10-Q 1 zk96754.htm 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

Or

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

Commission file number: 001-32832

Jazz Technologies, Inc.

(Exact name of registrant as specified in its charter)






Delaware	20-3320580
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4321 Jamboree Road
Newport Beach, California	92660
(Address of principal executive offices)	(Zip Code)

(949) 435-8000
Registrant’s telephone number, including area code

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 such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

(Note: As a voluntary filer not subject to the filing requirements, the Registrant 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).

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

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






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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format permitted by General Instruction H(2).

JAZZ TECHNOLOGIES, INC.






PART I - FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Unaudited Condensed Consolidated Balance Sheets	1

	Unaudited Condensed Consolidated Statements of Operations	2

	Unaudited Condensed Consolidated Statements of Cash Flows	3

	Notes to Unaudited Condensed Consolidated Financial Statements	4

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

Item 4.	Controls and Procedures	23

PART II - OTHER INFORMATION		24

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 6.	Exhibits	24

SIGNATURES		25

Index to Exhibits		25

PART I – FINANCIAL INFORMATION

Item

1. Financial Statements

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets
(in thousands)

	March 31, 2009			December 31, 2008
	Successor			Successor



ASSETS
Current assets:
Cash and cash equivalents	$	28,895		$	27,574
Receivables:
Trade receivables, net of allowance for doubtful accounts of $485 and $852 at March 31,
2009 and December 31, 2008, respectively		13,597			21,424
Due from related party		775			54
Inventories		7,722			10,281
Deferred tax asset		4,095			4,095
Prepaid expenses and other current assets		2,793			3,175

Total current assets		57,877			66,603
Property, plant and equipment, net		92,082			93,928
Investments		17,100			17,100
Intangible assets, net		55,364			56,460
Goodwill		7,000			7,000
Other assets		292			317

Total assets	$	229,715		$	241,408


LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	9,819		$	13,576
Due to related party		2,486			1,241
Short-term borrowings		7,000			7,000
Accrued compensation and benefits		4,331			5,672
Deferred revenues		2,179			1,958
Accrued interest		2,632			5,211
Other current liabilities		5,704			4,470

Total current liabilities		34,151			39,128
Long term liabilities:
Long-term borrowing		20,000			20,000
Convertible notes		111,240			110,052
Deferred tax liability		10,467			11,749
Accrued pension, retirement medical plan obligations and other long-term liabilities		14,758			13,821

Total liabilities		190, 616			194,750

Stockholder's equity:
Additional paid-in capital		50,219			50,166
Other comprehensive loss (*)		(2,367	)		(2,367	)
Accumulated deficit		(8,753	)		(1,141	)

Total stockholder's equity		39,099			46,658

Total liabilities and stockholder's equity	$	229,715		$	241,408

(*) Other comprehensive loss includes mainly plan assets and benefit obligation, net of taxes.

See accompanying notes.

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries

Unaudited Condensed Consolidated Statements of Operations

(In thousands)

	Three months ended
	March 31, 2009			March 28, 2008
	Successor			Predecessor


Net revenues	$	29,179		$	50,830
Cost of revenues		27,426			43,385

Gross profit		1,753			7,445
Operating expenses:
Research and development		2,457			3,910
Selling, general and administrative		4,042			4,964
Amortization of intangible assets		197			346

Total operating expenses		6,696			9,220
Operating loss		(4,943	)		(1,775	)
Interest and other expense, net		(3,946	)		(3,241	)

Net loss before income taxes		(8,889	)		(5,016	)
Income tax benefit		1,277			15

Net loss	$	(7,612	)	$	(5,001	)

Net loss per share (basic and diluted)				$	(0.27	)

Weighted average shares (basic and diluted)					18,400

See accompanying notes.

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

	Three months ended
	March 31, 2009			March 28, 2008
	Successor			Predecessor


Operating activities:
Net loss	$	(7,612	)	$	(5,001	)
Adjustments to reconcile net loss for the period to net cash provided by operating activities:
Depreciation and amortization of intangible assets		6,124			9,428
Convertible debenture accretion and amortization of deferred financing costs		1,213			901
Provision for doubtful accounts		(367	)		(68	)
Net gain on disposal of equipment		-			(6	)
Net gain on purchase of convertible notes		-			(375	)
Provision for obsolete inventory		(1,150	)		853
Stock compensation expense		53			271
Changes in operating assets and liabilities:
Receivables		8,194			7, 862
Inventories		3,709			(1,376	)
Prepaid expenses and other current assets		382			955
Accounts payable		(3,843	)		(2,148	)
Due to related party, net		524			-
Accrued compensation and benefits		(1,341	)		(1,695	)
Deferred Revenue		221			(1,452	)
Accrued interest		(2,579	)		(2,728	)
Other current liabilities		1,234			(3,184	)
Deferred tax liability		(1,282	)		(39	)
Accrued pension, retirement medical plan obligations and long-term liabilities		937			198

Net cash provided by operating activities		4,417			2,396

Investing activities:
Purchases of property and equipment		(3,096	)		(1,651	)
Net proceeds from sale of equipment		-			6

Net cash used in investing activities		(3,096	)		(1,645	)

Financing activities:
Payment for purchase of convertible notes		-			(4,100	)
Net borrowings from line of credit		-			2,000
Payment of debt and acquisition-related liabilities		-			(51	)

Net cash used in financing activities		-			(2,151	)

Effect of foreign currency on cash		-			(53	)
Net increase (decrease) in cash and cash equivalents		1,321			(1,453	)
Cash and cash equivalents at beginning of period		27,574			10,612

Cash and cash equivalents at end of period	$	28,895		$	9,159


Supplemental disclosure of interest paid and non-cash investing and financing activities:

Interest paid	$	5,351		$	5,620

Property, plant and equipment purchases accrued	$	2,176		$	1,406

See accompanying notes.

Jazz Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2009

1.	ORGANIZATION

Unless specifically noted otherwise, as used throughout these notes to the unaudited condensed consolidated financial statements, “Jazz,” “Company” refers to the business of Jazz Technologies, Inc. and “Jazz Semiconductor” refers only to the business of Jazz Semiconductor, Inc. References to “the Company” for dates prior to September 19, 2008 mean the Predecessor which on September 19, 2008 was merged with and into a subsidiary of Tower Semiconductor Ltd., an Israeli company (“Tower”), and references to “the Company” for periods on or after September 19, 2008 are references to the Successor Tower subsidiary.

The Company

Jazz Technologies, Inc., formerly known as Acquicor Technology Inc. (the “Company”), was incorporated in Delaware on August 12, 2005. The Company was formed to serve as a vehicle for the acquisition of one or more domestic and/or foreign operating businesses through a merger, capital stock exchange, stock purchase, asset acquisition or other similar business combination.

The Company is based in Newport Beach, California and following the acquisition of Jazz Semiconductor, Inc., is now an independent semiconductor foundry focused on specialty process technologies for the manufacture of analog intensive mixed-signal semiconductor devices. The Company’s specialty process technologies include advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar complementary metal oxide (“SiGe”) semiconductor processes, for the manufacture of analog and mixed-signal semiconductors. Its customer’s analog and mixed-signal semiconductor devices are used in cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems.

Merger with Tower Semiconductor, Ltd.

On May 19, 2008, the Company entered into an Agreement and Plan of Merger and Reorganization (“Merger”) with Tower and its wholly-owned subsidiary, Armstrong Acquisition Corp., a Delaware corporation (“Merger Sub”), which provided for Merger Sub to merge with and into the Company, with the Company surviving the merger as a wholly-owned subsidiary of Tower.

At a special meeting of the Company’s stockholders held on September 17, 2008, the requisite majority of the Company’s stockholders voted in favor of the Merger, which was effectively consummated on September 19, 2008. Under the terms of the Merger, Tower acquired all of the outstanding shares of Jazz in a stock-for-stock transaction. Each share of the Company’s common stock not held by Tower, Merger Sub or the Company was automatically converted into and represents the right to receive 1.8 ordinary shares of Tower. Cash was paid in lieu of fractional shares. In addition, on September 19, 2008, upon completion of the Merger, the Company’s common stock was delisted from the American Stock Exchange. As a result of the Merger, Tower is the only registered holder of the Company’s common stock and a change in control occurred. The Merger was accounted for under the purchase method of accounting in accordance with U.S. generally accepted accounting principles for accounting and financial reporting purposes. Under this method, Jazz was treated as the “acquired” company. In connection with this acquisition, the Company adopted Tower’s fiscal year for reporting purposes.

