INSILICON CORP, S-1/A, 2000-02-24

INSILICON CORP
S-1/A, 2000-02-24
SEMICONDUCTORS & RELATED DEVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24, 2000

REGISTRATION NO. 333-94573
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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INSILICON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 3674 77-0526155
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

411 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
(408) 894-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WAYNE C. CANTWELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
411 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
(408) 894-1900
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------

COPIES TO:

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<S> <C>
ALAN TALKINGTON, ESQ. PETER T. HEALY, ESQ.
BARBARA M. LANGE, ESQ. C. BROPHY CHRISTENSEN, JR., ESQ.
PAUL L. RUBIN, ESQ. O'MELVENY & MYERS LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP 275 BATTERY STREET
400 SANSOME STREET SAN FRANCISCO, CA 94111
SAN FRANCISCO, CA 94111
</TABLE>

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / ____________
--------------------------

CALCULATION OF REGISTRATION FEE

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<CAPTION>
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.001...... 4,025,000 SHARES $11.00 $44,275,000 $11,688
</TABLE>

(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act.

(2) Paid at initial filing.
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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EXPLANATORY NOTE

This registration statement contains two forms of prospectus front cover
pages: (a) one to be used in connection with an offering in the United States
and Canada and (b) one to be used in connection with a concurrent offering
outside of the United States and Canada. The U.S. prospectus and the
international prospectus are otherwise identical in all respects. The
international version of the front cover page is included immediately before
Part II of this registration statement.

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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>

SUBJECT TO COMPLETION, DATED FEBRUARY 24, 2000

[LOGO]

3,500,000 SHARES
COMMON STOCK

inSilicon is offering 3,500,000 shares of its common stock. This is our
initial public offering and no public market currently exists for our shares. We
have applied to have our shares approved for quotation on the Nasdaq National
Market under the symbol "INSN." We anticipate that the initial public offering
price will be between $9.00 and $11.00 per share.

Phoenix Technologies Ltd. currently owns all of inSilicon's common stock.
After this offering, Phoenix will own approximately 74.8% of inSilicon's common
stock (approximately 72.1% if the underwriters exercise their overallotment
option in full). Phoenix is not selling any of its inSilicon common stock in
this offering.

------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to inSilicon....................................... $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

inSilicon has granted the underwriters a 30-day option to purchase up to an
additional 525,000 shares of its common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.

------------------------

ROBERTSON STEPHENS

PRUDENTIAL VOLPE TECHNOLOGY

A UNIT OF PRUDENTIAL SECURITIES

NEEDHAM & COMPANY, INC.

THE DATE OF THIS PROSPECTUS IS , 2000
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[INSIDE FRONT COVER]

Title: "PROVEN COMMUNICATIONS TECHNOLOGY FOR TOMORROW'S PRODUCTS"

Two separate blocks of text underneath title:

"CONNECTING THE FUTURE. inSilicon brings semiconductor and systems companies a
wide selection of communications technology for a broad array of digital
devices."

"PROVEN SOLUTIONS. More than 400 companies have implemented inSilicon technology
in hundreds of different devices from network routers to digital cameras."

Color Artwork: Representation of the evolution of advanced system-on-a-chip
semiconductor devices. Images of inSilicon intellectual property "virtual
components" labeled "Ethernet," "USB," "1394," "PCI" and "IrDA" sweeping left to
right to a semiconductor device in a package that sweeps into a semiconductor
wafer. inSilicon logo.

[INSIDE GATEFOLD]

Right column: Title: "CONNECTING THE FUTURE -- INSILICON"

Text underneath title: "inSilicon -- providing semiconductor and systems
companies the communications technology they need to design complex
"systems-on-a-chip"

Under the text, vertically, from top to bottom, in separate colored boxes, the
words: "Our Markets," "Communications," "Consumer," "Computers" and "Office
Automation." inSilicon logo.

Color Artwork: Picture of a system board sweeping left to right via a
directional arrow to a semiconductor package sweeping to a semiconductor
system-on-chip die. The arrow then continues to sweep right to the inSilicon
logo. A second directional arrow sweeps left to right from a "cloud-like"
representation of the internet labeled "INTERNET" to the inSilicon logo.
Surrounding the cloud are 10 representative photographs of end-markets,
accompanied by the following titles (counter-clockwise) "Digital Cameras,"
"Set-Top Boxes," "Smart Phones," "Peripherals," "Internet Appliances," "Laptop
Computers," "Central Office Switching," "Routers," "DSL Modems" and "Satellite
Receivers."

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"INSILICON," "WE," "OUR" AND "US" REFER TO THE HISTORICAL OPERATING RESULTS AND
ACTIVITIES OF AND THE ASSETS AND LIABILITIES ASSIGNED TO THE BUSINESS AND
OPERATIONS OF INSILICON BY PHOENIX, AND NOT THE UNDERWRITERS OR PHOENIX.

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE IN OUR SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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TABLE OF CONTENTS

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PAGE
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Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Forward-Looking Statements.................................. 16
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 32
Management.................................................. 41
Arrangements Between inSilicon Corporation and Phoenix
Technologies Ltd.......................................... 50
Related Party Transactions.................................. 57
Principal Stockholder....................................... 59
Description of Capital Stock................................ 60
Shares Eligible for Future Sale............................. 63
Underwriting................................................ 64
Legal Matters............................................... 66
Experts..................................................... 66
Where You Can Find Additional Information................... 67
Index to Financial Statements............................... F-1
</TABLE>

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USBAccess-Registered Trademark- is a registered trademark of inSilicon.
TymeWare-TM-, SmartBridge-TM- and Rapidscript-TM- are trademarks of inSilicon.
We have filed for registration in the U.S. Patent and Trademark Office for
inSilicon-TM-, TymeWare-TM- and SmartBridge-TM-. All other brand names or
trademarks appearing in this prospectus are the property of their respective
holders.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE
BUYING OUR SHARES. YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE
DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES TO
THOSE CONSOLIDATED FINANCIAL STATEMENTS, APPEARING ELSEWHERE IN THIS PROSPECTUS.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS
ANTICIPATED IN THOSE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE FACTORS
DESCRIBED UNDER THE HEADING "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OUR BUSINESS

inSilicon is a leading provider of communications technology that is used by
semiconductor and systems companies to design complex semiconductors called
systems-on-a-chip that are critical components of digital devices. Over 400
customers use our communications technology in hundreds of different digital
devices ranging from network routers to cellular phones. Our modular approach
emphasizes customer-proven reusable semiconductor intellectual property that
focuses on communications and connectivity, and are compatible with a wide range
of microprocessor designs. Semiconductor and systems companies integrate our
communications technology into their overall semiconductor designs, saving time
and money and allowing them to focus on their core competencies that
differentiate their products. By integrating our communications technology into
their complex designs, our customers are better able to solve the widening
"design gap" caused by the difficulty of designing complex systems-on-a-chip in
the time necessary to get to market with their products.

The internet is creating the demand for all digital devices to be connected.
This demand is generating a proliferation of communications standards. These
standards include Ethernet, which is a widely used local area networking
standard; USB, which is a standard designed to simplify personal computer
connections to peripheral devices; and IrDA, which is a standard that allows a
wireless signal to be sent between appliances across short distances. The
proliferation of these standards and products based on them is driving the
demand for complex semiconductors. Improvements in semiconductor design and
manufacturing processes have enabled the integration of entire systems on a
single chip, thus creating a system-on-a-chip solution. Due to the complexity of
designing systems-on-a-chip, the multiplicity of communications standards and
time-to-market requirements, the design capabilities of semiconductor and
systems companies have not kept pace with the increase in the number of
transistors that can be placed on single chip. Consequently, a significant
"design gap" has developed. To address this gap, semiconductor and systems
companies are increasingly licensing proven and reusable intellectual property
from merchant semiconductor intellectual property suppliers, such as inSilicon.
Integrated Circuit Engineering, an independent research firm, estimates that the
merchant semiconductor intellectual property market will grow from approximately
$732 million in 2000 to approximately $1.9 billion in 2003, which represents a
compounded annual growth rate of approximately 37%.

- proven solutions;

- a broad portfolio of communications technology for a wide range of
standards;

- integrated systems that combine our communications technology and related
software;

- extensive test and verification tools;

- portability and flexibility; and

- standards leadership.

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Our goal is to be a leading provider of semiconductor intellectual property
for communications and connectivity. Key elements of our strategy include:

- targeting high growth communications applications;

- expanding our portfolio of communications technology and related software;

- expanding distribution channels and brand awareness; and

- developing e-commerce channels.

CORPORATE INFORMATION

inSilicon was incorporated in Delaware on November 1, 1999 as a wholly owned
subsidiary of Phoenix. Before November 1999, we were operated as a division of
Phoenix. Our principal executive offices are located at 411 East Plumeria Drive,
San Jose, CA 95134 and our telephone number is (408) 894-1900. We expect to move
to new executive offices in the Silicon Valley area. Our web site address is
http://www.in-silicon.com. Information on our web site and on web sites linked
to it is not part of this prospectus.

OUR RELATIONSHIP WITH PHOENIX

So long as Phoenix owns a substantial amount of our common stock, Phoenix
can exercise a controlling influence over our business. Phoenix has advised us
that it intends to hold its inSilicon shares after this offering. However,
Phoenix has no contractual or other obligation to hold any or all of our shares
of common stock, except that it has agreed that it will not dispose of any
inSilicon shares for 365 days after the date of this prospectus without the
prior written consent of FleetBoston Robertson Stephens Inc. See
"Underwriting--Future Sales." Therefore, you cannot be sure how long Phoenix
will continue to own our common stock after this offering. Phoenix may dispose
of our common stock in one or more transactions, in one or more ways, including
a public offering, a distribution to Phoenix stockholders, an exchange offer
involving Phoenix common stock or other transactions. We granted Phoenix
registration rights for our common stock that it will own after this offering,
which will make it easier for Phoenix to dispose of its inSilicon common stock.

inSilicon and Phoenix have executed agreements addressing interim and
ongoing relationships between them. See "Arrangements between inSilicon
Corporation and Phoenix Technologies Ltd."

THE OFFERING

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<S> <C>
Common stock offered......................... 3,500,000 shares
Common stock to be outstanding after the
offering................................... 13,900,010 shares
Use of proceeds.............................. General corporate purposes, including working
capital, sales and marketing, and research
and development.
Proposed Nasdaq National Market symbol....... INSN
</TABLE>

The above information assumes the automatic conversion of our Series A
Preferred Stock into common stock and that the underwriters do not exercise
their option to purchase additional shares in the offering. The information
excludes the following:

- 2,348,844 shares of common stock issuable as of December 31, 1999, upon
exercise of options under our 1999 stock option plan;

- 50,000 shares of common stock issuable upon exercise of a warrant held by
Phoenix;

- 1,651,156 shares of common stock available for future issuance as of
December 31, 1999, upon exercise of options not yet granted or for future
issuance under our 1999 stock option plan and 2000 stock plan; and

- 250,000 shares of common stock available for future issuance under our
2000 employee stock purchase plan.

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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The historical financial information may not be indicative of our future
performance and does not reflect what our financial position and results of
operations would have been had we operated as a separate, stand-alone entity
during the periods presented.

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<CAPTION>
DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $31,150
Working capital (deficit)................................... (1,995) 29,155
Total assets................................................ 22,023 53,173
Long-term obligations, less current portion................. -- --
Total stockholder's equity.................................. 13,784 44,934
</TABLE>

See Note 2 of Notes to Consolidated Financial Statements of inSilicon for an
explanation of the determination of the number of shares used in computing per
share data.

"As adjusted" amounts reflect the application of the net proceeds from the
sale of 3,500,000 shares of common stock by inSilicon at an assumed initial
public offering price of $10.00 per share, after deducting the underwriting
discounts, commissions and the estimated offering expenses. See "Use of
Proceeds" and "Capitalization."

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RISK FACTORS

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW BEFORE PURCHASING OUR COMMON STOCK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE MATERIALLY HARMED, AND OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY
AFFECTED. AS A RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND
YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

THE UNPREDICTABILITY OF OUR QUARTERLY OPERATING RESULTS MAY CAUSE THE PRICE OF
OUR COMMON STOCK TO DECLINE.

We expect our quarterly operating results to fluctuate significantly due to
a variety of factors, many of which are outside of our control. Our revenue is
difficult to predict and may fluctuate significantly from period to period.
Because our expenses are largely independent of our revenue in any particular
period, it is difficult to accurately forecast our operating results. Our
operating expenses are based, in part, on anticipated future revenue and a high
percentage of our expenses are fixed in the short term. As a result, if our
revenue is below expectations in any quarter, the negative effect may be
magnified by our inability to adjust spending in a timely manner to compensate
for the revenue shortfall.

Factors that could cause our revenue and operating results to vary from
quarter to quarter include:

- shifts in demand for and average selling prices of semiconductors that
incorporate our technology;

- large orders or regional spending patterns unevenly spaced over time;

- the financial terms of our contractual arrangements with our licensees and
partners that may provide for significant up-front payments or payments
based on the achievement of certain milestones;

- the relative mix of license revenues, royalties and services;

- the impact of competition on license revenue or royalty rates;

- establishment or loss of strategic relationships with semiconductor or
systems companies;

- timing of new technologies and technology enhancements by us and our
competitors;

- seasonality of demand; and

- changes in development schedules, research and development expenditure
levels and product support by us and semiconductor and systems companies.

As a result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and, accordingly, that these
comparisons should not be relied upon as indications of future performance. Due
to these and other factors, it is likely that our operating results will be
below market analysts' expectations in some future quarters, which would cause
the market price of our stock to decline.

WE HAVE INCURRED NET LOSSES SINCE OUR INCEPTION, AND WE MAY NOT ACHIEVE OR
SUSTAIN ANNUAL PROFITABILITY.

We incurred net losses of $2.0 million for fiscal year 1997, $7.1 million
for fiscal year 1998, $12.1 million for fiscal year 1999 and $1.0 million for
the three months ended December 31, 1999, and had an accumulated deficit of
$23.8 million as of December 31, 1999. We expect to continue to incur additional
operating losses for at least the next 12 months. Although we have experienced
revenue

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growth in recent periods, our net losses have also increased. In addition, we
cannot assure you that we will be able to sustain the growth in our revenue. If
we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the future or at all.
This may in turn cause our stock price to decline. In addition, if we do not
achieve or sustain profitability in the future, we may be unable to continue our
operations.

IF SEMICONDUCTOR AND SYSTEMS COMPANIES DO NOT ADOPT OUR SEMICONDUCTOR
INTELLECTUAL PROPERTY AND USE IT IN THE PRODUCTS THEY SELL, OUR REVENUES WILL
NOT GROW.

The adoption and continued use of our semiconductor intellectual property by
semiconductor and systems companies and an increasing demand for products
requiring complex semiconductors, such as portable computing devices and
cellular phones, is important to our continued success. The market for merchant
semiconductor intellectual property has only recently begun to emerge. Our
ability to achieve sustained revenue growth and profitability in the future will
depend on the continued development of this market and, to a large extent, on
the demand for complex semiconductors. There can be no assurance that the
merchant semiconductor intellectual property and complex semiconductor markets
will continue to develop or grow at a rate sufficient to support our business.
If either of these markets fails to grow or develops slower than expected, our
business, operating results and financial condition would be seriously harmed.

We face numerous risks in obtaining agreements with semiconductor and
systems companies on terms beneficial to our business, including:

- the lengthy and expensive process of building a relationship with a
potential licensee or prospective partner;

- the fact that we may compete with the internal development groups of
semiconductor and systems companies;

- the fact that we may be unable to persuade semiconductor and systems
companies to rely on us for critical technology;

- the fact that we may be unable to persuade potential licensees and
partners to bear development costs associated with our communications
technology;

- the risk that even after our customers select our communications
technology, they may not produce semiconductors using our communications
technology; and

- the risk that even if a particular semiconductor or systems company adopts
our communications technology, that the customer may fail due to
competition or lack of market acceptance of its products that use our
communications technology.

We cannot assure you that we will be able to maintain our current
relationships or establish new relationships with additional licensees or
partners, and any failure by us to do so could seriously harm our business. None
of our current licensees or partners is obligated to license new or future
generations of our communications technology.

IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY, WE WILL HAVE
LESS PROPRIETARY TECHNOLOGY TO LICENSE, WHICH WILL REDUCE OUR REVENUES AND
PROFITS.

Our patents, copyrights, trademarks, trade secrets and similar intellectual
property are critical to our success. We rely on a combination of patent,
trademark, copyright, mask work and trade secret laws to protect our proprietary
rights. After this offering, inSilicon will own three U.S. patents on various
aspects of its technology and have six pending U.S. patent applications. We
cannot be sure that patents will be issued from any patent applications
submitted, that any patents we hold will not be challenged, invalidated or
circumvented or that any claims allowed from our patents will be of

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sufficient scope or strength to provide meaningful protection or any commercial
advantage to us. In addition, the laws of foreign countries may not adequately
protect our intellectual property as well as the laws of the United States.

We use licensing agreements and employee and third-party nondisclosure and
assignment agreements to limit access to and distribution of our proprietary
information and to obtain ownership of technology prepared on a work-for-hire
basis. Even though we have taken all customary industry precautions, we cannot
be sure that the steps we take to protect our intellectual property rights will
be adequate to deter misappropriation of the rights or that we will be able to
detect unauthorized uses and take immediate or effective steps to enforce our
rights. We also cannot be sure that the steps we may take to obtain ownership of
any contributed intellectual property will be sufficient to assure our ownership
of all proprietary rights. We also rely on unpatented trade secrets to protect
our proprietary technology, however, we cannot be certain that others will not
independently develop or otherwise acquire the same or substantially equivalent
technologies or otherwise gain access to our proprietary technology or disclose
that technology. We also cannot be sure that we can ultimately protect our
rights to our unpatented proprietary technology. In addition, third parties
might obtain patent rights to such unpatented trade secrets, which could be used
to assert infringement claims against us.

THIRD PARTIES MAY CLAIM WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY RIGHTS,
AND WE COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED
FROM LICENSING OUR TECHNOLOGY.

Third parties may claim that we are infringing their intellectual property
rights, and we may be found to infringe those intellectual property rights.
While we do not believe that any of our technologies infringe the valid
intellectual property rights of third parties, we may be unaware of intellectual
property rights of others that may cover some of our technology and services.

Any litigation regarding patents or other intellectual property could be
costly and time-consuming, and divert our management and key personnel from our
business operations. The complexity of the technology involved and the
uncertainty of the outcome of intellectual property litigation increase these
risks. Claims of intellectual property infringement also might require us to
enter into costly royalty or license agreements. However, we may not be able to
obtain royalty or license agreements on terms acceptable to us, or at all. We
also may be subject to significant damages or injunctions against development
and licensing of certain of our technologies.

THE SEMICONDUCTOR INTELLECTUAL PROPERTY MARKET IS HIGHLY COMPETITIVE, AND WE MAY
LOSE MARKET SHARE TO LARGER COMPETITORS WITH GREATER RESOURCES AND TO COMPANIES
THAT DEVELOP THEIR OWN SEMICONDUCTOR INTELLECTUAL PROPERTY USING INTERNAL DESIGN
TEAMS.

We will face competition from both existing and new suppliers of
semiconductor intellectual property that we anticipate will enter the market. We
also compete with the internal development groups of large, vertically
integrated semiconductor and systems companies. We also may face competition
from suppliers of technologies based on new or emerging technology standards.

We must also differentiate our communications technology from those
available or under development by other suppliers or the internal development
groups of semiconductor and systems companies, including some of our current and
prospective licensees. Many of these internal development groups have
substantial programming and design resources and are part of larger
organizations with substantial financial and marketing resources. These internal
development groups may develop technologies that compete directly with ours or
may actively seek to license their own technologies to third parties.

Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater brand recognition and
larger customer bases, as well as greater financial and marketing resources,
than we do. This may allow them to respond more quickly than we can to

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new or emerging technologies and changes in customer requirements. It may also
allow them to devote greater resources than we can to the development and
promotion of their technologies.

IF WE ARE UNABLE TO DEVELOP ENHANCEMENTS AND NEW GENERATIONS OF OUR INTELLECTUAL
PROPERTY, WE MAY BE UNABLE TO ATTRACT OR RETAIN CUSTOMERS.

Our future success will depend on our ability to develop enhancements and
new generations of our communications technology that satisfy the requirements
of new and evolving standards and introduce these new technologies to the
marketplace in a timely manner. If our development efforts are not successful or
are significantly delayed, or if the characteristics of our communications
technology are not compatible with the requirements of specific product
applications, we may be unable to attract or retain customers.

Technical innovations of the type critical to our success are inherently
complex and involve several risks, including:

- our ability to anticipate and respond in a timely manner to changes in the
requirements of semiconductor and systems companies;

- the emergence of new standards by semiconductor and systems companies;

- the significant research and development investment that is often required
before market acceptance, if any, of a particular standard;

- the possibility that even after a significant investment of our resources,
the standard will not become accepted by the industry; and

- the introduction of products by our competitors embodying new technologies
or features.

Our failure to adequately address these risks could render our existing or
future communications technology obsolete and could seriously harm our business.
In addition, we cannot assure you that we will have the financial and other
resources necessary to develop communications technology in the future, or that
any enhancements or new generations of the technology that we develop or procure
will generate revenue in excess of the costs of development or procurement.

RAPID PRODUCT TRANSITIONS OR INTRODUCTIONS OF NEW STANDARDS MAY CAUSE OUR
TECHNOLOGIES TO BECOME OBSOLETE.

From time to time, we or our competitors may announce new technologies or
capabilities that may replace or shorten the life cycles of our existing
technologies. Announcements of currently planned or other new technologies may
cause customers to defer or stop licensing our technologies until those new
technologies become available. In addition, announcements of a new standard may
cause customers to defer or stop licensing our technologies until that standard
becomes available or accepted.

IF WE DO NOT COMPETE EFFECTIVELY WITH OTHERS TO ATTRACT AND RETAIN KEY
PERSONNEL, WE MAY BE UNABLE TO DEVELOP THE NEW COMMUNICATIONS TECHNOLOGY
NECESSARY TO EXPAND OUR BUSINESS.

Our ability to continue to grow successfully requires an effective planning
and management process. Since October 31, 1998, we have increased our headcount
substantially, from 51 employees at that date to 78 employees at December 31,
1999.

Our growth has placed, and the recruitment and integration of additional
employees will continue to place, a strain on our resources. Semiconductor and
systems company licensees typically require significant engineering support in
the design, testing and manufacture of products incorporating our technology.
Accordingly, increases in the adoption of our technology can be expected to
increase the strain on our personnel, particularly our engineers.

10
<PAGE>
We believe our future success will depend upon our ability to successfully
manage our growth, including attracting and retaining engineers, other highly
skilled personnel and senior managers. Our employees are "at will" and are not
hired for a specified term. Hiring qualified sales and technical personnel will
be difficult due to the limited number of qualified professionals. Competition
for these types of employees is intense. We have in the past experienced
difficulty in recruiting and retaining qualified sales and technical personnel.
Our employees are recruited aggressively by our competitors and by start-up
companies. We believe our salaries are competitive, but under certain
circumstances, start-up companies can offer more attractive stock option
packages. As a result, we have experienced, and may continue to experience,
significant employee turnover. Failure to attract and retain personnel,
particularly sales and technical personnel, would materially harm our business.

As we seek to expand our operations, we may also significantly strain our
financial and management systems and other resources. We cannot be certain that
our systems, procedures, controls and facilities will be adequate to support our
operations.

CHANGES TO ACCOUNTING STANDARDS AND RULES COULD EITHER DELAY OUR RECOGNITION OF
REVENUES OR REDUCE THE AMOUNT OF REVENUES THAT WE MAY RECOGNIZE AT A SPECIFIC
TIME DEFERRING OR REDUCING OUR PROFITABILITY. THESE EFFECTS ON OUR REPORTED
RESULTS COULD CAUSE OUR STOCK PRICE TO BE LOWER THAT IT OTHERWISE MIGHT HAVE
BEEN.

We adopted the American Institute of Certified Public Accountants' Statement
of Position, or SOP, 97-2, "Software Revenue Recognition," and SOP 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
Recognition," as of October 1, 1998. In December 1998, the American Institute of
Certified Public Accountants issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 98-4 to extend the deferral of the application of certain passages of
SOP 97-2 with respect to the fair value of elements in multiple-element
arrangements. We implemented these provisions as of October 1, 1999. Although
the adoption of SOP 97-2, SOP 98-4 and SOP 98-9 has not had and is not expected
to have a material impact on our consolidated financial statements or results of
operations, full implementation guidelines for SOP 97-2, SOP 98-4 and SOP 98-9
have not been issued. Once these guidelines are issued, our current revenue
recognition accounting practices may need to change and such changes could
affect the timing of our future revenue recognition.

RISKS RELATED TO THE SEMICONDUCTOR INDUSTRY

A DOWNTURN IN THE SEMICONDUCTOR OR ELECTRONICS BUSINESSES WOULD REDUCE OUR
SALES.

Our business has benefited from the rapid worldwide growth of the
semiconductor industry, which in turn has been fueled by growth in
telecommunications, computers and consumer electronics. Continued licenses of
our technologies are largely dependent upon the commencement of new design
projects by semiconductor and systems companies. However, the semiconductor
industry is highly cyclical and subject to rapid technological change. It also
has been subject to significant economic downturns at various times,
characterized by diminished demand, accelerated erosion of average selling
prices and production overcapacity. In addition, the semiconductor industry also
periodically experiences increased demand and production capacity constraints.
As a result, we may experience substantial period-to-period fluctuations in
future operating results due to general semiconductor industry conditions,
overall economic conditions or other factors. A number of semiconductor and
systems companies have announced layoffs of their employees or the suspension of
investment plans, and although we have not seen a significant drop-off in demand
from these customers, their budgets could be reduced, alone or as part of
overall expense control efforts. In addition, there have been a number of
mergers in the electronics industry, which may reduce the aggregate level of
licenses of our technologies and purchases of our services by the merged
companies. Potential slower growth in the

11
<PAGE>
electronics industry, a reduced number of design starts, tightening of
customers' operating budgets or continued consolidation among our customers may
seriously harm our business.

RISKS RELATED TO OUR RECENT SEPARATION FROM PHOENIX TECHNOLOGIES LTD.

OUR EXPENSES MAY BE HIGHER AS A SEPARATE STAND-ALONE ENTITY THAN THEY WERE WHEN
WE WERE PART OF PHOENIX.

The historical financial information included in this prospectus does not
reflect the many significant changes in our cost structure that will occur as a
result of our separation from Phoenix or changes in our funding and operations
that will result from our transition to a separate, stand-alone entity. For
example, before our separation from Phoenix, we were able to take advantage of
Phoenix's size and purchasing power in procuring goods, services and technology,
such as computer software licenses and employee benefits, and in negotiating
relatively favorable leases for facilities and other agreements. As a separate,
stand-alone entity, we may be unable to obtain goods, services, technology,
facilities and other items at prices and on terms as favorable as those we
obtained before the separation. In addition, our general and administrative
expenses and a portion of our research and development and sales and marketing
expenses represent allocations of Phoenix's total expenses. Once Phoenix no
longer provides these services for us, our expenses may be greater than these
allocations.

WE WILL DEPEND ON AGREEMENTS WITH PHOENIX FOR MANY IMPORTANT SERVICES THAT MAY
BE HARD TO REPLACE ON A COST-EFFECTIVE BASIS IF PHOENIX TERMINATES THE
AGREEMENTS.

We have entered into agreements with Phoenix that will define our
relationship after this offering. These agreements include a Services and
Cost-Sharing Agreement, under which Phoenix will provide various, primarily
administrative, services to us, including accounting, treasury, tax and
information services, and we will share with Phoenix certain costs, including
facilities and insurance. The Services and Cost-Sharing Agreement has an initial
term that extends to June 30, 2000 for all services other than accounting and an
initial term that extends to September 30, 2000 with respect to accounting
services, although we can terminate any one or more of the services at any time
on 30 days' written notice. The Services and Cost-Sharing Agreement will be
renewed on a month-to-month basis. Phoenix can terminate after those dates on 30
days' written notice. Consequently, we cannot be sure how long Phoenix will
continue to provide us services under the Services and Cost-Sharing Agreement
and, if it does not, whether, or on what terms we could obtain these services.
If we cannot perform these services ourselves or obtain them on acceptable
terms, this could materially harm our business. In addition, we have entered
into a distribution agreement under which Phoenix will act as a sales
representative for inSilicon in certain Asian countries and this service will be
difficult to replace if Phoenix terminates this agreement.

SINCE PHOENIX CAN ELECT ALL OUR DIRECTORS AND INFLUENCE OUR BUSINESS FOR ITS
BENEFIT FOR AT LEAST AS LONG AS IT OWNS 50% OR MORE OF OUR SHARES, PHOENIX CAN
TAKE ACTIONS BENEFICIAL TO IT AT OUR EXPENSE.

For at least as long as Phoenix continues to own more than 50% of our common
stock, Phoenix can direct the election of all our directors and exercise a
controlling influence over our business, including any mergers or other business
combinations, acquisitions or dispositions of assets, future issuances of our
common stock or other equity securities, the incurrence of debt and the payment
of dividends. Phoenix also can determine matters submitted to a vote of our
stockholders without the consent of our other stockholders, prevent or cause a
change in who controls us and take other actions that might be favorable to
Phoenix.

12
<PAGE>
WE MAY HAVE CONFLICTS OF INTEREST WITH PHOENIX THAT ARE NOT RESOLVED IN OUR
FAVOR.

We may have conflicts of interest with Phoenix in areas relating to our past
and ongoing relationships, including potential competitive business activities,
indemnity arrangements, tax and intellectual property matters, registration
rights, potential acquisitions or financing transactions, sales or other
dispositions by Phoenix of the shares of inSilicon common stock it will hold
after this offering and the exercise by Phoenix of its ability to control our
management and affairs. We also cannot be sure that any conflicts that may arise
between us and Phoenix will be resolved in a manner that does not seriously harm
us, even if Phoenix does not intend that result.

