UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
For the quarterly period ended June 30, 2014
For the quarterly period ended September 30, 2014
Or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	~~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 ox No xo

(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 x 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~~companyo

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.

Table of Contents

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 Comprehensive Income (Loss)	3
		Unaudited Condensed Consolidated Statements of Cash Flows	4
		Notes to Unaudited Condensed Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	109
	Item 4.	Controls and Procedures	11
PART II — OTHER INFORMATION			12
	Item 1.	Legal Proceedings	12
	Item 1A.	Risk Factors	12
	Item 6.	Exhibits	12
SIGNATURES			13
Index to Exhibits			13

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of

Tower Semiconductor, Ltd.) and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

	June 30, 2014		December 31, 2013
	September 30, 2014		December 31, 2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	6770,~~958~~340	$	51,351
Receivables:
Trade receivables, net of allowance for doubtful accounts of $0 at June 30, 2014 and December 31, 2013		21,367		20,426
Trade receivables, net of allowance for doubtful accounts of $0 at September 30, 2014 and December 31, 2013		25,886		20,426
Other receivables		4,~~532~~723		9,835
Inventories		2930,~~952~~762		26,297
Deferred tax asset		3,944		3,846
Other current assets		1,~~223~~990		1,303
Total current assets		~~128~~137,~~976~~645		113,058
Long-term investments		1,~~071~~336		778
Property, plant and equipment, net		73,~~331~~690		78,345
Intangible assets, net		2625,~~121~~109		28,302
Goodwill		7,000		7,000
Other assets		43,~~140~~887		3,333
Total assets	$	~~240~~248,~~639~~667	$	230,816
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of debentures	$	4041,~~592~~563	$	--
Accounts payable		2224,~~699~~543		15,290
Accrued compensation and benefits		57,~~735~~045		5,985
Deferred revenues		2,~~052~~082		2,492
Other current liabilities		46,~~430~~861		5,205
Total current liabilities		7582,~~508~~094		28,972
Long term liabilities:
Long-term debt from banks		19,100		19,100
Notes		4142,~~596~~229		81,181
Deferred tax liability		4,510		2,429
Employee related liabilities		2,551		2,551
Other long-term liabilities		13,~~442~~332		12,780
Total liabilities		~~156~~163,~~707~~816		147,013
Stockholder’s equity:
Ordinary shares of $1 par value;
Authorized: 200 shares;
Issued: 100 shares;
Outstanding: 100 shares;
Additional paid-in capital		74,986		63,576
Cumulative stock based compensation		2,~~481~~638		2,173
Accumulated other comprehensive earnings		21,~~227~~662		3,357
Retained earnings		45,~~238~~565		14,697
Total stockholders' equity		8384,~~932~~851		83,803
Total liabilities and stockholders’ equity	$	~~240~~248,~~639~~667	$	230,816

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						~~Six~~Nine months ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Revenues	$	4760,~~458~~209		$	3743,~~407~~914		$	94154,~~377~~586		$	74118,~~181~~095
Cost of revenues		3847,~~636~~366			3035,~~465~~952			78125,~~555~~921			6096,~~364~~316
Gross profit		812,~~822~~843			67,~~942~~962			1528,~~822~~665			1321,~~817~~779
Operating expenses:
Research and development		23,~~845~~185			32,~~097~~898			58,~~560~~745			58,~~976~~874
Selling, general and administrative		3,~~494~~935			3,~~085~~175			610,~~749~~684			58,~~821~~996
Amortization related to a lease agreement early termination		--			1,866			--			35,~~732~~598
Total operating expenses		67,~~339~~120			87,~~048~~939			1219,~~309~~429			1523,~~529~~468
Operating income (loss)		25,~~483~~723			~~(1,106~~23	)		39,~~513~~236			(1,~~712~~689	)
Financing expense, net		(4,522	)		(3,562	)		(18,322	)		(7,047	)
Financing expense, net and other expenses		(3,738	)		(4,064	)		(22,060	)		(11,111	)
Loss before income taxes		(2,039	)		(4,668	)		(14,809	)		(8,759	)
Income (loss) before income taxes		1,985			(4,041	)		(12,824	)		(12,800	)
Income tax benefit		710			1,545			4,350			3,215
Income tax benefit (expense)		(658	)		1,049			3,692			4,264
Net loss	$	(1,329	)	$	(3,123	)	$	(10,459	)	$	(5,544	)
Net profit (loss)	$	1,327		$	(2,992	)	$	(9,132	)	$	(8,536	)

See accompanying notes.

