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

Form 10-Q

(Mark One)

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

For the Quarterly Period Ended September 29, 2002

OR

[   ]

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

For the transition period from ____________ to ____________

Commission File Number 0-24758

MICRO LINEAR CORPORATION
(Exact name of Registrant as specified in its charter)

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

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

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

     The number of shares of the Registrant’s Common Stock outstanding as of October 31, 2002, net of shares held in treasury, was 12,096,722.

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TABLE OF CONTENTS

						PAGE
PART I.				FINANCIAL INFORMATION
Item 1.				Financial Statements
				Unaudited Consolidated Condensed Balance Sheet at September 30, 2002 and Audited Consolidated Condensed Balance Sheet at December 31, 2001			3
				Unaudited Consolidated Condensed Statements of Operations for the three and nine months ended September 30, 2002 and 2001			4
				Unaudited Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2002 and 2001			5
				Notes to Unaudited Consolidated Condensed Financial Statements			6
Item 2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
Item 3.				Quantitative and Qualitative Disclosures about Market Risk			22
Item 4.				Controls and Procedures			22
PART II.				OTHER INFORMATION
Item 1.				Legal Proceedings			24
Item 4.				Submission of Matters to a Vote of Security Holders			24
Item 6.				Exhibits and Reports on Form 8-K			24
SIGNATURES							25
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
Certification of the Chief Executive Officer
Certification of the Chief Financial Officer

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

					September 30,				December 31,
					2002				2001
Assets
Current assets:
	Cash and cash equivalents				$	15,289			$	14,888
	Short-term investments					13,333				13,018
	Accounts receivable, net					436				1,301
	Inventories					2,792				3,632
	Other current assets					1,099				1,135
		Total current assets				32,949				33,974
Property, plant and equipment, net						8,951				10,326
Other assets						115				213
			Total assets		$	42,015			$	44,513
Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable				$	1,783			$	2,361
	Accrued compensation and benefits					827				1,679
	Deferred income on shipments to distributors					2,527				2,888
	Accrued commissions					222				282
	Other accrued liabilities					1,893				1,950
	Current portion of long-term debt					239				239
		Total current liabilities				7,491				9,399
Long-term debt						2,126				2,308
			Total liabilities			9,617				11,707
Stockholders’ equity:
	Common stock					15				15
	Additional paid-in capital					60,096				59,945
	Notes receivable from stockholders					—				(6	)
	Accumulated deficit					(7,500	)			(7,000	)
	Accumulated other comprehensive income					20				85
	Treasury stock					(20,233	)			(20,233	)
		Total stockholders’ equity				32,398				32,806
			Total liabilities and stockholders’ equity		$	42,015			$	44,513

See accompanying notes to unaudited consolidated condensed financial statements.

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

					THREE MONTHS ENDED								NINE MONTHS ENDED
					SEPTEMBER 30,								SEPTEMBER 30,
					2002				2001				2002				2001
Net revenues					$	9,286			$	7,406			$	23,762			$	16,756
Cost of revenues						4,030				3,833				10,269				8,125
	Gross margin					5,256				3,573				13,493				8,631
Operating expenses:
	Research and development					3,891				4,328				12,160				11,790
	Selling, general and administrative					2,029				2,395				6,115				7,255
			Total operating expenses			5,920				6,723				18,275				19,045
	Loss from operations					(664	)			(3,150	)			(4,782	)			(10,414	)
Interest and other income						135				392				571				1,955
Interest and other expense						(65	)			(69	)			(199	)			(1,312	)
	Loss before income taxes					(594	)			(2,827	)			(4,410	)			(9,771	)
Benefits from income taxes						(3,989	)			—				(3,910	)			—
	Net income (loss)				$	3,395			$	(2,827	)		$	(500	)		$	(9,771	)
Basic:
		Net income (loss) per share			$	0.28			$	(0.24	)		$	(0.04	)		$	(0.82	)
		Weighted average number of shares used in per share computation				12,079				11,940				12,068				11,909
Diluted:
		Net income (loss) per share			$	0.28			$	(0.24	)		$	(0.04	)		$	(0.82	)
		Weighted average number of shares used in per share computation				12,239				11,940				12,068				11,909

See accompanying notes to unaudited consolidated condensed financial statements.