In addition, the ownership interests of our directors or officers in Phoenix
common stock or service as both a director of inSilicon and an officer or
director of Phoenix could create or appear to create potential conflicts of
interest when directors and officers are faced with decisions that could have
different implications for us and Phoenix. One of our current directors is a
director and officer of Phoenix.

LOSS OF THE PHOENIX AFFILIATION AS A RESULT OF OUR SEPARATION FROM PHOENIX MAY
DAMAGE OUR RELATIONSHIPS WITH EXISTING LICENSEES OR PARTNERS OR THEIR
PERCEPTIONS OF US, WHICH COULD REDUCE OUR REVENUES.

Licensees of our communications technology or our strategic partners may
have chosen our technologies because of the positive reputation of Phoenix or
their economic ties to Phoenix. For example, Phoenix may also be a customer for
their products. As a separate, stand-alone entity, we may not enjoy these
advantages with those customers and partners and it may be harder for us to
compete for their continued business. For example, our new name is not yet
recognized as a brand in the marketplace, and as a result our technology
licensing could suffer. The loss of the "Phoenix" brand name may hinder our
ability to establish new relationships with potential customers and partners,
particularly in Asia. In addition, our current customers, suppliers and partners
may react negatively to the separation. Although we believe we have all
necessary rights to use the brand name "inSilicon," our rights to use it may be
challenged by others.

WITHOUT FINANCIAL BACKING FROM PHOENIX, WE MAY HAVE INSUFFICIENT FUNDS TO EXPAND
OUR BUSINESS.

Phoenix has satisfied our capital requirements in the past, but it will not
be obligated to do so, nor do we expect it to do so, after this offering. As a
result, we must depend on the proceeds of this offering, cash flows from
operations and future financings, if any, to expand our business.

RISKS RELATED TO THE OFFERING

THE MARKET PRICE OF OUR COMMON STOCK MAY DROP IF PHOENIX SELLS ITS SHARES.

Phoenix, our only stockholder before this offering, will derive certain
benefits as a result of this offering, including the creation of a public market
for our common stock. After this offering, Phoenix may sell any and all of its
inSilicon common stock or distribute any or all of our common stock to its
stockholders. Phoenix has advised us that it intends to continue to hold our
common stock after this offering, but it is not obligated to do so (although it
cannot sell or otherwise dispose of any shares for 365 days after the date of
this prospectus without the prior written consent of FleetBoston Robertson
Stephens Inc.). The market price of our common stock may decline if Phoenix
sells or distributes large amounts of our common stock in the public market or
to its stockholders, or if investors think that Phoenix might do so. If Phoenix
transfers controlling interest in inSilicon, the other holders of our common
stock may not participate in the transaction or realize any premium on their
common stock. Phoenix has registration rights for its inSilicon common stock
that will make future dispositions easier for it.

13
<PAGE>
OUR RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS WILL CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER AND THEREFORE LIMIT THE MARKET PRICE OF OUR
COMMON STOCK.

Our Restated Certificate of Incorporation and by-laws will contain
provisions that could delay or prevent a change of control. These provisions
could limit the price that investors might be willing to pay in the future for
shares of our common stock. Some of these provisions:

- divide our board of directors into three classes;

- authorize the issuance of preferred stock which can be created and issued
by the board of directors without prior stockholder approval, commonly
referred to as "blank check" preferred stock, with rights senior to those
of common stock;

- prohibit stockholder action by written consent; and

- establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.

However, for at least as long as Phoenix continues to own more than 50% of our
common stock, these provisions should not have any practical significance to
investors.

OUR ABILITY TO RAISE CAPITAL IN THE FUTURE MAY BE LIMITED AND OUR FAILURE TO
RAISE CAPITAL WHEN NEEDED COULD PREVENT US FROM GROWING.

We believe that the net proceeds from this offering, together with cash
generated by our operations, will be sufficient to meet our operating and
capital requirements for at least the next twelve months. However, we may in the
future be required to raise additional funds through public or private
financing, strategic relationships or other arrangements. We cannot be certain
that any such financing will be available on acceptable terms, or at all, and
our failure to raise capital when needed could seriously harm our business.
Additional equity financing may be dilutive to the holders of our common stock,
and debt financing, if available, may involve restrictive covenants. In
addition, pursuant to the Registration Rights Agreement, a substantial portion
of the proceeds raised in any subsequent offerings of our common stock may be
payable to Phoenix for the sale of any of its shares of inSilicon common stock.
Moreover, strategic relationships, if necessary to raise additional funds, may
require us to relinquish some technology rights or modify our allocation of
resources.

OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL LOSSES
FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.

Our common stock has not been publicly traded, and an active trading market
may not develop or be sustained after this offering. We and the representatives
of the underwriters will determine the initial public offering price. The price
at which our common stock will trade after this offering is likely to be highly
volatile and may fluctuate substantially due to factors such as:

- changes in or failure by us to meet securities analysts' expectations;

- announcements of technological innovations;

- competitive trends, including timely adoption and market acceptance of,
competing standards;

- introduction of new services by us or our competitors;

- developments with respect to intellectual property rights;

- conditions and trends in the semiconductor industry; and

- market perception of our growth prospects.

14
<PAGE>
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stock of technology companies. These broad market fluctuations may result
in a material decline in the market price of our common stock. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. We may become involved in this type of litigation in the future.
Litigation is often expensive and diverts management's attention and resources
that are needed to successfully run our business.

OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY FAIL TO USE SUCH FUNDS EFFECTIVELY TO ACHIEVE OUR BUSINESS
GOALS.

We currently have no specific plans for using the net proceeds of this
offering. As a consequence, our management will have broad discretion to
allocate a large percentage of the net proceeds to uses which the stockholders
may not deem desirable or to uses that fail to achieve our business goals
effectively.

15
<PAGE>
FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements based largely on our
current expectations and projections about future events and financial trends
affecting the financial condition or financial results of our business. The
words "believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions identify these forward-looking statements.
These forward-looking statements are subject to a number of risks, uncertainties
and assumptions, including those described above under the caption "Risk
Factors" that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.

USE OF PROCEEDS

The principal purposes of this offering are to increase our equity capital,
to create a public market for our common stock, to facilitate our future access
to public equity markets, to improve the effectiveness of our stock option plan
in attracting and retaining key employees, to provide liquidity to Phoenix and
to provide increased visibility of inSilicon in the marketplace.

Except to the extent that any portion of the net proceeds is used to repay a
working capital bridge loan from Phoenix under the Contribution Agreement (which
amount is not expected to exceed $1 million), no portion of the net proceeds of
this offering has been earmarked for any specific purpose. We expect that the
net proceeds from this offering will be approximately $31.1 million, based on an
assumed initial public offering price of $10.00 per share, after paying
underwriting discounts, commissions and offering expenses. We expect to use the
net proceeds for general corporate purposes, including working capital, sales
and marketing, and research and development. In addition, we may use a portion
of the net proceeds to acquire complementary products, technologies or
companies. From time to time, we may acquire complementary products,
technologies or companies. We currently have no commitments or agreements and
are not involved in any negotiations for the acquisition of companies. Our
management will have broad discretion in the allocation of net proceeds. Pending
use, the net proceeds will be invested in short-term securities. We are not
under any contractual or other obligation, nor do we expect, to pay any
dividends or distribute any of the net proceeds from this offering to Phoenix
other than for the provision of administrative services included in the Services
and Cost-Sharing Agreement.

DIVIDEND POLICY

We have never paid any dividends. We currently intend to retain any earnings
to fund the development and growth of our business and do not anticipate
declaring or paying any cash dividends. In addition, our secured bank line of
credit, which will become effective upon the closing of this offering, generally
prohibits us from paying dividends.

16
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

- on an actual basis; and

- as adjusted to give effect to the conversion of all shares of Series A
Preferred Stock into shares of common stock and our sale of 3,500,000
shares of common stock at an assumed initial public offering price of
$10.00 per share, less underwriting discounts, commissions and estimated
offering expenses payable by us.

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------
ACTUAL AS ADJUSTED
---------- ------------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
Long-term obligations, less current portion................. $ -- $ --

Stockholder's equity........................................
Preferred stock, par value $0.001; 15,000,000 shares
authorized; 10,400,000 Series A shares issued and
outstanding actual; no shares issued and outstanding as
adjusted................................................ 10 --
Common stock, par value $0.001; 100,000,000 shares
authorized; 10 shares issued and outstanding actual;
13,900,010 shares issued and outstanding
as adjusted............................................. -- 14
Additional paid-in capital................................ 38,953 70,099
Deferred stock-based compensation......................... (1,360) (1,360)
Accumulated deficit....................................... (23,819) (23,819)
-------- --------
Total stockholder's equity................................ 13,784 44,934
-------- --------

Total capitalization.................................... $ 13,784 $ 44,934
======== ========
</TABLE>

You should read this capitalization table together with the sections of this
prospectus entitled "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes included in this
prospectus.

This table excludes the following shares:

- 2,348,844 shares of common stock issuable as of December 31, 1999, upon
exercise of options under our 1999 employee stock option plan;

- 50,000 shares of common stock issuable upon exercise of a warrant held by
Phoenix;

- 250,000 shares of common stock available for future issuance under our
2000 employee stock purchase plan.

17
<PAGE>
DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. The net tangible book value of our common stock as of
December 31, 1999 was a deficit of $2,853,000, or $0.27 per share. Pro forma net
tangible book value per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities and divided by the total pro
forma number of shares of common stock outstanding assuming the automatic
conversion of our Series A Preferred Stock into common stock. Dilution in net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
pro forma net tangible book value per share of our common stock immediately
afterwards. After giving effect to our sale of 3,500,000 shares of common stock
offered by this prospectus at an assumed public offering price of $10.00 per
share and after deducting the underwriting discounts, commissions and estimated
offering expenses payable by us, our pro forma net tangible book value as of
December 31, 1999 would have been $28,297,000, or approximately $2.04 per share.
This represents an immediate increase in net tangible book value of $2.31 per
share to Phoenix, our sole current stockholder, and an immediate and substantial
dilution in net tangible book value of $7.96 per share to new investors.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Net tangible book value deficit per share as of
December 31, 1999......................................... $(0.27)
Increase in net tangible book value per share attributable
to new investors.......................................... 2.31
------

Pro forma net tangible book value per share after the
offering.................................................. 2.04
------
Dilution per share to new investors......................... $ 7.96
======
</TABLE>

The table below sets forth, as of December 31, 1999, the following
information about our existing stockholder and the new investors:

- the total number of shares of common stock purchased from us;

- the total price paid; and

- the average price paid per share.

The dollar amounts in the table were calculated before deducting the
estimated underwriting discounts, commissions and estimated offering expenses
payable, assuming an initial public offering price of $10.00 per share.

<TABLE>
<CAPTION>
SHARES PURCHASED
ASSUMING NO
EXERCISE OF
UNDERWRITERS' TOTAL
OVERALLOTMENT OPTION CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Phoenix.................................. 10,400,010 74.8% $38,963,000 52.7% $ 3.75
New investors............................ 3,500,000 25.2 35,000,000 47.3 10.00
---------- ----- ----------- -----
Total.................................... 13,900,010 100.0% $73,963,000 100.0%
========== ===== =========== =====
</TABLE>

18
<PAGE>
If the underwriters' over-allotment option is exercised in full, the
following will occur:

- the percentage of the total number of shares of common stock held by
Phoenix will decrease to 72.1% immediately after the offering; and

- the number of shares held by new public investors will increase to
4,025,000, or approximately 27.9% of the total number of shares of our
common stock outstanding immediately after the offering.

As of December 31, 1999, there were options outstanding to purchase a total
of 2,348,844 shares of our common stock at a weighted average exercise price of
$6.14 per share, of which 364,360 shares were exercisable as of that date. In
addition, Phoenix holds a warrant to purchase 50,000 shares of common stock at
$0.01 per share.

19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements, the notes thereto and
the other information contained in this prospectus. The selected consolidated
balance sheet data as of September 30, 1998 and 1999 and the selected
consolidated statement of operations data for the years ended September 30,
1997, 1998 and 1999 have been derived from the audited consolidated financial
statements of inSilicon appearing elsewhere in this prospectus. The selected
consolidated balance sheet data as of September 30, 1995, 1996 and 1997, the
selected consolidated statement of operations data for the years ended
September 30, 1995 and 1996, and the pro forma net loss and pro forma net loss
per share data for the year ended September 30, 1999, have been derived from
unaudited consolidated financial statements of inSilicon not included in this
prospectus. The statement of operations data for the three months ended
December 31, 1998 and 1999, the balance sheet data as of December 31, 1999 and
the pro forma net loss and pro forma net loss per share data for the three
months ended December 31, 1999 have been derived from our unaudited financial
statements included elsewhere in this prospectus. In the opinion of management,
these unaudited statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring accruals, that we consider necessary for a fair presentation of our
financial position and results of operations for these periods.

The historical financial information includes the operations of Sand
Microelectronics from September 1998, the date of acquisition. For further
discussion on the comparability of the financial information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Furthermore, the historical financial information may not be indicative of our
future performance and does not necessarily reflect what our financial position
and results of operations would have been had we been a separate, stand-alone
entity during the periods covered. The historical financial information does not
reflect many significant changes that will occur in our operations and capital
structure as a result of our separation from Phoenix.

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
License fees....................................... $ 2,106 $ 2,832 $ 4,272 $ 7,304 $ 14,973 $ 3,677 $ 3,857
Services........................................... -- 498 839 1,488 3,982 1,189 1,400
------- ------- ------- ------- -------- ------- -------
Total revenue.................................... 2,106 3,330 5,111 8,792 18,955 4,866 5,257
Cost of revenue:
License fees....................................... 404 567 972 1,223 1,003 158 553
Services........................................... -- 97 638 734 826 27 208
Amortization of purchased technology............... -- -- -- -- 2,132 533 314
------- ------- ------- ------- -------- ------- -------
Total cost of revenue............................ 404 664 1,610 1,957 3,961 718 1,075
------- ------- ------- ------- -------- ------- -------
Gross margin......................................... 1,702 2,666 3,501 6,835 14,994 4,148 4,182
Operating expenses:
Research and development........................... 798 1,808 2,310 2,947 9,092 2,348 2,007
Sales and marketing................................ 575 1,223 2,128 3,843 6,350 1,622 1,712
General and administrative......................... 281 549 1,049 1,368 3,364 852 731
Amortization of intangible assets.................. -- -- -- -- 2,220 555 555
Stock-based compensation........................... -- -- -- -- -- -- 236
Merger and restructuring charges................... -- 318 -- 5,778 6,050 86 --
------- ------- ------- ------- -------- ------- -------
Total operating expenses......................... 1,654 3,898 5,487 13,936 27,076 5,463 5,241
------- ------- ------- ------- -------- ------- -------
Income (loss) from operations........................ 48 (1,232) (1,986) (7,101) (12,082) (1,315) (1,059)
Income tax benefit................................... -- -- -- -- -- -- (68)
------- ------- ------- ------- -------- ------- -------
Net income (loss).................................... $ 48 $(1,232) $(1,986) $(7,101) $(12,082) $(1,315) $ (991)
======= ======= ======= ======= ======== ======= =======
Pro forma net loss (1)............................... $ (8,566) $ (817)
======== =======
Pro forma net loss per share (2)(3).................. $ (0.82) $ (0.08)
======== =======
Shares used in computing pro forma net loss per share
(2)(3)............................................. 10,400 10,400
======== =======
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ -- $ -- $ -- $ -- $ -- $ --
Working capital (deficit)........................ (103) (405) 974 (3,340) (393) (1,995)
Total assets..................................... 1,767 1,807 4,505 31,331 24,481 22,023
Long-term obligations, less current portion...... 610 35 15 16 45 --
Total stockholder's net investment/stockholder's
equity......................................... 13 491 3,554 25,412 18,804 13,784
</TABLE>

- ------------
(1) Pro forma net loss gives effect to pro forma income tax credits related to
the reversal of deferred income tax liabilities in connection with the
acquisition of Sand. See Note 8 of Notes to Consolidated Financial
Statements of inSilicon.

(2) See Note 2 of Notes to Consolidated Financial Statements of inSilicon for an
explanation of the method used to determine the number of shares used to
compute pro forma net loss per share.

(3) Assumes the conversion of all shares of Series A Preferred Stock and
excludes a warrant to purchase 50,000 shares of common stock and all
outstanding stock options.

21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING THE RISKS DESCRIBED IN
THE "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. SEE "FORWARD-LOOKING
STATEMENTS."

OVERVIEW

We provide communications and connectivity solutions that allow
semiconductor and systems companies to focus their development resources on
their core competencies that differentiate their products. This reduces
development costs and improves time to market in complex system-on-a-chip
designs. By integrating our communications technology into their complex
designs, our customers are better able to narrow the design gap caused by the
difficulty of designing complex semiconductors in the time necessary to get to
market with their products.

We are currently a wholly owned subsidiary of Phoenix and were incorporated
in November 1999. Before November 1999, we were operated as a division of
Phoenix. Phoenix decided to separate inSilicon's operations into a separate
company because it believed that this would allow inSilicon's management to
focus more sharply on the semiconductor intellectual property business and to
make decisions and to deploy resources more rapidly and operate more efficiently
than we could as part of Phoenix. As a separate company, we also can better
attract and retain employees and management through stock option and other
programs tied to our common stock. In addition, creation of a public market for
our common stock, among other things, increases our equity capital and gives us
future access to public equity markets.

We have incurred operating and net losses for nearly all historical periods.
These losses have primarily resulted from two factors: research and development
and marketing costs incurred in order to generate market share and revenue
growth; and charges for restructurings, merger costs, and amortization of
acquired intangible assets. See further discussion included in "Risk Factors."
The discussion below refers to the historical operating results and activities
and the assets and liabilities assigned to inSilicon by Phoenix included in our
consolidated financial statements.

Phoenix has provided a number of administrative services to us on which we
continue to rely. Our consolidated financial statements were derived from the
historical books and records of Phoenix. The consolidated balance sheets include
all assets and liabilities directly attributable to us. The consolidated
statements of operations include all revenues and expenses attributable to us,
including direct charges and allocated costs for shared facilities, functions
and services used by us and provided by Phoenix. A significant amount of
expenses have been allocated to us based on Phoenix management's estimate of the
proportional benefit of services provided by it. These allocations were
generally based on pro rata personnel, revenue generated or costs incurred. See
Note 5 of Notes to Consolidated Financial Statements of inSilicon. You should
not consider our historical financial statements to be representative of our
operating results, financial position or cash flows to be expected in future
periods or what our results of operations, financial position or cash flows
would have been had inSilicon been a separate, stand-alone entity during the
periods presented.

We have entered into a Services and Cost-Sharing Agreement with Phoenix
effective as of November 30, 1999. This agreement covers various services that
Phoenix provides us and the method by which we and Phoenix share certain costs.
The services include data processing, telecommunications, information technology
support, accounting, financial management, tax preparation, payroll, stockholder
and public relations, legal, human resources administration, procurement, real
estate management and

22
<PAGE>
other administrative functions. The shared costs include the costs of the office
space we occupy at Phoenix's headquarters and insurance premiums. The amount we
will pay will be equal to the aggregate cost to Phoenix and inSilicon of the
services and costs multiplied by a percentage representing the number of our
employees to the total number of Phoenix and inSilicon employees. The Services
and Cost-Sharing Agreement has an initial term that extends to June 30, 2000 for
all services other than accounting and an initial term that extends to
September 30, 2000 with respect to accounting services, although we can
terminate any one or more of the services at any time on 30 days' written
notice. The Services and Cost-Sharing Agreement will be renewed on a
month-to-month basis. Phoenix can terminate after those dates on 30 days'
written notice.

Many Phoenix employees who were seconded to inSilicon in December 1999
exchanged their options to purchase Phoenix common stock for new options to
acquire 1,358,779 shares of inSilicon common stock. On the date of the exchange,
the inSilicon options had the same intrinsic value and ratio of exercise price
to market value of the underlying shares as the Phoenix options exchanged. They
also have equivalent vesting schedules to the Phoenix options exchanged. Also in
December 1999, we granted options to purchase 990,065 additional shares of our
common stock at a weighted average exercise price of $7.33 per share. Because we
granted these options at an exercise price less than the fair market value of
our common stock on the grant date, we recorded deferred stock compensation of
approximately $1.4 million. In addition, we recorded deferred compensation of
$219,000 related to certain performance-based options held by an officer of
inSilicon to acquire 65,170 shares of inSilicon common stock issued in exchange
for similar options granted by Phoenix. This stock compensation will be
amortized by charges to operations over the vesting period of the options,
generally straight-line over four years.

In September 1998, Phoenix acquired Sand Microelectronics, Inc., a leading
supplier of standards-based semiconductor intellectual property. The purchase
price consisted of approximately $18.6 million in cash, 464,000 shares of
Phoenix common stock with a fair value of $2.7 million, approximately 264,000
stock options to purchase Phoenix common stock with a fair value of
$1.6 million issued in exchange for Sand stock options, and up to $3.7 million
in performance incentives through fiscal year 2001 that inSilicon may be
required to pay. This transaction was accounted for using the purchase method of
accounting and therefore Sand's results of operations are not included within
ours before the date of acquisition. Our consolidated balance sheets include the
financial position of Sand as of September 30, 1998, and our consolidated
operating results include the operating results of Sand after the date of
acquisition.

In connection with the acquisition of Sand, we recorded $12.8 million of
capitalized software development costs, $9.6 million of goodwill and $2.8
million of other intangible assets. Amortization of these assets is being
recognized on a straight-line basis over three- to six-year periods. See Note 6
of Notes to Consolidated Financial Statements of inSilicon.

Also in September 1998, Phoenix completed a merger with Award Software
International, Inc. In connection with the Award merger, we acquired the
operations of Award associated with the development and marketing of
standards-based firmware. The Award transaction was accounted for as a
pooling-of-interests, and the firmware operations of Award are therefore
included in our results of operations for all periods presented. These
operations accounted for less than 10% of our revenue and operating costs for
all periods prior to the merger.

23
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth operating data as a percentage of total
revenue:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees........................................ 83.6% 83.1% 79.0% 75.6% 73.4%
Services............................................ 16.4 16.9 21.0 24.4 26.6
----- ----- ----- ----- -----
Total revenue..................................... 100.0 100.0 100.0 100.0 100.0

Cost of revenue:
License fees........................................ 19.0 13.9 5.3 3.2 10.5
Services............................................ 12.5 8.4 4.4 0.6 4.0
Amortization of purchased technology................ -- -- 11.2 11.0 6.0
----- ----- ----- ----- -----
Total cost of revenue............................. 31.5 22.3 20.9 14.8 20.5
----- ----- ----- ----- -----
Gross margin.......................................... 68.5 77.7 79.1 85.2 79.5

Operating expenses:
Research and development............................ 45.2 33.5 48.0 48.2 38.2
Sales and marketing................................. 41.7 43.7 33.5 33.3 32.6
General and administrative.......................... 20.5 15.6 17.7 17.5 13.8
Amortization of intangible assets................... -- -- 11.7 11.4 10.6
Stock-based compensation............................ -- -- -- -- 4.5
Merger and restructuring charges.................... -- 65.7 31.9 1.8 --
----- ----- ----- ----- -----
Total operating expenses.......................... 107.4 158.5 142.8 112.2 99.7
----- ----- ----- ----- -----
Loss from operations.................................. (38.9) (80.8) (63.7) (27.0) (20.2)
Income tax benefit.................................... -- -- -- -- (1.3)
----- ----- ----- ----- -----
Net loss.............................................. (38.9)% (80.8)% (63.7)% (27.0)% (18.9)%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999

REVENUE. We license software under non-cancelable license agreements and
provide related services, including training, non-recurring engineering and
product maintenance. License fee revenues are generally recognized when a
non-cancelable license agreement has been signed, the software has been shipped,
there are no uncertainties surrounding acceptance, the fees are fixed and
determinable, and collection is considered probable. For customer license
agreements which meet these recognition criteria, the portion of the fees
related to software licenses are generally recognized in the current period,
while the portion of the fees related to services is recognized as the services
are performed. When we enter into a license agreement with a customer requiring
significant customization of the software, we recognize revenue related to the
license agreement using contract accounting. Revenue from engineering services
is generally recognized on a time-and-materials basis or when contractual
milestones are met. Maintenance consists of support services and periodic
updates. Revenue from maintenance agreements is recognized ratably over the
maintenance period, which is typically one year.

24
<PAGE>
operations. In December 1998, the American Institute of Certified Public
Accountants issued SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions." SOP 98-9 amends SOP 98-4 to
extend the deferral of the application of certain passages of SOP 97-2 with
respect to the fair value of elements in multiple element arrangements. The
adoption of SOP 98-9 as of October 1, 1999, did not have a material impact on
our consolidated financial statements and results of operations for the three
months ended December 31, 1999, and such adoption is not expected to
significantly impact future periods. However, full implementation guidelines for
SOP 97-2, SOP 98-4 and SOP 98-9 have not been issued. Once available, the
current revenue recognition accounting practices may need to change and such
changes could affect the timing of our future revenue recognition.

Revenue for the three months ended December 31, 1999 was $5.3 million, an
increase of 8.0% from $4.9 million for the comparable period of the prior year.
This increase consists of increases in license fees revenue ($180,000) and
services revenue ($211,000) due to the growing market acceptance of
semiconductor intellectual property.

GROSS MARGIN. Gross margin is revenue less cost of revenue. License fee
cost of revenue consists primarily of amortization of capitalized software
development costs and costs of licensing certain technologies from third-party
developers and publishers. Services cost of revenue includes internal payroll
costs and third-party consulting costs associated with providing non-recurring
engineering services to customers.

Gross margin for the three months ended December 31, 1999 was $4.2 million,
an increase of 0.8% from $4.1 million for the comparable period of the prior
year. This increase was due to increased revenue ($391,000) and decreased
amortization of purchased technology ($219,000), partially offset by increased
license fees cost of revenue ($395,000). The increased license fees cost of
revenue was primarily due to a non-recurring license fee payment related to
third-party developed technology.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist principally of payroll and related costs associated with the development
of our semiconductor intellectual property and related software, net of amounts
capitalized.

Research and development expenses for the three months ended December 31,
1999 were $2.0 million, a decrease of 14.5% from $2.3 million for the comparable
period of the prior year. This decrease was due to the completion of a
significant outsourced design contract.

SALES AND MARKETING EXPENSES. Sales and marketing expenses consist of costs
related to advertising, public relations, and other marketing, selling and
distribution activities. These costs include direct out-of-pocket and payroll
expenses, and an allocation from Phoenix of costs associated with corporate
marketing programs and field selling activities.

Sales and marketing expenses for the three months ended December 31, 1999
were $1.7 million, an increase of 5.5% from $1.6 million for the comparable
period of the prior year. This increase was due to higher commissions and other
variable compensation costs from the increase in revenue.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of expenditures for executive, accounting, legal, personnel, recruiting
and other administrative functions. These costs were incurred and allocated by
Phoenix for all historical periods.

General and administrative expenses for the three months ended December 31,
1999 were $731,000, a decrease of 14.2% from $852,000 for the comparable period
of the prior year. This decrease was due to lower allocations of administrative
costs from Phoenix as a result of reductions in bad debt expense and other
allocated costs. We anticipate that general and administrative expenses will
increase in future quarters as we begin to incur additional direct
administrative costs.

25
<PAGE>

STOCK-BASED COMPENSATION. Stock-based compensation charges of $236,000 were
recorded in the three months ended December 31, 1999. These charges were due to
stock options granted in December 1999 at an exercise price less than the fair
market value of our common stock on the grant date. The total deferred
stock-based compensation recorded was approximately $1.6 million, and the
remaining compensation will be amortized by charges to operations over the
vesting periods of the options, generally straight-line over four years.

INCOME TAX BENEFIT. A benefit for income taxes of $68,000 was recorded in
the three months ended December 31, 1999. This amount represents the benefit to
be realized from Phoenix for the income tax effect of our losses from November
30, 1999, the date of our capitalization, through December 31, 1999. Prior to
capitalization, we operated as a division of Phoenix, and the net losses we
incurred were included in income tax returns filed or to be filed by Phoenix.
Therefore, no tax benefit prior to November 30, 1999, was recognized.

YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999

REVENUE. Our revenue for fiscal years 1997, 1998 and 1999 was $5.1 million,
$8.8 million and $19.0 million, respectively, increases of 72.0% from fiscal
year 1997 to fiscal year 1998 and 115.6% from fiscal year 1998 to fiscal year
1999. These increases consist of increases in license fees revenue
($3.0 million in fiscal year 1998 and $7.7 million in fiscal year 1999) and
services revenue ($649,000 in fiscal year 1998 and $2.5 million in fiscal year
1999). The license fees revenue increases reflects the growing market acceptance
of semiconductor intellectual property, while service revenue increases reflect
the higher maintenance fees generated from our growing installed base of
customers. The increase from fiscal year 1998 to fiscal year 1999 also relates
to the fact that fiscal year 1998 revenue generated by Sand of $6.3 million is
not included in our fiscal year 1998 historical operating results. Fiscal year
1999 results reflect a full year of combined operations following the
acquisition of Sand.