Jazz Technologies, Inc. (A Wholly Owned Subsidiary of

Tower Semiconductor, Ltd.) and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

	Three months ended						~~Six~~Nine months ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Net loss	$	(1,329	)	$	(3,123	)	$	(10,459	)	$	(5,544	)
Net income (loss)	$	1,327		$	(2,992	)	$	(9,132	)	$	(8,536	)
Change in employees plan assets and benefit obligations		(565	)		(~~440~~446	)		(1,~~130~~695	)		(~~880~~1,326	)
Comprehensive loss	$	(1,894	)	$	(3,563	)	$	(11,589	)	$	(6,424	)
Comprehensive income (loss)	$	762		$	(3,438	)	$	(10,827	)	$	(9,862	)

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)

	Six months ended
	Nine months ended
	June 30, 2014			June 30, 2013
	September 30, 2014			September 30, 2013
Operating activities:
Net loss	$	(109,~~459~~132	)	$	(58,~~544~~536	)
Adjustments to reconcile net loss for the period to net cash provided by operating activities:
Loss from notes exchange		9,817			--
Depreciation and amortization of intangible assets		2133,~~591~~215			2132,~~749~~931
Notes accretion and amortization of deferred financing costs		35,~~907~~573			35,~~284~~066
Stock based compensation expense		~~308~~463			82125
Other expenses , net		--			474
Changes in operating assets and liabilities:
Trade receivables		(~~941~~5,460	)		(~~709~~959	)
Inventories		(34,~~655~~465	)		(6,~~090~~136	)
Other receivables and assets		1,~~942~~532			(5,~~683~~775	)
Accounts payable		23,~~813~~825			~~4,650~~663
Due to related parties, net		14,~~591~~077			~~847~~3,950
Accrued compensation and benefits		~~(250~~1,060	)		~~(458~~260	)
Deferred Revenue		(~~440~~410	)		~~191~~247
Other current liabilities		(1,~~027~~892	)		(~~495~~1,934	)
Deferred tax liability, net		(4,162	)		--(3,724	)
Employee related liabilities and other long-term liabilities		~~519~~(1,567	)		~~(72~~41	)
Net cash provided by operating activities		2132,~~554~~474			1116,~~752~~693
Investing activities:
Purchases of property and equipment		(1118,~~135~~691	)		(913,~~273~~373	)
Proceeds related to property and equipment		~~1,224~~242			~~911~~1,332
Net cash used in investing activities		(918,~~911~~449	)		(812,~~362~~041	)
Financing activities:
Proceeds from issuance of notes, net		9,214			--
Debt repayment		(4,250	)		--
Net cash provided by financing activities		4,964			--
Net increase in cash and cash equivalents		1618,~~607~~989			34,~~390~~652
Cash and cash equivalents at beginning of period		51,351			43,306
Cash and cash equivalents at end of period	$	6770,~~958~~340		$	4647,~~696~~958
Non cash activities:
Investments in property, plant and equipment	$	7,772		$	5,124
Equity increase arising from exchange of straight to convertible debt	$	9,609		$	--
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	3,284		$	7,500
Cash paid during the period for income taxes	$	--		$	--

Non cash activities:

Investments in property, plant and equipment		$	5,498			$	2,640
Equity increase arising from exchange of straight to convertible debt		$	9,609			$	--

Supplemental disclosure of cash flow information:

Cash paid during the period for interest		$	4,835			$	3,756
Cash paid during the period for income taxes		$	--			$	--

See accompanying notes.

Jazz Technologies, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~June~~September 30, 2014

Note 1: Business and Formation

Unless specifically noted otherwise, as used throughout these notes to the consolidated financial statements, “Jazz”, “Company” refers to the business of Jazz Technologies, Inc. including its wholly owned subsidiaries, and “Jazz Semiconductor” refers only to the business of Jazz Semiconductor, Inc.

The Company

Since the merger with Tower in 2008, the Company is a 100% subsidiary of Tower.