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation

We prepare our consolidated financial statements in accordance with SEC and US GAAP requirements and include all adjustments of a normal recurring nature that are necessary to fairly present our consolidated results of operations, financial position, and cash flows for all periods presented. Interim period results are not necessarily indicative of full year results. This quarterly report should be read in conjunction with our most recent Annual Report on Form 10-K.

The condensed consolidated financial statements included herein are unaudited; however, they contain all normal recurring adjustments that, in the opinion of management, are necessary to present fairly the Company’s consolidated financial position at March 31, 2009 and December 31, 2008, and the consolidated results of its operations and cash flows for the periods ended March 31, 2009 and March 28, 2008. All intercompany accounts and transactions have been eliminated. Certain amounts have been reclassified to conform to the Successor presentation.

For purposes of presentation and disclosure, we refer to the Company as the Predecessor as of and for all periods up to September 19, 2008, the date of consummation of the Merger and as the Successor as of and for all periods thereafter. The financial statements also reflect “push-down” accounting in accordance with SEC Staff Accounting Bulletin No. 54 (“SAB 54”), with respect to the Tower’s acquisition of the Company.

Fiscal Year

Effective as of September 19, 2008, the Company changed its fiscal year end to December 31 to conform to Tower’s fiscal year end. As a result of this change, all quarters will now end on the last day of each calendar quarter. Previously, beginning January 1, 2007, the Company had adopted a 52- or 53- week fiscal year. Each of the first three quarters of a fiscal year ended on the last Friday in each of March, June and September and the fourth quarter of a fiscal year ended on the Friday prior to December 31. As a result, each fiscal quarter consisted of 13 weeks during a 52-week fiscal year. During a 53-week fiscal year, the first three quarters consisted of 13 weeks and the fourth quarter consisted of 14 weeks.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Among the significant estimates affecting the financial statements are those relating to sales return allowances, the allowance for doubtful accounts, inventories and related reserves, valuation of acquired assets and liabilities, determination of asset lives for depreciation and amortization, asset impairment assumptions, income taxes, stock compensation, post-retirement medical plan and pension plan. On an ongoing basis, management reviews its estimates based upon currently available information. Actual results could differ materially from those estimates.

Revenue Recognition

The Company’s net revenues are generated principally from sales of semiconductor wafers. The Company derives the remaining balance of its net revenues from the resale of photomasks and other engineering services. The majority of the Company’s sales occur through the efforts of its direct sales force.

In accordance with SEC Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”), and SAB No. 104, “Revenue Recognition” (“SAB No. 104”), the Company recognizes revenues when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. These criteria are usually met at the time of product shipment. Revenues are recognized when the acceptance criteria are satisfied, based on performing electronic, functional and quality tests on the products prior to shipment. Such Company testing reliably demonstrates that the products meet all of the specified criteria prior to formal customer acceptance, and that product performance can reasonably be expected to conform to the specified acceptance provisions.

Revenues for engineering services are recognized ratably over the contract term or as services are performed. Revenues from contracts with multiple elements are recognized as each element is earned based on the relative fair value of each element and when there are no undelivered elements that are essential to the functionality of the delivered elements and when the amount is not contingent upon delivery of the undelivered elements. Advances received from customers towards future engineering services, product purchases and in some cases capacity reservation are deferred until products are shipped to the customer, services are rendered or the capacity reservation period ends.

The Company provides for sales returns and allowances relating to specified yield or quality commitments as a reduction of revenues at the time of shipment based on historical experience and specific identification of events necessitating an allowance. Actual allowances given have been within management’s expectations.

Impairment of Assets

The Company periodically reviews long-lived assets and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. If an asset is considered to be impaired, the impairment loss is recognized immediately and is considered to be the amount by which the carrying amount of the asset exceeds its fair value.

The Company conducted an impairment review as of March 31, 2009, due to the global economic downturn and the prevailing conditions in the semiconductor industry. The Company used the income approach methodology of valuation that includes undiscounted cash flows to determine the fair value of its long-lived assets and intangible assets. Significant management judgment is required in the forecasts of future operating results used for this methodology. These estimates are consistent with the plans and forecasts the Company uses to conduct its business. As a result of this analysis, no assets were considered to be impaired and the Company has not recognized any impairment loss for any long-lived or intangible asset for the period ended March 31, 2009.

Impairment of Goodwill

Goodwill is subject to an impairment test on at least an annual basis or upon the occurrence of certain events or circumstances. Goodwill impairment is assessed based on a comparison of the fair value of the Company to the underlying carrying value of the Company’s net assets, including goodwill. When the carrying amount of the Company exceeds its fair value, the implied fair value of the Company’s goodwill is compared with its carrying amount to measure the amount of impairment loss, if any.

The Company conducted an impairment review as of March 31, 2009. The Company used the income approach methodology of valuation that includes discounted cash flows to determine the fair value of the Company. Significant management judgment is required in the forecasts of future operating results used for this methodology. These estimates are consistent with the plans and forecasts that the Company uses to conduct its business. As a result of this analysis, the carrying amount of the Company’s net assets, including goodwill were not considered to be impaired and the Company did not recognize any impairment of goodwill for the period ended March 31, 2009. Prior to its acquisition by Tower, the Company had no goodwill.

Accounting for Income Taxes

The Company utilizes the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS No. 109”). Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates.

Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The likelihood of a material change in the Company’s expected realization of these assets depends on its ability to generate sufficient future taxable income.

The Company accounts for its uncertain tax positions in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). The Company recognizes interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense.

Stock Based Compensation

The Company records equity compensation expense in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R requires companies to estimate the fair value of stock options on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods. The Company has estimated the fair value of stock options as of the date of grant using the Black-Scholes option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes model considers, among other factors, the expected life of the award and the expected volatility of the Company’s stock price. Although the Black-Scholes model meets the requirements of SFAS No. 123R and SAB No. 107, “Share-Based Payment” (“SAB No. 107”), the fair values generated by the model may not be indicative of the actual fair values of the Company’s equity awards, as it does not consider other factors important to those awards to employees, such as continued employment, periodic vesting requirements, and limited transferability. The Company estimates stock price volatility based on historical volatility of its own stock price from April 2008 to September 18, 2008 and based on its peers prior to April 2008. Since September 19, 2008, the Company estimates stock price volatility based on historical volatility of Tower’s stock price. The Company recognizes compensation expense using the straight-line amortization method for stock-based compensation awards with graded vesting.

Net Loss Per Share

Net (loss) income per share (basic) is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Net (loss) income per share (diluted) is calculated by adjusting the number of shares of common stock outstanding using the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s common stock results in a greater dilutive effect from outstanding warrants, options, restricted stock awards and convertible securities (common stock equivalents). Since the Company reported a net loss for the period ended March 28, 2008, all common stock equivalents would be anti-dilutive and the basic and diluted weighted average shares outstanding are the same. On September 19, 2008, upon completion of the Merger, the Company’s common stock was delisted from the American Stock Exchange.

Comprehensive Loss

	Three months ended
	March 31, 2009			March 28, 2008
	(In thousands)


Net loss	$	(7,612	)	$	(5,001	)
Foreign currency translation adjustment		-			(8	)

Comprehensive loss	$	(7,612	)	$	(5,009	)

Concentrations

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history, age of the balance and the customer’s current credit worthiness, as determined by a review of the customer’s current credit information. The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts based upon historical experience and any specific customer collection issues that have been identified. A considerable amount of judgment is required in assessing the ultimate realization of these receivables. Customer receivables are generally unsecured.

Accounts receivable from significant customers representing 10% or more of the net accounts receivable balance as of March 31, 2009 and December 31, 2008 consists of the following customers:

	March 31, 2009			December 31, 2008
	Successor			Successor



Skyworks		20	%		10	%
R F Micro Devices		18	%		42	%

Net revenues from significant customers representing 10% or more of net revenues are provided by customers as follows:

	Three Months Ended
	March 31, 2009			March 28, 2008
	Successor			Predecessor


R F Micro Devices		26	%		19	%
Skyworks		16	%		13	%
Conexant			*		14	%

* Indicates less than 10%.

