volumes and lower revenues. Costs and associated margins can be influenced by the variation in
the mix of products sold.

Research and Development Expenses.  Research and development expenses related to continuing operations were $2.2 million
for the six months ended September 26, 2009 as compared to expenditures of $3.5 million for the six months ended September 27, 2008.
Research and development spending for the six months ended September 26, 2009 reflects lower overall payroll spending as a result of our
headcount reductions in line the global economic downturn and the resulting overall reduction in demand. It additionally reflects the benefit of
lower overall spending as a result of the streamlining of activities following the sale of the discontinued operations in February 2009. In the six
months ended September 26, 2009, research and development activities focused on the development of energy management focused
solutions. These solutions include capabilities in sensing and detecting coupled with wireless functionality where required and target
consumer and industrial applications.

Selling, General and Administrative Expenses. Selling, general and administrative expenses related to continuing operations
decreased to $4.9 million for the six months ended September 26, 2009 from $11.2 million for the six months ended September 27, 2008.
Spending on sales and marketing as well as general and administrative costs decreased reflecting savings from the significant workforce
reduction and consolidation implemented in December 2008 and January 2009. We have also streamlined our global distribution and sales
representation support activities, reduced marketing activities including trade shows and advertising, and streamlined third party consulting
activities in line with global demand and targeted markets and applications.

Special Charges and Credits. During the six months ended September 26, 2009 special charges totaled $0.2 million related to
remaining severance and other costs related to the Company's workforce reductions in December 2008 and January 2009 associated with
lower demand and sales affected by the global economic crisis. Additionally, the Company incurred costs and expenses associated with its
consolidation activities following the sale of the discontinued operations including facility lease expenses and supplier agreement exposures.

23

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Special charges of $1.1 million for the six months ended September 27, 2008, primarily related to severance and other costs related to
the Company's test outsourcing activities which were completed in October 2008.

Interest Income and Expense

Other income for the six months ended September 26, 2009 of $1.01million primarily reflects income recorded as a result of the sale and
assignment of certain intellectual property. On May 27, 2009 the Company entered into an agreement for the sale and assignment of
intellectual property rights to five of the Company's patents. The related patents are 5386469, 5588118, 5781784, 5805834 and 6154793.
The patents were sold and assigned to a non practicing entity (NPE) for a cash payment of $1 million.
The Company may share in future revenue on these patents.
Other income for the six months
ended September 27, 2009 of $0.35 reflected foreign exchange gains, income related to sale of excess equipment and other miscellaneous
income.

Income Taxes. For the six months ended September 26, 2009, our income tax provision reflects provisions for taxes in certain
profitable foreign jurisdictions.  For the six months ended September 27, 2008, the income tax provision reflects provisions for taxes in certain
profitable foreign jurisdictions. We presently estimate and anticipate no significant taxable income for U.S. tax purposes for the fiscal year
ending March 31, 2010. We provide for income tax expense in foreign jurisdictions where the foreign subsidiaries' operations generate profits
that are expected to be taxable.

Deferred tax assets have been recorded net of valuation allowances. A valuation allowance is required to be recorded if in
management's judgment, and based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not
be realized.  Based on available evidence, we have concluded that a valuation allowance is necessary and have reduced our net
deferred tax assets to the extent of our deferred tax liabilities.

Liquidity and Capital Resources

As of September 26, 2009, and September 27, 2008, we had $0.3 million in standby letters of credit related to the lease for our corporate
headquarters facility in San Jose, California.

At September 26, 2009, we had cash and cash equivalents of $36.0 million, compared to $32.3 million as of March 31, 2009.  We
classified $0.375 million of our Auction Rate Preferred Securities ("ARPS"), as long-term investments as of September 26, 2009,
due to the continued disruption in the credit markets that resulted in widespread failed auctions.  Those failed auctions resulted in a
loss of liquidity for sellers but did not constitute a default by the issuer of the underlying security.  As of March 31, 2009 we held $1.1
million in ARPS and subsequently have received $0.725 million from the redemptions of our ARPS, which have been included in cash and
cash equivalents as of September 26, 2009.