The Company is based in Newport Beach, California and is 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 customers' 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.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company prepares its consolidated financial statements in accordance with SEC and U.S. generally accepted accounting principles (“US GAAP”) requirements and includes all adjustments of a normal recurring nature that are necessary to fairly present its condensed consolidated results of operations, financial position, and cash flows for all periods presented. The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Interim period results are not necessarily indicative of full year results. This quarterly report should be read in conjunction with the Company’s 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 ~~June~~September 30, 2014 and December 31, 2013, and the consolidated results of its operations and cash flows for the three months and ~~six~~nine months ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013. All intercompany accounts and transactions have been eliminated. Certain amounts have been reclassified in order to conform to 2014 presentation.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from those estimates.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with US GAAP. For financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, the carrying amounts approximate fair value due to their short maturities.

Concentrations

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable.

The Company generally does not require collateral for insurance of receivables. An allowance for doubtful accounts is provided for those amounts that were determined to be doubtful of collection. The Company performs ongoing credit evaluations of its customers.

Accounts receivable from significant customers representing 10% or more of the net accounts receivable balance as of ~~June~~September 30, 2014 and December 31, 2013 consists of:

	June 30, 2014			December 31, 2013
	September 30, 2014			December 31, 2013
Customer 1		3741	%		36	%
Customer 2		*11			12

Net revenues from significant customers representing 10% or more of net revenues consist of:

Three months ended

~~Six~~Nine months ended

June 30, 2014

June 30, 2013

June 30, 2014

June 30, 2013

September 30, 2014

September 30, 2013

September 30, 2014

September 30, 2013

Customer A

2622

Customer B

*10

10*

Customer C

* 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 products 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

In May 2014, the FASB ~~and~~issued ~~IASB~~Accounting ~~issued~~Standards ~~their~~Update ~~final~~No. ~~standard~~2014-09 on(ASU ~~revenue~~2014-09), Revenue from ~~contracts~~Contracts with ~~customers.~~Customers ~~The~~to ~~core~~clarify ~~principle of~~ the ~~standard,~~principles ~~issued~~for asrecognizing ~~ASU~~revenue ~~2014-9~~from bycontracts ~~the~~with ~~FASB~~customers. ~~and~~The ~~IFRS~~guidance 15requires ~~by the IASB, is that~~ an entity ~~should~~to recognize revenue to depict the transfer of ~~promised~~ goods or services to customers in an amount that reflects the consideration to which ~~the~~an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The requirements are effective for annual reporting periods beginning after December 15, 2016 using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The Company are evaluating the impact of the amended revenue recognition guidance on our financial statements.

The guidance sets out five steps an entity should undertake to fulfill the core principle of the standard as follows: identify the contract(s) with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract and recognize revenue when (or as) the entity satisfies a performance obligation.

For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods therein. Early application is not permitted. Adoption of this guidance is not expected to have a significant impact on the Company’s financial position or results of operations.

Note 3: Other Balance Sheet Details

Inventories

Inventories, net of reserves, consist of the following on ~~June~~September 30, 2014 and December 31, 2013 (in thousands):

	June 30, 2014		December 31, 2013
	September 30, 2014		December 31, 2013
Raw material	$	3,~~585~~268	$	4,434
Work in process		2224,~~867~~855		15,618
Finished goods		32,~~500~~639		6,245
	$	2930,~~952~~762	$	26,297

Property, Plant and Equipment

Property, plant and equipment consist of the following on ~~June~~September 30, 2014 and December 31, 2013 (in thousands):

	Useful life (in years)		~~June~~September 30, 2014			December 31, 2013
Building improvements		10-14	$	27,~~016~~025		$	26,809
Machinery and equipment		3-7		~~211~~221,~~002~~487			196,812
				238,018			223,621
				248,512			223,621
Accumulated depreciation				(~~164~~174,~~687~~822	)		(145,276	)
			$	73,~~331~~690		$	78,345

Intangible Assets

Intangible assets consist of the following on ~~June~~September 30, 2014 (in thousands):

	Useful life (in years)		Cost		Accumulated Amortization		Net
Technology		4;9	$	3,300	$	2,~~367~~450	$	~~933~~850
Patents and other core technology rights		9		15,100		910,~~709~~128		54,~~391~~972
In-process research and development		--		1,800		1,800		--
Customer relationships		15		2,600		1,~~003~~046		1,~~597~~554
Trade name		9		5,200		3,~~343~~488		1,~~857~~712
Facilities lease		19		33,500		17,~~157~~479		16,~~343~~021
Total identifiable intangible assets			$	61,500	$	3536,~~379~~391	$	2625,~~121~~109