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

				Nine Months Ended
				September 30,
				2002				2001
Net cash provided by (used in) operating activities				$	1,205			$	(7,310	)
Investing activities:
	Purchase of capital equipment				(282	)			(1,378	)
	Proceeds from sale of equipment				—				7
	Proceeds from notes receivable				—				2,690
	Purchases of short-term investments				(11,082	)			(17,889	)
	Sales of short-term investments				10,702				18,599
		Net cash provided by (used in) investing activities			(662	)			2,029
Financing activities:
	Principal payments on debt				(182	)			(168	)
	Proceeds from issuance of common stock				40				195
		Net cash provided by (used in) financing activities			(142	)			27
	Net increase (decrease) in cash and cash equivalents				401				(5,254	)
	Cash and cash equivalents at beginning of period				14,888				17,664
		Cash and cash equivalents at end of period		$	15,289			$	12,410

See accompanying notes to unaudited consolidated condensed financial statements.

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MICRO LINEAR CORPORATION
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. Description of Business

     Micro Linear Corporation is a worldwide supplier of integrated circuits to the communications market. Our products are used in high-speed networks and wireless applications, supporting broadband digital voice, data and video transmission in the enterprise and the home. Our headquarters are in San Jose, California. In addition to our San Jose engineering group, we have design centers in Salt Lake City, Utah and Cambridge, England. We operate in a single industry segment, and serve our customers through worldwide direct sales, manufacturer’s representatives, and distributors.

2. Summary of Significant Accounting Policies

Fiscal Year

     We report results of operations on the basis of fifty-two or fifty-three week periods, ending on the Sunday closest to December 31. Fiscal year 2001 ended on December 30, 2001. The third quarter of each year ends on the Sunday closest to September 30. The third quarter of 2001 ended on September 30, 2001. The third quarter of 2002 ended on September 29, 2002. For presentation purposes, the unaudited consolidated condensed financial statements refer to the calendar month or year end of each period.

Principles of Consolidation

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

Basis of Presentation

     The unaudited consolidated condensed financial statements included herein have been prepared by us in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary to state fairly our financial position, results of operations, and cash flows for the periods presented.

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

Use of Estimates

     The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such differences may be material to the financial statements.

3. Financial Statement Details

     Inventories consist of the following (in thousands):

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

Related Party Transaction

     In May 2002, Timothy Richardson was elected as President and Chief Executive Officer of the Company. We extended a bridge loan to Mr. Richardson in June 2002, to assist him in purchasing a home in California pending the sale of his existing residence. The $450,000 loan is secured by a first mortgage on Mr. Richardson’s home in Georgia. The loan bears interest at the prime rate, which is 4.75%. Principal and interest will be due upon the sale of the Georgia home or, if earlier, six months after the date of the loan.

Benefits from Income Taxes

     The benefits from income taxes for the nine months ended September 30, 2002 consists of a small amount of foreign tax expense and a $4.0 million benefit of carrying back losses to profitable years and claiming current refunds resulting from a tax law change in March, 2002. We believe that the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that we have recorded a full valuation allowance for the remaining deferred tax assets.

Comprehensive Income

     For the three and nine months ended September 30, 2002 and 2001, comprehensive loss, which consists of the net loss for the periods and unrealized gain or loss on short-term marketable securities, is as follows (in thousands):

Earnings Per Share

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

					THREE MONTHS ENDED								NINE MONTHS ENDED
					SEPTEMBER 30,								SEPTEMBER 30,
					2002				2001				2002				2001
Basic:
		Net income (loss)			$	3,395			$	(2,827	)		$	(500	)		$	(9,771	)
		Weighted average common shares outstanding				12,079				11,940				12,068				11,909
		Basic income (loss) per share			$	0.28			$	(0.24	)		$	(0.04	)		$	(0.82	)
Diluted:
		Net income (loss)			$	3,395			$	(2,827	)		$	(500	)		$	(9,771	)
		Weighted average common shares outstanding				12,079				11,940				12,068				11,909
		Dilutive stock options				160				—				—				—
		Weighted average common shares outstanding				12,239				11,940				12,068				11,909
		Diluted income (loss) per share			$	0.28			$	(0.24	)		$	(0.04	)		$	(0.82	)

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

     Options to purchase 4,469,938 shares of common stock were outstanding as of September 30, 2002, and options to purchase 3,926,532 shares of common stock were outstanding as of September 30, 2001. Outstanding options had no effect upon the computation of diluted earnings per share for the periods in which we experienced a net loss. Including outstanding options in the computation in the case of a net loss would be anti-dilutive.

4. Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” and SFAS No. 14