As a result of the Company’s concentration of its customer base, loss or cancellation of business from, or significant changes in scheduled deliveries of product sold to these customers or a change in their financial position could materially and adversely affect the Company’s consolidated financial position, results of operations and cash flows.

The Company operates a single manufacturing facility located in Newport Beach, California. A major interruption in the manufacturing operations at this facility would have a material adverse affect on the consolidated financial position and results of operations of the Company.

Initial Adoption of New Standards

EITF Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity’s own stock. It is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. The adoption of EITF 07-5 did not have a significant impact on the consolidated results of operations or financial position of the Company.

Effective January 1, 2009, the Company adopted FSP No. APB 14-1, “Accounting for Convertible Debt Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB No. 14-1”). FSP APB No. 14-1 applies to any convertible debt instrument that may be wholly or partially settled in cash and requires the separation of the debt and equity components of cash-settleable convertibles at the date of issuance. The FSP is effective for the convertible debt issued by the Company, for the 8% convertible notes due 2011, which were originally recorded at face value of $166.8 million in December 2006 and requires retrospective application for all periods presented. The Company calculated a theoretical non-cash interest expense based on a similar debt instrument carrying a fixed interest rate but excluding the equity conversion feature and measured at fair value at the time the notes were issued. As a result, the debt component determined for these notes was $151.4 million with discount of $15.4 million and the equity component, recorded as additional paid-in capital, was $14.8 million, which represents the difference between the net proceeds from the issuance of the notes and the fair value of the liability, net of related issuance costs. A fixed interest rate was then applied to the debt component of the notes in the form of an original issuance discount and amortized over the life of the notes as a non-cash interest charge. The Merger on September 19, 2008 required the Company, as part of the purchase method, to fair value the convertible debt instrument. As a result, a new basis was determined to the convertibles of $108.6 million and debt discount of $19.6 million. Upon adoption of the FSP, the Company evaluated the equity component as of the merger date and determined that it is immaterial. As such, there will be no impact in the Successor period for the adoption of this FSP; however this resulted in a non-cash increase of our historical interest expense of $1.8 million and $5.9 million for 2008 and 2007 respectively. Our consolidated statement of operations for the three months ended March 28, 2008 was retroactively modified compared to previously reported amounts as follows (in thousands, except per share amounts):

	Three Months Ended March 28, 2008




Interest and other expense	$	957
Change to basic and diluted earnings per share	$	(0.05	)

Effective January 1, 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133” (“SFAS No. 161”). SFAS No. 161 expands disclosures but does not change accounting for derivative instruments and hedging activities. The adoption of SFAS No. 161 did not have a significant impact on the consolidated results of operations or financial position of the Company.

In December 2007, the FASB issued SFAS No. 160,” Non-controlling Interests in Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report non-controlling (minority) interests in subsidiaries in the same way as equity in the consolidated financial statements. Moreover, SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. SFAS No. 160 is effective as of the start of fiscal years beginning after December 15, 2008. Early adoption is not allowed. Since the Company currently has no minority interest, the adoption of this standard did not have any impact on the consolidated results of operations or financial position of the Company.

Recently Issued Accounting Standards

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”) to require disclosures about fair value of financial instruments in interim period financial statements of publicly traded companies and in summarized financial information required by APB Opinion No. 28, “Interim Financial Reporting” (“APB 28-1”). FSP FAS 107-1 and APB 28-1 are effective for interim and annual reporting periods ending after June 15, 2009. The Company is currently evaluating the additional disclosure requirements of this FSP.

In April 2009 the FASB issued FASB staff position 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“OTTI”) for investment in debt securities. This FSP applies to all entities and are effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Earlier adoption for periods ending before March 15, 2009, is not permitted.

Under the FSP, the primary change to the OTTI model for debt securities is the change in focus from an entity’s intent and ability to hold a security until recovery. Instead, an OTTI is triggered if (1) an entity has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery, or (3) it does not expect to recover the entire amortized cost basis of the security. In addition, the FSP changes the presentation of an OTTI in the income statement if the only reason for recognition is a credit loss (i.e., the entity does not expect to recover its entire amortized cost basis). That is, if the entity has the intent to sell the security or it is more likely than not that it will be required to sell the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings.

However, if the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security, but the security has suffered a credit loss, the impairment charge will be separated into the credit loss component, which is recorded in earnings, and the remainder of the impairment charge, which is recorded in other comprehensive income (OCI). The Company does not expect the adoption of this FSP to have a material impact on the Company’s consolidated results of operations or financial position.

In April 2009 the FASB issued FASB staff position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4 “). This FSP applies to all assets and liabilities within the scope of accounting pronouncements that require or permit fair value measurements, except as discussed in paragraphs 2 and 3 of statement 157. The FSP is Effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively.FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms what Statement 157 states is the objective of fair value measurement–to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.

FSP FAS 157-4 provides guidance on (1) estimating the fair value of an asset or liability (financial and nonfinancial) when the volume and level of activity for the asset or liability have significantly decreased and (2) identifying transactions that are not orderly.

The Company is currently evaluating the impact that this FSP will have, if at all, on its consolidated financial statements and disclosures.

3.	MERGER WITH TOWER

On September 19, 2008, pursuant to the terms of the Merger signed on May 19, 2008, Tower acquired all of Jazz’s outstanding capital in a stock-for-stock transaction.

For accounting purposes, the purchase price for the Company’s acquisition was $50.1 million and reconciles to all consideration and payments made to date as follows (in thousands):






Stock consideration	$	39,189
Other equity consideration		7,555

Total merger consideration		46,744
Transaction costs		3,326

Total purchase price	$	50,070

Pursuant to the Merger with Tower, each outstanding share of Jazz’s common stock was converted into the right to receive 1.8 ordinary shares of Tower, at an aggregate fair value of approximately $39.2 million. The fair value of the shares was determined based on Tower’s ordinary shares price on Nasdaq prevailing around May 19, 2008, the date of signing the definitive agreements of the merger and announcing it, in accordance with provisions set forth in EITF 99-12 “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination” (“EITF 99-12”).

Pursuant to the Merger with Tower, the Company’s outstanding stock options immediately prior to the effective time of the Merger, whether vested or unvested, were converted to options to purchase Tower’s ordinary shares on the same terms and conditions as were applicable to such options under the Predecessor Company’s plan, with adjusted exercise prices and numbers of shares to reflect the exchange ratio of the common stock. This conversion was accounted for as a modification in accordance with SFAS No. 123R with the fair value of the outstanding options of $1.3 million being included as part of the purchase price.

Pursuant to the Merger with Tower, all outstanding warrants to purchase the shares of the Company’s common stock that were outstanding immediately prior to the effective time of the Merger, became exercisable for Tower ordinary shares. The fair value of the outstanding warrants of $6.3 million was included as part of the purchase price.

Tower’s transaction costs of $3.3 million primarily consist of fees for financial advisors, attorneys, accountants and other advisors incurred in connection with the Merger.

The Company also incurred approximately $4.1 million in similar merger costs which are included as part of operating expenses in the Predecessor’s statement of operations for the period from December 29, 2007 through September 18, 2008.

Purchase Price Allocation

The purchase price of $50.1 million, including the transaction costs of approximately $3.3 million, has been allocated to tangible and intangible assets and liabilities, based on their fair market values as of September 19, 2008, as follows (in thousands):

	September 19, 2008




Fair value of the net tangible assets and liabilities:
Cash and cash equivalents	$	3,486
Receivables		16,549
Inventories		12,907
Deferred tax asset		6,157
Prepaid expenses and other current assets		2,936
Property, plant and equipment		95,244
Investments		17,100
Other assets		66
Short-term borrowings		(7,000	)
Accounts payable		(11,878	)
Accrued compensation and benefits		(9,337	)
Deferred tax liability		(14,883	)
Deferred revenues		(3,135	)
Other current liabilities		(8,285	)
Convertible notes		(108,600	)
Accrued pension, retirement medical plan obligations and other long-term liabilities		(7,757	)

Total net tangible assets and liabilities				$	(16,430	)

Fair value of identifiable intangible assets acquired:
Existing technology		1,300
Patents and other core technology rights		15,100
In-process research and development		1,800
Customer relationships		2,600
Trade name		5,200
Facilities lease		33,500
Goodwill		7,000

Total identifiable intangible assets acquired					66,500

Total purchase price				$	50,070

The fair values set forth above are based on a valuation of the Company’s assets and liabilities performed by the Company in accordance with SFAS No. 141, “Business Combinations” (“SFAS No. 141”) and reflect “push-down” accounting in accordance with SEC Staff Accounting Bulletin No. 54 (“SAB 54”), Topic 5J, with respect to the Tower’s acquisition of the Company. Currently, the net operating loss limitation for the change in ownership which occurred in September 2008 is in the process of being determined and accordingly, the amount of the Company’s net operating losses which may be available to offset future taxable income of the Company is not finalized. The Company expects it will not be able to utilize a significant portion of its net operating loss carry forwards, and has adjusted its net operating loss carryforwards to reflect their current estimated annual utilization of $1.0 million. However, the Company has currently not finalized its analysis of this matter. Once the final information is available, the purchase accounting impact on the deferred tax assets and liabilities will be recognized and disclosed.