Intangible assets consist of the following on December 31, 2013 (in thousands):

	Useful life (in years)		Cost		Accumulated Amortization		Net
Technology		4;9	$	3,300	$	2,046	$	1,254
Patents and other core technology rights		9		15,100		8,870		6,230
In-process research and development		--		1,800		1,800		--
Customer relationships		15		2,600		916		1,684
Trade name		9		5,200		3,054		2,146
Facilities lease		19		33,500		16,512		16,988
Total identifiable intangible assets			$	61,500	$	33,198	$	28,302

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

Note 4: Wells Fargo Asset-Based Revolving Credit Line

In December 2013, the Company entered into an agreement with Wells Fargo Capital Finance, part of Wells Fargo & Company (“Wells Fargo”), to amend the previous loan and security agreement, for a five-year secured asset-based revolving credit line in the total amount of up to $70 million, maturing in December 2018 (the “Credit Line Agreement”). Loans under the Credit Line Agreement bear interest at a rate equal to, at lender’s option, either the lender’s prime rate plus a margin ranging from 0.50% to 1.0% or the LIBOR rate plus a margin ranging from 1.75% to 2.25% per annum.

The outstanding borrowing availability varies from time to time based on the levels of the Company's eligible accounts receivable, eligible equipment, eligible inventories and other terms and conditions described in the Credit Line Agreement. The Credit Line Agreement is secured by the assets of the Company. The Credit Line Agreement contains customary covenants and other terms, including customary events of default. If any event of default occurs, Wells Fargo may declare due immediately, all borrowings under the facility and foreclose on the collateral. Furthermore, an event of default under the Credit Line Agreement would result in an increase in the interest rate on any amounts outstanding. The Company's obligations pursuant to the Credit Line Agreement are not guaranteed by Tower.

Borrowing availability under the Credit Line Agreement as of ~~June~~September 30, 2014 was approximately $4951 million, of which approximately $~~23.7~~24 million has been utilized as such date. As of ~~June~~September 30, 2014, the Company was in compliance with all the covenants under this facility.

Note 5: Notes

Introduction

As of ~~June~~September 30, 2014, the Company had approximately $~~45million~~45 million principal amount of Notes outstanding due June 2015 and approximately $58 million principal amount of Notes outstanding due December 2018. Description and composition are as follows:

$45 million Jazz 2010 Notes due June 2015:

In July 2010, the Company issued notes in the principal amount of approximately $94 million due June 2015 (the “2010 Notes”). Interest on the 2010 Notes at a rate of 8% per annum is payable semiannually. As of ~~June~~September 30, 2014 the outstanding principal amount of 2010 Notes was $45 million, see also the 2014 Exchange Agreement (as defined and discussed below).

The 2010 Notes are unsecured obligations of the Company, rank equally with all other existing and future unsecured senior indebtedness of the Company, including the 2014 Notes (as defined below) and are effectively subordinated to all existing and future secured indebtedness of the Company, including the Company’s up to $70 million secured Credit Line Agreement with Wells Fargo (see Note 4 above), to the extent of the value of the collateral securing such indebtedness. The 2010 Notes are not guaranteed by Tower. The 2010 Notes shall rank senior to all existing and future subordinated debt of the Company.

~~Since~~The ~~July 1, 2013, the~~ Company has ~~had~~ the right to redeem some or all of the 2010 Notes for cash at a redemption price equal to par plus accrued and unpaid interest plus a redemption premium equal to ~~4% if redemption occurs prior to July 1, 2014 and~~ 2% ~~if redemption occurs between July 1, 2014 and maturity~~.

Holders of the 2010 Notes are entitled, subject to certain conditions and restrictions, to require the Company to repurchase the 2010 Notes at par plus accrued interest and a 1% redemption premium in the event of certain change of control transactions as set forth in the Indenture.

The indenture governing the 2010 Notes contains certain customary covenants as set forth in the Indenture.

If there is an event of default on the 2010 Notes, all of the 2010 Notes may become immediately due and payable, subject to certain conditions set forth in the Indenture.