GROSS MARGIN. Gross margin was $3.5 million, $6.8 million and $15.0 million
in fiscal years 1997, 1998 and 1999, respectively, increases of 95.2% from
fiscal year 1997 to fiscal year 1998 and 119.4% from fiscal year 1998 to fiscal
year 1999. The increases in both years were primarily the result of higher
revenue ($3.7 million in fiscal year 1998 and $10.2 million in fiscal year
1999). Partially offsetting the fiscal year 1999 increase was $2.1 million of
amortization of purchased technology from the acquisition of Sand. The increase
from fiscal year 1998 to fiscal year 1999 also relates to the fact that fiscal
year 1998 gross margin of $6.1 million generated by Sand is not included in our
fiscal year 1998 historical operating results.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$2.3 million, $2.9 million and $9.1 million in fiscal years 1997, 1998 and 1999,
respectively, increases of 27.6% from fiscal year 1997 to fiscal year 1998 and
208.5% from fiscal year 1998 to fiscal year 1999. The fiscal year 1998 increase
primarily reflects increases in compensation and related benefits ($236,000),
allocations from Phoenix ($260,000), consulting services ($309,000),
firmware-related research and development costs ($274,000) and depreciation
($302,000), partially offset by an increase in research and development cost
capitalized under Statement of Financial Accounting Standards, or SFAS, 86
($818,000). These increases were due to increases in semiconductor intellectual
property development activities. The fiscal year 1999 increase primarily
reflects increases in compensation and related benefits ($2.7 million),
allocations from Phoenix ($464,000), consulting services ($530,000),
depreciation ($553,000) and a reduction of research and development cost
capitalized under SFAS 86 ($1.6 million). The increase from fiscal year 1998 to
fiscal year 1999 also relates to the fact that fiscal year 1998 Sand research
and development expenses of $2.2 million are not included in our fiscal year
1998 historical operating results.

As a percentage of revenue, research and development expenses were 45.2% in
fiscal year 1997, 33.5% in fiscal year 1998 and 48.0% in fiscal year 1999. The
reduced relative research and development

26
<PAGE>

expenses in fiscal year 1998 were due to the higher revenues that year. Because
we completed a significant outsourced design contract and have also reduced the
use of software consultants, we expect that overall research and development
expenditures will decrease in fiscal year 2000. We believe that they will
increase thereafter.

SALES AND MARKETING EXPENSES. Sales and marketing expenses were $2.1
million, $3.8 million and $6.4 million in fiscal years 1997, 1998 and 1999,
respectively, increases of 80.6% from fiscal year 1997 to fiscal year 1998 and
65.2% from fiscal year 1998 to fiscal year 1999. The fiscal year 1998 increase
primarily reflects increases in compensation and related benefits ($353,000),
marketing costs ($317,000), allocations from Phoenix ($484,000) and
firmware-related sales and marketing ($469,000). The fiscal year 1999 increase
primarily reflects increases in compensation and related benefits
($1.5 million) and allocations from Phoenix ($1.9 million), partially offset by
a decrease in marketing costs ($239,000) and firmware-related sales and
marketing costs ($626,000). The increase from fiscal year 1998 to fiscal year
1999 also relates to the fact that fiscal year 1998 Sand sales and marketing
expenses of $1.2 million are not included in our fiscal year 1998 historical
operating results.

As a percentage of revenue, sales and marketing expenses amounted to 41.6%
in fiscal year 1997, 43.7% in fiscal year 1998 and 33.5% in fiscal year 1999.
The decrease in sales and marketing expenses as a percentage of revenue in
fiscal year 1999 is attributable to revenue growth that exceeded spending
growth, as certain sales and marketing costs are fixed.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1.0 million, $1.4 million and $3.4 million in fiscal years 1997, 1998 and
1999, respectively, increases of 30.5% from fiscal year 1997 to fiscal year 1998
and 145.9% from fiscal year 1998 to fiscal year 1999. The increases in both
years included increases in the headcount-based allocations from Phoenix. The
increase from fiscal year 1998 to fiscal year 1999 also relates to the fact that
$793,000 of fiscal year 1998 Sand general and administrative expenses are not
included in our fiscal year 1998 historical operating results.

As a percentage of revenue, general and administrative expenses amounted to
20.5% in fiscal year 1997, 15.6% in fiscal year 1998 and 17.7% in fiscal year
1999.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
represents the straight-line amortization of goodwill and other intangible
assets associated with the purchase of Sand in September 1998. Goodwill is being
amortized over a six-year period, while other intangible assets are being
amortized over three- to six-year periods.

MERGER AND RESTRUCTURING CHARGES. Merger and restructuring charges
represent out-of-pocket costs and asset write-offs related to merger or
restructuring activities.

In fiscal year 1998, we recorded merger and restructuring charges of $5.8
million related to the acquisition of Sand and the associated integration and
restructuring. In fiscal year 1999, we recorded restructuring charges of
$6.1 million.

Included in these restructuring charges were $1.5 million in fiscal year
1998 and $4.9 million in fiscal year 1999 related to the write-off of
capitalized semiconductor intellectual property development costs that became
redundant as a result of merger or restructuring activities. These development
cost write-offs were calculated for each development project based upon the
excess of carrying value over the difference between the gross expected future
revenue to be generated and the projected future costs of such revenue. The
charges related primarily to projects that were redundant between inSilicon and
Sand, and to reduced revenue expectations due to changing market conditions.

In fiscal year 1998, we recorded an in-process research and development
charge based upon an allocation of a portion of the Sand purchase price to
development projects that were not yet capitalizable under the provisions of
SFAS 86. The determination of the value of the in-process charge associated with
each project, which is the responsibility of inSilicon management, was made by
estimating the future net cash flows from the project, and discounting the net
cash flows to calculate the present value.

27
<PAGE>
The Sand projects under development at the date of acquisition related to
semiconductor intellectual property designed for various communications
standards. The value associated with each project as of the date of acquisition
was almost entirely attributable to the project's discrete development efforts.
The projects are listed below, along with the fair value assigned, anticipated
costs to complete at acquisition and the risk-adjusted discount rate. Each of
the projects was scheduled for completion and release in late fiscal year 1999
or early fiscal year 2000.

<TABLE>
<CAPTION>
COMMUNICATIONS FAIR VALUE COSTS TO DISCOUNT
STANDARD ASSIGNED COMPLETE RATE
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
10/100 Ethernet(1)....................................... $1,223 $ 230 25%
IEEE-1394(1)............................................. 437 1,400 45%
USB(1)................................................... 835 380 30%
VSI/SIP (TymeWare-TM-)(2)................................ 1,025 720 40%
Gigabit Ethernet(3)...................................... 370 480 50%
Cable Modem(4)........................................... 360 690 45%
---------------------
$4,250 $3,900
=====================
</TABLE>

- ------------------------

(1) These projects were completed in fiscal year 1999.

(2) This project was completed in the first quarter of fiscal year 2000.

(3) This project is under development and currently scheduled for release in
the three months ending June 30, 2000.

(4) This project was cancelled in fiscal year 1999.

If these projects are not successfully developed and/or marketed, future
revenue and profitability of inSilicon may be adversely affected. Additionally,
the value of other intangible assets acquired may become impaired.

Also included in fiscal year 1999 was $1.2 million of severance costs
allocated from Phoenix related to the elimination of nine Phoenix corporate
management positions ($1.1 million) and three inSilicon positions ($90,000). The
severance costs incurred for the Phoenix positions were allocated to inSilicon
based upon relative headcount, consistent with the allocation of other inSilicon
costs incurred by Phoenix.

INCOME TAXES. The net losses we incurred through November 30, 1999 are
attributable to our operations as a division of Phoenix and were or will be
included in income tax returns filed by Phoenix. Because we will not receive any
benefit for our historical operating losses incurred through November 30, 1999,
no income tax benefit has been reflected for the periods presented through
September 30, 1999, and because our operating losses for tax purposes have been
used by Phoenix, we have no net operating loss carryforwards as of November 30,
1999 to apply against future taxable income, if any. We do not believe that the
tax treatment of these historical losses will have a material adverse effect on
our future results of operations or financial condition.

In conjunction with our capitalization as of November 30, 1999, a net
deferred tax liability of $2.7 million was transferred by Phoenix to us,
representing the future tax effect of historical temporary book/tax differences.
Further, we have entered into a tax-sharing agreement with Phoenix under which
we are responsible for federal and state income taxes for the periods subsequent
to November 30, 1999.

QUARTERLY RESULTS OF OPERATIONS

The following tables set forth inSilicon's consolidated statement of
operations data for each of the quarters during the fiscal years ended
September 30, 1998 and 1999, and the three months ended December 31, 1999,
expressed in dollars and as a percentage of total revenue. This unaudited
quarterly information has been prepared on the same basis as inSilicon's audited
consolidated financial statements and, in the opinion of management, reflects
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information for the periods presented. The operating
results for any quarter are not necessarily indicative of results to be
anticipated for any

future period.

28
<PAGE>

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
License fees............. $1,544 $2,049 $1,511 $ 2,200 $ 3,677 $ 4,003 $ 3,270 $ 4,023 $ 3,857
Services................. 238 407 432 411 1,189 922 882 989 1,400
------ ------ ------ ------- ------- ------- ------- ------- -------
Total revenue.......... 1,782 2,456 1,943 2,611 4,866 4,925 4,152 5,012 5,257
Cost of revenue:
License fees............. 305 194 372 352 158 274 61 510 553
Services................. 125 252 162 195 27 311 267 221 208
Amortization of purchased
technology............. -- -- -- -- 533 533 533 533 314
------ ------ ------ ------- ------- ------- ------- ------- -------
Total cost of
revenue.............. 430 446 534 547 718 1,118 861 1,264 1,075
------ ------ ------ ------- ------- ------- ------- ------- -------
Gross margin............... 1,352 2,010 1,409 2,064 4,148 3,807 3,291 3,748 4,182

Operating expenses:........
Research and
development............ 545 771 750 881 2,348 2,191 2,335 2,218 2,007
Sales and marketing...... 835 1,027 1,040 942 1,622 1,710 1,475 1,543 1,712
General and
administrative......... 297 338 349 384 852 725 809 978 731
Amortization of
intangible assets...... -- -- -- -- 555 555 555 555 555
Stock-based
compensation........... -- -- -- -- -- -- -- -- 236
Merger and restructuring
charges................ -- -- 50 5,728 86 -- 188 5,776 --
------ ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1,677 2,136 2,189 7,935 5,463 5,181 5,362 11,070 5,241
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss from operations....... (325) (126) (780) (5,871) (1,315) (1,374) (2,071) (7,322) (1,059)
Income tax benefit......... -- -- -- -- -- -- -- -- (68)
------ ------ ------ ------- ------- ------- ------- ------- -------
Net loss................... $ (325) $ (126) $ (780) $(5,871) $(1,315) $(1,374) $(2,071) $(7,322) $ (991)
====== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUE:
Revenue:
License fees............. 86.6% 83.4% 77.8% 84.3% 75.6% 81.3% 78.8% 80.3% 73.4%
Services................. 13.4 16.6 22.2 15.7 24.4 18.7 21.2 19.7 26.6
------ ------ ------ ------- ------- ------- ------- ------- -------
Total revenue.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License fees............. 17.1 7.9 19.1 13.5 3.2 5.6 1.5 10.2 10.5
Services................. 7.0 10.3 8.4 7.4 0.6 6.3 6.4 4.4 4.0
Amortization of purchased
technology............. -- -- -- -- 11.0 10.8 12.8 10.6 6.0
------ ------ ------ ------- ------- ------- ------- ------- -------
Total cost of
revenue.............. 24.1 18.2 27.5 20.9 14.8 22.7 20.7 25.2 20.5
------ ------ ------ ------- ------- ------- ------- ------- -------
Gross margin............... 75.9 81.8 72.5 79.1 85.2 77.3 79.3 74.8 79.5

Operating expenses:
Research and
development............ 30.6 31.3 38.5 33.7 48.2 44.5 56.3 44.3 38.2
Sales and marketing...... 46.9 41.8 53.5 36.1 33.3 34.7 35.5 30.8 32.6
General and
administrative......... 16.6 13.8 18.0 14.7 17.5 14.7 19.5 19.5 13.8
Amortization of
intangible assets...... -- -- -- -- 11.4 11.3 13.4 11.1 10.6
Stock-based
compensation........... -- -- -- -- -- -- -- -- 4.5
Merger and restructuring
charges................ -- -- 2.6 219.4 1.8 -- 4.5 115.2 --
------ ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............. 94.1 86.9 112.6 303.9 112.2 105.2 129.2 220.9 99.7
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss from operations....... (18.2) (5.1) (40.1) (224.8) (27.0) (27.9) (49.9) (146.1) (20.2)
Income tax benefit......... -- -- -- -- -- -- -- -- (1.3)
------ ------ ------ ------- ------- ------- ------- ------- -------
Net loss................... (18.2)% (5.1)% (40.1)% (224.8)% (27.0)% (27.9)% (49.9)% (146.1)% (18.9)%
====== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>

29
<PAGE>
Our revenue in each of the quarters of fiscal years 1999 and the first
quarter of fiscal year 2000 has increased over the comparable quarter of the
prior year. Revenue substantially increased between the fourth quarter of fiscal
year 1998 and first quarter of fiscal year 1999, primarily due to the inclusion
of Sand's results of operations. Typically, in the second quarter of each fiscal
year, we experience higher than normal revenue due to a number of factors,
including seasonal buying patterns and an increase in the number of design
starts typically associated with the beginning of the year. Over the nine fiscal
quarters, gross margins have also fluctuated due to the timing of
customer-specific development projects and capitalized software development cost
amortization.

Research and development costs increased in the first quarter of fiscal
1999, reflecting the research and development personnel added through the
acquisition of Sand and the initial outsourcing of a significant design
contract. General and administrative expenses have generally shown quarterly
increases, due to increased headcount-based allocations by Phoenix.

Quarterly results in fiscal years 1999 and 2000 also have been affected by
the amortization of goodwill associated with the acquisition of Sand, which has
amounted to $555,000 on a quarterly basis. In addition, in the third and fourth
quarters of fiscal year 1998 and the first, third and fourth quarters in fiscal
year 1999, we have taken one-time charges for employee severance costs and asset
write-offs related to merger and restructuring activities. These charges
amounted to $5.8 million in fiscal year 1998 and $6.1 million in fiscal year
1999.

LIQUIDITY AND CAPITAL RESOURCES

Our principal capital requirements are to fund working capital needs and
capital expenditures to support our revenue growth. Since Phoenix acquired or
introduced the various aspects of our business, Phoenix has performed cash
management services for us and provided the funds necessary to satisfy our
capital requirements. After this offering, Phoenix will no longer be obligated,
and does not intend, to provide us additional funds to finance our operations.

Cash used in operating activities was $2.2 million, $4.3 million and
$2.7 million for fiscal years 1997 and 1999 and the three months ended
December 31, 1998, respectively. Cash provided by operating activities was $3.6
million for fiscal year 1998 and $1.6 million for the three months ended
December 31, 1999. Cash used in operating activities during fiscal year 1997 was
primarily attributable to a net loss and an increase in accounts receivable due
to increased revenue, offset in part by depreciation and amortization. Cash
provided by operating activities during fiscal year 1998 was due to a net loss
and an increase in liabilities due to merger and restructuring activities, net
of charges for in-process research and development, depreciation and
amortization, and write-offs of capitalized software. Cash used in operating
activities during fiscal year 1999 was primarily due to a net loss and an
increase in accounts receivable due to increased revenue, offset in part by
depreciation and amortization and a write-off of capitalized software costs.
Cash used in operating activities in the three months ended December 31, 1998,
was due to an increase in accounts receivable due to increased revenue and
decreases in accounts payable and other accrued liabilities due to a transition
of direct to allocated costs and a payment of restructuring costs. Cash provided
by operating activities in the three months ended December 31, 1999 was due to a
decrease in accounts receivable generated from increased collection efforts.

Cash used in investing activities was $2.8 million, $18.9 million,
$1.1 million, $325,000 and $64,000 for fiscal years 1997, 1998, 1999, and the
three months ended December 31, 1998 and 1999, respectively. Cash used in fiscal
year 1997 and 1999 was primarily attributable to additions to computer software
costs. Cash used in fiscal year 1998 was primarily attributable to additions to
computer software costs, purchases of property and equipment and a
$15.6 million investment in Sand.

Net cash provided by financing activities was $5.0 million for fiscal year
1997, $15.3 million for fiscal year 1998, $5.5 million for fiscal year 1999 and
$3.0 million for the three months ended

30
<PAGE>
December 31, 1998. Net cash used in investing activities was $1.5 million for
the three months ended December 31, 1999. Cash provided by financing activities
in all annual periods and the three months ended December 31, 1998 related
primarily to capital contributions from Phoenix. Net cash used in the three
months ended December 31, 1999 was due to a reduction in Phoenix's net
investment based upon net cash generated by inSilicon operations through
November 30, 1999 as a division of Phoenix.

As a portion of the consideration for the acquisition of Sand, we entered
into an earn-out agreement with the selling stockholders. Under the terms of the
agreement, the selling stockholders may earn additional purchase price
consideration for each of the three years ending September 30, 2002, contingent
upon the financial performance of inSilicon. The maximum contingent
consideration is $3.7 million, of which approximately $1.6 million represents
minimum anticipated payments that were recorded as accrued merger costs. Future
payments are due subsequent to the end of each of the three fiscal years ending
September 2001, and payments in excess of amounts accrued, if any, will be
recorded as additional goodwill and amortized over the remaining life of the
original goodwill recorded. Approximately $867,000 was earned in fiscal year
1999 and will be paid in the second quarter of fiscal year 2000.

We expect our future liquidity and capital requirements to vary greatly from
quarter to quarter, depending on numerous factors, including the cost, timing
and success of product development efforts, the cost and timing of sales and
marketing activities, the extent to which our existing and new technologies gain
market acceptance, the number and complexity of communications standards, the
level and timing of revenues, competing technological and market developments
and the costs of maintaining and enforcing patent claims and other intellectual
property rights. We believe that the net proceeds from this offering, together
with cash generated by our operations, if any, will be sufficient to meet our
operating and capital requirements for at least the next 12 months. Thereafter,
we believe we will be able to raise any additional funds required through public
or private financings, strategic relationships or other arrangements. However,
we cannot be certain that any such financing will be available on acceptable
terms, or at all, and our failure to raise capital when needed could seriously
harm our business. Additional equity financing may be dilutive to the holders of
our common stock, and debt financing, if available, may involve restrictive
covenants. Moreover, strategic relationships, if necessary to raise additional
funds, may require that we relinquish our rights to certain technology.

Effective upon the closing of this offering, we have a secured bank line of
credit with Silicon Valley Bank, which will provide up to $5.0 million in
working capital. Borrowings, if any, will bear interest at prime plus 0.25%.
This line of credit expires in January 2001 and requires us to comply with
various financial covenants, including a minimum quick ratio and a maximum on
aggregate annual losses.

QUANTITATIVE AND QUALITATIVE DISCUSSION OF MARKET INTEREST RATE RISK

INTEREST RATE RISK. As a division of Phoenix, we have not maintained our
own cash investments and have not been subject to significant interest rate
risk. In addition, we do not believe that we will be subject to significant
interest rate risk in future periods.

FOREIGN CURRENCY. Substantially all of our revenues are earned in U.S.
dollars. Operating expenses incurred by our foreign subsidiaries are denominated
in local currencies. Accordingly, we are subject to exposure from movements in
foreign currency exchange rates. To date, the effect of changes in foreign
currency exchange rates on our financial position and operating results have not
been material. We currently do not use financial instruments to hedge foreign
currency risks. We intend to assess the use of financial instruments to hedge
currency exposures on an ongoing basis.

31
<PAGE>
BUSINESS

OVERVIEW

INDUSTRY BACKGROUND

The internet is creating the demand for all digital devices to be connected.
This demand is generating a proliferation of communications standards and
connectivity requirements. Examples of current and emerging standards include
Ethernet, USB, IEEE 1394, PCI, HPNA, DSL and Bluetooth. Products that use these
standards include corporate networks which use Ethernet; printers and scanners
which use USB; digital video cameras which use IEEE 1394; routers, personal
computers and notebooks which use PCI; home networks which use HPNA; high speed
internet modems which use DSL; and next-generation cellular phones which use
Bluetooth.

The proliferation of these products and their many communications standards
is driving the demand for complex semiconductors. Improvements in semiconductor
design and manufacturing processes have enabled the integration of entire
systems, including microprocessor, communications, logic and memory elements, on
a single chip, and creating a system-on-a-chip solution. The following diagram
illustrates a sample system-on-a chip and its major technologies. Each block in
the diagram is a necessary technology used to create the complex
system-on-a-chip. In the diagram below, the upper left block represents the
video processing technology that distinguishes this chip from others and makes
it a set-top box. The upper right block represent the microprocessor and memory
technologies needed for this chip. The four blocks at the bottom represent
communications standards that enable the chip to communicate within the set-top
box and externally with other devices such as a digital video camera or a remote
control.

[DIAGRAM]

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<PAGE>
A designer of a complex system-on-a-chip, such as the one above, needs to
design each technology separately and then must ensure that each communicates
with each other as well as externally with other devices. Due to the complexity
of designing such systems-on-a-chip, the multiplicity of communications
standards and time-to-market requirements, the design capabilities of
semiconductor and systems companies have not kept pace with the increase in the
number of transistors that can be placed on a single chip. Consequently, a
significant "design gap" has developed.

To address the design gap, semiconductor and systems companies are
increasingly licensing proven and reusable intellectual property such as
microprocessor, communications, logic and memory blocks from merchant
semiconductor intellectual property, or SIP, suppliers. The emergence of a
merchant SIP market allows semiconductor and systems companies to create
differentiated products, reduce development costs, increase functionality and
improve time to market. For example, Integrated Circuit Engineering, an
independent research firm, estimates that the merchant SIP market as a whole
will grow from approximately $732 million in 2000 to approximately $1.9 billion
in 2003, which represents a compounded annual growth rate of approximately 37%.

This developing merchant SIP market has three primary segments, as follows:

[DIAGRAM]

Microprocessors act as the central processing unit for the system-on-a-chip.
Communications and connectivity technologies are the primary vehicles that
translate and transport external data streams to and from the microprocessor.
Foundation SIP consists of the underlying logic that is designed to operate in a
specific semiconductor supplier's manufacturing process.

Leaders have emerged in both the microprocessor and foundation market
segments. However, no clear leader has emerged in the communication and
connectivity market segment. Semiconductor and systems companies divert
significant time and resources from their core competencies to address these
needs. Moreover, the wide variety of communications standards that have emerged
due to the specific requirements of various devices makes it increasingly
difficult for these companies to successfully design these crucial
communications technologies for their systems-on-a-chip. Consequently, they are
unable to develop new products in a cost- and time-effective manner.

THE inSILICON SOLUTION

We provide communications and connectivity technologies that allow
semiconductor and systems companies to focus their development resources on
their core competencies that differentiate their

33
<PAGE>
products. This improves time to market and reduces risk and development costs in
the design of complex systems-on-a-chip, thus narrowing the design gap. We
offer:

- PROVEN SOLUTIONS. More than 400 companies have implemented our technology
in more than 500 integrated circuit designs. Millions of individual
products include inSilicon technology. Our technologies have been
implemented in over 25 semiconductor fabrication facilities using some of
the most advanced semiconductor processing technology, including 0.18
micron process technology. The customer- and systems-proven nature of our
technologies makes less likely the substantial interoperability issues and
costly development delays that our customers might experience from
in-house or other third-party designs, thereby reducing risk.

- A BROAD PORTFOLIO OF COMMUNICATIONS TECHNOLOGY FOR A WIDE RANGE OF
STANDARDS. We provide semiconductor and systems companies with a broad
portfolio of communications and connectivity technology. We believe our
semiconductor intellectual property fulfills many of the communications
technology needs of those companies.

- INTEGRATED SILICON SUBSYSTEMS. We recently introduced a modular Virtual
Component Interface, or VCI, architecture known as TymeWare-TM-. This
product integrates a number of our popular communications technologies
into a single communication subsystem. TymeWare can also integrate
customer and third-party VCI-compliant semiconductor intellectual
property. Additionally, we have designed TymeWare so that it interfaces
successfully with the most popular microprocessors using our proprietary
SmartBridge-TM- technology.

- INTEGRATED SOFTWARE SOLUTION. For the USB and IEEE 1394 communications
standards, we have the essential software that allow operating systems to
communicate with our USB and IEEE 1394 technology. By using our software,
semiconductor and systems companies may integrate our technology into
their designs in a cost-effective and timely manner.

- EXTENSIVE TEST AND VERIFICATION TOOLS. We provide our customers with
extensive verification and test modules to ensure the functionality of our
technology within their designs. This allows our customers to implement
our communications technology into their designs with a higher degree of
first time success.

- PORTABILITY AND FLEXIBILITY. We design our semiconductor intellectual
property to be foundry independent and easy to use. We use popular
hardware languages that fit readily into our customers' design flows,
which provides our customers significant manufacturing flexibility. Our
Rapidscript-TM- configuration tool and our adoption of VCI facilitate
customer integration of our semiconductor intellectual property into their
system-on-a-chip designs.

- STANDARDS LEADERSHIP. We were the first to market with merchant
semiconductor intellectual property solutions for many communications
standards including PCI, AGP, USB, IrDA, IEEE 1394 and VCI. We are members
of numerous industry standards bodies, including the IEEE 1394 trade
association, USB Implementator Forum, Infrared Data Association and PCI
SIG Steering Committee. Our involvement with these bodies helps us stay on
the leading edge of evolving standards.

THE INSILICON STRATEGY

Our objective is to be a leading provider of communications and connectivity
technologies that allow semiconductor and systems companies to create
differentiated products, reduce risk and development costs, increase
functionality and improve time to market. Key elements of our strategy include:

- TARGET HIGH GROWTH COMMUNICATIONS APPLICATIONS. We target selected high
growth communications and connectivity protocols. Building upon our
established portfolio of

34
<PAGE>
technology, we plan to develop semiconductor intellectual property for
evolving wireless and wireline communications standards.

- EXPAND OUR PORTFOLIO OF COMMUNICATIONS TECHNOLOGY AND RELATED SOFTWARE. We
intend to continue strengthening and broadening our semiconductor
intellectual property to provide a wide range of new communications
technology together with related analog technology. We expect to expand by
developing products ourselves, acquiring technologies, and partnering with
and licensing from third parties. We also plan to expand our firmware
offerings.

- EXPAND DISTRIBUTION CHANNELS AND BRAND AWARENESS. We intend to expand our
traditional channels of distribution by increasing our direct sales force.
We also intend to increase the number of third-party partner programs with
design houses, application specific integrated circuit, or ASIC,
manufacturers and semiconductor-related tool makers, among others. We
intend to advertise both in print and online to our target audiences
worldwide.

- DEVELOP E-COMMERCE CHANNELS. We allow semiconductor designers to download,
via the internet, encrypted versions of our technology before committing
to a commercial license. Using this method, semiconductor designers can
immediately begin developing their designs using our communications
technology.

MARKETS AND APPLICATIONS

We target high growth markets requiring high performance, quick time to
market, design flexibility and compliance with industry standards. Examples of
the markets and applications using our products include:

- TELECOMMUNICATIONS AND DATA COMMUNICATIONS. Telecommunications and data
communications equipment companies design and manufacture equipment that
must comply with many industry standards. For example, communications
technologies such as Ethernet, PCI and USB are used in network switches
and routers, network adapters, concentrators, public switched telephone
network central office equipment, cable set-top boxes and modems.

- CONSUMER ELECTRONICS. Consumer electronics devices are rapidly converting
to digital methods of signal transmission, processing and storage, and
they require standard connectivity interfaces such as IEEE 1394, IrDA,
USB, and PCI. For example, digital still cameras, digital video cameras,
video games, digital video cassette recorders and DVD players all use such
digital transmission technology. New application of this technology is
anticipated in digital audio equipment and emerging video devices such as
personal video recorders.

- COMPUTERS. Computation equipment such as personal computers, workstations
and servers require implementation of standard interfaces such as PCI,
USB, AGP, IrDA and Ethernet. Our communications technology can be found in
standard products and application specific implementations for these types
of platforms.

- OFFICE AUTOMATION. Computer peripherals require a means of connection to
both their host computer and to larger networks. These connections are
generally made with standard interfaces, including USB, IEEE 1394 and
IrDA. These interface technologies are used in such devices as printers,
scanners, keyboards, display terminals, pointing devices, and mass storage
devices such as hard, floppy and removable media disk drives; and tape and
optical drives.

PRODUCTS

Our communications technology includes semiconductor intellectual property
and related software. Our semiconductor intellectual property includes a wide
variety of standards-based communications technology. Our semiconductor
intellectual property subsystems vertically combine many of these technologies
into functional blocks tailored for ease of use and faster integration into the
customer's

35
<PAGE>
complex designs. Our firmware and drivers provide protocol translation
technologies that allow the operating system to communicate with the hardware.
We provide simulation models, test environments, documentation and training for
many of these technologies.

We supply our technology as Verilog, VHDL or C source code, which are the
primary design languages in use today. Semiconductor and systems companies then
integrate our communications technology into their overall semiconductor designs
using electronic design automation tools, such as those provided by Synopsys and
Cadence. We use a modular approach that emphasizes silicon-proven reusable,
licensable technology and software that are compatible with a wide range of
processor designs.

inSilicon's technologies are outlined in the following chart. Each family
consists of our technologies that relate to a specific industry standard.

<TABLE>
<C> <S> <C>
COMMUNICATIONS
STANDARDS TECHNOLOGY FAMILIES TECHNOLOGY APPLICATION
AGP AGP Master, AGP Host and AGP Accelerated Graphics Port is an interconnect
Simulation Models standard used in high performance graphic cards
for personal computers.
Ethernet 10/100 Ethernet Media Access Ethernet is a widely used local area networking
Controller and Ethernet Simulation communications standard, used in such devices
Model as modems, cable modems, home networking,
routers and switches.
IEEE 1394 1394 Device Controller Link, 1394 IEEE 1394 is a high-speed digital interface
Analog Phy, 1394 Cable Phy and standard used in digital cameras, audio-visual
1394 Simulation Model. disk drives and scanners.
IrDA IrDA and IrDA Simulation Model IrDA is a wireless standard that enables
communication between appliances across short
distances. It is used in mobile phones,
handheld and laptop computers and electronic
games.
PCI PCI Suite and PCI Simulation Model Peripheral Component Interconnect is an
internal communications standard that connects
various elements of computer systems to each
other. It is used in many computers as well as
in embedded systems.
PCI-X PCI-X and PCI-X Simulation Model PCI-X is the latest revision of the PCI
standard. It is used in many high performance
computing applications, including
multiprocessor servers, communications switches
and routers and storage area networks.
USB USB OHCI Host Controller, USB Hub, Universal Serial Bus is a standard designed to
USB Device Controller and simplify connections between personal computers
USBAccess-Registered Trademark- and peripheral devices, such as printers,
System Software digital cameras and scanners. Our
USBAccess-Registered Trademark- software adds
USB capability to computer operating systems,
such as Microsoft's NT.
VCI TymeWare-TM- VCI Virtual Component Interface is a standard
interface that simplifies the mix-and-match of
semiconductor intellectual property. Our
TymeWare-TM- VCI enables integration of
multiple communications standards and includes
interfaces to popular microprocessors.
</TABLE>

36
<PAGE>
RESEARCH AND DEVELOPMENT

We believe that our future success will depend in large part on our ability
to continue developing and acquiring new and enhanced communications technology
and related software in a timely and cost-effective manner. To this end, we have
assembled a team of highly skilled engineers with significant experience in the
design and development of communications technology, simulation and verification
environments and firmware. We participate in the development of new and existing
industry standards.