Pro Forma Results of Operations

The following unaudited information for the three months ended March 31, 2009 and March 28, 2008 assumes the acquisition of the Company occurred on January 1, 2008:

	Results of Operations (in thousands) Three Months ended
	March 31, 2009			March 28, 2008
	(Actual, unaudited)			(Pro Forma, unaudited)


Net revenues	$	29,179		$	50,830

Net loss	$	(7,612	)	$	(2,060	)

The Company is presenting pro forma results for the three months ended March 28, 2008 as if the merger with Tower occurred on January 1, 2008. The Company derived the pro forma results from the unaudited condensed consolidated financial statements of the predecessor Company for the period from January 1, 2008 to March 28, 2008 and the successor Company for the period from January 1, 2009 to March 31, 2009. As of March 28, 2008, the pro forma EPS is not presented since the pro forma assumes the merger occurred on January 1, 2008 and therefore no EPS exists for such date.

The pro forma results are not necessarily indicative of the results that may have actually occurred had the acquisition taken place on the date noted, or the future financial position or operating results of the Company. The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable. The pro forma adjustments include adjustments for reduced depreciation and amortization expense as a result of the application of the purchase method of accounting.

4.	OTHER BALANCE SHEET DETAILS

Inventories

Inventories, net of reserves, consist of the following at March 31, 2009 and December 31, 2008 (in thousands):

	March 31, 2009		December 31, 2008
	Successor		Successor



Raw material	$	821	$	730
Work in process		4,352		5,956
Finished goods		2,549		3,595

	$	7,722	$	10,281

Property, Plant and Equipment

Property, plant and equipment consist of the following at March 31, 2009 and December 31, 2008 (in thousands):

		March 31, 2009			December 31,2008
		Successor			Successor



Building improvements	10-12	$	24,230		$	24,230
Machinery and equipment	7		64,394			64,097
Furniture and equipment	5-7		1,941			1,785
Computer software	3		763			763
Construction in progress	-		7,619			6,443

			98,947			97,318
Accumulated depreciation			(6,865	)		(3,390	)

		$	92,082		$	93,928

Investment

In connection with the acquisition of Jazz Semiconductor in February 2007, the Company acquired an investment in Shanghai Hua Hong NEC Electronics Company, Ltd. (“HHNEC”). As of March 31, 2009, the investment represented a minority interest of approximately 10% in HHNEC. In accordance with the purchase method of accounting, this investment was recorded at fair value on the date of acquisition by Tower.

Intangible Assets

Intangible assets consist of the following at March 31, 2009 (in thousands):

		Cost		Accumulated Amortization		Net




Existing technology	9	$	1,300	$	77	$	1,223
Patents and other core technology rights	9		15,100		894		14,206
In-process research and development	-		1,800		1,800		-
Customer relationships	15		2,600		92		2,508
Trade name	9		5,200		308		4,892
Facilities lease	19		33,500		965		32,535

Total identifiable intangible assets	14	$	59,500	$	4,136	$	55,364

Intangible assets consist of the following at December 31, 2008 (in thousands):

		Cost		Accumulated Amortization		Net




Existing technology	9	$	1,300	$	41	$	1,259
Patents and other core technology rights	9		15,100		475		14,625
In-process research and development	-		1,800		1,800		-
Customer relationships	15		2,600		49		2,551
Trade name	9		5,200		163		5,037
Facilities lease	19		33,500		512		32,988

Total identifiable intangible assets	14	$	59,500	$	3,040	$	56,460

The Company expects future amortization expense to be as follows (in thousands):

	Charge to cost of revenues		Charge to operating expenses		Total




Fiscal year ends:
Remainder of 2009	$	2,698	$	590	$	3,288
2010		3,597		787		4,384
2011		3,597		787		4,384
2012		3,597		787		4,384
2013		3,597		787		4,384
Thereafter		30,229		4,311		34,540

Total expected future amortization expense	$	47,315	$	8,049	$	55,364

The amortization related to existing technology, patents and other core technologies, and facilities lease is charged to cost of revenues. The amortization related to customer relationships and trade name is charged to operating expenses.

5.	LOAN AND SECURITY AGREEMENT

On September 19, 2008, the Company entered into a second amended and restated loan and security agreement, as parent guarantor, with Wachovia Capital Markets, LLC, as lead arranger, bookrunner and syndication agent, and Wachovia Capital Finance Corporation (Western), as administrative agent (“Wachovia”), and Jazz Semiconductor and Newport Fab, LLC, as borrowers, with respect to a three-year secured asset-based revolving credit facility for the total amount of $55 million, including up to $10 million for letters of credit. On December 31, 2008, Wells Fargo acquired all of Wachovia Corporation and its businesses and obligations.

The borrowing availability varies according to the levels of the borrowers’ eligible accounts receivable, eligible equipment and other terms and conditions described in the loan agreement. The maturity date of the facility is September 19, 2011, unless earlier terminated. Loans under the facility bear interest at a rate equal to, at borrowers’ option, either the lender’s prime rate plus a margin ranging from 0.25% to 0.75% or the LIBOR rate (as defined in the loan agreement) plus a margin ranging from 2% to 2.5% per annum. The facility is secured by all of the Company’s assets and the assets of the borrowers.

The loan agreement contains customary covenants and other terms, including covenants based on the Company’s EBITDA (as defined in the loan agreement), as well as customary events of default. If any event of default occurs, Wachovia may declare due immediately, all borrowings under the facility and foreclose on the collateral. Furthermore, an event of default under the loan agreement would result in an increase in the interest rate on any amounts outstanding. As of March 31, 2009, the Company was in compliance of all the covenants under this facility.

Borrowing availability under the facility as March 31, 2009, was $12.1 million in addition to outstanding borrowings of $27.0 million and $1.9 million of the facility supporting outstanding letters of credits on that date. The Company considers borrowings of $20.0 million to be long-term debt as of March 31, 2009.

6.	CONVERTIBLE NOTES

The Company has convertible notes at an interest rate of 8% per annum payable semi-annually and are due December of 2011 (“Convertible Notes”).

Pursuant to the Merger with Tower, each holder of the Convertible Notes immediately prior to the Merger, has the right to convert such holder’s note into Tower ordinary shares based on an implied conversion price of approximately $4.07 per Tower ordinary share. The Company’s obligations under the Convertible Notes are not being guaranteed by Tower.

In connection with the Merger of the Company with Tower, the Convertible Notes were recorded at the preliminary fair value of $108.6 million on the date of the acquisition by Tower. The Company has accreted $1.2 million in interest for the three months ended March 31, 2009. As of March 31, 2009, $128.2 million in principal amount of Convertible Notes remains outstanding. See Note 2 for discussion on the adoption of FSP APB 14-1.

The Company’s obligations under the Convertible Notes are guaranteed by the Company’s wholly owned domestic subsidiaries. The Company has not provided condensed consolidating financial information because the Company has no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and any subsidiaries of the Company other than the subsidiary guarantors are minor. Other than the restrictions in the Wachovia Loan Agreement, there are no significant restrictions on the ability of the Company and its subsidiaries to obtain funds from their subsidiaries by loan or dividend.

During the first three months of 2008 the Company purchased $5.0 million in principal amount of its Convertible notes at a price of $4.1 million, including $4,444 for prepayment of interest from the date of the last interest payment to the date of purchase. The purchase price was 82.0% of the principal amount of such notes and resulted, after giving affect to the retrospective application under FSP APB No. 14-1( “See Note 2 for discussion on the adoption of FSP APB 14-1”) in a net gain of $0.4 million which is included as part of interest and other expense in the statement of operations.