The Company’s obligations under the 2010 Notes are guaranteed by the Company’s wholly owned domestic subsidiaries. The Company has not provided condensed consolidated financial information for such subsidiaries because the subsidiaries have no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and the subsidiaries of the Company, other than the subsidiary guarantors, are minor.

$58 million Jazz 2014 Notes due December 2018:

In March 2014, the Company, certain of its domestic subsidiaries and Tower entered into an exchange agreement (the “2014 Exchange Agreement”) with certain note-holders (the “2014 Participating Holders”) according to which the Company issued new unsecured 8% convertible senior notes due December 2018 (the “2014 Notes”) in exchange for approximately $45 million in aggregate principal amount of 2010 Notes.

In addition, the Company, Tower and certain of the 2014 Participating Holders (the “Purchasers”) entered into a purchase agreement (the “Purchase Agreement”) pursuant to which the Purchasers purchased $10 million aggregate principal amount of 2014 Notes for cash considerations.

The 2014 Participating Holders and Purchasers may submit a conversion request with the Company with respect to their 2014 Notes to be settled at the Company’s discretion through cash from Jazz or ordinary shares from Tower, in which event Tower has to issue ordinary shares based on a conversion price of $10.07 per share, reflecting a 20 percent premium over the average closing price for Tower’s ordinary shares for the five trading days ending on the day prior to the signing date of the 2014 Exchange Agreement and Purchase Agreement.

The 2014 Notes are unsecured senior obligations of the Company, rank equally with all other existing and future unsecured senior indebtedness of the Company, including the 2010 Notes, and are effectively subordinated to all existing and future secured indebtedness of the Company, including the Company’s secured Credit Line Agreement with Wells Fargo (see Note 4 above), to the extent of the value of the collateral securing such indebtedness. The 2014 Notes rank senior to all existing and future subordinated debt. The 2014 Notes are jointly and severally guaranteed on a senior unsecured basis by the Company’s domestic subsidiaries. The 2014 Notes are not guaranteed by Tower.

Holders of the 2014 Notes are entitled, subject to certain conditions and restrictions, to require the Company to repurchase the 2014 Notes at par plus accrued interest and a 1% redemption premium in the event of certain change of control transactions as set forth in the Indenture governing the 2014 Notes.

The Indenture contains certain customary covenants including covenants restricting the Company’s ability and the ability of its subsidiaries to, among other things, incur additional debt, incur additional liens, make specified payments and make certain asset sales.

If there is an event of default on the 2014 Notes, all of the 2014 Notes may become immediately due and payable, subject to certain conditions set forth in the Indenture.

Jazz’s obligations under the 2014 Notes are guaranteed by Jazz’s wholly owned domestic subsidiaries. The Company has not provided condensed consolidated financial information for such subsidiaries because the subsidiaries have no independent assets or operations, the subsidiary guarantees are full and unconditional and joint and several and the subsidiaries of the Company, other than the subsidiary guarantors, are minor.

~~As of June 30, 2014, approximately $58 million principal amount of 2014 Notes was outstanding.~~8

~~The~~As ~~Company concluded the exchange should not be recognized as a troubled debt restructuring in accordance with the provisions~~ of ~~ASC~~ ~~470-60~~September "Modifications and Extinguishments". In accordance with the provisions of ASC 470-50 the Company concluded that the exchange resulted in an extinguishment of the old debt and the issuance of a new convertible debt to be recorded at fair value. As described above30, ~~certain of the~~ 2014 ~~Notes were issued in exchange for certain of the 2010 Notes. Since the 2014 Notes were not traded and no quotes were available~~, ~~the Company determined the fair value of the 2014 Notes using the present value technique. The 2014 Exchange Agreement resulted in an expense of~~ approximately $~~9.8~~58 million, ~~which~~principal ~~has~~amount ~~been recorded in the statement~~ of ~~operations report as non-cash one-time financing expense for the six months ended June 30,~~ 2014 ~~and~~Notes ~~the~~was ~~convertible feature has been recorded in equity~~outstanding.