We adopted FASB ASC 820 "Fair Value Measurement and Disclosures" on April 1, 2008. FASB ASC 820 establishes
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into a three broad categories for disclosure
to show the extent and level of judgment used to estimate fair value measurements.  In determining fair value, we use various valuation
techniques, including market and income approaches to value available-for-sale investments.  The availability of observable inputs can vary
from instrument to instrument and to the extent that valuation is based on inputs that are less observable or unobservable in the market, the
determination of fair value requires more judgment. The degree of judgment exercised by our management in determining fair value is
greatest for instruments categorized in Level 3.  The Company has maximized its use of observable inputs in determining the fair value of its
ARPS (see note 3). All of our ARPS have AAA credit ratings, are 100% collateralized and continue to pay interest in accordance with their
contractual terms. The issuers reported collateralized asset value ranges which exceed the value of ARPS held by us by 200 to 300 percent.
Accordingly, our remaining ARPS balance of $0.04 million has been categorized as Level 2 for fair value

24

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measurement and has been
recorded at full par value on our unaudited condensed consolidated balance sheet as of September 26, 2009. We believe the ARPS values
are not impaired and as such, no impairment has been recognized against the investment. If the issuers are unable to successfully close
future auctions and their credit rating continues to deteriorate, we may be required to record an impairment charge against the value of our
ARPS holdings.

We believe that existing cash, cash equivalents and investments, together with any cash generated from operations will be sufficient to
meet normal operating requirements including capital expenditures for the next twelve months.

Cash Flows From Operating Activities.



Cash Flows From Investing Activities.  During the six months ended September 26, 2009, net cash provided by
continuing investing activities was $0.3 million, an increase of $0.2 million from $0.1 million during the six months ended September 27, 2008.
Cash provided by continuing investing activities in the six months ended September 26, 2009 includes $0.7 million in redemptions of our
investment in ARPS classified as long term investments offset by capital expenditures of $0.5 million.  Cash provided by investing activities in
the six months ended September 27, 2008 includes $0.5 million of redemptions ARPS classified as long term investments, partially offset by
$0.4 million of software and IT infrastructure related capital expenditures.

Cash Flows From Financing Activities.  During the six month periods ended September 26, 2009 cash used by continuing
financing activities was $0.3 million related to the remaining payments made against short term debt as compared to cash provided by
continuing financing activities of $0.4 million during the six months ended September 27, 2008, comprised of $0.3 million of net proceeds
from short term and $0.1 million from the proceeds from Company stock plans.

Non-GAAP EBITDA Measure.   We present EBITDA amounts to reflect a non-GAAP measure of our liquidity.  EBITDA
reflects our earnings before interest, taxes, depreciation and amortization.  We believe the disclosure of such information helps investors
more meaningfully evaluate our liquidity position by the elimination of non-cash related items such as depreciation and amortization.  We
believe that our investor base regularly uses EBITDA as a measure of the liquidity of our business.   Our management uses EBITDA as a
supplement to cash flow from operations as a way to assess the cash generated from our business available for capital expenditures and
debt service.  However, we recommend that investors carefully review the GAAP financial information included as part of our Quarterly
Reports on Form 10-Q, our Annual Reports on Form 10-K, and our quarterly earnings releases, compare GAAP financial information with the
non-GAAP financial results disclosed in our quarterly earnings releases and investor calls, and read the associated reconciliation.