Our research and development costs were $2.3 million in fiscal year 1997,
$2.9 million in fiscal year 1998, $9.1 million in fiscal year 1999 and
$2.0 million in the three months ended December 31, 1999. In order to maintain a
leading position as a merchant semiconductor intellectual property provider in
emerging communications and connectivity standards, we expect that these costs
will increase in the future. However, because of the conclusion of a significant
outsource design contract and the reduced use of software consultants, we expect
that overall research and development expenditures will decrease in fiscal year
2000. As of December 31, 1999, we had 45 employees engaged in research and
development. We expect to identify and hire additional highly-skilled technical
personnel in fiscal year 2000 to staff our anticipated research and development
activities.

SALES AND MARKETING

We focus our sales efforts in the following areas: direct sales; indirect
sales through application specific integrated circuit, or ASIC, manufacturers,
software resellers and design house programs; and internet distribution.

DIRECT SALES. We maintain a direct worldwide sales network consisting of
our own employees and a limited number of sales representatives and field
applications engineers. The sales force's primary responsibility is to secure
and maintain direct account relationships with the semiconductor and systems
companies of the world. We have over 400 customers for which the sales force
maintains the relationship. We document these relationships with a technology
license agreement for the first purchase. For subsequent purchases from existing
customers, we generally obtain a customer purchase order for the desired
technology under the terms of the license agreement or an amendment to the
license agreement. The sales force is distributed in key geographic areas around
the world with employees in the following locations: Austin; Boston; Irvine; San
Jose; Geneva, Switzerland; London, England; Munich, Germany; and Tokyo, Japan.
In addition, we have a distribution agreement with Phoenix Technologies Ltd.
covering Hong Kong, Japan, Korea, Singapore and Taiwan.

INDIRECT SALES. In addition to the direct sales force, we also use the
following indirect sales channels:

- ASIC MANUFACTURERS. Application specific integrated circuit, or ASIC,
manufacturers provide customized build-to-order chips to their customers.
Several ASIC manufacturers have access to our technology and are able to
license our products directly to their customers and include our
communications technology in their complex semiconductors. We receive
revenues from the ASIC vendors for each of our technologies that is used
in a customer chip.

- SOFTWARE RESELLERS. We also have a group of software resellers whose
primary function is the development and resale of firmware and drivers.
These companies perform both licensing and servicing of firmware customers
for us. We receive revenues from our software resellers for our
technologies that they provide to their customers.

- DESIGN HOUSE PARTNERS. Our design house program provides access to our
communications technologies to enable design houses to develop expertise
with our semiconductor intellectual property. This encourages design
houses to incorporate our semiconductor intellectual property when they
design custom semiconductors for their customers. We receive revenues from
customers who are referred to us by our design center partners.

INTERNET DISTRIBUTION. In addition, we allow semiconductor designers to
download and test, via the internet, encrypted versions of our technology before
committing to any economic arrangement.

37
<PAGE>
CUSTOMERS

We have developed a strong customer base among semiconductor and systems
companies that use our communications technology to design complex
semiconductors. The following chart provides a representative list of our major
customers and some of the applications in each industry in which customers use
our technology. The listed customers are considered representative as they
include our top ten customers for fiscal year 1999, based on revenue, together
with a sample of other customers using our technology in a variety of
applications. The ten customers that generated the highest level of revenues for
us in fiscal year 1999 are indicated in the following chart with an asterisk.

<TABLE>
INDUSTRY EXAMPLE APPLICATION SELECTED CUSTOMERS
<S> <C> <C>
Communications ATM Traffic Processor, Backbone Alcatel
Router, Cable Modem, DSL Modem, Cisco
Encryption Processor, Gigabit hi/fn
Servicer Adapter, Gigabit Maker Communications
Switch, Multilayer NEC*
Communications Switch, Network Telocity*
Adapter, Satellite Receiver and
Terabit Router
Consumer AutoPC, Cell Phone, Digital WebTV (Microsoft)*
Still Camera, Digital Video Motorola*
Camera, Internet Audio, Personal Qualcomm
Digital Assistant, Set-top Box Sharp*
and Smart Card Reader Sony
ST Microelectronics*
Computer Embedded Microprocessor, Laptop AMD
Computer, RISC Processor, Server Fujitsu
Processor Interconnect, Super SMSC*
I/O Chip, Microprocessor and USB Intel
Controller Lucent
Toshiba*
Office Automation 3-D Digital Audio, Floppy Disk Siemens*
Drive, Inkjet Printer, Laser Creative Labs
Printer, Page Scanner, PC Audio Hewlett-Packard*
Card, PC Video Camera and iomega
Removable Disk Drive Yamaha
</TABLE>

PROPRIETARY TECHNOLOGY AND INTELLECTUAL PROPERTY

We rely primarily on a combination of nondisclosure agreements and other
contractual provisions, as well as patent, trademark, trade secret, and
copyright law to protect our proprietary rights. Our general policy has been to
seek patent protection for those inventions and improvements likely to be
incorporated in our products or otherwise expected to be of value. We have an
active program to protect our proprietary technology through the filing of
patents.

As of February 1, 2000, we had applications for six U.S. patents on file
with the United States Patent and Trademark Office, or USPTO, and five draft
applications in the various stages of review in preparation for filing with the
USPTO. To date, the USPTO has issued two patents related to our design
simulation techniques and one patent related to our proprietary asynchronous PCI
design. As of December 31, 1999, we had filed two foreign applications under the
Patent Cooperation Treaty and had national filings in place for those countries
which are not members. We intend to continue to file

38
<PAGE>
patent applications as appropriate in the future. We cannot be sure, however,
that our pending patent applications will be approved, that any issued patents
will protect our intellectual property or will not be challenged by third
parties, or that the patents of others will not seriously harm our ability to do
business. In addition, others may independently develop similar or competing
technology or design around any of our patents.

We protect the source code of our technologies as both trade secrets and
unpublished copyrighted works. We license the source code to our customers for
limited uses and maintain contractual controls over the use of our software.
Wide dissemination of our software makes protection of our proprietary rights
difficult, particularly outside the United States.

We protect our trade secrets and other proprietary information through
nondisclosure agreements with our employees and customers and other security
measures, although others may still gain access to our trade secrets or discover
them independently.

From time to time, third parties, including our competitors, may assert
patent, copyright and other intellectual property rights to technologies that
are important to us. Although we believe that our technologies do not infringe
on any copyright or other proprietary rights of third parties, there are
currently significant legal uncertainties relating to the application of
copyright and patent law in the field of software.

COMPETITION

Our industry is very competitive and is characterized by constant
technological change, rapid rates of product obsolescence, and frequently
emerging new suppliers. Our existing competitors include other merchant
semiconductor intellectual property, or SIP, suppliers, such as the Mentor
Graphics' Inventra Division, Synopsys, Enthink and VAutomation; and suppliers of
application specific integrated circuits, or ASICs, such as LSI Logic, and the
ASIC divisions of IBM, Lucent, Toshiba and NEC. We also compete with the
internal development groups of large, vertically integrated semiconductor and
systems companies, such as Intel, Motorola, Cisco and Hewlett-Packard. In these
companies, SIP developed for an individual project sometimes is subject to
efforts by the company to re-use the SIP in multiple projects. Companies whose
principal business is providing design services as work-for-hire, such as
Intrinsix, Sican and the service division of Cadence, also provide competition.
These companies generally build a portfolio of internally developed SIP over
time and then re-use that SIP as applicable in new service projects in order to
gain productivity leverage. For firmware, our primary competitors are in-house
research and development departments of system companies and small
privately-held companies. As we introduce new SIP technologies, we will face
competition from both existing SIP suppliers and new SIP suppliers that we
anticipate will enter the market. We also may face competition from new
suppliers of technologies based on new or emerging standards.

We believe that important competitive factors in our market include:
performance; functionality; customizability; length of development cycle; price;
compatibility with prevailing design methodologies; interoperability with other
devices or subsystems; ease of use; reputation for successful designs and
installed base; technical service and support; technical training;
configurability of technologies for specific designs; and regional sales and
technical support.

EMPLOYEES

As of December 31, 1999, we had 78 employees, including 19 in sales, eight
in marketing, 45 in research and development and six in general and
administrative functions. We believe that our future success will depend in part
on our continued ability to attract, hire and retain qualified personnel. None
of our employees is represented by a labor union and we believe our employee
relations are good.

39
<PAGE>
LEGAL PROCEEDINGS

inSilicon is not a party to any pending litigation.

FACILITIES

Our executive, administrative and technical offices currently occupy
approximately 22,000 square feet in a building leased by Phoenix in San Jose,
California. We expect in the future to move to separate offices in the Silicon
Valley area. We believe that our current and planned facilities will be
adequate.

40
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The names and ages of our existing executive officers and directors as of
February 10, 2000 are set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- -------- -----------
<S> <C> <C>
Wayne C. Cantwell.................. 35 President, Chief Executive Officer and Director
Barry A. Hoberman.................. 41 Executive Vice President and Chief Technical
Officer
William E. Meyer................... 37 Executive Vice President and Chief Financial
Officer
Anand C. Naidu..................... 46 Vice President of Internet Products
Robert G. Nalesnik................. 41 Vice President of Marketing
David J. Power..................... 42 Vice President and General Counsel
Linda V. Moore..................... 53 Secretary
Albert E. Sisto(1)................. 50 Chairman of the Board of Directors
Raymond J. Farnham(1)(2)........... 52 Director
John R. Harding(2)................. 45 Director
E. Thomas Hart(1)(2)............... 58 Director
</TABLE>

- ------------------------

(1) Expected member of compensation committee

(2) Expected member of audit committee

WAYNE C. CANTWELL has served as our President and Chief Executive Officer
since our incorporation in November 1999 and as a Director of inSilicon since
November 1999. Mr. Cantwell also has served as Senior Vice President and General
Manager of Phoenix's Semiconductor IP Division since July 1999, a position from
which he will resign before the closing of this offering. He was Vice President
and General Manager, Worldwide Field Operations, for Phoenix from November 1998
to July 1999; Vice President and General Manager, North American Operations,
from March 1998 to October 1998; Vice President, Asia/America Operations, from
September 1997 to March 1998; and General Manager, Asia Operations, from
January 1996 to August 1997. Prior to that, Mr. Cantwell held various sales,
sales management and general management roles with Phoenix since joining in
March 1991. Prior to that, Mr. Cantwell held various roles in sales and
engineering at Intel and NEC Technologies. He received a B.S. in Electrical
Engineering from DeVry Institute of Technology.

BARRY A. HOBERMAN has served as our Executive Vice President and Chief
Technical Officer since November 1999. Prior to November 1999, Mr. Hoberman was
Vice President of Phoenix's Semiconductor IP Division from April 1999 to
November 1999, and the Senior Director of the same division from May 1996 to
March 1999. Prior to that, he was Product Line Director at Advanced Micro
Devices, a semiconductor manufacturer, from October 1987 to May 1996. He held
various roles in product management and development at Advanced Micro Devices
and Monolithic Memories. Mr. Hoberman has been issued 13 U.S. patents. He
received a B.S. in Electrical Engineering and a B.S. in Biology from the
Massachusetts Institute of Technology, and has done graduate work in Electrical
Engineering at Stanford University.

WILLIAM E. MEYER has served as our Executive Vice President and Chief
Financial Officer since December 1999. He was also a Director of inSilicon from
our incorporation in November 1999 until February 2000. He was Phoenix's Chief
Financial Officer from June 1999 to December 1999. He served as Phoenix's Vice
President of Finance and Controller from February 1998 to June 1999. Mr. Meyer
was Vice President and Corporate Controller for Microprose, a developer of
entertainment software, from November 1995 to February 1998. He served as Vice
President of Finance and Chief Financial Officer for SBT Accounting Systems, a
developer of accounting software applications, from 1992 to

41
<PAGE>
1995. Mr. Meyer also held various positions with Arthur Andersen. He is a
Certified Public Accountant and received a B.S. in Accounting from California
State University at Sacramento.

ANAND C. NAIDU has served as our Vice President of Internet Products since
November 1999. He has been the Vice President of Internet Products of Phoenix's
Semiconductor IP Division since October 1999, was the Senior Director of
Worldwide Sales in Phoenix's Semiconductor IP Division from July 1999 to
October 1999; and Director of Business Development from September 1998 to
July 1999. Mr. Naidu was a co-founder of Sand in 1991 and served as Sand's
President and Chief Executive Officer until Phoenix acquired Sand in
September 1998. Prior to founding Sand, he was President of Silicon Platforms,
which was acquired by S3. Mr. Naidu also held key marketing and development
management positions at Western Digital, STC, Intersil, and Rolm. He holds a
B.S. and an M.S. in Electrical Engineering from the University of California at
Berkeley and an M.B.A from the University of Santa Clara.

ROBERT G. NALESNIK has served as our Vice President of Marketing since
November 1999 and had held the same position at Phoenix's Semiconductor IP
Division since October 1999. Prior to that, he was Director of Marketing of the
Semiconductor IP Division since joining Phoenix in September 1998. He was Vice
President of Marketing at Sand from March 1998 until Phoenix acquired it in
September 1998. Prior to joining Sand, he was Director of Product Marketing at
Actel, a semiconductor manufacturer, from October 1995 to March 1998. Prior to
that, he spent five years at VLSI Technology, a semiconductor manufacturer, in
various marketing and engineering management roles. He has also held management
positions at Compass Design Automation and Fairchild Semiconductor.
Mr. Nalesnik holds a B.S. in Electrical Engineering from the Georgia Institute
of Technology.

DAVID J. POWER has served as Vice President and General Counsel of inSilicon
since November 1999. He was previously the Associate General Counsel for
Phoenix, overseeing the legal functions of the Semiconductor IP Division since
October 1997. Prior to coming to Phoenix, Mr. Power held corporate counsel
positions with CIDCO from July 1996 to October 1997, with Cymer Laser
Technologies from August 1995 through July 1996 and with Varian Associates from
January 1994 through August 1995. Mr. Power specializes in intellectual property
and technology licensing law. He received a B.S. in Engineering from Arizona
State University and a J.D. from the John Marshall Law School.

LINDA V. MOORE has been Secretary of inSilicon since November 1999. She has
served as Phoenix's Secretary and General Counsel since November 1999. Prior to
joining us, she was Vice President and General Counsel of Nhancement
Technologies, a distributor of computer-telephony products, from September 1998
to August 1999. She served as General Counsel and Secretary of Jabil Circuit, an
electronics contract manufacturer, from 1989 to 1998. She has also served as a
consultant to internet start-ups and has six years experience in equipment
leasing. Ms. Moore received a B.A. from the University of Michigan, an M.A. from
Eastern Michigan University and a J.D. from the Detroit College of Law. We
expect that Ms. Moore will resign as our Secretary immediately before the
closing of this offering.

ALBERT E. SISTO has served as a Director of inSilicon since our
incorporation in November 1999 and as the Chairman of our Board of Directors
since December 1999. Since June 1999, he has served as Phoenix's Chief Executive
Officer. Mr. Sisto served as the Chief Operating Officer of RSA Data Security, a
subsidiary of Security Dynamics Technologies, providing encryption technology,
from October 1997 to February 1999. He was Chairman, President and Chief
Executive Officer of Documagix, a software developer of document imaging
software, from September 1994 through October 1997. Mr. Sisto is a Director of
hi/fn, efax.com, Insignia Solutions and Tekgraf, all publicly traded technology
companies, and nCipher and Trintech Group. Mr. Sisto holds a B.E. in Engineering
from the Stevens Institute of Technology.

42
<PAGE>
JOHN R. HARDING has served as a Director of inSilicon since February 2000.
Since January 2000, he has served as Chairman of the Board of Directors and
Chief Executive Officer of The Dorset Group, a venture management and investment
firm. Mr. Harding served as Chief Executive Officer and as a Director of Cadence
Design Systems, a provider of software and services for electronic design, from
October 1997 through May 1999. From May 1997 through October 1997, he served as
Cadence's Senior Vice President of the Strategic Business Group. Mr. Harding
served as President and Chief Executive Officer of Cooper & Chyan
Technology, Inc., an electronic design automation software tool company, from
December 1994 until its merger with Cadence in May 1997. Prior to that,
Mr. Harding served as Executive Vice President of Zycad Corporation, an
electronic design automation company, from January 1992 through October 1994.
Mr. Harding is Chairman of the Board of Directors of SafeCorp.com, an
information security consulting firm. He is a Director of Zland.com, a provider
of internet-based applications for businesses. Mr. Harding holds a B.A. in
Economics and Chemistry from Drew University, where he is a member of the Board
of Trustees.

RAYMOND J. FARNHAM has served as a Director of inSilicon since
February 2000. Since October 1998, he has served as Chairman of the Board of
Directors, President and Chief Executive Officer of hi/fn, a designer and
developer of semiconductor devices and software. He served as Executive Vice
President of Integrated Device Technology, a supplier of microprocessor, logic
and memory integrated circuits, from July 1996 through July 1998. He worked as
an independent consultant from February 1995 through August 1996. Mr. Farnham
was President and Chief Executive Officer of OPTi, a fabless semiconductor
company, from February 1994 through February 1995. From 1972 through 1993, he
had numerous management responsibilities at National Semiconductor Corp., with
his final position being President of the Communication and Computing Group from
1991 through 1993. He received a B.S. in Electrical Engineering from
Pennsylvania State University.

E. THOMAS HART has served as a Director of inSilicon since February 2000.
Since June 1994, Mr. Hart has served as QuickLogic's President and Chief
Executive Officer. Prior to joining QuickLogic, Mr. Hart was Vice President and
General Manager of the Advanced Networks Division at National Semiconductor, a
semiconductor manufacturing company, from September 1992 to June 1994. Prior to
joining National Semiconductor, he was a private consultant with Hart Weston
International, a technology-based management consulting firm, from
February 1986 to September 1992. Mr. Hart holds a B.S. in Electrical Engineering
from the University of Washington.

There are no family relationships among any of our directors or executive
officers.

BOARD COMPOSITION

We currently have five directors, one of whom is an officer of Phoenix, and
one of whom is an officer of inSilicon.

After this offering, our board of directors will be divided into three
classes of directors serving staggered three-year terms. As a result, we will
elect only one class of directors at each annual meeting of our stockholders. We
expect the terms of office of the directors will expire as follows: Mr. Hart at
the annual meeting of stockholders in 2001, Mr. Farnham and Mr. Cantwell at the
annual meeting of stockholders in 2002 and Mr. Sisto and Mr. Harding at the
annual meeting of stockholders in 2003. For at least as long as Phoenix
continues to own more than 50% of our common stock, Phoenix will have the
ability to change the size and composition of our board of directors.

BOARD COMMITTEES

Our board of directors expects to establish two committees: an audit
committee and a compensation committee. The responsibilities of the audit
committee are expected to include recommending to the board of directors the
independent public accountants to conduct the annual audit of our accounts;
reviewing the proposed scope of the audit and approving the audit fees to be

43
<PAGE>
paid; and reviewing the adequacy and effectiveness of our internal auditing,
accounting and financial controls with the independent public accountants and
our financial and accounting staff. The audit committee will be comprised of the
three independent directors. The responsibilities of the compensation committee
are expected to include determining the compensation and benefits of inSilicon
officers, establishing and reviewing general policies relating to the
compensation and benefits of inSilicon officers and employees and administering
the stock option plans. We expect that the compensation committee will be
comprised of Mr. Sisto, Mr. Hart and Mr. Farnham.

The Board may, from time to time, establish other committees.

DIRECTOR COMPENSATION

We will pay to directors who are not officers or employees of inSilicon or
any of its affiliates $1,000 per board meeting and $500 for committee meetings.
We have also granted to each non-employee director options to purchase 20,000
shares of our common stock. Each person who becomes a non-employee director
after the completion of this offering will receive an initial grant of options
to purchase 20,000 shares of our common stock upon appointment or election under
the 2000 stock plan. The 2000 stock plan also provides for annual grants of
7,500 shares of our common stock to each non-employee director. Members of the
audit and compensation committees will also receive an additional 5,000 shares
upon appointment to that committee. We will also reimburse our directors for
reasonable expenses incurred in attending board of directors or committee
meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the expected members of the compensation committee of our board of
directors is or was an officer or employee of inSilicon. None of our executive
officers serves as a member of the board of directors or compensation committee
of any other public company. See "Related Party Transactions" for a description
of transactions between us and entities affiliated with prospective members of
the compensation committee.

BENEFIT PLANS

1999 STOCK OPTION PLAN. Our 1999 stock option plan was adopted by our board
of directors and approved by our stockholder in December 1999. Our 1999 stock
option plan provides for the granting to employees of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code and for the
granting to employees, directors and consultants of nonstatutory stock options.
A total of 2,700,000 shares has been reserved for issuance under the 1999 stock
option plan. As of December 31, 1999, options to purchase an aggregate of
2,348,844 shares of our common stock were outstanding under our 1999 stock
option plan. Our board of directors has determined that no further options will
be granted under the 1999 stock option plan after this offering. The 1999 stock
option plan provides that in the event of our acquisition by another
corporation, each outstanding option may be assumed or substituted for by the
successor corporation. If outstanding options are not assumed or substituted for
in certain acquisitions, they will vest prior to the consummation of the
transaction.

2000 STOCK PLAN. Our 2000 stock plan was adopted by our board of directors
and approved by our stockholder in January 2000. The 2000 stock plan will become
effective when the underwriting agreement for this offering is signed. At that
time, all outstanding options under our 1999 stock option plan will be
administered under the 2000 stock plan but will continue to be governed by their
existing terms.

The 2000 stock plan provides for the discretionary grant of incentive stock
options to employees, including officers and employee directors, and for the
discretionary grant of nonstatutory stock options and stock purchase rights to
employees, directors and consultants. The 2000 stock plan also provides for the
periodic automatic grant to non-employee directors of nonstatutory stock
options.

44
<PAGE>
The total shares of common stock currently reserved for issuance under the
2000 stock plan equals 1,300,000 shares of common stock plus the number of
shares that remain reserved for issuance under the 1999 stock option plan as of
the date the 2000 option plan became effective.

In addition, commencing on the first day of our next fiscal year, shares
will be added to the 2000 stock plan annually equal to the lesser of (a) 5% of
the outstanding shares on the last day of the prior fiscal year and
(b) 2,000,000 shares.

Unless terminated sooner, the 2000 stock plan will terminate automatically
10 years from its effective date.

The administrator of our 2000 stock plan generally has the power to
determine:

- the terms of the options or stock purchase rights granted, including the
exercise price of the option or restricted stock grant;

- the number of shares subject to each option or restricted stock grant;

- the exercisability of each option or stock purchase right; and

- the form of consideration payable upon the exercise of each option or
stock purchase right.

The board is the administrator of the 2000 stock plan's automatic
non-employee director grant program. Under that program, non-employee directors
who first join our board after the date of this prospectus will receive a grant
of an option to purchase 20,000 shares when they become non-employee directors.
In addition, all non-employee directors will receive a grant of an option to
purchase 7,500 shares at each subsequent annual meeting, provided they continue
to serve after such annual meeting. Directors also receive an additional
one-time, automatic grant of an option to purchase 5,000 shares upon appointment
to the audit and compensation committees. These options vest quarterly at a rate
of 6.25% per quarter from the date of grant, provided the director continues to
serve as a director on the vesting date. These options also provide for
accelerated vesting in the event of certain changes of control.

In addition, the board has the authority to amend, suspend or terminate the
2000 stock plan, so long as no such action affects any shares of common stock
previously issued and sold or any option previously granted under the plan. The
maximum number of option shares each optionee may be granted during a fiscal
year is 1,000,000 shares. However, in connection with an optionee's initial
service with us, such optionee may be granted up to a total of 2,000,000 shares
during the initial fiscal year of service. Restricted stock grants are limited
to 200,000 shares in any fiscal year.

Options and restricted stock granted under our 2000 stock plan are generally
not transferable by the optionee, and each option and stock purchase right is
exercisable during the lifetime of the optionee and only by such optionee.
Options granted under the 2000 stock plan must generally be exercised within
three months after the end of optionee's status as an employee, director or
consultant of inSilicon, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term. However, the compensation committee will have the power under
the 2000 stock plan to vary these terms, except for grants under the
non-employee director grant program.

In the case of restricted stock, unless the administrator determines
otherwise, the restricted stock purchase agreement shall grant inSilicon a
repurchase option exercisable after the purchaser's employment or consulting
relationship with inSilicon has ended for any reason, including death or
disability. The purchase price for shares repurchased pursuant to the restricted
stock purchase agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to inSilicon.
The repurchase option shall lapse at a rate determined by the administrator.

45
<PAGE>
The exercise price of all incentive stock options and nonstatutory stock
options granted automatically to non-employee directors must be at least equal
to the fair market value of the common stock on the date of grant. The exercise
price of other nonstatutory stock options and stock purchase rights granted
under the 2000 stock plan is determined by the administrator, but with respect
to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the exercise price must be at least equal to the fair market value of our common
stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of any incentive stock option granted must at
least equal 110% of the fair market value on the grant date and the term of such
incentive stock option must not exceed five years. The term of all other options
granted under the 2000 stock plan may not exceed ten years.

The 2000 stock plan provides that in the event that we are acquired by
another corporation, or sell substantially all of our assets, each option and
stock purchase right may be assumed or an equivalent option substituted for by
the successor corporation. If the outstanding options and stock purchase rights
are not assumed or substituted for by the successor corporation, the option
holder will fully vest in and have the right to exercise the option or stock
purchase right as to all of the optioned stock, including shares as to which the
holder would not otherwise be entitled to exercise.

2000 EMPLOYEE STOCK PURCHASE PLAN. Our 2000 employee stock purchase plan
was adopted by our board of directors and approved by our stockholder in
January 2000. A total of 250,000 shares of our common stock has been reserved
for issuance under the 2000 purchase plan, plus annual increases equal to the
lesser of (a) 0.3125% of the outstanding shares on the last day of the prior
fiscal year and (b) 100,000 shares.

The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains consecutive, overlapping, twenty-four month
offering periods. Each offering period includes four six-month purchase periods.
The offering periods generally start on the first trading day on or after
June 1 and December 1 of each year, except for the first such offering period
which commences on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before May 31, 2000. The board
has the power to change the duration of the offering periods.

Employees of inSilicon or of any participating subsidiaries are eligible to
participate. However, employees may not be granted an option to purchase stock
under the 2000 purchase plan if they either:

- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or

- hold rights to purchase stock under our employee stock purchase plan which
accrue at a rate which exceeds $25,000 worth of stock for each calendar
year.

The 2000 purchase plan permits participants to purchase our common stock
through payroll deductions of up to 10% of their total compensation, including
bonuses and commissions. The maximum number of shares a participant may purchase
during a single purchase period is 10,000 shares.

Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 2000 purchase plan is generally 85% of the lower of the fair
market value of the common stock either at the beginning of the offering period
or at the end of the purchase period.

In the event the fair market value at the end of a purchase period is less
than the fair market value at the beginning of the offering period, the
participants will be withdrawn from the current offering period following
exercise and automatically re-enrolled in a new offering period. Participants

46
<PAGE>
may end their participation at any time during an offering period, and they will
be paid their payroll deductions to date. Participation ends automatically upon
termination of employment with inSilicon.

Rights granted under the 2000 purchase plan are not transferable by a
participant other than upon death or by a special determination by the plan
administrator. Each outstanding option under the 2000 purchase plan will be
subject to the acquisition agreement in the event we merge with or into another
corporation or sell substantially all of our assets.

Our board of directors has the authority to amend or terminate the 2000
purchase plan, except that no such action may adversely affect any outstanding
rights to purchase stock under the 2000 purchase plan, provided that the board
of directors may terminate an offering period on any exercise date if the board
determines that the termination of the 2000 purchase plan is in the best
interests of inSilicon and its stockholders. Notwithstanding anything to the
contrary, the board of directors may in its sole discretion amend the 2000
purchase plan to the extent necessary and desirable to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. Unless earlier terminated by our board of directors, the
2000 purchase plan will terminate automatically ten years from its effective
date.

EXECUTIVE COMPENSATION

The following table summarizes the compensation of inSilicon's Chief
Executive Officer and the other four most highly compensated executive officers
based on employment with Phoenix whose aggregate compensation exceeded $100,000
during the year ended September 30, 1999. We refer to these individuals as the
"named executive officers" elsewhere in this prospectus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY(1) BONUS(1) OPTIONS(2) COMPENSATION(3)
- ------------------------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Wayne C. Cantwell, President and Chief
Executive Officer......................... $199,166 $94,262 66,000 $ 1,000

Barry A. Hoberman, Executive Vice President
and Chief Technical Officer............... 169,125 32,918 25,996 1,000

William E. Meyer, Executive Vice President
and Chief Financial Officer............... 141,667 30,060 75,000 1,000

Anand C. Naidu, Vice President.............. 132,275 17,272 40,000 1,000

Robert G. Nalesnik, Vice President.......... 140,400 19,658 40,000 59,000(4)
</TABLE>

- ----------------

(1) Represents salary and bonus paid by Phoenix to the named executive officers
for their services to Phoenix while employed at Phoenix.