The Company concluded the exchange should not be recognized as a troubled debt restructuring in accordance with the provisions of ASC 470-60 "Modifications and Extinguishments". In accordance with the provisions of ASC 470-50 the Company concluded that the exchange resulted in an extinguishment of the old debt and the issuance of a new convertible debt to be recorded at fair value. As described above, certain of the 2014 Notes were issued in exchange for certain of the 2010 Notes. Since the 2014 Notes were not traded and no quotes were available, the Company determined the fair value of the 2014 Notes using the present value technique. The 2014 Exchange Agreement resulted in an expense of approximately $9.8 million, which has been recorded in the statement of operations report as non-cash one-time financing expense for the nine months ended September 30, 2014 and the convertible feature has been recorded in equity.

Note 6: Income Taxes

In 2013, the U.S. tax authorities commenced an audit of the Company’s 2011 tax returns, and asked the Company for certain reports and data in connection with said year’s tax returns. ~~While~~During ~~there~~September is2014, ~~no assurance that~~ the Company ~~will~~received ~~not~~correspondence befrom ~~required~~the toU.S. ~~pay~~tax ~~additional~~authorities that ~~taxes~~they ~~pursuant~~accepted tothe ~~said~~2011 ~~audit,~~federal no tax ~~adjustments~~returns ~~have~~as ~~been~~filed ~~requested~~without toany ~~date~~audit adjustments.

As described in Note 5 above, the 2014 Exchange Agreement resulted in the recognition of a $9.8 million one-time non cash cost included in financing expenses, net. The tax benefit has been recorded entirely in the statements of operations for the three months ended March 31, 2014 and this one-time non cash cost has not and will not impact the Company’s projected annual effective tax rate to be applied to year-to-date net profit or loss before income taxes excluding this one-time non cash cost.

Note 7: Employee Benefit Plans

The pension and other post retirement benefit plans amount to $0.5 million and $0.4 million income for the three months ended ~~June~~September 30, 2014 and 2013, respectively. For the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013 amounts were $1.15 million and $01.83 million income, respectively.

Note 8: Employee Stock Option Expense

During the ~~six~~nine months ended ~~June~~September 30, 2014, 5125,000 options were awarded. For the three months ended ~~June~~September 30, 2014 and 2013, the Company recorded $0.12 million and immaterial amount, respectively of compensation expenses relating to options granted to employees. For the ~~six~~nine months ended ~~June~~September 30, 2014 and 2013, the Company recorded $0.35 million and $0.1 million, respectively of compensation expenses relating to options granted to employees, respectively.

Note 9: Related Party Transactions:

Related Party Transactions consist of the following (in thousands):

	As of June 30, 2014		As of December 31, 2013
	As of September 30, 2014		As of December 31, 2013
Due from related parties (included in the accompanying balance sheets)	$	43,~~721~~930	$	6,406
Due to related parties (included in the accompanying balance sheets)	$	~~398~~4,150	$	146

Related parties’ balances are with Tower and TowerJazz Japan Ltd. (“TJP”) and are mainly for purchases and payments on behalf of the other party, capital expenditures’ related transactionsand service charges.

Note 10: Commitments and Contingencies

Leases

The Company leases its fabrication facilities and headquarters under lease contracts that may be extended until 2027, through the exercise of options at Jazz’s sole discretion to extend the lease periods from 2017 to 2022 and from 2022 to 2027. In 2010, the properties which the Company leases for its fabrication facilities and headquarters were sold to a real estate investment firm based in Irvine, California. In connection with the sale, the Company negotiated amendments to its operating leases that confirm the Company’s ability to remain in the fabrication facilities through 2027 as described above. In the amendments to its leases, Jazz secured various contractual safeguards designed to limit and mitigate any adverse impact of construction activities on its fabrication operations. In addition, the most recent lease amendment set forth certain obligations of the Company and the landlord, including certain noise abatement actions at the fabrication facility.

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 for the fiscal year ended December 31, 2013 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:

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.

This report, including these forward-looking statements, are subject to risks and uncertainties, including those risks and uncertainties described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 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.

RESULTS OF OPERATIONS

For the ~~six~~nine months ended ~~June~~September 30, 2014, we had a net loss of $109.51 million compared to a net loss of $58.5 million for the ~~six~~nine months ended ~~June~~September 30, 2013.

The following table sets forth certain statement of operations data as a percentage of total revenues for the periods indicated.