25

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

|                                                               |  |  | Three Months Ended |  |  | Six Months Ended
|-------------------------------------------------------------- |  |  | ------------------ |  |  | ----------------
|                                                               |  |  | Sep. 26,           |  |  | Sep. 27,        
|                                                               |  |  | 2009               |  |  | 2008            
|Reconciliation of net loss to EBITDA:                          |  |  |                    |  |  |                 
|Net income (loss) from continuing operations                   |  |  | $50                |  |  | ($3,615)        
|Depreciation and amortization                                  |  |  | 338                |  |  | 478             
|Interest income                                                |  |  | (6)                |  |  | (49)            
|Provision for income taxes                                     |  |  | 22                 |  |  | 62              
|EBITDA from continuing operations                              |  |  | $404               |  |  | ($3,124)        
|                                                               |  |  |                    |  |  |                 
|Reconciliation of EBITDA to net cash provided by               |  |  |                    |  |  |                 
|(used in) operating activities:                                |  |  |                    |  |  |                 
|EBITDA                                                         |  |  | $404               |  |  | ($3,124)        
|Provision for income taxes                                     |  |  | (22)               |  |  | (62)            
|Interest income                                                |  |  | 6                  |  |  | 49              
|Stock-based compensation                                       |  |  | 205                |  |  | 288             
|Loss (gain) on disposition of operating assets                 |  |  | -                  |  |  | -               
|Changes in operating assets and liabilities                    |  |  | (393)              |  |  | (576)           
|Net cash provided by (used in) continuing operating activities |  |  | $200               |  |  | ($3,425)        

Changes in operating assets and liabilities generally reflect changes in working capital as well as certain other non- current
assets and liability amounts. For the six months ended September 26, 2009, the changes in operating assets and liabilities primarily reflects
the increase in accounts receivable, decrease in deferred income from distributors and increases in accounts payable.

Contractual Obligations. We lease certain of our facilities and equipment under non-cancelable operating leases, which expire in
fiscal 2010 through fiscal 2013. These facility lease agreements generally provide for base rental rates, which may increase at various times
during the terms of the leases and also provide for renewal options at fair market rental value. We are also responsible for common area
maintenance charges on certain office leases, the amounts of which are not included in the table below.  These charges are generally less
than 10% of the respective base rents.

|                            |  |  |        |  |  | Payment due by period (unaudited, in thousands)
|--------------------------- |  |  | ------ |  |  | -----------------------------------------------
|                            |  |  |        |  |  |                                                
|                            |  |  |        |  |  | Within                                         
|                            |  |  | Total  |  |  | 1 year                                         
|Operating lease obligations |  |  | $2,956 |  |  | $703                                           
|                            |  |  |        |  |  |                                                
|Purchase obligations        |  |  | 3,081  |  |  | 2,569                                          
|                            |  |  |        |  |  |                                                
|Total                       |  |  | $6,037 |  |  | $3,272                                         

We generally make purchases under cancelable purchase orders and do not enter into long-term supply agreements. Certain of our
wafer foundry, assembly, materials suppliers, software vendors and support tool manufacturers require non-cancelable purchase orders since
they often provide products and services tailored to our specifications.

26

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In March 2008, the Company, in conjunction with its outsourcing efforts, entered into a test supply agreement with a vendor.  This
agreement commits the Company to certain minimum monthly payments for test services and support of approximately $40,000 per month.
The agreement expires in November 2011.

From time to time, the Company has agreed to indemnify and hold harmless certain customers for potential allegations of infringement of
intellectual property rights and patents arising from the use of its products. During the ordinary course of business, in certain limited
circumstances, the Company has agreed to reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally
parties with which the Company has commercial relations, in connection with certain intellectual property infringement claims by any third
party with respect to its products and services. The Company has an indemnification arrangement with a customer that limits its net contingent obligation to pay
for defense costs, if any, up to a maximum of $2 million. To date, there have not been any costs incurred in connection with such
indemnification arrangements; therefore, there is no accrual of such amounts at September 26, 2009. The Company discloses
indemnification liabilities according to FASB ASC 460 "Guarantees". Under FASB ASC 450  " Contingencies" a claim
would be accrued when a loss is probable and the amount can be reasonably estimated. At September 26, 2009, no such amounts are
accrued.

Off-Balance Sheet Arrangements

As of September 26, 2009, we are not involved in any off-balance sheet arrangements, as defined in Item 303(a) (4) (ii) of SEC
Regulation S-K.