INCOME TAXES

The Company’s effective tax rate for the three months ended March 31, 2009 differs from the statutory rate primarily due to the establishment of a valuation allowance against federal deferred tax assets that the Company has determined do not meet the more likely than not threshold. The Company establishes a valuation allowance for federal deferred tax assets, when it is unable to conclude that it is more likely than not that such deferred tax assets will be realized. In making this determination the Company evaluates both positive and negative evidence as well as potential tax planning strategies. The annual losses are projected to exceed the reversal of taxable temporary differences. Without other significant positive evidence the Company has determined that the federal deferred tax assets are not more likely than not to be realized.

The future utilization of the Company’s net operating loss carry forwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. The Company has had two “change in ownership” events that limit the utilization of net operating loss carry forwards. The first “change in ownership” event occurred in February 2007 upon our acquisition of Jazz Semiconductor. The second “change in ownership” event occurred on September 19, 2008, the date of the Company’s acquisition by Tower. Currently, the net operating loss limitation for the change in ownership which occurred in September 2008 is in the process of being determined and accordingly, the amount of the Company’s net operating losses which may be available to offset future taxable income of the Company is not finalized. The Company expects it will not be able to utilize a significant portion of its net operating loss carry forwards, and has adjusted its net operating loss carryforwards to reflect their current estimated annual utilization limited to $1.0 million. However, the Company has currently not finalized its analysis of this matter. Once the final information is available, the purchase accounting impact on the deferred tax assets and liabilities will be recognized and disclosed.

The Company adopted the provisions of FIN No. 48 on January 1, 2007. The Company’s policy is to recognize interest and penalties that would be assessed in relation to the settlement value of unrecognized tax benefits as a component of income tax expense. At March 31, 2009 the Company had unrecognized tax benefits of $1.9 million. The unrecognized tax benefits were unchanged during the three months ended March 31, 2009. At March 31, 2009, it is reasonably likely that $1.1 million of the unrecognized tax benefits will reverse during the next twelve months. The reversal of uncertain tax benefits is related to net operating losses that will be abandoned when the Company liquidates its Chinese subsidiary in 2009.

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal income tax examinations for years before 2005; state and local income tax examinations before 2004; and foreign income tax examinations before 2005. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the net operating loss carryforward amount. The Company is not currently under Internal Revenue Service (“IRS”), state or local tax examination. In connection with the liquidation of the Company’s Chinese subsidiary, the Chinese tax authorities are conducting a review of the historic income tax filings. The tax authorities have not proposed any adjustments to the historic income tax filings as of March 31, 2009.

8.	EMPLOYEE BENEFIT PLANS

The pension and other post retirement benefit plans expenses for the three months ended March 31, 2009 were $0.2 million and $0.2 million, respectively. The amounts for the pension and other post retirement benefit plans expense for the corresponding period in 2008 were $0.2 million and $0.4 million, respectively.

9.	STOCKHOLDER’S EQUITY

Common Stock

Pursuant to the Merger with Tower, each share of the Company’s common stock not held by Tower, Merger Sub or the Company was automatically converted into and represents the right to receive 1.8 ordinary shares of Tower. Cash was paid in lieu of fractional shares. In connection with the Merger with Tower, the Company amended its Certificate of Incorporation to decrease the authorized shares of the Company’s common stock from 200,000,000 shares to 100 shares.

The number of outstanding shares of Jazz’s common stock at March 31, 2009 was 100, all of which are owned by Tower.

Warrants

Pursuant to the Merger with Tower, all outstanding warrants to purchase the shares of the Company’s common stock that were outstanding immediately prior to the effective time of the Merger, became exercisable for Tower ordinary shares. Each such warrant to purchase shares of the Company’s common stock became a warrant to purchase 1.8 Tower ordinary shares at an exercise price of $2.78 per Tower ordinary share, which is equal to the exercise price of $5.00 immediately prior to the effective time of the merger divided by the exchange ratio of 1.8. Fractional ordinary shares of Tower were rounded up to the nearest whole number.

Stock Options

Pursuant to the Merger with Tower, options to purchase shares of the Company’s common stock that were outstanding immediately prior to the effective time of the Merger, whether vested or unvested, became exercisable or will become exercisable for Tower ordinary shares. The Company recorded $27,844 of period compensation expense for the three months ended March 31, 2009 for modifications of these existing options pursuant to the Merger.

During the three months ended March 31, 2009 Tower awarded 10,000 non-qualified stock options to Company employees that vest over four year period from the date of grant . The exercise price was $0.32. The Company recorded $24,864 and $211,439 of compensation expenses relating to options granted to employees, for the three months ended March 31, 2009 and March 28, 2008 respectively.

As the amount of stock compensation activity for the three months ended March 31, 2009 is immaterial no additional disclosures have been provided

10.

RELATED PARTY TRANSACTIONS

	As of March 31, 2009		As of December 31, 2008




Due from related party (included in the accompanying balance sheets)	$	775	$	54
Due to related party (included in the accompanying balance sheets).	$	2,486	$	1,241

Related parties balances are with Tower mainly for purchases and payments on behalf of the other party, tools sale and service charges billed by Tower.

11.

FAIR VALUE MEASUREMENTS

The Company holds an investment in HHNEC, a non-public entity. This investment represents a minority interest of approximately 10% recorded at fair value of $17.1 million under the Guideline Company Method on September 19, 2008, the date of the Company’s acquisition by Tower.

The Convertible Notes’ fair value of $46.2 million determined by taking in consideration (i) the market approach, using the last quotations of the notes and (ii) the income approach utilizing the present value method at discount rate with credit worthiness appropriate for Jazz.

12.

LITIGATION

During 2008, an International Trade Commission (“ITC”) action was filed by Agere/LSI Corporation (“LSI”), which alleged infringement by 17 corporations of LSI’s patent no. 5227335. Following the initial filing, LSI amended the ITC complaint to add the Company, Tower and three other corporations as additional respondents. Tower, the Company and the other three corporations were added as additional respondents in the ITC action in October 2008. The Company and Tower are assessing the merits of this action and cannot provide an estimate of any possible losses or predict the outcome thereof, which could have a material and adverse effect on the Company’s and Tower’s businesses and financial position. The Company and Tower intend to vigorously defend the litigation.

Item 2.

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

The following discussion and analysis should be read in conjunction with the financial statements and related notes contained elsewhere in this report. See our Annual Report on Form 10-K and subsequent quarterly reports filed with the Securities and Exchange Commission for information regarding certain risk factors known to us that could cause reported financial information not to be necessarily indicative of future results.

FORWARD LOOKING STATEMENTS

This report on Form 10-Q may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Report Act of 1995. These statements, which represent our expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” or other words indicating future results. Such statements may include but are not limited to statements concerning the following:

—

the potential benefits of the merger with Tower Semiconductor Ltd.;

—

anticipated trends in revenues;

—

growth opportunities in domestic and international markets;

—

new and enhanced channels of distribution;

—

customer acceptance and satisfaction with our products;

—

expected trends in operating and other expenses;

—

purchase of raw materials at levels to meet forecasted demand;

—

anticipated cash and intentions regarding usage of cash;

—

changes in effective tax rates; and

—

anticipated product enhancements or releases.

These forward-looking statements are subject to risks and uncertainties, including those risks and uncertainties described in our Annual Report on Form 10-K and subsequent quarterly reports filed with the Securities and Exchange Commission, that could cause actual results to differ materially from those anticipated as of the date of this report. We assume no obligation to update any forward-looking statements to reflect events or circumstances arising after the date of this report.

OVERVIEW

The Company

We were incorporated on August 12, 2005, for the purpose of acquiring, through a merger, capital stock exchange, stock purchase, asset acquisition or other similar business combination, one or more domestic and/or foreign operating businesses in the technology, multimedia and networking sectors, focusing specifically on businesses that develop or provide technology-based products and services in the software, semiconductor, wired and wireless networking, consumer multimedia and information technology-enabled services segments.

We are based in Newport Beach, California and following the acquisition of Jazz Semiconductor Inc. (“Jazz Semiconductor”), we are now an independent semiconductor foundry focused on specialty process technologies for the manufacture of analog and mixed-signal semiconductor devices. Our specialty process technologies include advanced analog, radio frequency, high voltage, bipolar and silicon germanium bipolar complementary metal oxide (“SiGe”) semiconductor processes, for the manufacture of analog and mixed-signal semiconductors. Our customers use the analog and mixed-signal semiconductor devices in products they design that are used in cellular phones, wireless local area networking devices, digital TVs, set-top boxes, gaming devices, switches, routers and broadband modems.