	Six Months Ended
	Nine Months Ended
	June 30, 2014			June 30, 2013
	September 30, 2014			September 30, 2013
Net revenues		100	%		100	%
Cost of revenues		8381.25			81.46
Gross profit		1618.85			18.64
Operating expenses:
Research and development		5.97			87.15
Selling, general and administrative		76.29			7.86
Amortization related to a lease agreement early termination		--			54.7
Total operating expenses		1312.16			2019.9
Operating profit (loss)		36.70			(21.34	)
Financing expense , net		(19.4	)		(9.5	)
Financing expense , net and other expenses		(14.3	)		(9.4	)
Income tax benefit		42.64			4.3.6
Net loss		(115.19	)%		(7.52	)%

Comparison of ~~Six~~Nine Months Ended ~~June~~September 30, 2014 and ~~June~~September 30, 2013

Revenues

Our net revenues for the ~~six~~nine months ended ~~June~~September 30, 2014 amounted to $94154.46 million, an increase of $2036.25 million as compared to $74118.21 million for the corresponding period in 2013. The revenue increase is mainly attributable to the 1926% increase of quantities sold and 4% higher average selling price during the ~~six~~nine months ended ~~June~~September 30, 2014.

Cost of Revenues

Our cost of revenues was $78125.69 million for the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $6096.43 million for the corresponding period in 2013. The increase in cost of revenues was mainly due to variable costs directly associated with the increase in quantities of wafers ~~shipped~~that we manufactured, as described above~~, and lower margin profile from some of our technologies, however still total costs increased by a lower amount than the increased revenues~~ .

Gross Profit

Our gross profit amounted to $1528.87 million in the ~~six~~nine months ended ~~June~~September 30, 2014 as compared to $1321.8 million in the corresponding period in 2013.

Operating Expenses

Operating expenses for the ~~six~~nine months ended ~~June~~September 30, 2014 amounted to $1219.34 million, as compared to $1523.5 million in the ~~six~~nine months ended ~~June~~September 30, 2013. ~~Operating~~The primary reason for the reduction in operating expenses is that for the ~~six~~nine months ended ~~June~~September 30, 2013 ~~include~~we included $35.76 million amortization related charge to ~~a lease agreement early termination of~~ an office building lease early termination.

Financing Expense, Net and Other Expenses

Financing expense, net for the ~~six~~nine months ended ~~June~~September 30, 2014 amounted to $1822.31 million, as compared to $711.01 million in the corresponding period in 2013. Financing expense, net and other expenses in the ~~six~~nine months ended ~~June~~September 30, 2014 ~~includes~~were higher than in same period in 2013 due to the inclusion of a $9.8 million non-cash one-time financing cost resulting from the 2014 Exchange Agreement, as described in Note 5 above.

Income Tax Benefit

Income tax benefit amounted to $43.47 million in the ~~six~~nine months ended ~~June~~September 30, 2014, as compared to income tax benefit of $34.23 million in the ~~six~~nine months ended ~~June~~September 30, 2013.

Net loss

Net loss for the ~~six~~nine months ended ~~June~~September 30, 2014 amounted to $109.51 million as compared to net loss of $58.5 million in the ~~six~~nine months ended ~~June~~September 30, 2013. The $0.6 million increase in net loss is ~~mainly~~ due to the one-time non-cash cost of $9.8 million included in financing expenses, resulting from the 2014 Exchange Agreement described in Note 5 above, offset by improved gross profits resulted from the increased revenue.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Based on the 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

There are no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we are a party or any of our property is subject.

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, 2013. Our business, financial condition and/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
31.1		Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1		Principal Executive Officer Certification required by Section 1350.
32.2		Principal Financial Officer Certification required by Section 1350.
101		Financial information from the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2014, formatted in XBRL

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: August 14, 2014	JAZZ TECHNOLOGIES, INC.
Date: November 17, 2014	JAZZ TECHNOLOGIES, INC.
	By:	/s/ Marco Racanelli
		Senior Vice President and Site General Manager (Principal Executive Officer)
	By:	/s/ RONIT VARDI
		Chief Financial Officer (Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

Number		Description
31.1		Principal Executive Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		Principal Financial Officer Certification required by Rule 13a-14(a) or Rule 15d-14(a).
32.1		Principal Executive Officer Certification required by Section 1350.
32.2		Principal Financial Officer Certification required by Section 1350.
101		Financial information from the registrant’s Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2014, formatted in XBRL

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