Seasonality

Sales typically increase in the June fiscal quarter and peak in the September fiscal quarter driven by increased holiday demand from our
customers in the home entertainment and consumer products markets. Our sales are generally lower in the March and December fiscal
quarters as compared to the June and September fiscal quarters, although our trends have fluctuated considerably in the most recent
periods. Our sales have been impacted by non-seasonal trends including sales reductions by certain direct customers and declines in our
classic business. Additionally, general world-wide economic, political and regional instabilities may impact our results of operations in any
given period.

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. 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 September 26, 2009, our cash and cash equivalents of $36.0 million were invested in bank time deposits, United States Treasury
bills and US treasury money market funds.

In February 2008, tightening of the U.S. liquidity markets caused the auction rate process to default and our Auction
Rate Preferred Securities ("ARPS") could not be successfully sold. At that time, we had $4.0 million invested in ARPS.
Subsequently, we have received cash proceeds from the redemption at par of $3.275 million of our ARPS, including $$0.525 million during
the fiscal quarter ended September 26, 2009. As of September 26, 2009 our remaining investment in ARPS of $0.375 million has been
classified as long-term investments at full par value on our consolidated balance sheet.

27

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Foreign Currency Exchange Risk

We transact business in various foreign countries of which a significant portion of our consolidated net sales and purchases are
denominated in U.S. dollars. Currently, we do not employ a foreign currency hedging program to mitigate our foreign currency exchange risk
as we believe the risks to date have not been significant or economically viable to conduct such activities. We maintain local currency bank
accounts in our international offices to facilitate payment of local operating costs.

Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's

Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of September 26, 2009. Based on such evaluation, the Company's  Chief Executive Officer and Chief
Financial Officer have concluded that, as of September 26, 2009, the Company's disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that
it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the
Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting. There have been no changes in the Company's internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 26,
2009 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

See our description of litigation contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009,
as the disclosure has not materially changed.

Item 1A. Risk Factors

Risk Factors.

In addition to the other information set forth in this report, you should consider the risk factors discussed in Part I "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009, which could materially affect our business,
financial condition or future results. The risk factors in our Form 10-K have not materially changed. The risk factors described in our
Form 10-K, are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial conditions and/or operating results.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None.

28

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Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

We held our Annual Meeting of stockholders on September 22, 2009. At the meeting, the stockholders elected each of Mr. Richard L.
Sanquini (with 11,801,838 shares voting for, zero against and 334,748 abstaining) to serve as a Group I Director and Ms. Robin A. Abrams
(with 11,802,250 shares voting for, zero against and 334,336 abstaining) to serve as a Group I Director each for a three-year term expiring at
the Annual Meeting of stockholders in 2012. Darin Billerbeck and Federico Faggin, each an incumbent Group II Director, and David G. Elkins
and Eric Singer, each an incumbent Group III Director, will continue serving as directors.

Additionally, the stockholders ratified the appointment of Armanino McKenna LLP as our independent auditors for the fiscal year ending
March 31, 2010 (with 12,045,162 shares voting for, 65,549 against and 25,875 abstaining).

Item 5.  Other Information

None.

Item 6.  Exhibits

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

|Exhibit
Number | Description                                                                                                                                                                                                             
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 (a)        | Amended and Restated Certificate of Incorporation of ZiLOG, Inc., as amended and corrected.                                                                                                                             
|3.2 (b)        | Amended and Restated Bylaws of ZiLOG, Inc.                                                                                                                                                                              
|3.3 (c)        | Amendment to Amended and Restated Bylaws of ZiLOG, Inc.                                                                                                                                                                 
|31.1           | Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 10, 2009.
    PDF             
|31.2           | Certifications of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated November 10, 2009.
    PDF            
|32             | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated November 10, 2009.
    PDF

_____________

|(a) | Incorporated herein by reference to the item of the same name filed as an exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on
November 21, 2007.                               
|(c) | Incorporated herein by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 26, 2008 (filed August 12, 2008).               

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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 J. Grace
      
           Perry J. GraceExecutive Vice President and Chief Financial Officer         (Duly Authorized Officer)



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | /s/ Darin G. Billerbeck
      
           Darin G. BillerbeckPresident, Chief Executive Officer and Director         (Duly Authorized Officer)

Date:  November 10, 2009

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