(2) Represents options to purchase Phoenix common stock granted by Phoenix. The
named executive officers have exchanged these Phoenix options for options to
purchase inSilicon common stock at a ratio of 1.862 shares of inSilicon
common stock for each share of Phoenix common stock, except for Mr. Naidu
and Mr. Nalesnik, each of whom did not exchange their options with respect
to 2,500 shares of Phoenix common stock.

(3) Consists of Phoenix's contribution to the individual's 401(k) savings
account while employed at Phoenix.

(4) Includes $58,000 paid in October 1999 that is the first of three annual
installments of a $174,000 retention bonus.

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<PAGE>
FUTURE COMPENSATION

Since January 1, 2000, our officers and other employees of inSilicon have
been compensated by inSilicon. However, through February 2000, they will
continue to participate in Phoenix's 401(k) savings plan, and at least until
January 1, 2002, they will continue to participate in Phoenix's welfare benefit
plans at inSilicon's expense. Phoenix employees who were seconded to inSilicon
in December 1999 had the opportunity to exchange their unexercised options to
purchase Phoenix common stock for new options to acquire inSilicon common stock.
On the date of the exchange, the inSilicon options had the same intrinsic value
and ratio of exercise price to market value of the underlying shares as the
Phoenix options exchanged. They also have equivalent vesting schedules to the
Phoenix options exchanged. For information with respect to the exchange of
options by the named executive officers, see "Related Party Transactions."

OPTION GRANTS

The following table provides summary information regarding options to
purchase Phoenix common stock that were granted by Phoenix to the named
executive officers during the fiscal year ended September 30, 1999.

OPTION GRANTS IN FISCAL YEAR 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF MARKET STOCK PRICE
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR ON DATE OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE OF GRANT EXPIRATION --------------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ----------- ------------- ------------ --------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell...... 35,000(3) 1.1% $ 9.3000 $17.1880 07/01/09 $276,080 $654,410 $1,234,844
Wayne C. Cantwell...... 31,000 1.0 8.5000 8.5000 03/31/09 NA 165,714 419,951
Barry A. Hoberman...... 25,996 0.8 8.5000 8.5000 04/16/09 NA 138,964 352,163
William E. Meyer....... 45,000 1.4 11.1250 11.1250 06/17/09 NA 91,976 233,085
William E. Meyer....... 10,000 0.3 10.8130 10.8130 05/28/09 NA 68,002 172,331
William E. Meyer....... 20,000 0.6 7.3125 7.3125 02/26/09 NA 314,840 797,867
Anand C. Naidu......... 40,000 1.3 11.1875 11.1875 09/30/09 NA 281,430 713,200
Robert G. Nalesnik..... 40,000 1.3 11.1875 11.1875 09/30/09 NA 281,430 713,200
</TABLE>

- ------------------

(1) In the fiscal year 1999, Phoenix granted options to purchase an aggregate of
3,279,370 shares of Phoenix common stock. Unless otherwise stated, options
to purchase shares vest quarterly at the rate of 6.25% per quarter. Options
have a term of ten years but may terminate before their expiration dates if
the optionee's status as an employee is terminated or upon the optionee's
death or disability. Except as set forth in Note 2 to the Summary
Compensation Table, all of these options were exchanged for options to
purchase inSilicon common stock that have substantially the same terms and
conditions.

(2) 0%, 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our or Phoenix's future common stock
prices. The potential realizable values are calculated by assuming the
Exercise or Base Price shown on the table, that the common stock appreciates
at the indicated rate for the entire term of the option and that the option
is exercised at the exercise price and sold on the last day of the option
term at the appreciated price.

(3) 22,500 of these shares were subject to an accelerated vesting schedule,
based upon Mr. Cantwell's achievement of certain quarterly
management-related goals, of which options to purchase 15,000 shares had
vested as of December 31, 1999.

48
<PAGE>
OPTION EXERCISES AND HOLDINGS

The following table provides summary information regarding options to
purchase Phoenix common stock that were exercised by the named executive
officers during the fiscal year ended September 30, 1999 and the number and
value of unexercised in the money Phoenix options held by the named executive
officers at September 30, 1999.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(1)(2) AT FISCAL YEAR-END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell............... -- -- 58,362 86,638 $141,857 $213,442
Barry A. Hoberman............... -- -- 50,064 38,432 16,360 100,233
William E. Meyer................ -- -- 11,813 79,188 11,488 78,132
Anand C. Naidu.................. -- -- -- 40,000 -- --
Robert G. Nalesnik.............. -- -- 20,926 60,924 212,347 212,326
</TABLE>

- ----------------

(1) These options were granted on various dates during fiscal years 1991 through
1999 and generally vest quarterly at the rate of 6.25% per quarter. Except
for an option of Mr. Naidu to purchase 2,500 shares and options of
Mr. Nalesnik to purchase 23,426 shares, all of these options were exchanged
for options to purchase inSilicon common stock.

(2) Stock option exercise prices ranged from $1.0400 per share to $19.8750 per
share.

(3) The amounts in this column reflect the difference between the closing market
price of Phoenix's common stock on September 30, 1999, which was $11.1875,
and the option exercise price.

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

For a table setting forth the number of shares of inSilicon common stock
owned by Phoenix and each of our directors and named executive officers, see
"Principal Stockholder" in this prosepctus.

RELATED TRANSACTIONS WITH PHOENIX

SAND ACQUISITION. On September 24, 1998, Phoenix acquired Sand for
approximately $18.5 million in cash and 464,000 shares of Phoenix common stock.
The Agreement and Plan of Reorganization which governed the acquisition also
provided for contingent payments of up to $3.7 million, based on a formula tied
to the actual net revenues and operating earnings of the Semiconductor IP
Division unit of which Sand became a part. Mr. Naidu was one of the three
majority stockholders of Sand, and as a result of the acquisition, he received
32.73% of the initial consideration. He will also receive the same percentage of
any future contingent payments. Through December 31, 1999, no contingent
payments have been made. Phoenix also assumed Sand's stock options, including
Mr. Nalesnik's Sand stock options which were converted to the right to purchase
41,850 shares of Phoenix common stock.

Also in connection with the acquisition, Sand assigned to Phoenix an
Independent Contractor Agreement, dated March 15, 1996, between Sand and Sand
Microelectronics Pvt. Ltd., India, or Sand India, which allows Phoenix to obtain
consulting services for hardware and software development and related fields of
technical computer expertise from Sand India from time to time. Mr. Naidu owns
approximately one-third of the shares of Sand India. During fiscal year 1999,
Phoenix paid or accrued payments to Sand India of $365,000 for services under
the Independent Contractor Agreement.

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The Agreement and Plan of Reorganization also required Mr. Naidu and the
other majority stockholders of Sand to enter into worldwide non-compete
agreements which are effective for three years after the acquisition regardless
of the status of their employment with Phoenix. Each non-compete agreement
provides that these individuals will not compete with Phoenix in the business
area in which Sand was engaged, including semiconductor intellectual property
and models and test environments based on interconnect standards.

In addition, as an incentive to encourage long-term service from certain
Sand personnel who remained in Phoenix's employ after the acquisition, Phoenix
established a retention bonus program. Under this program, Mr. Nalesnik is
entitled to receive up to $174,000 in three equal annual installments commencing
in fiscal year 1999 if he remains an employee of Phoenix. Phoenix paid
Mr. Nalesnik $58,000 as a retention bonus under this program related to fiscal
year 1999.

Phoenix has assigned the Agreement and Plan of Reorganization, the
Independent Contractor Agreement with Sand India, the non-compete agreements and
the retention bonus program agreements to inSilicon.

TECHNOLOGY LICENSE AGREEMENTS WITH HI/FN. Mr. Farnham, who is a director of
inSilicon, is chairman of the board of directors, president and chief executive
officer of hi/fn. Mr. Sisto, president and the chairman of the board of
directors of Phoenix and a director of inSilicon, is a director of hi/fn. During
fiscal years 1998 and 1999, Phoenix licensed to hi/fn PCI cores for $59,250 and
$89,750, respectively. This license agreement has been assigned to inSilicon.

INCENTIVE AND SEVERANCE AGREEMENT WITH MR. CANTWELL. In July 1999, Phoenix
entered into an Incentive and Severance Agreement with Mr. Cantwell. This
agreement provided an initial base compensation of $200,000 plus bonus and
benefits. In addition, the agreement provided that as a retention and
performance incentive, Phoenix grant to Mr. Cantwell a non-qualified option to
purchase 22,500 shares of Phoenix common stock at an exercise price of $9.30 per
share, vesting in three quarterly installments upon the fulfillment of various
objectives of which options to purchase 15,000 shares of Phoenix common stock
have vested. It also granted him options to purchase 12,500 shares of Phoenix
common stock at $9.30 per share that will immediately vest if Phoenix's
Semiconductor IP Division is no longer majority owned by Phoenix. On the date of
these grants, the market price of Phoenix common stock was $17.1875 per share.
If Mr. Cantwell's employment is terminated other than for cause or in a
constructive termination, the agreement also provides severance payments,
including continued salary for 12 months with continued option vesting during
such period. Benefits include participation in executive compensation programs
and company paid post-termination health insurance. This agreement has been
replaced with an agreement between Mr. Cantwell and inSilicon. See "Related
Party Transactions--Severance Agreements with inSilicon Named Executive
Officers."

ARRANGEMENTS BETWEEN INSILICON CORPORATION AND PHOENIX TECHNOLOGIES LTD.

We also have entered into various agreements with Phoenix including:

- a Contribution Agreement;

- an Initial Public Offering Agreement;

- a Services and Cost-Sharing Agreement;

- an Employee Matters Agreement;

- a Tax-Sharing Agreement;

- a Registration Rights Agreement; and

- a Technology Distributor Agreement.

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This description summarizes the material terms of these agreements. You
should read the full text of these agreements, which have been filed with the
Securities and Exchange Commission as exhibits to the registration statement of
which this prospectus is a part.

After this offering, any amendments to these agreements must be approved by
a majority of our independent directors.

CONTRIBUTION AGREEMENT

The separation was completed effective as of November 30, 1999. The
Contribution Agreement governs the terms of the transfer to us of assets and
liabilities from Phoenix. Some aspects of the contribution are also clarified in
the other agreements mentioned above. To the extent that the terms of any other
agreements conflict with the Contribution Agreement, the terms of the other
agreements govern.

Pursuant to the Contribution Agreement, Phoenix transferred to us ownership
of specified intellectual property and technology related to and necessary for
inSilicon to conduct its business, as well as customer and supplier contracts
related primarily to the SIP business.

The Contribution Agreement generally identifies the assets Phoenix
transferred to us and the liabilities we assumed from Phoenix in the separation.
The agreement also describes when and how these transfers and assumptions
occurred. The net book value of the assets transferred and the liabilities
assumed under this agreement was approximately $14.5 million.

ASSET TRANSFER. Effective on the separation date, Phoenix transferred
ownership of the following assets to us, subject to any exceptions expressly set
forth in an ancillary agreement:

- all assets reflected on our balance sheet as of September 30, 1999;

- all written-off, expensed or fully depreciated assets that would have
appeared on our balance sheet as of September 30, 1999 if we had not
written-off, expensed or fully depreciated them;

- all assets that Phoenix acquired after September 30, 1999 that would have
appeared in our financial statements as of the separation date if we
prepared these financial statements using the same principles we used in
preparing our balance sheet dated September 30, 1999;

- all assets used primarily by our business as of the separation date, but
are not reflected in our balance sheet as of September 30, 1999 due to
mistake or omission;

- intangible assets, including but not limited to, the following: (i) all
intellectual property assets such as copyrights, patents, patent
applications pending and in draft, trademarks, domain names, invention
disclosures, developed and developing technology, including ideas,
inventions, concepts currently in progress related to the SIP business;
and (ii) technology, software and know-how related to the current SIP
business and business plans;

- all supply, vendor, capital, equipment lease, software or technology
licenses, memberships in industry associations, or other contracts that
relate primarily to our business, including contracts representing
obligations reflected on our balance sheet as of September 30, 1999, and
all similar contracts obtained by Phoenix after that date;

- all computer-related assets used primarily by employees of Phoenix who
will become our employees due to the separation;

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- copies of, and the right to use, all corporate license agreement forms and
templates used in the in the licensing and evaluation of the SIP products;
and

- a credit for administrative services and allocated costs for the month of
December 1999 of $550,000.

ASSUMPTION OF LIABILITIES. Effective on the separation date, we assumed the
following liabilities from Phoenix, except as provided in an ancillary agreement
or other agreement:

- all liabilities reflected as liabilities on our balance sheet as of
September 30, 1999, less any liabilities that were discharged after the
date of the balance sheet;

- all liabilities of Phoenix arising after September 30, 1999, that would
have appeared in our financial statements as of the separation date if we
prepared these financial statements using the same principles we used in
preparing our balance sheet as of September 30, 1999;

- all liabilities that are primarily related to or primarily arise out of
our business but are not reflected in our balance sheet as of
September 30, 1999 due to mistake or omission; and

- all liabilities, other than income taxes, primarily resulting from the
operation of our business or resulting from any asset that Phoenix
transferred to us, including the contingent payment and other obligations
of Phoenix related to the acquisition of Sand.

EQUITY TO PHOENIX. For its contribution, we issued to Phoenix 10,400,000
shares of our Series A Preferred Stock, which converts to an equal number of
shares of our common stock at the completion of this offering. We also issued to
Phoenix a warrant to purchase 50,000 shares of our common stock at $.01 per
share, exercisable at any time until May 31, 2002.

BRIDGE LOAN FACILITY. Upon our written request, Phoenix will loan us any
funds necessary to fund our operations until the completion of this offering.
Such loan shall bear interest at a rate of 8.0% per annum and shall be repaid
from the proceeds of this offering.

OBTAINING APPROVALS AND CONSENTS. The parties agree to use all reasonable
efforts domestically and their best efforts internationally to obtain any
required consents, substitutions or amendments required to novate or assign all
rights and obligations under any contracts transferred in the separation.

DELAYED TRANSFERS. If it is not practicable to transfer specified assets
and liabilities on the separation date, the agreement provides that these assets
and liabilities will be transferred as promptly as possible after the separation
date. Pending receipt of any required consent or other action necessary to make
a transfer, Phoenix will hold the asset for the use and benefit of inSilicon or
the liability for the account of inSilicon and take all commercially reasonable
actions that inSilicon requests to place inSilicon in the same position as if
the transfer had occurred.

NO REPRESENTATIONS AND WARRANTIES. In general, Phoenix has provided no
representations or warranties with respect to the assets transferred, except
with respect to certain intellectual property developed by Phoenix outside of
the SIP division.

EXPENSES. We will reimburse Phoenix for its reasonable and actual third
party expenses incurred in connection with the separation.

TERMS OF OTHER AGREEMENTS GOVERN. To the extent that another agreement
expressly provides for the transfer of an asset or an assumption of a liability,
the terms of that other agreement will determine the manner of the transfer and
assumption.

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THE INITIAL PUBLIC OFFERING AGREEMENT

The Initial Public Offering Agreement governs the relationship between us
and Phoenix following this offering in a number of respects including without
limitation, the following:

INFORMATION EXCHANGE. Both Phoenix and we have agreed to share information
with each other, at no cost to the requesting party, unless the information is
confidential and the sharing would be commercially detrimental to us or contrary
to any contract term:

- Each party has agreed to maintain adequate internal accounting to allow
the other party to satisfy its own reporting obligations and prepare its
own financial statements.

- Each party will retain records that may be beneficial to the other party
for a specified period of time. If the records are going to be destroyed,
the destroying party will give the other party an opportunity to retrieve
all relevant information from the records.

- Each party will do its best to provide the other party with personnel,
directors, officers or agents who may be used as witnesses in legal
proceedings.

AUDITING PRACTICES. So long as Phoenix is required to consolidate our
results of operations and financial position, we have agreed to:

- not change independent accounting firms without Phoenix's consent, which
shall not unreasonably be withheld;

- use reasonable commercial efforts to generate quarterly financial
statements that have been reviewed by our independent accountants on a
timely basis following such fiscal quarter-end;

- use reasonable commercial efforts to cause our independent accountants to
date their opinion on our audited annual financial statements on the same
date as Phoenix's auditors date their opinion on Phoenix's financial
statements;

- provide Phoenix all relevant information to enable Phoenix to prepare
their financial statements (and Phoenix has agreed to provide us all
relevant information to enable us to prepare our financial statements);

- grant each other's internal accountants access to our relevant records;
and

- notify each other of any change in accounting principles.

DISPUTE RESOLUTION. If problems arise between us and Phoenix, we have
agreed to the following procedures:

- The parties will make a good faith effort to first resolve the dispute
through negotiation.

- If negotiations fail, the parties agree to attempt to resolve the dispute
through non-binding mediation. The selection of the mediator shall be
mutually agreed upon.

- If mediation fails, the parties can resort to litigation. In addition,
nothing prevents either party acting in good faith from initiating
litigation at any time if failure to do so would substantially
disadvantage the party.

NO SOLICITATION. Both parties have agreed not to directly recruit employees
of the other party for a period of one year after the separation date if the
recruiting would be damaging to the other party. However, general advertising
and employee-initiated solicitations are permissible.

NONCOMPETITION. Each of Phoenix and inSilicon has agreed not to engage in
any business conducted by the other as of the separation date for a period
ending at the earliest of (a) five years from the separation date, (b) the date
Phoenix no longer owns at least 10% of our outstanding voting

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securities and (c) the date the other ceases to engage in that business. Should
either we or Phoenix experience a change of control, the other agrees it will
not unreasonably withhold its waiver of this agreement not to compete upon the
request of the party undergoing the change of control. Refusal to waive the
agreement not to compete is deemed to be reasonable if the person acquiring
control competes with the party from which waiver is sought.

STANDSTILL. So long as it retains ownership of at least 50% of our
outstanding voting securities, Phoenix has agreed not to purchase more than 2%
of our then-outstanding shares of common stock on the open market during any
12-month period.

COSTS AND EXPENSES. The Initial Public Offering Agreement provides that we
will pay all of the third-party expenses related to the offering of our common
stock other than as provided in the Services and Cost-Sharing Agreement. After
the completion of the offering, any costs and expenses that are not allocated in
the Services and Cost-Sharing Agreement or any other agreement between Phoenix
and us shall be the responsibility of the party that incurs the costs and
expenses.

CONFIDENTIALITY. Both parties agree not to disclose confidential
information of the other party except in specific circumstances.

GENERAL RELEASE OF PRE-SEPARATION CLAIMS. Effective as of the separation
date, we have released Phoenix and its affiliates, agents, successors and
assigns, and Phoenix has released us, and our affiliates, agents, successors and
assigns, from any liabilities arising from events occurring on or before the
separation date, including events occurring in connection with the activities to
implement the separation and the initial public offering. This provision will
not impair a party from enforcing the Contribution Agreement, any other
agreement between Phoenix and inSilicon, or any arrangement specified in any of
these other agreements.

INDEMNIFICATION. In general, we have agreed to indemnify Phoenix and its
affiliates, agents, successors and assigns from all liabilities arising from:

- our business, any of our liabilities or any of our contracts; and

- any breach by us of the Contribution Agreement or any other agreement
between the parties.

Phoenix has agreed to indemnify us and our affiliates, agents, successors
and assigns from all liabilities arising from:

- Phoenix's business other than the businesses transferred to us pursuant to
the separation; and

- any breach by Phoenix of the Contribution Agreement or any other agreement
between the parties.

The indemnifying party will make all indemnification payments net of
insurance proceeds that the indemnified party receives. The agreement also
contains provisions governing notice and indemnification procedures.

DISCLOSURE LIABILITIES. We have agreed to bear any liability arising from
any untrue statement of a material fact or any omission of a material fact in
this prospectus, other than matters pertaining solely to Phoenix, which shall be
borne solely by Phoenix.

INSURANCE MATTERS. The agreement also contains provisions governing our
insurance coverage from the separation date. Phoenix will generally act as
insurance administrator and claims administrator for Phoenix insurance policies
under which we are or have been insured; provided, however, no settlements
involving us shall be made without our consent and all awards regarding us shall
be promptly paid to us. We will fund a pro rata portion of the Phoenix insurance
costs under the Services and Cost-Sharing

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Agreement and will be entitled to receive the proceeds, if any, from insured
claims under these policies and applicable prior policies, after the applicable
deductible or retention.

ASSIGNMENT. The Initial Public Offering Agreement is not assignable by
either party without the prior written consent of the other, except in
connection with a merger or a sale of significant assets, in which event the
agreement must be assumed by the surviving party.

SERVICES AND COST-SHARING AGREEMENT

We have also entered into a Services and Cost-Sharing Agreement with
Phoenix. This agreement covers various services that Phoenix provides and the
method by which certain costs will be shared by the companies. The services
include data processing, telecommunications and information technology support
services, accounting, financial management, tax preparation, payroll,
stockholder and public relations, legal, human resources administration,
procurement, real estate management and other administrative functions. The
shared costs include the costs of the office space we occupy at Phoenix's
headquarters and insurance premiums.

The amount we will pay for services and shared costs will generally be equal
to the aggregate cost to Phoenix and inSilicon of the services and costs
multiplied by a percentage representing the number of our employees to the total
number of Phoenix and inSilicon employees. The Services and Cost-Sharing
Agreement will have an initial term that extends to June 30, 2000 for all
services other than accounting and an initial term that extends to
September 30, 2000 with respect to accounting services. The Services and
Cost-Sharing Agreement will be renewed on a month-to-month basis. Phoenix can
terminate after those dates on 30 days' written notice. We can terminate any one
or more of the services at any time on 30 days' written notice.

EMPLOYEE MATTERS AGREEMENT

We have entered into an Employee Matters Agreement with Phoenix to allocate
assets, liabilities, and responsibilities relating to current and former United
States employees of inSilicon Corporation and their participation in the benefit
plans, including stock plans, that Phoenix currently sponsors and maintains.

In general, separate agreements will address similar issues relating to
foreign employment and benefit matters.

Until the separation date, United States employees provided services to
inSilicon as employees of Phoenix. After the separation date, such employees
remained on the Phoenix payroll and provided services to inSilicon on a seconded
basis through December 31, 1999. Certain employees with pending visa
applications are being seconded for a longer period.

All eligible United States inSilicon employees will continue to participate
in the Phoenix benefit plans on comparable terms and conditions to those for
Phoenix employees until we establish comparable benefit plans for our current
and former employees. Once we establish our own corresponding benefit plan, we
may modify or terminate that plan in accordance with the terms of that plan and
our policies. inSilicon benefit plans generally will not provide benefits that
overlap benefits under the corresponding Phoenix benefit plan at the time of the
offering. Each inSilicon benefit plan will provide that all service,
compensation and other benefit determinations that, as of the offering, were
recognized under the corresponding Phoenix benefit plan will be taken into
account under that inSilicon benefit plan.

Each inSilicon benefit plan will assume any liabilities under the
corresponding Phoenix benefit plan for inSilicon employees. Assets relating to
the employee liabilities will also be transferred to inSilicon or the related
inSilicon plans and trusts from trusts and other funding vehicles associated
with Phoenix's benefit plans. However, with respect to the 401(k) retirement
plans, the companies may agree

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that assets and liabilities will be transferred by way of employer-mandated
transfer, employee voluntary transfer, employee elective rollover or a
combination thereof.

OPTIONS. Persons providing us services on December 21, 1999 had the ability
to have their Phoenix options exchanged for inSilicon stock options with the
same intrinsic value. The number of shares and the exercise price of Phoenix
options that were exchanged for inSilicon options were adjusted using a formula
based upon the relative fair market values of the two companies' stock on the
date of exchange. Each of the resulting inSilicon options maintains the original
vesting provisions and option period.

STOCK PURCHASE PLAN. We anticipate that inSilicon employees will continue
to participate in the Phoenix stock purchase plan through the end of May 2000.
Immediately following the completion of this offering, inSilicon employees may
begin participating in our 2000 stock purchase plan.

TAX-SHARING AGREEMENT

We have entered into a Tax-Sharing Agreement with Phoenix concerning each
party's obligations for various tax liabilities. The Tax-Sharing Agreement
provides that Phoenix generally will pay all federal, state, local and foreign
taxes relating to our business before November 30, 1999. For any taxable period
after that date in which we are included in a Phoenix consolidated or combined
tax return, the agreement provides that we will make payments to Phoenix based
upon the amount of U.S. federal and state income taxes that would have been paid
by us had we and each of our subsidiaries filed our own federal and state income
tax returns, subject to specific adjustments. Further, if we incur losses on
either a federal or state basis that reduce Phoenix's consolidated or combined
tax liability, Phoenix will pay us an amount equal to the tax savings generated
by our losses.

The net losses we incurred for all periods through November 30, 1999 are
attributable to our operations as a division of Phoenix and were included in
income tax returns filed by Phoenix. Because we will not receive any benefit for
our historical operating losses incurred through November 30, 1999, no income
tax benefit has been reflected for the periods presented.

Each member of a consolidated group for U.S. federal income tax purposes is
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax-Sharing Agreement
allocates tax liabilities between Phoenix and us for any period in which we were
included in Phoenix's consolidated group, we could be liable in the event that
any federal tax liability was incurred, but not discharged, by any other member
of the group. Phoenix has agreed to indemnify us for any tax liability allocated
to Phoenix under the Tax-Sharing Agreement, and we have provided a similar
indemnity to Phoenix.

The Tax-Sharing Agreement further provides for cooperation with respect to
tax matters, the exchange of information and the retention of records which may
affect the income tax liability of either party.

REGISTRATION RIGHTS AGREEMENT

The Registration Rights Agreement provides that, at Phoenix's request, we
will use our best efforts to register for sale under federal and state
securities laws any shares of inSilicon common stock (or any other securities
Phoenix receives in exchange for inSilicon common stock) that Phoenix owns,
subject to specified limitations. Phoenix also will have the right to include
its inSilicon shares in other registrations of our common stock initiated by us.
In the first registration in which Phoenix participates after this offering,
following waiver or expiration of the lockup, we will be entitled to sell at
least 40% of the shares of the total offering if we so desire, and in all
registrations thereafter, 50% of the shares; provided that if the first
following registration involves a total of $50 million or less, we shall be
entitled to sell at least 50% of the shares of the total offering.

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So long as Phoenix owns 50% or more of our common stock, Phoenix may request
or participate in an unlimited number of registrations. Once it owns less than
50%, Phoenix will be limited to a total of four demand and an unlimited number
of "piggyback" registrations, provided that it is not entitled to more than two
demand registrations in any 12-month period. Phoenix must request registration
of a minimum of $25 million of shares in any demand registration. Subject to
specified limitations, Phoenix may assign these registration rights. The
Registration Rights Agreement also will require us to indemnify Phoenix, the
underwriters and others in connection with these registrations.

Phoenix will pay its pro rata share (according to the percentage of shares
sold for its account) of expenses relating to any registration in which it
participates, and Phoenix will pay all of the underwriting discounts and
commissions attributable to the shares Phoenix sells.

TECHNOLOGY DISTRIBUTOR AGREEMENT

We have entered into arrangements with Phoenix to act as our sales
representative and distributor of our firmware products in Japan and our full
line of products in the rest of Asia. Phoenix will promote the licensing of
inSilicon's firmware or other products, as applicable, identify prospective
customers, and solicit orders from prospective, as well as current, customers on
behalf of inSilicon. The agreement also provides Phoenix a nonexclusive license
for our firmware products that will allow it to perform customization, or
non-recurring engineering work, to the firmware in accordance with customer
specified requirements. Phoenix will provide all the customer support
obligations in Japan for the firmware and the firmware customization it
develops. We will pay Phoenix a commission of 20% of the net licensing and/or
royalty revenue specified under each license; and 80% of the net revenues for
customization and non-recurring engineering work. We believe that the terms of
this agreement are no less favorable than we would have obtained from an
unaffiliated third party.

RELATED PARTY TRANSACTIONS

Other than the transactions described in "Arrangements Between inSilicon
Corporation and Phoenix Technologies Ltd.," there has not been any transaction
or series of similar transactions since our inception to which we were or are a
party in which the amount involved exceeded or exceeds $60,000 and in which any
director, executive officer, holder of more than 5% of any class of our voting
securities or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest, other than the
transactions described below.

OPTIONS TO NAMED EXECUTIVE OFFICERS AND DIRECTORS OF INSILICON. On
December 21, 1999, the named executive officers exchanged all or a portion of
their Phoenix options for options to purchase the following amounts of inSilicon
common stock based upon the exchange ratio of 1.862 options to purchase
inSilicon shares for each option to purchase Phoenix shares: Mr. Cantwell,
269,991 shares; Mr. Hoberman, 164,780 shares; Mr. Meyer, 169,443 shares;
Mr. Naidu, 69,825 shares; and Mr. Nalesnik, 108,786 shares. The exchange ratio
was determined based upon the relative fair values of Phoenix and inSilicon
common stock on the date of exchange. Therefore, on the date of the exchange,
the inSilicon options had the same intrinsic value and ratio of exercise price
to market value of the underlying shares as the Phoenix options exchanged. They
also have equivalent vesting schedules to the Phoenix options exchanged. In
addition, we granted the following named executive officers and directors
options to purchase additional inSilicon shares at a purchase price of $7.36 per
share, in the following amounts: Mr. Cantwell, 205,009 shares; Mr. Hoberman,
30,220 shares; Mr. Meyer, 60,000 shares; Mr. Naidu, 50,520 shares;
Mr. Nalesnik, 10,000 shares; Mr. Sisto, 20,000 shares; Mr. Farnham, 20,000
shares; and Mr. Hart, 20,000 shares. We later granted Mr. Harding an option to
purchase 20,000 inSilicon shares at a purchase price of $7.75 per share.

OPTIONS TO CONSULTANTS WHO ARE EMPLOYEES OF PHOENIX. On December 21, 1999,
we also granted options to purchase 50,000 shares of inSilicon common stock at
an exercise price of $7.36 per share to certain consultants of inSilicon, some
of whom are also employees of Phoenix.