Merger with Tower Semiconductor, Ltd

On May 19, 2008, we entered into an Agreement and Plan of Merger and Reorganization with Tower Semiconductor Ltd., an Israeli company (“Tower”), and its wholly-owned subsidiary, Armstrong Acquisition Corp., a Delaware corporation (“Merger Sub”), which provided for Merger Sub to merge with and into us, with us surviving the merger as a wholly-owned subsidiary of Tower, also referred to as the “Merger”. At a special meeting of the Company’s stockholders held on September 17, 2008, the requisite majority of our stockholders voted in favor of the Merger, and the Merger was effectively consummated on September 19, 2008. As a result of the Merger, our certificate of incorporation and bylaws were amended and restated.

At the effective time of the Merger, each outstanding share of our common stock not held by Tower, Merger Sub or us immediately before the Merger became automatically converted into and represented the right to receive 1.8 ordinary shares of Tower. Cash was paid in lieu of fractional shares.

At the effective time of the Merger, all outstanding warrants to purchase shares of our common stock that were outstanding immediately prior to the effective time of the Merger became exercisable for Tower ordinary shares. Each such warrant to purchase shares of our common stock became a warrant to purchase 1.8 Tower ordinary shares at an exercise price of $2.78 per Tower ordinary share, which is equal to the existing price of $5.00 divided by the exchange ratio of 1.8. Fractional ordinary shares of Tower are rounded up to the nearest whole number.

At the effective time of the Merger, each holder of the Convertible Notes outstanding immediately prior to the effective time of the Merger received the right to convert such holder’s note into Tower ordinary shares based on an implied conversion price of approximately $4.07 per Tower ordinary share. We entered into a second supplemental indenture, on September 19, 2008, with U.S. Bank, N.A. as trustee, reflecting these provisions relating to the consummation of the Merger. Our obligations under the Convertible Notes are not being guaranteed by Tower.

At the effective time of the Merger, all options to purchase shares of our common stock that were outstanding immediately prior to the effective time of the Merger, whether vested or unvested, became exercisable for Tower ordinary shares. Each option to purchase shares of our common stock outstanding at the effective time of the Merger became an option to purchase a number of Tower ordinary shares equal to 1.8 multiplied by the number of shares of our common stock that such option was exercisable for prior to the effective time, rounded down to the nearest whole number of Tower ordinary shares, and the per share exercise price of each option now equals the exercise price of such option divided by 1.8, rounded up to the nearest cent.

Tower and Jazz submitted the Merger for review by the Committee on Foreign Investment in the United States (“CFIUS”), a group of U.S. agencies that reviews foreign investments in U.S. companies for national security reasons pursuant to the Defense Production Act of 1950. The review by CFIUS has been completed, and CFIUS has notified the Company that there are no unresolved national security concerns and CFIUS will take no further action with respect to the Merger.

In connection with the Company’s aerospace and defense business, its facility security clearance and trusted foundry status, the Company and Tower are working with the Defense Security Service of the United States Department of Defense (“DSS”) to develop an appropriate structure to mitigate any concern of foreign ownership, control or influence over the operations of the Company specifically relating to protection of classified information and prevention of potential unauthorized access thereto. In order to safeguard classified information, it is expected that the DSS will require adoption of a Special Security Agreement (“SSA”). The SSA may include certain security related restrictions, including restrictions on the composition of the board of directors, the separation of certain employees and operations, as well as restrictions on disclosure of classified information to Tower. The provisions contained in the SSA may also limit the projected synergies and other benefits to be realized from the Merger. There is no assurance when, if at all, an SSA will be reached.

In connection with the Merger, on September 19, 2008, we entered into a second amended and restated loan and security agreement, as parent guarantor, with Wachovia Capital Markets, LLC, as lead arranger, bookrunner and syndication agent, and Wachovia Capital Finance Corporation (Western), as administrative agent, and Jazz Semiconductor and Newport Fab, LLC, as borrowers, with respect to a three-year secured asset-based revolving credit facility for the total amount of $55 million, including up to $10 million for letters of credit. On December 31, 2008, Wells Fargo acquired all of Wachovia Corporation and its businesses and obligations. The borrowing availability varies according to the levels of the borrowers’ eligible accounts receivable, eligible equipment and other terms and conditions described in the loan agreement. The maturity date of the facility is September 19, 2011, unless earlier terminated. Loans under the facility bear interest at a rate equal to, at borrowers’ option, either the lender’s prime rate plus a margin ranging from 0.25% to 0.75% or the LIBOR rate (as defined in the loan agreement) plus a margin ranging from 2% to 2.5% per annum. The facility is secured by all of our assets and the assets of the borrowers. Borrowing availability under the facility as of March 31, 2009 was $12.1 million in addition to outstanding borrowings of $27.0 million and $1.9 million in letters of credit committed under the facility on that date.

Effective September 23, 2008 as a result of the Merger, we voluntarily delisted our common stock, warrants and units from trading on the American Stock Exchange. On October 14, we filed a Form 15 with the SEC terminating our registration under Section 12(g) of the Securities Exchange Act of 1934 as amended, or the Exchange Act, and suspending our duty to file reports under Sections 13 and 15(d) of the Exchange Act. In connection with existing contractual commitments, we continue to voluntarily file reports under Sections 13 and 15(d) of the Exchange Act.

We also incurred approximately $4.1 million in merger costs, which were included as part of selling, general & administrative expenses in the statements of operations in 2008.

Critical Accounting Policies and Estimates

Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the US. Accordingly, we are required to make estimates incorporating judgments and assumptions we believe are reasonable based on our historical experience, contract terms, trends in our company and the industry as a whole, as well as information available from other outside sources. Our estimates affect amounts recorded in the financial statements and actual results may differ from initial estimates.

We consider the following accounting estimates to be the most critical to fully understand and evaluate our reported financial results. They require us to make subjective or complex judgments about matters that are inherently uncertain or variable.

—

Revenue Recognition

—

Account Receivable

—

Inventories

—

Impairment of Assets

—

Impairment of Goodwill

—

Accounting for Income Taxes

—

Pension Plans

—

Stock Based Compensation

For a discussion of our critical accounting estimates, please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2008.

RESULTS OF OPERATIONS

For the three months ended March 31, 2009, we had a net loss of $7.6 million compared to a net loss of $5.0 million for the three months ended March 28, 2008.

Pro Forma Financial Information

We were acquired by Tower on September 19, 2008, and accordingly, we do not believe a comparison of the results of operations and cash flows for the three months ended March 31, 2009 versus the three months ended March 28, 2008 is very meaningful. In order to assist users in better understanding the changes in our business between the three months ended March 31, 2009 and the three months ended March 28, 2008, we are presenting in the discussion below pro forma results for the three months ended March 28, 2008, as if our merger with Tower occurred on January 1, 2008. We derived the pro forma results from our unaudited condensed consolidated financial statements for the three months ended March 28, 2008.

The pro forma results are not necessarily indicative of the results that may have actually occurred had the acquisition taken place on the dates noted, or the future financial position or operating results of us or Jazz Semiconductor. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma adjustments include adjustments for reduced depreciation and amortization expense as a result of the application of the purchase method of accounting.

Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired and liabilities assumed, based on various estimates of their respective fair values. We performed the valuation of all the assets and liabilities in accordance with SFAS No. 141. The depreciation and amortization expense adjustments reflected in the pro forma results of operations are based on the preliminary valuation of our tangible and intangible assets described in Note 3 to our unaudited condensed consolidated financial statements.

	Three Months Ended
	March 31, 2009 (actual, unaudited)			March 28, 2008 (pro forma, unaudited)



Net revenues	$	29,179		$	50,830
Cost of revenues		27,426			40,107	(*)

Gross profit		1,753			10,723
Operating expenses:
Research and development		2,457			3,599
Selling, general and administrative		4,042			4,820
Amortization of intangible assets		197			197

Total operating expenses		6,696			8,616

Income (loss) from operations		(4,943	)		2,107
Interest and other expense, net		(3,946	)		(4,182	)(**)
Income tax benefit		1,277			15

Net loss	$	(7,612	)	$	(2,060	)

(*) The proforma results for the three months ended March 28, 2008 were adjusted by $3.3 million related to depreciation and amortization derived from the fair value changes in the plant, property and equipments and intangible assets, for the Merger.

(**) The proforma results for the three months ended March 28, 2008 were adjusted by $1.0 million related to interest accretion derived from the fair value changes in the convertible notes for the Merger.

Comparison of Three Months Ended March 31, 2009 and March 28, 2008

Revenues

Our revenues are generated principally from the sale of semiconductor wafers and in part from the sale of photomasks and other engineering services. Net revenues are net of provisions for returns and allowances. Revenues are categorized by technology group into specialty process revenues and standard process revenues. Specialty process revenues include revenues from wafers manufactured using our specialty process technologies-advanced analog CMOS, radio frequency CMOS or RF CMOS, high voltage CMOS, bipolar CMOS or BiCMOS, SiGe BiCMOS, and bipolar CMOS double-diffused metal oxide semiconductor or BCD, processes. Standard process revenues are revenues derived from wafers employing digital CMOS and standard analog process technologies.

The following table presents pro forma net revenues for the three months ended March 31, 2009 and March 28 2008:

	Net Revenues (in thousands, except percentages)
	Three Months Ended March 31, 2009 (actual, unaudited)				Three Months Ended March 28, 2008 (pro forma, unaudited)
	Amount		% of Net Revenues		Amount		% of Pro forma Net Revenues		Increase (Decrease)			% Change


Net Revenues	$	29,179		100.0	$	50,830		100.0	$	(21,651	)		(43	)

Our net revenues decreased by $21.7 million or 43% to $29.2 million for the three months ended March 31, 2009 compared to $50.8 million for the corresponding period in 2008 mainly due to the current worldwide economic downturn and the prevailing adverse market conditions in the semiconductor industry. Such decrease in revenues is lower than the industry's decrease. This decrease is the result of a $15.1 million or 39% decrease in specialty process net revenues to $24.1 million for the three months ended March 31, 2009 from $39.2 million of specialty process revenues for the corresponding period in 2008 and a $6.6 million or 57% decrease in standard process net revenues to $5.0 million for the three months ended March 31, 2009 from $11.6 million of standard process revenues for the corresponding period in 2008.

Specialty process revenues increased to 83% of total revenue for the three months ended March 31, 2009, as compared to 77% for the three months ended March 28, 2008. Standard process revenues for the three months ended March 31, 2009 decreased to 17% of total revenue, as compared to 23% in the corresponding period in 2008.

Cost of Revenues

The following table presents pro forma cost of revenues for the three months ended March 31, 2009 and March 28, 2008:

	Cost of Revenues (in thousands, except percentages)
	Three Months Ended March 31, 2009 (actual, unaudited)				Three Months Ended March 28, 2008 (pro forma, unaudited)
	Amount		% of Net Revenues		Amount		% of Pro Forma Net Revenues		Increase (Decrease)			% Change


Cost of revenues (excluding
depreciation & amortization of
intangible assets)	$	21,810		75	$	34,491		68	$	(12,681	)		(37	)
Cost of revenues - depreciation &
amortization of intangible assets		5,616		19		5,616		11		-			-

Total cost of revenues	$	27,426		94	$	40,107		79	$	(12,681	)		(32	)

On a pro forma basis, our cost of revenues decreased by $12.7 million or 32% to $27.4 million for the three months ended March 31, 2009 compared to $40.1 million for the corresponding period in 2008. The decrease in cost of revenues is mainly due to cost reduction efforts which have resulted in lower labor and overhead cost for the three months ended March 31, 2009 as well as due to the effect of the revenue decrease. We achieved such 32% decrease in cost of revenues as compared to 43% decrease in revenues, despite the high portion of fixed costs associated in operating a foundry, due to such cost reduction efforts. Cost reduction efforts included scaling the labor force to meet production demand and negotiating more favorable pricing for materials and supplies.

Gross Profit (Loss)

The following table presents pro forma gross profit for the three months ended March 31, 2009 and March 28, 2008:

	Gross Profit (in thousands, except percentages)
	Three Months Ended March 31, 2009 (actual, unaudited)				Three Months Ended March 28, 2008 (pro forma, unaudited)
	Amount		% of Net Revenues		Amount		% of Pro Forma Net Revenues		Increase (Decrease)			% Change


Gross profit	$	1,753		6	$	10,723		21	$	(8,970	)		(84	)

On a pro forma basis, the decrease in gross profit was primarily attributed to the above mentioned $21.7 million decrease in revenues which was partially offset by $12.7 million lower cost of revenues mainly due to the cost reduction actions resulted in lower labor, overhead and material and supplies costs as described in the cost of revenues section above.

Operating Expenses

The following table presents operating expenses for the three months ended March 31, 2009 and March 28, 2008:

	Operating Expenses (in thousands, except percentages)
	Three Months Ended March 31, 2009 (actual, unaudited)				Three Months Ended March 28, 2008 (pro forma, unaudited)
	Amount		% of Net Revenues		Amount		% of Pro Forma Net Revenues		Increase (Decrease)			% Change


Research and development	$	2,457		8	$	3,599		7	$	(1,142	)		(32	)
Selling, general and administrative		4,042		14		4,820		10		(778	)		(16	)
Amortization of intangible assets		197		1		197		-		-			-

Total operating expenses	$	6,696		23	$	8,616		17	$	(1,920	)		(22	)

On a pro forma basis, operating expenses for the three months ended March 31, 2009 decreased by $1.9 million compared to the three months ended March 28, 2008. The decrease in operating expenses was mainly attributed to lower research and development and selling, general and administrative expenses due to the continued efforts for reducing the overhead costs compared to the corresponding period in 2008.

Interest and Other (Expense) Income, Net

The following table presents interest and other income for the three months ended March 31, 2009 and March 28, 2008:

	Interest and Other Expense, Net (in thousands, except percentages)
	Three Months Ended March 31, 2009 (actual, unaudited)				Three Months Ended March 28, 2008 (pro forma, unaudited)
	Amount		% of Net Revenues		Amount		% of Pro Forma Net Revenues		Increase (Decrease)			% Change


Interest expense, net	$	3,946		14	$	4,557		9	$	(611	)		(13	)
Other income, net		-		-		375		1		375			(100	)

Interest and other expense, net	$	3,946		14	$	4,182		8	$	(236	)		(6	)

Other income, net of $0.4 million for the three months ended March 28, 2008 represents mainly net gain realized from the purchase of 5.0 million in principal amount of our Convertible Notes at a discount, applying FSP APB No. 14-1. During the quarter ended March 31, 2009 we did not repurchase any convertible notes.

CHANGES IN FINANCIAL CONDITION

Liquidity and Capital Resources

As of March 31, 2009, we had cash and cash equivalents of $28.9 million, borrowings of $27.0 million under our line of credit with Wachovia and had $12.1 million of additional availability under this credit line. Of the borrowings of $27.0 million, we consider $20.0 million to be long-term as the repayment of that sum will be made beyond the one year period. As of December 31, 2008, we had cash and cash equivalents of $27.6 million, borrowings of $27.0 million under our line of credit with Wachovia and had $13 million of additional availability under this credit line.

We believe, based on our current plans and current levels of operations, that our cash from operations, together with cash and cash equivalents and available line of credit, will be sufficient to fund our operations for at least the next 12 months. Current uncertainty arising from the global economic downturn, the prevailing market conditions in the semiconductor industry (including global decreased demand, downward price pressure, excess inventory and unutilized capacity) including the recent disruption in financial and credit markets, pose a risk to the overall economy that could impact consumer and customer demand for our and our customers’ products, as well as our commercial relationships with our customers, suppliers, and creditors, including our lenders. If the current situation continues or worsens significantly, our business could be negatively impacted, including such areas as reduced demand for our products and services from a slow-down in the general economy, or supplier or customer disruptions resulting from tighter credit markets, which could reduce our revenues or our ability to collect our accounts receivable and have a material adverse effect on our continued operations and financial condition. The Company is working to mitigate the potential effects of this downturn through several measures, including implementing a cost reduction plan and exploring measures to obtain funds from additional sources, including exploring potential opportunities for sales or licenses of intellectual property and technology. However, there is no assurance that the Company will be able to obtain sufficient funding from its cost reduction measures or obtain sufficient funds from the other funding sources in a timely manner to allow it to fully mitigate the effect of the existing economic downturn and any potential further deterioration in market conditions.