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SEVERANCE AGREEMENTS WITH INSILICON NAMED EXECUTIVE OFFICERS. We have
entered into severance agreements with certain of our officers, including all of
our named executive officers other than Mr. Naidu. The severance agreements
provide for initial levels of base compensation, bonus, and benefits. The
initial base levels of compensation are as follows: Mr. Cantwell, $200,000;
Mr. Hoberman, $173,250; Mr. Meyer, $173,250; and Mr. Nalesnik, $160,000. The
agreements also provide for the continued payment of salary for 12 months (in
the case of Mr. Cantwell, Mr. Hoberman and Mr. Meyer) and six months (in the
case of the other officers) with continued option vesting during such period,
and a prorated portion of the executive's target bonus if the executive's
employment is terminated for reasons other than for cause or constructive
termination. Mr. Cantwell's and Mr. Meyer's agreements also provide for the full
vesting of all unvested options within 90 days of a change in control. Benefits
provided under the severance agreements include participation in an executive
bonus plan and company-paid post-termination health insurance.

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PRINCIPAL STOCKHOLDER

Until this offering, Phoenix will own all of our outstanding shares of
common stock. Phoenix has previously conducted inSilicon's business through
Phoenix. As a division of Phoenix, inSilicon has historically utilized Phoenix's
cash management and certain other services. See Note 2 of Notes to Consolidated
Financial Statements of inSilicon. For a description of certain agreements we
entered into with Phoenix in connection with our separation from Phoenix and
this offering, see "Arrangements Between inSilicon Corporation and Phoenix
Technologies Ltd."

Phoenix Technologies Ltd. is a global leader in system-enabling software
solutions for PCs and connected devices. In addition to inSilicon, Phoenix has
two other operating divisions. One division focuses on platform-enabling
software providing critical functionality that links the hardware and operating
systems of tens of millions of PCs, embedded systems and information appliances
sold annually. The other is a recently launched Internet business to deliver new
value propositions to original equipment manufacturers, channel partners and end
users of connected PCs and other devices. The principal executive offices of
Phoenix are located at 411 East Plumeria Drive, San Jose, California 95134.

The following table sets forth certain information with respect to the
beneficial holders of inSilicon's common stock as of February 1, 2000, and as
adjusted to reflect the sale of the common stock being offered by this
prospectus, for each of inSilicon's directors and named executive officers, for
each holder of 5% or more of inSilicon's common stock and for all of inSilicon's
officers and directors as a group. The beneficial owners named in the table have
sole voting and investing power with respect to all shares of common stock shown
as beneficially owned by them, subject to community property laws, where
applicable. All shares beneficially owned by our executive officers and
directors are shares issuable upon the exercise of stock options exercisable
within 60 days of February 1, 2000.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING AFTER THE OFFERING
---------------------------- ----------------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT(1) NUMBER PERCENT(1)
- --------------------------------------- -------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Phoenix Technologies Ltd............... 10,400,010 100% 10,400,010 74.8%
Wayne C. Cantwell...................... 150,862 1.4% 150,862 1.1%
Barry O. Hoberman...................... 108,721 1.0% 108,721 *
William E. Meyer....................... 43,176 * 43,176 *
Anand C. Naidu......................... 7,813 * 7,813 *
Robert G. Nalesnik..................... 5,280 * 5,280 *
Albert E. Sisto........................ 1,250 * 1,250 *
Raymond J. Farnham..................... 1,250 * 1,250 *
John R. Harding........................ 0 * 0 *
E. Thomas Hart......................... 1,250 * 1,250 *
All executive officers and directors as
a group (10 persons)................. 333,244 3.1% 333,244 2.3%
</TABLE>

- ------------------------

* Less than 1%.

59
<PAGE>
DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, we will be authorized to issue
100,000,000 shares of common stock, $.001 par value per share, and 15,000,000
shares of undesignated preferred stock, $.001 par value per share.

COMMON STOCK

Assuming the conversion of our Series A Preferred Stock to common stock, as
of December 31, 1999, there were 10,400,010 shares of common stock outstanding.
Options to purchase 2,348,844 shares of common stock were also outstanding.
There will be 13,900,010 shares of common stock outstanding (assuming no
exercise of the underwriters' overallotment option or exercise of outstanding
options), after giving effect to the sale of the shares offered by this
prospectus.

The holders of our common stock will be entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders, including
elections of directors. Subject to preferences that may be applicable to any
outstanding preferred stock, holders of common stock are entitled to receive
ratably any dividends declared by our board of directors out of funds legally
available for that purpose. See "Dividend Policy." In the event of our
liquidation, dissolution or winding up, the holders of our common stock will be
entitled to share ratably in all assets remaining after payment of liabilities,
subject to the prior distribution rights of any outstanding preferred stock. Our
common stock has no preemptive or conversion rights or other subscription
rights. The outstanding shares of our common stock are, and the shares of common
stock to be issued upon completion of this offering will be, fully paid and
non-assessable.

PREFERRED STOCK

Upon the completion of this offering, our board of directors will have the
authority, without further action by our stockholders, to issue up to 15,000,000
shares of preferred stock, $.001 par value, in one or more series. Our board of
directors also will have the authority to designate the rights, preferences,
privileges and restrictions of each series, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series.

Issuances of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and for other corporate purposes, may have
the effect of delaying, deferring or preventing a change in control of inSilicon
without further action by the stockholders. The issuance of preferred stock with
voting and conversion rights may also adversely affect the voting power of the
holders of common stock. In certain circumstances, an issuance of preferred
stock could have the effect of decreasing the market price of our common stock.
All outstanding shares of preferred stock will be converted to common stock upon
the completion of this offering and we currently have no plans to issue any
other shares of preferred stock.

COMMON STOCK WARRANT

We have issued to Phoenix a warrant to purchase 50,000 shares of our common
stock for $0.01 per share, immediately exercisable in whole or in part at any
time until May 31, 2002. The exercise price and number of shares of common stock
issuable upon the exercise of the warrant may be adjusted upon the occurrence of
certain events, including stock splits, stock dividends, reorganization,
recapitalization, merger, or sale of all or substantially all of our assets.

DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS

Provisions of Delaware law and our charter documents could have an
anti-takeover effort and may delay, discourage or prevent a tender offer or
takeover attempt that a stockholder might consider to be

60
<PAGE>
in its best interests, including attempts that might result in a premium being
paid over the market price of our common stock.

SECTION 203. inSilicon is subject to the provisions of Section 203 of the
Delaware law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless, subject to exceptions, the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years prior, did own, 15% or more of the corporation's voting
stock. These provisions may have the effect of delaying, deferring or preventing
a change in control of inSilicon without further action by the stockholders.

BOARD OF DIRECTORS. Our Restated Certificate of Incorporation will provide
that, subject to any rights of holders of preferred stock to elect additional
directors under specified circumstances, the number of directors will be fixed
from time to time exclusively by resolution of the board of directors. The
directors, other than those who may be elected by the holders of preferred
stock, will be divided into three classes, as nearly equal in number as
possible. Each director will hold office until such person's successor is duly
elected and qualified. In addition, subject to any rights of holders of
preferred stock, newly created directorships resulting from any increase in the
number of directors and any vacancies on the board of directors resulting from
death, resignation, disqualification, removal or other cause will be filled by
the affirmative vote of a majority of the remaining directors then in office,
even if less than a quorum, and not by the stockholders. No decrease in the
number of directors constituting the board of directors will shorten the term of
any incumbent director. Subject to the rights of holders of preferred stock,
generally any director may be removed from office only for cause by the
affirmative vote of the holders of at least a majority of our outstanding common
stock. Until Phoenix and its affiliates no longer own at least a majority of our
outstanding common stock, however, the holders of at least a majority of our
common stock may remove any director, with or without cause.

These provisions would preclude a third-party from removing incumbent
directors and simultaneously gaining control of our board of directors by
filling the vacancies created by removal with its own nominees. Under the
classified board provision described above, it would take at least two elections
of directors for any individual or group to gain control of our board of
directors. Accordingly, these provisions could discourage a third party from
initiating a proxy contest, making a tender offer or otherwise attempting to
gain control of inSilicon.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. Our Restated
Certificate of Incorporation will provide that once Phoenix and its affiliates
no longer own at least a majority of our outstanding common stock, stockholders
may only take action at a duly called annual or special meeting and not by
written consent. At the same time, stockholders will no longer be able to call
special meetings; special meetings of stockholders may be called only by the
chairman of the board or the president or by any officer at the request in
writing of a majority of the directors. These provisions may delay consideration
of a stockholder proposal until the next annual meeting unless a special meeting
is called by our board of directors or certain specified officers.

ADVANCE NOTICE PROCEDURES. Our By-laws will provide for an advance notice
procedure for the nomination, other than by or at the direction of our board of
directors, of candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of stockholders. The
advance notice procedures will not apply to Phoenix and its affiliates so long
as they own at least a majority of our outstanding common stock.

61
<PAGE>
CHARTER AMENDMENTS. Our Restated Certificate of Incorporation will provide
that the affirmative vote of the holders of at least 80% of our outstanding
common stock is required to amend, repeal or adopt any provision inconsistent
with the foregoing provisions of the Restated Certificate of Incorporation. The
Restated Certificate of Incorporation will also provide that the By-laws may be
altered, amended or repealed by the affirmative vote of directors constituting
not less than a majority of the entire board of directors (if effected by action
of the board of directors) or by the affirmative vote of the holders of at least
80% of the voting power of all classes of outstanding capital stock, voting
together as a single class (if effected by action of the stockholders).

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

As permitted by the Delaware General Corporation Law, we have included a
provision in our Restated Certificate of Incorporation to eliminate the personal
liability of our officers and directors for monetary damages for breach or
alleged breach of their fiduciary duties as officers or directors, other than in
cases of fraud or other willful misconduct. In addition, our By-laws provide
that we are required to indemnify our officers and directors even when
indemnification would otherwise be discretionary, and we are required to advance
expenses to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. We have entered into
indemnification agreements with our officers and directors containing provisions
that are in some respects broader than the specific indemnification provisions
contained in the Delaware General Corporation Law. The indemnification
agreements require us to indemnify our officers and directors against
liabilities that may arise by reason of their status or service as officers and
directors and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.

At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of inSilicon in
which indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the common stock is EquiServe Trust
Company. The Transfer Agent's address and telephone number is P.O. Box 2533,
Jersey City, N.J. 07303; (201) 222-5610.

62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

After completion of this offering, inSilicon will have outstanding
13,900,010 shares of common stock. Of these shares, the 3,500,000 shares sold in
this offering (plus any shares issued upon exercise of the underwriters'
over-allotment option) will be freely tradable without restriction under the
Securities Act, unless purchased by "affiliates" of inSilicon.

All of the inSilicon shares owned by Phoenix after this offering will not
have been registered under the Securities Act of 1933 and may not be sold in the
absence of an effective registration statement under the Securities Act, other
than in accordance with Rule 144 or another exemption from registration. Phoenix
has certain rights to require inSilicon to register its inSilicon shares, which
rights may be assigned. See "Arrangements Between inSilicon Corporation and
Phoenix Technologies Ltd."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to sell in any
three-month period a number of shares that does not exceed the greater of 1% of
the number of shares of our common stock then outstanding (which will equal
approximately 139,000 shares immediately after this offering) or the average
weekly trading volume of our common stock during the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about inSilicon.

Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that market sales of
outstanding shares of inSilicon common stock owned by Phoenix, or the
availability of such shares for sale, will have on the market price of our
common stock prevailing from time to time. Nevertheless, sales of substantial
amounts of our common stock owned by Phoenix in the public market, or the
perception that such sales could occur, could reduce the prevailing market price
of our common stock. Although Phoenix may in the future effect or direct sales
or other dispositions of common stock that would reduce its ownership interest
in inSilicon, Phoenix has advised us that it currently intends to continue to
hold all of its inSilicon common stock following this offering. However, Phoenix
is not subject to any contractual obligation to retain its controlling interest,
except that it has agreed not to sell or otherwise dispose of any shares of
inSilicon common stock for a period of 365 days after the date of this
Prospectus without the prior written consent of FleetBoston Robertson Stephens
Inc. As a result, we cannot be sure how long Phoenix will maintain its ownership
of inSilicon common stock after this offering.

63
<PAGE>
UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Prudential Securities Incorporated and
Needham & Company, Inc. have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of our common stock indicated opposite their names below. The
underwriters are committed to purchase and pay for all these shares if any are
purchased.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
- ----------------- ----------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Prudential Securities Incorporated..........................
Needham & Company, Inc......................................
</TABLE>

<TABLE>
<CAPTION>
INTERNATONAL UNDERWRITERS
- -------------------------
<S> <C>
FleetBoston Robertson Stephens International Limited........
Prudential Securities Incorporated..........................
Needham & Company, Inc......................................
----------

Total..................................................... 3,500,000
==========
</TABLE>

We have been advised that the underwriters propose to offer the shares of
our common stock to the public at the initial public offering price located on
the cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be reallowed to
other dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
reduction will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus. Our common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. The underwriters
do not intend to confirm sales to any accounts over which they exercise
discretionary authority.

OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 525,000 additional shares of our common stock at the same price
per share as we will receive for the 3,500,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of additional shares that the number of shares of our common
stock to be purchased by it shown in the above table represents as a percentage
of the shares offered by this prospectus. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on which the
3,500,000 shares are being sold. We will be obligated, under this option, to
sell shares to the extent the option is exercised. The underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
the shares of our common stock offered by this prospectus.

The following table shows the per share and total underwriting discounts and
commissions to be paid by us to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment option.

<TABLE>
<CAPTION>
PER WITHOUT WITH
SHARE OPTION OPTION
-------- -------- --------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discounts and commissions........... $ $ $
Expenses payable by us........................... $ $ $
Proceeds to us................................... $ $ $
</TABLE>

64
<PAGE>
FleetBoston Robertson Stephens Inc. expects to deliver the shares of our
common stock to purchasers on .

Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor-SM-, a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.

INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, Phoenix and us against certain civil liabilities, including
liabilities under the Securities Act of 1933 and liabilities arising from
breaches of representations and warranties contained in the underwriting
agreement.

LOCK-UP AGREEMENT. Each of our executive officers and directors have agreed
with the representatives for a period of 180 days after the date of this
prospectus, subject to certain exceptions, not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock, any options or warrants to purchase any
shares of our common stock, or any securities convertible into or exchangeable
for shares of our common stock owned as of the date of this prospectus or
thereafter acquired directly from us by such holders or with respect to which
they have or hereafter acquire the power of disposition, without the prior
written consent of FleetBoston Robertson Stephens Inc. Phoenix has agreed with
the representatives for a period of 365 days after the date of this prospectus,
subject to certain exceptions, not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of common stock, any options or warrants to purchase any shares of our
common stock, or any securities convertible into or exchangeable for shares of
our common stock owned as of the date of this prospectus or thereafter acquired
directly from us by such holders or with respect to which they have or hereafter
acquire the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson Stephens Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to the lock-up agreements. There are no
agreements between the representatives and any of inSilicon's stockholders
providing consent by the representatives to the sale of shares prior to the
expiration of the lock-up period.

FUTURE SALES. In addition, we have agreed that during the 180-day lock-up
period, we will not, without the prior written consent of FleetBoston Robertson
Stephens Inc., subject to certain exceptions,

- consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period; or

- issue, sell, contract to sell, or otherwise dispose of, any shares of our
common stock, any options or warrants to purchase any shares of our common
stock or any securities convertible into, exercisable for or exchangeable
for shares of our common stock other than our sale of shares in this
offering, our issuance of common stock upon the exercise of currently
outstanding options, and our issuance of incentive awards under our stock
incentive plans. See "Shares Eligible for Future Sale."

NO PRIOR PUBLIC MARKET. Before this offering, there has been no public
market for the common stock of inSilicon. Consequently, the initial public
offering price for our common stock offered by this prospectus will be
determined through negotiations between us and the representatives of the
underwriters. Among the factors to be considered in such negotiations are
prevailing market conditions, our financial information, market valuations of
other companies that we and the representatives believe to be comparable to us,
estimates of our business potential, the present state of our development and
other factors deemed relevant.

LISTING. We have applied to have our shares approved for quotation on the
Nasdaq National Market under the symbol "INSN."

65
<PAGE>
STABILIZATION. The representatives have advised us that, under Regulation M
under the Securities Exchange Act, certain persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids that may have the effect
of stabilizing or maintaining the market price of our common stock at a level
above that which might otherwise prevail in the open market. A "stabilizing bid"
is a bid for or the purchase of the common stock on behalf of the underwriters
for the purpose of fixing or maintaining the price of the common stock. A
"syndicate covering transaction" is the bid for or the purchase of our common
stock on behalf of the underwriters to reduce a short position incurred by the
underwriters in connection with the offering. A "penalty bid" is an arrangement
permitting the representatives to reclaim the selling concession otherwise
accruing to an underwriter or syndicate member in connection with the offering
if the common stock originally sold by such underwriter or syndicate member is
purchased by the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives have advised us that these transactions may be effected on
the Nasdaq National Market or otherwise and, if commenced, may be discontinued
at any time.

DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to 175,000 shares of common stock to be issued by us and offered hereby for
sale, at the initial public offering price, to directors, officers, employees,
other business associates and related persons of inSilicon. The number of shares
of our common stock available for sale to the general public will be reduced to
the extent that these individuals purchase all or a portion of these reserved
shares. Any reserved shares which are not purchased will be offered by the
underwriters to the general public on the same basis as the shares of common
stock offered by this prospectus.

From time to time, the underwriters may perform investment banking or other
services for Phoenix and for inSilicon in the future.

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Orrick, Herrington & Sutcliffe LLP, San Francisco, California. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by O'Melveny & Myers LLP, San Francisco, California.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and financial statement schedule at September 30, 1998 and
1999 and for each of the three years in the period ended September 30, 1999, as
set forth in their report. We have included our consolidated financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.

The financial statements of Sand Microelectronics, Inc., as of December 31,
1996 and 1997 and for the years then ended included in this prospectus have been
so included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

66
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of our
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the registration statement or the exhibits and
schedules to that registration statement. For further information with respect
to inSilicon and the common stock, we refer you to the registration statement,
including the exhibits and schedules. Statements made in this prospectus
concerning the contents of any contract or other document are not necessarily
complete. Please refer to the copy of the document filed as an exhibit to the
registration statement for a more complete description.

Each statement is qualified in all respects by reference to the exhibit. You
may inspect the registration statement without charge and obtain copies of all
or any part by paying certain fees at the SEC's public reference facilities at
450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices at
Seven World Trade Center, 13th Floor, New York, NY 10048, and the Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our Securities and
Exchange Commission filings, including the registration statement, are also
available to you on the SEC's web site at http://www.sec.gov.

As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act, and, in accordance therewith, will
file periodic reports, proxy statements and other information with the SEC.

We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.

67
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INSILICON CORPORATION

Report of Ernst & Young LLP, Independent Auditors....... F-2

Consolidated Balance Sheets............................. F-3

Consolidated Statements of Operations................... F-4

Consolidated Statements of Changes in Stockholder's Net
Investment/Stockholder's Equity........................ F-5

Consolidated Statements of Cash Flows................... F-6

Notes to Consolidated Financial Statements.............. F-7

AUDITED FINANCIAL STATEMENTS OF SAND MICROELECTRONICS, INC.

Report of PricewaterhouseCoopers LLP, Independent
Accountants............................................ F-22

Balance Sheets.......................................... F-23

Statements of Operations................................ F-24

Statements of Shareholders' Equity...................... F-25

Statements of Cash Flows................................ F-26

Notes to Financial Statements........................... F-27

UNAUDITED INTERIM FINANCIAL STATEMENTS OF SAND
MICROELECTRONICS, INC.
AS OF JUNE 30, 1998..................................... F-35
</TABLE>

F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholder
inSilicon Corporation

We have audited the accompanying consolidated balance sheets of inSilicon
Corporation as of September 30, 1998 and 1999 and the related consolidated
statements of operations, stockholder's net investment/stockholder's equity, and
cash flows for each of the three years in the period ended September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
inSilicon Corporation at September 30, 1998 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles.

/S/ ERNST & YOUNG LLP

San Jose, California
December 17, 1999,
except for Notes 5 and 10, as to which the date is
February 11, 2000

F-2
<PAGE>
INSILICON CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDER'S
SEPTEMBER 30, EQUITY AT
------------------- DECEMBER 31, DECEMBER 31,
1998 1999 1999 1999
-------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ -- $ --
Accounts receivable, net of allowances of $198, $364 and
$216 at September 30, 1998 and 1999, and December 31,
1999, respectively...................................... 2,416 5,104 3,415
Other current assets...................................... 147 135 93
-------- -------- --------
Total current assets.................................... 2,563 5,239 3,508

Investments................................................. 838 838 838
Property and equipment, net................................. 1,477 1,174 1,004
Computer software costs, net................................ 13,958 6,974 6,408
Goodwill and other intangible assets, net................... 12,439 10,220 9,665
Other assets................................................ 56 36 600
-------- -------- --------
Total assets.............................................. $ 31,331 $ 24,481 $ 22,023
======== ======== ========
LIABILITIES AND STOCKHOLDER'S NET INVESTMENT/STOCKHOLDER'S EQUITY

Current liabilities:
Accounts payable.......................................... $ 830 $ 205 $ 378
Payroll and related liabilities........................... 1,223 1,776 1,312
Deferred revenue.......................................... 1,211 1,589 1,196
Payable to Phoenix........................................ -- -- 748
Accrued merger costs...................................... 1,560 1,560 1,560
Accrued restructuring costs............................... 696 200 200
Other accrued liabilities................................. 383 302 109
-------- -------- --------
Total current liabilities............................... 5,903 5,632 5,503
Deferred tax liabilities.................................... -- -- 2,736

Other liabilities........................................... 16 45 --
Commitments
Stockholder's net investment/stockholder's equity:
Preferred stock, par value $0.001; 15,000,000 shares
authorized, 10,400,000 Series A shares issued and
outstanding at December 31, 1999 (none pro forma)....... -- -- 10 $ --
Common stock, par value $0.001; 100,000,000 shares
authorized, 10 shares issued and outstanding at
December 31, 1999 (10,400,010 shares pro forma)......... -- -- -- --
Additional paid-in capital................................ -- -- 38,953 38,963
Net contribution from stockholder......................... 36,158 41,632 -- --
Deferred stock-based compensation......................... -- -- (1,360) (1,360)
Accumulated deficit....................................... (10,746) (22,828) (23,819) (23,819)
-------- -------- -------- --------
Total stockholder's net investment/stockholder's
equity................................................ 25,412 18,804 13,784 $ 13,784
========
Total liabilities and stockholder's net
investment/stockholder's
equity.................................................... $ 31,331 $ 24,481 $ 22,023
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3
<PAGE>
INSILICON CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees................................ $ 4,272 $ 7,304 $ 14,973 $ 3,677 $ 3,857
Services.................................... 839 1,488 3,982 1,189 1,400
------- ------- -------- ------- --------
Total revenue............................. 5,111 8,792 18,955 4,866 5,257
Cost of revenue:
License fees................................ 972 1,223 1,003 158 553
Services.................................... 638 734 826 27 208
Amortization of purchased technology........ -- -- 2,132 533 314
------- ------- -------- ------- --------
Total cost of revenue..................... 1,610 1,957 3,961 718 1,075
------- ------- -------- ------- --------
Gross margin.................................. 3,501 6,835 14,994 4,148 4,182
Operating expenses:
Research and development.................... 2,310 2,947 9,092 2,348 2,007
Sales and marketing......................... 2,128 3,843 6,350 1,622 1,712
General and administrative.................. 1,049 1,368 3,364 852 731
Amortization of intangible assets........... -- -- 2,220 555 555
Stock-based compensation.................... -- -- -- -- 236
Merger and restructuring charges............ -- 5,778 6,050 86 --
------- ------- -------- ------- --------
Total operating expenses.................. 5,487 13,936 27,076 5,463 5,241
------- ------- -------- ------- --------
Loss from operations.......................... (1,986) (7,101) (12,082) (1,315) (1,059)
Income tax benefit............................ -- -- -- -- (68)
------- ------- -------- ------- --------
Net loss...................................... $(1,986) $(7,101) $(12,082) $(1,315) $ (991)
======= ======= ======== ======= ========
Pro forma net loss (unaudited)................ $ (8,566) $ (817)
======== ========
Pro forma net loss per share (unaudited)...... $ (0.82) $ (0.08)
======== ========
Shares used in computing pro forma net loss
per share (unaudited)....................... 10,400 10,400
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-4
<PAGE>
INSILICON CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S NET INVESTMENT/
STOCKHOLDER'S EQUITY

(IN THOUSANDS)
<TABLE>
<CAPTION>

NET
PREFERRED STOCK COMMON STOCK ADDITIONAL CONTRIBUTION DEFERRED
------------------- ---------------------- PAID-IN FROM STOCK-BASED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER COMPENSATION DEFICIT
-------- -------- --------- ---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1996.................... -- $-- -- $ -- $ -- $ 2,150 $ -- $ (1,659)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 5,049 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (1,986)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1997.................... -- -- -- -- -- 7,199 -- (3,645)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 28,959 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (7,101)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1998.................... -- -- -- -- -- 36,158 -- (10,746)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 5,474 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (12,082)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1999.................... -- -- -- -- -- 41,632 -- (22,828)
Net decrease in
contribution from
stockholder
(unaudited)........... -- -- -- -- -- (1,529) -- --
Issuance of common and
preferred stock upon
capitalization, net of
deferred taxes
(unaudited)........... 10,400 10 -- -- 37,357 (40,103) -- --
Deferred stock-based
compensation
(unaudited)........... -- -- -- -- 1,596 -- (1,596) --
Amortization of deferred
stock-based
compensation
(unaudited)........... -- -- -- -- -- -- 236 --
Net loss and
comprehensive loss
(unaudited)........... -- -- -- -- -- -- -- (991)
------ --- --------- ---------- ------- -------- -------- --------
Balance, December 31, 1999
(unaudited)............. 10,400 $10 -- $ -- $38,953 $ -- $ (1,360) $(23,819)
====== === ========= ========== ======= ======== ======== ========

<CAPTION>
TOTAL
STOCKHOLDER'S
NET
INVESTMENT/
STOCKHOLDER'S
EQUITY
-------------
<S> <C>
Balance, September 30,
1996.................... $ 491
Net increase in
contribution from
stockholder........... 5,049
Net loss and
comprehensive loss.... (1,986)
--------
Balance, September 30,
1997.................... 3,554
Net increase in
contribution from
stockholder........... 28,959
Net loss and
comprehensive loss.... (7,101)
--------
Balance, September 30,
1998.................... 25,412
Net increase in
contribution from
stockholder........... 5,474
Net loss and
comprehensive loss.... (12,082)
--------
Balance, September 30,
1999.................... 18,804
Net decrease in
contribution from
stockholder
(unaudited)........... (1,529)
Issuance of common and
preferred stock upon
capitalization, net of
deferred taxes
(unaudited)........... (2,736)
Deferred stock-based
compensation
(unaudited)........... --
Amortization of deferred
stock-based
compensation
(unaudited)........... 236
Net loss and
comprehensive loss
(unaudited)........... (991)
--------
Balance, December 31, 1999
(unaudited)............. $ 13,784
========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-5
<PAGE>
INSILICON CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(1,986) $ (7,101) $(12,082) $(1,315) $ (991)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization.................... 1,175 1,411 5,787 1,314 1,355
Write-off of in-process research and
development.................................... -- 4,250 -- -- --
Write-off of capitalized software................ -- 1,478 4,855 -- --
Stock-based compensation......................... -- -- -- -- 236
Changes in operating assets and liabilities:
Accounts receivable............................ (754) (402) (2,688) (1,518) 1,689
Other assets................................... (299) 546 33 108 (522)
Accounts payable............................... (421) 675 (625) (675) 173
Payroll and related liabilities................ 68 328 553 172 (464)
Other accrued liabilities...................... (11) 2,438 (171) (802) 117
------- -------- -------- ------- -------
Total adjustments............................ (242) 10,724 7,745 (1,401) 2,584
------- -------- -------- ------- -------
Net cash provided by (used in) operating
activities................................... (2,228) 3,623 (4,337) (2,716) 1,593
------- -------- -------- ------- -------
Cash flows from investing activities:
Purchases of short-term and long-term
investments.................................... (500) (338) -- -- --
Additions to computer software costs............. (1,774) (2,359) (712) (162) --
Purchases of property and equipment.............. (547) (625) (425) (163) (64)
Acquisition of Sand, net of cash acquired........ -- (15,573) -- -- --
------- -------- -------- ------- -------
Net cash used in investing activities.......... (2,821) (18,895) (1,137) (325) (64)
------- -------- -------- ------- -------
Cash flows from financing activities:
Increase (decrease) in net contribution from
stockholder.................................... 5,049 15,272 5,474 3,041 (1,529)
------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities................................... 5,049 15,272 5,474 3,041 (1,529)
------- -------- -------- ------- -------
Change in cash and cash equivalents................ -- -- -- -- --
Cash and cash equivalents at beginning of period... -- -- -- -- --
------- -------- -------- ------- -------
Cash and cash equivalents at end of period......... $ -- $ -- $ -- -- --
======= ======== ======== ======= =======
Supplemental disclosure of cash flow information:
Non-cash portion of Sand acquisition contributed
by stockholder................................. $ -- $ 13,687 $ -- $ -- $ --
Issuance of common and preferred stock upon
capitalization, net of deferred taxes............ $ -- $ -- $ -- $ -- $ 2,736
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 1. DESCRIPTION OF OPERATIONS

inSilicon Corporation ("inSilicon" or the "Company") provides communications
semiconductor intellectual property, or SIP, that is used by semiconductor and
systems companies to design the complex semiconductors called systems-on-a-chip,
or SOCs, which are critical components of digital devices. The Company provides
SIP cores, related silicon subsystems and firmware to over 400 customers that
use its technologies in hundreds of different digital devices ranging from
network routers to cellular phones.