Net cash provided by operating activities was $4.4 million for the three months ended March 31, 2009. The primary categories of operating activities for that period include our net loss of $7.6 million, non-cash operating expenses (including depreciation and amortization of $5.9 million and the net changes in operating assets and liabilities of $6.1 million. Net cash provided by operating activities was $2.4 million during the three months ended March 28, 2008. The primary categories of operating activities for the three months ended March 28, 2008 include our net loss of $5.0 million, non-cash operating expenses of $11.0 million and the changes in operating assets and liabilities of $3.6 million.

Net cash used in investing activities was $3.1 million for the three months ended March 31, 2009 and 1.6 million for the three months ended March 28, 2008. Net cash used in investing activities for the periods presented primarily represents capital purchases of equipment.

Net cash used by financing activities was $2.2 million for the three months ended March 28, 2008 and represents mainly $4.1 million paid to purchase $5.0 million in principle amount of our convertible notes offset by $2.0 million of additional net borrowings from our line of credit.

As of March 31, 2009 and December 31, 2008, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Convertible Notes

On December 19, 2006 and December 21, 2006, we completed private placements of $166.8 million aggregate principal amount of Convertible Notes. The Convertible Notes bear interest at a rate of 8% per annum payable semi-annually, beginning on June 30, 2007. We may redeem the Convertible Notes on or after December 31, 2009 at agreed upon redemption prices, plus accrued and unpaid interest. The holders of the Convertible Notes have the option to convert the Convertible Notes into Tower ordinary shares based on an implied conversion price of $4.07 per Tower ordinary share.

During the first three months of 2008, we purchased on the open market $5.0 million in principal amount of our Convertible Notes for a total purchase price of $4.1 million. The Convertible Notes were purchased at a discount to their face value, including prepayment of interest. As of March 31, 2009, $128.2 million in principal amount of Convertible Notes remained outstanding.

Wachovia Line of Credit

On September 19, 2008, we entered into a second amended and restated loan and security agreement, as parent guarantor, with Wachovia Capital Markets, LLC, as lead arranger, bookrunner and syndication agent, and Wachovia Capital Finance Corporation (Western), as administrative agent (“Wachovia”), and Jazz Semiconductor and Newport Fab, LLC, as borrowers, with respect to a three-year secured asset-based revolving credit facility for the total amount of $55 million, including up to $10 million for letters of credit. On December 31, 2008, Wells Fargo acquired all of Wachovia Corporation and its businesses and obligations.

The borrowing availability varies according to the levels of the borrowers’ eligible accounts receivable, eligible equipment and other terms and conditions described in the loan agreement. The maturity date of the facility is September 19, 2011, unless earlier terminated. Loans under the facility bear interest at a rate equal to, at borrowers’ option, either the lender’s prime rate plus a margin ranging from 0.25% to 0.75% or the LIBOR rate (as defined in the loan agreement) plus a margin ranging from 2% to 2.5% per annum. The facility is secured by all of our assets and the assets of the borrowers. Borrowing availability under the facility as of March 31, 2009 was $12.1 million in addition to outstanding borrowings of $27.0 million and $1.9 million in letters of credit committed under the facility on that date.

The loan agreement contains customary covenants and other terms, including covenants based on EBITDA (as defined in the loan agreement), as well as customary events of default. If any event of default occurs, Wachovia may declare due immediately, all borrowings under the facility and foreclose on the collateral. Furthermore, an event of default under the loan agreement would result in an increase in the interest rate on any amounts outstanding. As of March 31, 2009, we were in compliance of all the covenants under this facility.

Acquisition Contingent Payments

As part of the acquisition of Jazz Semiconductor, we acquired a 10% interest in HHNEC (Shanghai Hau Hong NEC Electronics Company, Ltd.). This investment was valued at $24.3 million which is the fair value based upon the application of the purchase method of accounting on the date of our acquisition by Tower but carried at $17.1 million as we are obligated to pay additional amounts to former stockholders of Jazz Semiconductor if we realize proceeds in excess of $10 million from a liquidity event during the three-year period following the completion of the acquisition of Jazz Semiconductor. In that event, we will pay the former Jazz Semiconductor stockholders an amount equal to 50% of the proceeds over $10 million.

Royalty Obligations

We have agreed to pay to Conexant Systems, Inc. a percentage of our gross revenues derived from the sale of SiGe products to parties other than Conexant and its spun-off entities through March 2012. Under our technology license agreement with Polar Semiconductor, Inc., or PolarFab, we have also agreed to pay PolarFab certain royalty payments based on a decreasing percentage of revenues from sales of devices manufactured for PolarFab’s former customers. We also have an agreement with ARM Holdings plc to pay them royalties for using their intellectual property library to manufacture our customer’s products.

Leases

We lease our headquarters and Newport Beach, California fabrication and probing facilities from Conexant Systems, Inc. under non-cancelable operating leases through March 2017. We have the unilateral option to extend the terms of each of these leases for two consecutive five-year periods. Our rental payments under these leases consist solely of our pro rata share of the expenses incurred by Conexant in the ownership of these buildings and applicable adjustments for increases in the consumer price index. We have estimated future minimum costs under these leases based on actual costs incurred during 2008. We are not permitted to sublease space that is subject to these leases without Conexant’s prior approval.

We also have commitments consisting of software leases and facility and equipment licensing arrangements.

Future minimum payments under non-cancelable operating leases as of March 31, 2009 are as follows:

	Payment Obligations by Year
	Remainder of 2009		2010		2011		2012		Thereafter		Total
	(in thousands)


Operating leases	$	1,851	$	2,300	$	2,300	$	2,300	$	9,653	$	18,404

Item 4.

Controls and Procedures.

Disclosure Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, our principal executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of the end of the period covered by this report.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our principal executive officer and our principal financial officer have concluded that these controls and procedures are effective at the “reasonable assurance” level. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

During 2008, an International Trade Commission (“ITC”) action was filed by Agere/LSI Corporation (“LSI”), which alleged infringement by 17 corporations of LSI’s patent no. 5227335. Following the initial filing, LSI amended the ITC complaint requesting to add the Company, Tower and three other corporations as additional respondents. The Company, Tower and the other three corporations were added as additional respondents in the ITC action in October 2008. The Company and Tower are assessing the merits of this action and cannot provide an estimate of any possible losses or predict the outcome thereof, which could have a material and adverse effect on the Company’s and Tower’s businesses and financial position. The Company and Tower intend to vigorously defend the litigation.

Item 1A.

Risk Factors

In addition to the other information contained in this Form 10-Q, you should carefully consider the risk factors associated with our business previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. Additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

Item 6.

Exhibits.

Number

Description

10.1

First Amendment to Second Amended and Restated Loan and Security Agreement among the Registrant, Jazz Semiconductor, Inc., Newport Fab, LLC, Wachovia Capital Markets, LLC, Wachovia Capital Finance Corporation (Western) and the lenders from time to time party thereto, dated as of March 17, 2009.

31.1

CEO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

31.2

CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

Section 1350 Certification. (Not provided as not required of voluntary filers)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: May 15, 2009

JAZZ TECHNOLOGIES, INC.

By: /s/ Rafi Mor
——————————————
Rafi Mor
(Principal Executive Officer)

By: /s/ SUSANNA H. BENNETT
——————————————
SUSANNA H. BENNETT
Chief Financial Officer
(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Number

Description

10.1

31.1

CEO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

31.2

CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

Section 1350 Certification. (Not provided as not required of voluntary filers)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

Or

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

JAZZ TECHNOLOGIES, INC.

Table of Contents

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of Tower Semiconductor, Ltd.) and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets(in thousands)

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of Tower Semiconductor, Ltd.) and Subsidiaries

Jazz Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial StatementsMarch 31, 2009

FORWARD LOOKING STATEMENTS

OVERVIEW

Critical Accounting Policies and Estimates

RESULTS OF OPERATIONS

Pro Forma Financial Information

Comparison of Three Months Ended March 31, 2009 and March 28, 2008

Revenues

Cost of Revenues

Gross Profit (Loss)

Operating Expenses

Interest and Other (Expense) Income, Net

CHANGES IN FINANCIAL CONDITION

SIGNATURES

INDEX TO EXHIBITS

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets
(in thousands)

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of
Tower Semiconductor, Ltd.) and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2009