The Company was incorporated on November 1, 1999. Prior to that date, the
Company was operated as a division of Phoenix Technologies Ltd. ("Phoenix"). As
of November 30, 1999, the assets, liabilities and operations of the Company were
contributed by Phoenix to inSilicon in exchange for 10.4 million shares of
inSilicon's Series A preferred stock.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FINANCIAL STATEMENT PRESENTATION. The consolidated financial statements
include the accounts of inSilicon and its wholly owned subsidiaries after the
elimination of all significant intercompany balances.

The consolidated balance sheets as of September 30, 1998 and 1999, and
December 31, 1999, have been prepared using the historical basis of accounting
and include all of the assets and liabilities specifically identifiable to the
Company and certain liabilities that are not specifically identifiable, for
which estimates have been used to allocate a portion of Phoenix's liabilities to
the Company. Until December 1999, cash management for the Company was performed
by Phoenix on a centralized basis and all cash provided by Phoenix was recorded
as equity contributions from Phoenix in these consolidated financial statements.

The consolidated statements of operations include all revenue and costs
attributable to the Company, including an allocation of the costs of facilities
and employee benefits. Additionally, corporate administration, finance and
management costs have been allocated by Phoenix to the Company based on certain
methodologies that management believes are reasonable under the circumstances
(see Note 5).

INTERIM FINANCIAL INFORMATION. The interim financial information as of
December 31, 1999 and for the three months ended December 31, 1998 and 1999 is
unaudited, but includes all adjustments, consisting only of normal recurring
adjustments, that the Company considers necessary for a fair presentation of its
consolidated financial position at that date and its consolidated results of
operations and cash flows for those periods. Operating results for the three
months ended December 31, 1999 are not necessarily indicative of results that
may be expected for any future periods.

FOREIGN CURRENCY TRANSLATION. The Company has determined that the
functional currency of its foreign operations is the local currency. Therefore,
assets and liabilities are translated at year-end exchange rates and
transactions are translated at average exchange rates prevailing during each
period. Translation gains and losses are recorded as a component of
stockholder's equity and transaction gains and losses are recorded in the
consolidated statement of operations in the period in which they occur.

F-7
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
To date, transaction and translation gains and losses related to foreign
currencies have not been significant.

USE OF ESTIMATES. The presentation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

REVENUE RECOGNITION. The Company's revenue is derived from license fees,
engineering services and maintenance and support services sold primarily to
systems and semiconductor companies. Revenue from software license fees is
generally recognized when a non-cancelable license agreement has been signed,
the software product has been shipped, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable, and collection of the
receivable is considered probable. Engineering services revenue is generally
recognized on a time-and-materials basis or when contractual milestones are met.
Maintenance revenue, which relates principally to maintenance and support
contracts, is generally recognized ratably over the contract period, which is
typically one year. Deferred revenue consists mostly of billings under
maintenance contracts in advance of revenue recognition.

The Company adopted the American Institute of Certified Public Accountants'
("AICPA") Statement of Position, or SOP, 97-2, "Software Revenue Recognition,"
and SOP 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition," as of October 1, 1998. The adoption of SOP 97-2
and SOP 98-4 did not have a material impact on the Company's consolidated
financial statements or results of operations.

In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
amends SOP 98-4 to extend the deferral of the application of certain provisions
of SOP 97-2 with respect to the fair value of elements in multiple element
arrangements. The adoption of SOP 98-9 as of October 1, 1999 did not have a
material impact on the Company's consolidated financial statements for the three
months ended December 31, 1999 and such adoption is not expected to
significantly impact future periods. However, full implementation guidelines for
SOP 97-2, SOP 98-4 and SOP 98-9 have not been issued. Once available, the
current revenue recognition accounting practices may need to change and such
changes could effect the timing of the Company's future revenue recognition.

Allowances for estimated returns and customer credits are recorded in the
same period as the related revenue.

No customer accounted for more than 10% of revenue in fiscal years 1997,
1998 or 1999.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of the Company's
financial instruments, including accounts receivable, accounts payable and
accrued liabilities, approximate their fair values due to their short
maturities. The estimated fair values may not be representative of actual values
of the financial instruments that could be realized as of the period end or that
will be realized in the future.

BUSINESS AND CREDIT RISK. The Company's product revenues are concentrated
in the computer industry, which is highly competitive and rapidly changing.
Significant changes in the industry, customer

F-8
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
requirements, or customer buying behavior or the emergence of competitive
products with new capabilities or technologies could adversely affect operating
results.

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade receivables. The Company extends
credit on open accounts to its customers and generally does not require
collateral. It performs ongoing credit evaluations of all customers and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
At September 30, 1998 and 1999, no customer accounted for 10% of accounts
receivable.

INVESTMENTS. Investments consist of non-controlling interests in private
company securities, which are recorded at cost. At September 30, 1998 and 1999,
and December 31, 1999, the fair value of such securities approximated cost and
unrealized holding gains were not material.

PROPERTY AND EQUIPMENT. Property and equipment are carried at cost and
depreciated using the straight-line method over the estimated useful life of the
assets, typically three to five years. Leasehold improvements are recorded at
cost and amortized over the lesser of the useful life of the assets or the
remaining term of the related lease.

COMPUTER SOFTWARE COSTS. Computer software costs consist of internally
developed and purchased software under the provisions of Statement of Financial
Accounting Standards No. 86, "COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED" ("SFAS 86"). Costs incurred in the research and development of new
software products and enhancements to existing products are expensed as incurred
until technological feasibility has been established, at which time such costs
are capitalized. Capitalized computer software costs are amortized over the
estimated economic life of the product, generally three to six years, using the
straight-line method or a ratio of current revenue to total anticipated revenue.

inSilicon evaluates the net realizable value of computer software costs on
an ongoing basis based upon gross expected future revenue to be generated from
each product less projected future costs of those sales, and records charges to
reduce carrying value to net realizable value, as necessary. In assessing
expected future revenue and costs, inSilicon relies on a number of factors,
including operating results, business plans, budgets and economic projections.
In addition, inSilicon's evaluation considers non-financial data such as market
trends and customer relationships, buying patterns and product development
cycles.

INCOME TAXES. Income taxes are accounted for in accordance with SFAS No.
109, "ACCOUNTING FOR INCOME TAXES" ("SFAS 109"). Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates which apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period of enactment.

F-9
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The net losses incurred for fiscal years 1997, 1998 and 1999 are
attributable to the operations of the Company as a division of Phoenix and were
included in the income tax returns filed or to be filed by Phoenix. See Note 8.

STOCK-BASED COMPENSATION. The Company accounts for its stock option plans
and employee stock purchase plan in accordance with the provisions of the
Accounting Principles Board's Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES" ("APB 25"). The Company has adopted disclosure only criteria
described in SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS
123"). See Note 10. As a result, no expense has been recognized related to
employee options to purchase common stock granted with an exercise price equal
to fair market value at the date of grant.

The Company accounts for stock options and other equity instruments issued
to consultants and other non-employees under the provisions of Emerging Issues
Task Force Issue No. 98-16. The Company generally measures the fair value of
such equity instruments as of the date at which the non-employee's performance
under the grant is complete, with interim measurements of fair value as of dates
prior to the measurement date. Such amounts are charged to operations over the
period of performance.

NET LOSS PER SHARE. Through November 30, 1999, the Company was not a
separate legal entity and, as a division of Phoenix, had no historical capital
structure. Therefore, historical net loss per share amounts have not been
presented in the consolidated financial statements.

Pro forma net loss per share amounts for fiscal 1999 and for the three
months ended December 31, 1999, have been computed in accordance with SFAS 128,
"EARNINGS PER SHARE" to reflect the pro forma effect of the Company's
capitalization. Pro forma net loss per share has been computed by dividing the
pro forma net loss by the pro forma number of common shares outstanding, giving
effect to the issuance of preferred shares upon the capitalization of the
Company and the conversion of those preferred shares to common shares upon
completion of the Company's initial public offering of common stock.

COMPREHENSIVE INCOME. The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130") which requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income (revenues, expenses, gains and losses) be reported in the
consolidated financial statements. The Company adopted SFAS 130 effective
October 1, 1998. Comprehensive losses were not materially different from net
losses incurred for all periods presented.

SEGMENT INFORMATION. The Company has organized and managed its operations
in a single operating segment for all periods presented. Revenues from customers
outside of the United States were less than 10% of net revenues for all periods
presented in the accompanying consolidated statements of operations.

F-10
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 3. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Equipment................................................. $ 2,345 $ 2,799
Leasehold improvements.................................... 7 --
Furniture and fixtures.................................... 187 165
------- -------
2,539 2,964
Less accumulated depreciation and amortization............ (1,062) (1,790)
------- -------
$ 1,477 $ 1,174
======= =======
</TABLE>

Depreciation and amortization expense related to property and equipment
totaled $277,000, $406,000 and $728,000 for fiscal years 1997, 1998 and 1999,
respectively.

NOTE 4. COMPUTER SOFTWARE COSTS

Costs associated with purchased and internally developed computer software
of $2.4 million and $711,000, were capitalized during fiscal years 1998 and
1999, respectively. In addition, inSilicon capitalized approximately $12.8
million of software costs in conjunction with its September 1998 acquisition of
Sand Microelectronics, Inc. ("Sand"). Amortization of computer software costs
charged to cost of revenue was $898,000, $1.0 million, and $2.8 million in
fiscal years 1997, 1998 and 1999, respectively. Accumulated amortization of
capitalized computer software costs was $3.2 million and $5.0 million at
September 30, 1998 and 1999, respectively.

NOTE 5. RELATED PARTY TRANSACTIONS

The Company has entered into an Independent Contractor Agreement with a
company in India of which an officer of the Company is a significant stockholder
for the provision of hardware and software development consulting services.
During fiscal year 1999, the Company paid or accrued $365,000 for services to
that company.

Prior to December 1999, the Company was operated as a division of Phoenix
and the Company's operations were funded entirely by Phoenix. Net financing
provided to the Company by Phoenix in fiscal years 1997, 1998 and 1999 was
approximately $5.0 million, $29.0 million and $5.5 million, respectively. These
cumulative contributions decreased by approximately $1.5 million in the three
months ended December 31, 1999.

For all periods through December 31, 1999, Phoenix has allocated a portion
of its domestic corporate expenses to its divisions, including the Company, in
accordance with SEC Staff Accounting Bulletin No. 55, "Allocation of Expenses
and Related Disclosure in Financial Statements of Subsidiaries, Divisions or
Lesser Business Components of Another Entity." These expenses have included
corporate communications, management, compensation and benefits administration,
payroll, accounts payable, income tax compliance, treasury and other
administration and finance overhead. Allocations and charges were based on
either a direct cost pass-through or a percentage allocation for

F-11
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
such services provided based on factors such as net revenue, headcount and
relative expenditure levels. Such allocations and corporate charges totaled
$2.5 million, $3.3 million, $8.3 million and $1.3 million for fiscal years 1997,
1998 and 1999, and the three months ended December 31, 1999, respectively.

Management believes that the basis used for allocating corporate services is
reasonable. While the terms of these transactions may differ from those that
would result from transactions among unrelated parties, management does not
believe such differences would be material.

The Company has entered into certain agreements with Phoenix effective
November 30, 1999 for the purpose of defining their ongoing relationship.

CONTRIBUTION AGREEMENT

Pursuant to the Contribution Agreement, Phoenix transferred to the Company
ownership of all assets reflected on the Company's consolidated balance sheet,
specified intellectual property and technology related to and necessary for
inSilicon to conduct its business, as well as customer and supplier contracts
related primarily to the semiconductor intellectual property business. As of the
effective date, the Company also assumed all liabilities from Phoenix primarily
resulting from operations of the business or resulting from any asset that
Phoenix transferred to the Company. For its contribution, Phoenix received
10,400,000 shares of inSilicon Series A Preferred Stock that convert to an equal
number of shares of common stock at the completion of the initial public
offering of common stock. The Company also issued to Phoenix a warrant to
purchase 50,000 shares of inSilicon common stock at $.01 per share, exercisable
at any time until May 31, 2002.

SERVICES AND COST-SHARING AGREEMENT

The Services and Cost-Sharing Agreement covers various services that Phoenix
provides to the Company and the method by which certain costs will be shared by
the companies. The services include data processing, telecommunications and
information technology support services, accounting, financial management, tax
preparation, payroll, stockholder and public relations, legal, human resources
administration, procurement, real estate management and other administrative
functions. The shared costs include the costs of the office space the Company
occupies at Phoenix's headquarters and insurance premiums.

The amount the Company will pay for services and shared costs will generally
be equal to the aggregate cost to Phoenix and inSilicon of the services and
costs multiplied by a percentage representing the number of the Company's
employees to the total number of Phoenix and inSilicon employees. The Services
and Cost-Sharing Agreement has an initial term that extends to June 30, 2000 for
all services other than accounting and an initial term that extends to
September 30, 2000 with respect to accounting services. The Services and
Cost-Sharing Agreement will be renewed on a month-to-month basis. Phoenix can
terminate after those dates on 30 days' written notice. The Company can
terminate any one or more of the services at any time on 30 days' written
notice.

F-12
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
TAX-SHARING AGREEMENT

The Company entered into a Tax-Sharing Agreement with Phoenix concerning
each party's obligations for various tax liabilities. The Tax-Sharing Agreement
provides that Phoenix generally will pay all federal, state, local and foreign
taxes relating to the Company's business before November 30, 1999. For any
taxable period after that date in which the Company is included in a Phoenix
consolidated or combined tax return, the agreement provides that the Company
will make payments to Phoenix based upon the amount of U.S. federal and state
income taxes that would have been paid by the Company had it and each of its
subsidiaries filed separate federal and state income tax returns, subject to
specific adjustments. Further, if the Company incurs losses on either a federal
or state basis that reduce Phoenix's consolidated or combined tax liability,
Phoenix will pay the Company an amount equal to the tax savings generated by the
Company's losses.

INITIAL PUBLIC OFFERING AGREEMENT

The Initial Public Offering Agreement governs the relationship between the
Company and Phoenix following the initial public offering in a number of
respects. Management does not believe that this Initial Public Offering
Agreement will have a significant impact on the Company's accounting practices
or financial reporting.

EMPLOYEE MATTERS AGREEMENT

The Company entered into an Employee Matters Agreement with Phoenix to
allocate assets, liabilities, and responsibilities relating to current and
former United States employees of inSilicon Corporation and their participation
in the benefit plans, including stock plans, that Phoenix currently sponsors and
maintains. Management does not believe that this Employee Matters Agreement will
have a significant impact on the Company's accounting practices or financial
reporting.

REGISTRATION RIGHTS AGREEMENT

The Registration Rights Agreement provides that, at Phoenix's request, the
Company will use its best efforts to register for sale under federal and state
securities laws any shares of inSilicon common stock (or any other securities
Phoenix receives in exchange for inSilicon common stock) that Phoenix owns,
subject to specified limitations. Phoenix also will have the right to include
its inSilicon shares in other registrations of common stock initiated by the
Company.

TECHNOLOGY DISTRIBUTOR AGREEMENT

The Company entered into arrangements with Phoenix to act as its sales
representative and distributor of its firmware technology in Japan and our full
line of technology and related services in the rest of Asia.

NOTE 6. BUSINESS COMBINATIONS

SAND MICROELECTRONICS, INC. In September 1998, Phoenix acquired Sand, a
leading supplier of standards-based system software and semiconductor
intellectual property for PCs and information

F-13
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
appliances. The purchase price consisted of approximately $18.6 million in cash,
464,000 shares of Phoenix's common stock with a fair value of $2.7 million,
options to purchase approximately 264,000 shares of Phoenix's common stock with
a fair value of $1.6 million in exchange for Sand stock options, and up to $3.7
million in performance incentives to be paid through fiscal 2001. Of the total
performance incentives, approximately $1.6 million of minimum anticipated
payments was recorded as accrued merger costs. None of these costs had been paid
as of December 31, 1999.

The acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities of the acquired business are included in
the consolidated balance sheet as of September 30, 1998. The results of
operations of Sand from the date of acquisition through September 30, 1998 were
included in the accompanying consolidated statement of operations for the year
ended September 30, 1998.

The total purchase cost of approximately $33.7 million exceeded the assets
acquired as follows (in thousands):

<S> <C>
Total consideration......................................... $ 24,494
Liabilities assumed......................................... 7,749
Acquisition costs........................................... 1,465
--------
Total purchase cost......................................... 33,708
Less: Assets acquired....................................... (19,831)
Less: Acquired in-process research and development.......... (4,250)
--------
Excess of purchase cost over assets acquired................ $ 9,627
========
</TABLE>

The assets acquired include $12.8 million of software development costs
(that are being amortized on a straight-line basis over six years) and $2.8
million of other intangible assets (that are being amortized on a straight-line
basis over three to six years). The other intangible assets capitalized
represents the value of the distribution channel, assembled workforce and
related agreements acquired. The $9.6 million of excess of purchase cost over
assets acquired was recorded as goodwill and is being amortized on a
straight-line basis over six years. The Company regularly reviews the carrying
value of these intangible assets for impairment in accordance with SFAS
No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF." Any impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair market value.

The in-process research and development charge in fiscal year 1998 was an
allocation of a portion of the Sand purchase price for development projects that
were not yet capitalizable under the provisions of Statement of Financial
Accounting Standards No. 86, "Computer Software to be Sold, Leased or Otherwise
Marketed." The Sand projects under development upon acquisition related to the
development of semiconductor intellectual property technology designed for
various communications standards. The value of the in-process charge associated
with each project is the responsibility of Company management, and was
determined by estimating the future net cash flows from the project, and
discounting the net cash flows back to their present value. If these projects
are not successfully

F-14
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
developed and/or marketed, future revenue and profitability of the Company may
be adversely affected. Additionally, the value of other intangible assets
acquired may become impaired.

The following pro forma, unaudited information includes the consolidated
results of operations for the years ended September 30, 1997 and 1998, as if the
Sand acquisition had occurred at the beginning of each period presented at the
purchase price established in September 1998. The results of operations are not
necessarily indicative of those which would have occurred had the acquisition
actually been made at the beginning of each of the respective periods presented
or of future operations of the combined companies. The pro forma results for
1997 combine inSilicon's results for the year ended September 30, 1997 with the
results of Sand for the year ended December 31, 1997. The pro forma results for
fiscal year 1998 combine inSilicon's results for the year ended September 30,
1998, with the results of Sand for the same period. Accordingly, the fiscal 1997
operating results included a three-month period (ended December 31, 1997) that
is also included in the fiscal 1998 operating results. Revenue and an operating
loss of $443,000 and $470,000 were recorded in this three-month period,
respectively. The following pro forma results for the years ended September 30,
1997 and 1998, include the straight-line amortization of acquired intangibles,
primarily over a period of six years; and the pro forma fiscal 1998 results
include a $4.3 million write-off of acquired in-process research and development
discussed above (in thousands):

<TABLE>
<CAPTION>
PRO FORMA,
UNAUDITED
-------------------
1997 1998
-------- --------
<S> <C> <C>
Revenue................................................... $10,135 $15,128
Net loss.................................................. (3,978) (9,761)
</TABLE>

AWARD SOFTWARE INTERNATIONAL, INC. Also in September 1998, Phoenix
completed a merger with Award Software International, Inc. ("Award"), a leading
provider of system enabling and management software for personal computers.
Phoenix exchanged approximately 8.8 million shares of its common stock for all
of the common stock of Award. Each share of Award was exchanged for 1.225 shares
of Phoenix common stock. In addition, outstanding Award employee stock options
were converted at the same exchange ratio into options to purchase approximately
2.3 million shares of Phoenix common stock. The merger was accounted for as a
pooling of interests. Certain of Award's operations were merged with inSilicon's
operations, and accordingly, inSilicon's consolidated financial statements
include the combined results of operations and financial position for all
periods and dates presented. The Award operations accounted for less than 10% of
the Company's revenue and operating costs for all periods prior to the merger.

Prior to the Award merger, Award's fiscal year ended on December 31. The
Award statement of income for the year ended December 31, 1997 has been combined
with the Company's statement of income for the year ended September 30, 1997. In
order to conform Award's year-end to the Company's year-end, the fiscal 1997
operating results include a three-month period (ended December 31, 1997) that is
also included in the fiscal 1998 operating results. During this three-month
period, Award generated revenue of $105,000 and a net loss of $118,000 related
to the Company's operations.

F-15
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
The results of operations for the separate companies prior to the merger and
the combined amounts included in the consolidated financial statements were as
follows:

<TABLE>
<CAPTION>
NINE-MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1997 JUNE 30, 1998
<S> <C> <C>
----------------------------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Revenue:
inSilicon..................................... $ 5,006 $ 6,001
Award......................................... 105 180
-------- --------
Combined...................................... $ 5,111 $ 6,181
======== ========

Net Loss:
inSilicon..................................... $ (1,868) $ (707)
Award......................................... (118) (523)
-------- --------
Combined...................................... $ (1,986) $ (1,230)
======== ========
</TABLE>

NOTE 7. MERGER AND RESTRUCTURING CHARGES

Merger and restructuring charges during the years ended September 30, 1998
and 1999, were as follows:

<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Restructuring............................................... $ 50 $1,195
Asset write-offs............................................ 1,478 4,855
In-process research and development......................... 4,250 --
------ ------
$5,778 $6,050
====== ======
</TABLE>

These charges were mostly related to the integration of Sand into inSilicon
and severance costs allocated to inSilicon from Phoenix related to the
elimination of certain corporate management positions.

1998 CHARGES

Included in the fourth quarter of fiscal 1998 was a charge of $5.8 million
related to the acquisition of Sand. Included in this charge was a $1.5 million
write-off of software development costs associated with semiconductor
intellectual property that were capitalized on the historical balance sheet of
inSilicon under SFAS 86. The write-off was calculated based upon the excess of
carrying value over the difference between the gross expected future revenue to
be generated and the projected future costs of such revenue, and related
primarily to projects that were redundant between inSilicon and Sand.

F-16
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 7. MERGER AND RESTRUCTURING CHARGES (CONTINUED)
The in-process research and development charge in fiscal 1998 was an
allocation of a portion of the purchase price for Sand for projects that were
not yet capitalizable under the provisions of SFAS 86.

1999 CHARGES

Included in fiscal 1999 was a restructuring charge of $6.1 million due to
the write-off of $4.9 million of capitalized software development costs and
approximately $1.2 million of severance and other costs allocated from Phoenix.
The capitalized software development cost write-off was calculated based upon
the excess of carrying value over the difference between the gross expected
future revenue to be generated and the projected future costs of such revenue,
and was related primarily to reduced revenue expectations due to changing market
conditions. The severance and other costs allocated from Phoenix related to the
elimination of nine Phoenix corporate management positions ($1.1 million) and
three inSilicon positions ($90,000). The severance costs incurred for the
Phoenix positions were allocated to the Company based upon relative headcount,
consistent with the allocation of other Company costs incurred by Phoenix.

None of the fiscal 1998 merger and restructuring charges and approximately
$200,000 of the fiscal 1999 restructuring charges were unpaid as of
December 31, 1999. The remaining unpaid charges will mostly be paid in fiscal
year 2000.

NOTE 8. INCOME TAXES

The net losses incurred through November 30, 1999, are attributable to the
operations of the Company as a division of Phoenix and were included in the
income tax returns filed or to be filed by Phoenix. Because the Company will not
receive any benefit for its historical operating losses incurred through
November 30, 1999, no income tax benefit has been reflected for the periods
presented.

The unaudited pro forma net losses for fiscal 1999 and for the three months
ended December 31, 1999, give effect to income tax credits related to the
reversal of deferred income tax liabilities in connection with the Company's
acquisition of Sand. These credits would have been recorded had the Company
operated as a separate, stand-alone entity.

In conjunction with the capitalization of the Company as of November 30,
1999, a net deferred tax liability of $2.7 million was transferred by Phoenix to
the Company, representing the future tax effects of historical temporary
book/tax differences applicable to the Company.

The Company and Phoenix have entered into a tax-sharing agreement. See
Note 5. In general, the Company will be included in Phoenix's consolidated group
for federal income tax purposes for so long as Phoenix beneficially owns at
least 80% of the total voting power and value of the Company's outstanding
stock.

F-17
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 9. STOCKHOLDER'S EQUITY

In November 1999, the Company issued 10,400,000 shares of Series A
convertible preferred stock and a warrant to purchase 50,000 shares of common
stock to Phoenix in exchange for its accumulated net investment. The rights and
preferences of each Series A preferred share are as follows:

- liquidation preference of $8.66;

- voting rights equal to one vote for each share of common stock into which
such convertible preferred stock could be converted;

- convertible into one share of common stock at the option of the holder;
and

- automatically converted into one share of common stock upon the sale of
common stock in a public offering pursuant to a registration statement
under the Securities Act of 1933, as amended, with proceeds of greater
than $10 million and a price to the public of at least $7.50 per share.

The warrant has an exercise price of $0.01 per share, is immediately
exercisable and expires May 31, 2002.

NOTE 10. EMPLOYEE BENEFIT PLANS

Employees of the Company have historically participated in stock-based
compensation and savings plans that are administered through Phoenix and involve
options to acquire Phoenix's common stock.

EMPLOYEE STOCK PURCHASE PLAN. Phoenix has an employee stock purchase plan
for all eligible employees. Under the terms of the plan, shares of Phoenix's
common stock may be purchased at six-month intervals at 85% of the lower of the
fair market value on the first or the last day of each six-month period.
Employees may purchase shares having a value not exceeding 10% of their gross
compensation during an offering period. During fiscal 1997, 1998 and 1999,
employees of the Company purchased approximately 7,000, 20,000 and 61,000 shares
under the Phoenix plan at average prices of $12.37, $9.96 and $5.92 per share,
respectively.

401(K) SAVINGS PLAN. Phoenix has a retirement plan ("401(k) Plan") that is
intended to qualify under Section 401(k) of the Internal Revenue Code. This plan
covers U.S. employees who meet minimum age and service requirements and allows
participants to defer a portion of their annual compensation on a pre-tax basis.
In addition, Company contributions to the 401(k) Plan may be made at the
discretion of the board of directors. Phoenix has historically made matching
contributions of 25% of each participant's contribution, up to a match of $1,000
per year per participant. Matching contributions vest over a four-year period
which starts with the participant's employment start date with Phoenix.
Phoenix's matching contributions for employees of the Company were approximately
$17,000, $29,000 and $30,000 in fiscal 1997, 1998 and 1999, respectively.

STOCK OPTION PLANS. Phoenix has various stock option plans for employees,
officers, consultants and independent contractors. Incentive stock options under
these Phoenix plans may not be granted at a price less than 100% (110% in
certain cases) of the fair market value of the shares on the date of grant.
Nonqualified options may not be granted at a price less than 85% of the fair
value of the shares

F-18
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
on the date of grant. Options vest over a period determined by the board of
directors, generally four years, and have a term not exceeding ten years.

The following table sets forth the option activity under Phoenix's and in
Silicon's option plans for all employees of the Company. Phoenix shares have
been restated to equivalent inSilicon shares based upon the appropriate exchange
ratio. See further discussion of the exchange ratio below in Note 10.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Shares under option, September 30, 1996.............. 493,268 $3.60

Options granted...................................... 361,476 5.64
Options exercised.................................... (87,086) 0.17
Options canceled..................................... (31,885) 5.38
--------- -----
Shares under option, September 30, 1997.............. 735,773 4.94

Options granted...................................... 494,128 2.78
Options exercised.................................... (28,029) 0.17
Options canceled..................................... (57,798) 6.98
--------- -----
Shares under option, September 30, 1998.............. 1,144,074 4.02

Options granted...................................... 639,390 5.33
Options exercised.................................... (156,767) 0.80
Options canceled..................................... (154,749) 6.00
--------- -----
Shares under option, September 30, 1999.............. 1,471,948 4.72
Options granted (unaudited).......................... 1,036,621 7.37
Options exercised (unaudited)........................ (14,092) 1.76
Phoenix options not exchanged (unaudited)............ (133,486) 6.87
--------- -----
Shares under option, December 31, 1999 (unaudited)... 2,348,844 $6.14
========= =====
</TABLE>

The following table summarizes information about Phoenix's stock options
outstanding at September 30, 1999, on an as-converted basis to the Company's
shares:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------------
NUMBER AVERAGE WEIGHTED NUMBER
OUTSTANDING REMAINING AVERAGE EXERCISABLE WEIGHTED
AT SEPT. 30, CONTRACTUAL EXERCISE AT SEPT. 30, AVERAGE
RANGE OF EXERCISE PRICES 1999 LIFE (YEARS) PRICE 1999 EXERCISE PRICE
- ------------------------ ------------ ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$0.06 - $0.44........................ 76,789 6.89 $0.18 33,294 $0.19
$0.56 - $2.82........................ 254,815 6.45 0.72 90,410 1.02
$2.96 - $4.66........................ 394,565 8.72 4.12 100,328 4.00
$4.70 - $7.42........................ 513,076 9.50 5.91 52,620 6.37
$7.45 - $10.67....................... 232,703 7.33 8.99 167,176 9.29
--------- ---- ----- ------- -----
1,471,948 8.28 $4.72 443,828 $5.38
========= ==== ===== ======= =====
</TABLE>

F-19
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
In December 1999, the Company's stockholder authorized the 1999 Stock Option
Plan for the issuance of up to 2,700,000 shares of common stock to employees,
officers, directors and independent contractors. Incentive stock options may be
granted under this plan at a price not less than 100% (110% in some cases) of
the fair market value of the shares on the date of grant. Non-qualified options
may be granted at a price not less than 85% of the fair value of the shares on
the date of the grant.

In December 1999, the Company implemented a program under which options to
purchase shares of Phoenix common stock held by inSilicon employees could be
exchanged for options to purchase the Company's common stock under the 1999
Stock Option Plan. The exchange was based upon a ratio of 1.862 shares of
inSilicon common stock for each share of Phoenix common stock. Options to
purchase 1,358,779 shares of inSilicon common stock with an average exercise
price of $5.25 were issued under this exchange program. The new options have
comparable terms and vesting schedules and, at the date of the exchange, had
equivalent intrinsic value and ratio of exercise price to fair value of common
stock as the exchanged Phoenix options.

In December 1999, the Company granted options to employees, directors and
consultants to purchase 990,065 shares of common stock under the 1999 Stock
Option Plan. These options have exercises prices that were less than the per
share value of the Company's common stock on the date of grant, and therefore
the Company recorded deferred stock compensation associated with these grants of
approximately $1.4 million. In addition, the Company recorded deferred
compensation of $219,000 related to certain performance-based options held by an
officer of the Company to acquire 65,170 shares of common stock issued in
exchange for similar options granted by Phoenix. This deferred stock
compensation will be amortized over the vesting period of the underlying
options, generally straight-line over four years. As of December 31, 1999,
options to purchase 1,651,156 shares were available for future grants under this
plan.

FAIR VALUE DISCLOSURES. Pro forma information regarding net loss is
required by SFAS 123. This information is required to be determined as if
Phoenix had accounted for its employee stock options granted to inSilicon
employees under the fair value method of that statement. The fair value of
options granted in fiscal 1997, 1998 and 1999, reported below has been estimated
as of the date of the grant using a Black-Scholes multiple option pricing model
with the following assumptions:

<TABLE>
<CAPTION>
EMPLOYEE STOCK PURCHASE
EMPLOYEE STOCK OPTIONS PLAN
------------------------------ ------------------------------
1997 1998 1999 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Expected life from vest date (in years).......... 0.70 0.70 0.70 0.50 0.50 0.50
Risk-free interest rate.......................... 6-7% 6-7% 5-6% 6-7% 6-7% 5-6%
Volatility....................................... 0.63 0.57 0.56 0.63 0.57 0.56
Dividend yield................................... None None None None None None
</TABLE>

The weighted average estimated fair value of employee stock options granted
during fiscal 1997, 1998 and 1999, was $4.25, $4.03 and $2.35 per share,
respectively. The weighted average estimated fair value of shares granted under
the Purchase Plan during fiscal 1997, 1998 and 1999 was $2.21, $1.97 and $1.15,
respectively. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the vesting period of the options. Had
compensation costs for inSilicon's

F-20
<PAGE>
INSILICON CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)

NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
stock-based compensation plans been determined based on the fair value at the
grant date for awards under those plans consistent with the method of SFAS 123,
inSilicon's net loss for the years ended September 1997, 1998 and 1999, would
have been $2.4 million, $7.7 million, and $12.2 million, respectively.

NOTE 11. SUBSEQUENT EVENTS

In January 2000, the Board of Directors of the Company approved the filing
of a registration statement by the Company under the Securities Act of 1933, as
amended, relating to an initial public offering of the Company's common stock.

In January 2000, the Company entered into a $5.0 million secured bank line
of credit agreement that will be effective upon the closing of an underwritten
public offering. Borrowings on the line bear interest at the bank's prime rate
plus 0.25%. The line of credit agreement contains various covenants that require
the Company to meet certain financial ratios. The line of credit is secured by
the assets of the Company and expires in January 2001.

In January 2000, the Company's stockholders authorized the 2000 employee
stock purchase plan. Under the terms of the plan, employees may elect to deduct
up to 10% of their total compensation to purchase the Company's common stock.
The plan contains consecutive, overlapping, twenty-four month offering periods,
and each offering period includes four six-month purchase periods. Purchases of
Company stock are made at the end of each purchase period at a price generally
equal to 85% of the lower of the fair market value of the common stock either at
the beginning of the offering period or at the end of the purchase period. A
total of 250,000 shares of common stock have been reserved for issuance under
this 2000 purchase plan, plus annual increases equal to the lesser or
(a) 0.3125% of the outstanding shares on the last day of the prior fiscal year
and (b) 100,000 shares.

F-21
<PAGE>
REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Sand Microelectronics, Inc.

In our opinion, the accompanying balance sheets and the related statements
of operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Sand Microelectronics, Inc. at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
March 30, 1998

F-22
<PAGE>
SAND MICROELECTRONICS, INC.
BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $601,000 $3,116,000
Accounts receivable....................................... 127,000 188,000
Prepaid expenses and other current assets................. 34,000 22,000
Deferred tax assets....................................... 35,000 158,000
-------- ----------

Total current assets.................................... 797,000 3,484,000

Property and equipment, net................................. 121,000 209,000
Deposits.................................................... 5,000 5,000
-------- ----------
$923,000 $3,698,000
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 45,000 $ 71,000
Accrued liabilities....................................... 26,000 141,000
Income taxes payable...................................... 98,000 897,000
Sales taxes payable....................................... 18,000 24,000
Current portion of capital leases......................... 13,000 32,000
Current portion of notes payable to founders.............. 40,000 20,000
Deferred revenue.......................................... 300,000 730,000
-------- ----------
Total current liabilities............................... 540,000 1,915,000

Notes payable to founders, net of current portion........... 20,000 --
Capital lease obligations, long term........................ 12,000 12,000
-------- ----------
572,000 1,927,000
======== ==========

Commitments (Note 7)

Shareholders' equity:
Common stock, no par value; 50,000,000 shares authorized;
12,000,000 and 12,107,000 shares issued and
outstanding............................................. 5,000 9,000
Retained earnings......................................... 346,000 1,762,000
-------- ----------

Total shareholders' equity.............................. 351,000 1,771,000
-------- ----------
$923,000 $3,698,000
======== ==========
</TABLE>

F-23
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Revenues:
Licenses.................................................. $1,478,000 $4,330,000
Maintenance, engineering services and other services...... 344,000 694,000
---------- ----------
Net revenues............................................ 1,822,000 5,024,000
========== ==========

Cost of net revenue
Licenses.................................................. 8,000 8,000
Maintenance, engineering services and other services...... 140,000 93,000
---------- ----------
Cost of net revenues.................................... 148,000 101,000
---------- ----------

Gross profit................................................ 1,674,000 4,923,000
---------- ----------
Operating expenses:
Research and development.................................. 738,000 1,562,000
Sales and marketing....................................... 437,000 652,000
General and administrative................................ 177,000 416,000
---------- ----------
Total operating expenses................................ 1,352,000 2,630,000
---------- ----------
Income from operations...................................... 322,000 2,293,000

Interest income............................................. 8,000 75,000
Interest expense............................................ (6,000) (8,000)
---------- ----------
Income before provision for income taxes.................... 324,000 2,360,000

Provision for income taxes.................................. (121,000) (944,000)
---------- ----------
Net income.................................................. $ 203,000 $1,416,000
========== ==========
</TABLE>

F-24
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
---------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995..................... 12,000,000 $5,000 $ 143,000 $ 148,000
Net income....................................... -- -- 203,000 203,000
---------- ------ ---------- ----------
Balance at December 31, 1996..................... 12,000,000 5,000 346,000 351,000

Issuance of Common Stock......................... 2,000 1,000 -- 1,000
Exercise of Common Stock options................. 105,000 3,000 -- 3,000
Net income....................................... -- -- 1,416,000 1,416,000
---------- ------ ---------- ----------
Balance at December 31, 1997..................... 12,107,000 $9,000 $1,762,000 $1,771,000
========== ====== ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-25
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $203,000 $1,416,000

Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation.......................................... 37,000 82,000
Changes in assets and liabilities:
Accounts receivable................................. (58,000) (61,000)
Prepaid expenses and other current assets........... (38,000) 12,000
Accounts payable.................................... 56,000 26,000
Accrued liabilities................................. (48,000) 115,000
Taxes payable....................................... 75,000 682,000
Deferred revenue.................................... 278,000 430,000
-------- ----------
Net cash provided by operating activities......... 505,000 2,702,000
-------- ----------

Cash flows from investing activities:
Purchases of property and equipment..................... (93,000) (127,000)
-------- ----------
Net cash used in investing activities............. (93,000) (127,000)
-------- ----------
Cash flows from financing activities:
Proceeds from issuance of Common Stock.................. -- 4,000
Repayment of notes payable.............................. -- (40,000)
Principal payment of capital lease obligations.......... (1,000) (24,000)
-------- ----------
Net cash (provided by) used in financing
activities...................................... (1,000) (60,000)
-------- ----------
Net increase in cash and cash equivalents................... 411,000 2,515,000

Cash and cash equivalents at beginning of year.............. 190,000 601,000
-------- ----------

Cash and cash equivalents at end of year.................... $601,000 $3,116,000
======== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes.............................. $ 43,000 $ 152,000
Cash paid for interest.................................. 6,000 8,000
Capital leases for equipment............................ 26,000 43,000
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-26
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE COMPANY

Sand Microelectronics, Inc., (the "Company"), designs, develops and markets
semiconductor intellectual property ("IP") with a focus on connectivity
standards, such as IEEE 1394, USB and PCI. The Company licenses IP
(synthesizable cores and related tools) to systems and semiconductor companies
in the computer, communication and consumer markets. The Company was
incorporated in California in June 1991.

Following is a summary of the Company's significant accounting policies.

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
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

REVENUE RECOGNITION

The Company's revenues are derived from product licenses, support and
engineering services. Annual maintenance services are charged separately from
product licenses.

Product license fees are recognized upon shipment if no significant vendor
obligations remain and if collection of the resulting receivable is considered
probable. In instances where significant vendor obligations exist, revenue
recognition is delayed until the obligation has been satisfied.

Annual support revenues consist of ongoing support and product updates and
are recognized ratably over the term of the related contract. Payments received
in advance of revenue recognition are recorded as deferred revenue. Engineering
and other services consist of contract consulting, training and development
services and the related revenue is recognized as the services are performed.

CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist primarily of certificates of deposit, money market accounts
and savings accounts, the fair value of which approximates cost.

SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash equivalents, short-term investments
and accounts receivable. The Company deposits cash and cash equivalents with
high credit quality financial institutions. The Company's accounts receivable
are derived from revenue earned primarily from customers located in the U.S.,
Japan and Germany. Export sales, principally to Japan and Europe, are generally
transacted in U.S. dollars and represented 4% and 2%, respectively, of net
revenues in 1996 and 14% and 12%, respectively, of net revenues in 1997. The
Company performs ongoing credit evaluations of its customers' financial
condition and, generally,

F-27
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
requires no collateral from its customers. The Company maintains an allowance
for doubtful accounts receivable based upon the expected collectibility of all
accounts receivable.

At December 31, 1996, approximately 78% of total accounts receivable
represented amounts due from three customers. At December 31, 1997,
approximately 81% of total accounts receivable represented amounts due from five
customers. Sales to two of the Company's customers accounted for 33% and 12% of
net revenues for the year ended December 31, 1996, and 14% and 12% of net
revenues for the year ended December 31, 1997.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to seven years.

SOFTWARE DEVELOPMENT COSTS

Software development costs are classified as research and development and
are expensed as incurred and capitalized once technological feasibility is
established. The capitalized costs are then amortized on a straight-line basis
over the estimated product life, or based on the ratio of current revenues to
total projected product revenues, whichever is greater. To date, no software
development costs have been capitalized.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax liabilities and assets are recognized
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of the Company's assets and liabilities.

STOCK-BASED COMPENSATION

The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," ("APB No. 25") and related interpretations in
accounting for its stock-based compensation plans, as permitted by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"). FAS 123 defines a "fair value" based method of
accounting for an employee stock option or similar equity instrument and
encourages, but does not require, entities to adopt that method of accounting
for their employee stock compensation plans. The Company has adopted, as
required, the disclosure provisions of FAS 123. The pro forma disclosures of the
difference between compensation cost included in net income under APB 25 and the
related cost measured by the fair value method of FAS 123 are presented in
Note 6.

RECENT ACCOUNTING PRONOUNCEMENTS

In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition," which the Company is required to adopt for transactions entered
into in the fiscal year beginning January 1, 1998. SOP 97-2 provides guidance on
recognizing revenue on software transactions and supersedes SOP 91-1, "Software

F-28
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Revenue Recognition." The Company believes that the adoption of SOP 97-2 will
not have a significant impact on its current licensing or revenue recognition
practices.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments, including
accounts receivable, accounts payable and accrued liabilities, approximate fair
value due to their short maturities. The carrying value of the Company's
long-term debt approximates fair value as its interest rates approximate market
rates for borrowings with similar terms and maturities.

NOTE 2--BALANCE SHEET COMPONENTS:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
PROPERTY AND EQUIPMENT
Computers, lab equipment and software..................... $198,000 $345,000
Furniture, fixtures and office equipment.................. 4,000 27,000
-------- --------
202,000 372,000
Less: Accumulated depreciation and amortization........... (81,000) (163,000)
-------- --------
$121,000 $209,000
======== ========
ACCRUED LIABILITIES
Vacation.................................................. $ 14,000 $ 31,000
Sales commission.......................................... -- 35,000
Other..................................................... 12,000 75,000
-------- --------
$ 26,000 $141,000
======== ========
</TABLE>

NOTE 3--RELATED PARTY TRANSACTIONS:

SAND MICROELECTRONICS PVT. LTD., INDIA

The Company obtains consulting services from Sand Microelectronics
Pvt. Ltd., India ("Sand India") which is 100% owned by the owners of Sand
Microelectronics, Inc.

Purchases from Sand India for the years ended December 31, 1996 and 1997 of
$61,000 and $178,000, respectively, are for consulting for design and
engineering services. There were no receivables or payables outstanding at
December 31, 1996 and 1997.

On January 22, 1998, the Company entered into a contract for $300,000 for
engineering services from Sand India. Payment terms are $30,000 per month,
commencing in January 1998.

F-29
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 3--RELATED PARTY TRANSACTIONS: (CONTINUED)
ASPEN TECHNOLOGIES PVT. LTD. INDIA

From time to time the company obtains consulting services from Aspen
Technologies ("Aspen") which is partially owned by the owners of Sand
Microelectronics, Inc.

There were no purchases from Aspen Technologies for the years ended
December 31, 1996 and 1997. There were no receivables/payables outstanding at
December 31, 1996 and 1997.

NOTES PAYABLE TO FOUNDERS

<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
10% note; interest payable December 31, 1997; matures
January 1998.............................................. $60,000 $20,000
Less current portion........................................ (40,000) (20,000)
------- -------
Long-term portion of notes payable to founders $20,000 $ --
======= =======
</TABLE>

NOTE 4--INCOME TAXES:

The provisions for income taxes consist of the following, for the years
ended December 31, 1996 and 1997:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1997
-------- ---------
<S> <C> <C>
Current tax expense:
Federal................................................... $124,000 $ 840,000
State..................................................... 27,000 207,000
Foreign................................................... 5,000 20,000
-------- ---------
156,000 1,067,000
-------- ---------
Deferred tax benefit:
Federal................................................... (30,000) (105,000)
State..................................................... (5,000) (18,000)
-------- ---------
(35,000) (123,000)
-------- ---------
Provision for income taxes.................................. $121,000 $ 944,000
======== =========
</TABLE>

Deferred income tax assets consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred revenue.......................................... $30,000 $126,000
Nondeductible reserves and other.......................... 5,000 32,000
------- --------
Total................................................... $35,000 $158,000
======= ========
</TABLE>

F-30
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 4--INCOME TAXES: (CONTINUED)
Differences between the Company's effective tax rate and the federal
statutory rate were as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
Federal statutory rate...................................... 35% 35%
Research and development tax credit......................... (8%) (3%)
State taxes (net of federal benefit)........................ 8% 9%
Non deductible expenses..................................... 1% 1%
Other....................................................... 1% (2%)
------- -------
Effective tax rate.......................................... 37% 40%
======= =======
</TABLE>

NOTE 5--BORROWINGS:

LINE OF CREDIT

In December 1997, the Company entered into a line of credit agreement ("Line
of Credit") with a bank, which allows the Company to borrow up to $500,000
through December 14, 1998. At December 31, 1997, the Company has not drawn down
on the Line of Credit. The Line of Credit bears interest at the bank's prime
rate plus 0.5% (8.5% at December 31, 1997). Borrowings are secured by
substantially all of the Company's assets. The credit agreement requires the
Company to meet certain financial covenants including quick ratio, tangible net
worth and profitability requirements. At December 31, 1997, the Company met all
such requirements.

EQUIPMENT LEASE

At December 31, 1996, the Company had $25,000 outstanding and due under
various equipment lease financings. These financings expire in October 1998 and
accrue interest at a rate of 11.8% per annum. At December 31, 1997, the Company
had $44,000 outstanding and due under various equipment lease financings. These
financings expire between January 1998 and May 1999, and accrue interest at a
rate of 11.8% to 15.4% per annum.

NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS:

In 1995, the Company adopted a stock option plan (the "Plan"). The Plan
provides for the granting of nonqualified stock options to employees and
consultants of the Company. At December 31, 1997, the Company has reserved
2,000,000 shares of Common Stock for issuance under the Plan.

F-31
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS: (CONTINUED)
Plan activity was as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE NUMBER OF EXERCISE
FOR GRANT OPTIONS PRICE
--------- --------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1995............................ 1,930,000 70,000 $0.03
Options granted........................................... (625,000) 625,000 0.04
Options canceled.......................................... 15,000 (15,000) 0.10
--------- -------- -----

Outstanding at December 31, 1996............................ 1,320,000 680,000 0.04
Options granted........................................... (68,750) 68,750 0.14
Options canceled.......................................... 2,500 (2,500) 0.15
Options exercised......................................... -- (105,000) 0.03
--------- -------- -----

Balance at December 31, 1997................................ 1,253,750 641,250 $0.05
========= ======== =====
</TABLE>

Stock option grants to date have been made at prices that were no less than
fair value of the underlying stock on the date of grant. Fair value of Sand
common stock is determined periodically in good faith by the board of directors.

At December 31, 1996 and 1997, options to purchase 17,500 and 191,250,
respectively, were exercisable.

The following table summarizes information about employee and consultant
stock options outstanding at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICE PER SHARE 1997 LIFE PRICE 1997 PRICE
- --------------- -------------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.03 488,750 8.64 $0.03 165,000 $0.03
0.10 90,000 8.20 0.10 26,250 0.10
0.15 62,500 9.71 0.15 -- 0.15
------- ---- ----- ------- -----
641,250 8.68 0.05 191,250 0.04
======= ==== ===== ======= =====
</TABLE>

On February 6, 1998, the Company adopted the 1998 Incentive Stock Option
Plan and 1,253,750 shares remaining in the previous plan were reserved for under
this new plan.

F-32
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS: (CONTINUED)
PRO FORMA DISCLOSURES

Had compensation cost for the Plan been determined based on the fair value
of each stock option grant on its grant date, as prescribed in FAS 123, the
Company's net income would have been as follows:

<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Net income after taxes:
As reported............................................... $1,416,000 $ 203,000

Pro forma................................................. $1,414,000 $ 202,000
</TABLE>

The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants during
the respective years:

<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Expected life (in years).................................... 4 4
Risk-free interest rate..................................... 6.48% 6.23%
Volatility.................................................. 0% 0%
Dividend yield.............................................. 0% 0%
</TABLE>

The weighted average fair value of options granted was $0.01 per share for
the year ended December 31, 1996 and $0.03 for the year end December 31, 1997.

Because additional option grants are expected to be made each year, the
above pro forma disclosures are not representative of the pro forma effects on
option grants on reported net income for future years.

The Company offers its employees a 401(k) plan that qualifies as a deferred
salary arrangement under Section 401 of the Internal Revenue Code. Under the
401(k) plan, participating employees may defer a portion of their pretax
earnings not to exceed certain statutorily specified amounts ($9,500 for the
calendar year 1997). The Company, at its discretion, may make contributions for
the benefit of eligible employees. In fiscal 1997, the Company made
contributions of $26,000 under the 401(k) plan.

NOTE 7--COMMITMENTS:

LEASES

The Company leases equipment and office space under noncancelable operating
and capital leases. In January 1998, the Company entered into a sublease
agreement for a portion of its primary office facility with a third party. Rent
expense for the years ended December 31, 1996 and 1997 was $63,000 and $51,000,
respectively. The terms of the facility lease provide for rental payments on a
graduated scale. The Company recognizes rent expense on a straight-line basis
over the lease period, and has accrued for rent expense incurred but not paid.

F-33
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--COMMITMENTS: (CONTINUED)
Future minimum lease payments under noncancelable operating and capital
leases, including lease commitments entered into subsequent to December 31,
1997, and future minimum sub-lease rental receipts under noncancelable operating
leases are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING SUB-LEASE
YEAR ENDED DECEMBER 31, LEASES LEASES INCOME
- ----------------------- -------- --------- ---------
<S> <C> <C> <C>
1998........................................................ $ 38,000 $238,000 $ 97,000
1999........................................................ 9,000 189,000 15,000
2000........................................................ -- 168,000 --
2001........................................................ -- 7,000 --
-------- -------- --------
Total minimum lease payments and sublease income............ 47,000 $602,000 $112,000
======== ========

Less: amount representing interest.......................... 3,000
--------

Present value of capital lease obligations.................. 44,000

Less: current portion....................................... (32,000)
--------
Long-term portion of capital lease obligations.............. $ 12,000
========
</TABLE>

F-34
<PAGE>
SAND MICROELECTRONICS, INC.
BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30,
1998
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,688,000
Accounts receivable....................................... 1,111,000
Prepaid expenses and other current assets................. 218,000
Deferred tax assets....................................... 103,000
------------

Total current assets.................................... 4,120,000

Property and equipment, net................................. 451,000
Deposits.................................................... 20,000
------------

$ 4,591,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 72,000
Accrued liabilities....................................... 382,000
Current portion of capital leases......................... 23,000
Deferred revenue.......................................... 1,113,000
------------
Total current liabilities............................... 1,590,000

Capital lease obligations, long term........................ 8,000
------------

1,598,000
------------

Commitments................................................. --

Shareholders' Equity:
Common Stock, no par value; 50,000,000 shares authorized;
12,218,000 shares issued and outstanding................ 13,000
Retained earnings......................................... 2,980,000
------------

Total shareholders' equity................................ 2,993,000
------------

$ 4,591,000
============
</TABLE>

F-35
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues:
Licenses.................................................. $2,986,000 $3,971,000
Maintenance, engineering services and other services...... 384,000 579,000
---------- ----------

Net revenues............................................ 3,370,000 4,550,000

Cost of net revenues:
Licenses.................................................. 8,000 --
Maintenance, engineering services and other services...... 33,000 157,000
---------- ----------

Cost of net revenues.................................... 41,000 157,000
---------- ----------

Gross profit................................................ 3,329,000 4,393,000
---------- ----------

Operating expenses:
Research and development.................................. 665,000 1,139,000
Sales and marketing....................................... 309,000 880,000
General and administrative................................ 168,000 402,000
---------- ----------

Total operating expenses................................ 1,142,000 2,421,000
---------- ----------

Income from operations...................................... 2,187,000 1,972,000

Interest income............................................. 18,000 60,000
Interest expense............................................ (4,000) (2,000)
---------- ----------

Income before provision for income taxes.................... 2,201,000 2,030,000

Provision for income taxes.................................. (845,000) (812,000)
---------- ----------

Net income.................................................. $1,356,000 $1,218,000
========== ==========
</TABLE>

See notes to condensed financial statements

F-36
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $1,356,000 $1,218,000
Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation.......................................... 33,000 71,000
Loss on disposals of assets........................... -- 1,000
Changes in assets and liabilities:
Accounts receivable................................. (850,000) (923,000)
Prepaid expenses and other current assets........... (4,000) (196,000)
Deposits............................................ -- (15,000)
Accounts payable.................................... 7,000 1,000
Accrued liabilities................................. 3,000 241,000
Taxes payable....................................... 658,000 (866,000)
Deferred revenue.................................... 292,000 383,000
---------- ----------

Net cash provided by (used in) operating
activities........................................ 1,495,000 (85,000)
---------- ----------

Cash flows from investing activities:
Purchases of property and equipment....................... (43,000) (332,000)
Proceeds from sales of assets............................. -- 18,000
---------- ----------

Net cash used in investing activities............. (43,000) (314,000)
---------- ----------

Cash flows from financing activities:
Repayment of notes payable................................ (40,000) (20,000)
Proceeds from issuance of common stock.................... 4,000 4,000
Principal payments on capital lease obligations........... (8,000) (13,000)
---------- ----------

Net cash used in financing activities............. (44,000) (29,000)
---------- ----------

Net increase (decrease) in cash and cash equivalents........ 1,408,000 (428,000)

Cash and cash equivalents at beginning of period............ 601,000 3,116,000
---------- ----------

Cash and cash equivalents at end of period.................. $2,009,000 $2,688,000
========== ==========
Supplemental disclosure of cash flow information:
Capital leases for equipment........................ $ 43,000 $ --
</TABLE>

See notes to condensed financial statements

F-37
<PAGE>
SAND MICROELECTRONICS, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited financial statements include the accounts of Sand
Microelectronics, Inc. These financial statements have been prepared by Sand
Microelectronics, Inc., without audit, and reflect all adjustments, which in the
opinion of management are necessary to present fairly the financial position and
the results of operation for the interim periods. These financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. However, they omit certain information and
footnote disclosures necessary to conform to generally accepted accounting
principles. These statements should be read in conjunction with the audited
financial statements and notes to the financial statements included elsewhere
herein. The results of operations presented are not necessarily indicative of
the results expected for the full fiscal year or for any future period.

F-38
<PAGE>
[LOGO]
<PAGE>

THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>

SUBJECT TO COMPLETION, DATED FEBRUARY 24, 2000

[LOGO]

3,500,000 SHARES
COMMON STOCK

------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

---------------------

------------------------

ROBERTSON STEPHENS INTERNATIONAL

PRUDENTIAL VOLPE TECHNOLOGY

A UNIT OF PRUDENTIAL SECURITIES

NEEDHAM & COMPANY, INC.

THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by inSilicon in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.

<S> <C> <C>
SEC registration fee........................................ $ 11,688
NASD filing fee............................................. 4,927
Nasdaq National Market listing fee.......................... 60,000
Printing and engraving expenses............................. 350,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 350,000
Blue Sky qualification fees and expenses.................... 6,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous fees and expenses............................. 107,385
----------
Total................................................. $1,400,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VI of inSilicon's By-laws (Exhibits
3.3 and 3.4) provide for indemnification of inSilicon's directors and officers
to the maximum extent permitted by Delaware Law. In addition, inSilicon will
enter into Indemnification Agreements (Exhibit 10.3) with its officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among inSilicon, and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since its incorporation, inSilicon has sold and issued the following
securities:

1. On November 15, 1999, inSilicon issued 10 shares of its common stock to
Phoenix for an aggregate cash consideration of $1,000.

2. As of November 30, 1999, inSilicon agreed to issue 10,400,000 shares of
Series A Preferred Stock and a warrant to purchase 50,000 shares of common stock
at $0.01 per share to Phoenix in consideration for Phoenix's contribution of
assets to inSilicon, which shares and warrant were subsequently issued.

3. As of December 21, 1999, inSilicon issued 2,348,844 options to purchase
common stock of inSilicon with a weighted average price of $6.14 per share to a
number of employees, directors and consultants of inSilicon.

4. As of February 10, 2000, inSilicon issued 20,000 options to purchase
common stock of inSilicon at $7.75 per share to a director of inSilicon.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (CONTINUED)
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 2 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and warrants issued
in such transactions. All recipients had adequate access, through their
relationships with inSilicon, to information about inSilicon.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Amended and Restated Certificate of Incorporation of
inSilicon Corporation.*
3.2 Amended and Restated Certificate of Incorporation of
inSilicon Corporation (proposed).*
3.3 By-laws of inSilicon Corporation.*
3.4 Amended and Restated By-laws of inSilicon Corporation
(proposed).*
4.1 Specimen Stock Certificate.*
4.2 Common Stock Purchase Warrant.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP regarding the
legality of the common stock being registered.*
10.1 Agreement and Plan of Reorganization dated as of
September 17, 1998 by and among Phoenix Technologies Ltd.,
Phoenix Sub Corporation, Sand Microelectronics, Inc. and
Babu Chilukuri, Anand C. Naidu and Ajit Deora.*
10.2 Contribution Agreement dated as of November 30, 1999,
between inSilicon Corporation and Phoenix Technologies Ltd.
(Schedules omitted).*
10.3 Form of Indemnification Agreement between inSilicon
Corporation and each of its Officers and Directors.*
10.4 1999 Stock Option Plan.*
10.5 2000 Stock Plan.*
10.6 2000 Employee Stock Purchase Plan.*
10.7 Initial Public Offering Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.*
10.8 Registration Rights Agreement dated as of November 30, 1999
by and between inSilicon Corporation and Phoenix
Technologies Ltd.*
10.9 Services and Cost-Sharing Agreement dated as of
November 30, 1999 by and between inSilicon Corporation and
Phoenix Technologies Ltd.*
10.10 Employee Matters Agreement dated as of November 30, 1999 by
and between inSilicon Corporation and Phoenix Technologies
Ltd.*
10.11 Tax-Sharing Agreement dated as of November 30, 1999 by and
between inSilicon Corporation and Phoenix Technologies Ltd.*
10.12 Technology Distributor Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.*
10.13 Key Executive Officer Severance Agreement with Wayne
Cantwell.*
10.14 Key Executive Officer Severance Agreement with William
Meyer.*
10.15 Key Executive Officer Severance Agreement with Barry
Hoberman.*
</TABLE>

II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
10.16 Key Executive Officer Severance Agreement with Robert
Nalesnik.*
10.17 Loan and Security Agreement dated January 18, 2000 between
Silicon Valley Bank and inSilicon Corporation.*
21.1 List of Subsidiaries.*
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.1).
23.4 Consent of Integrated Circuit Engineering.*
24.1 Power of Attorney.*
</TABLE>

- ------------------------

* Previously filed

** To be filed by amendment

(b) Financial Statement Schedules

Schedule II--Valuations and Qualifying Account

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of San
Jose, State of California on February 23, 2000.

<TABLE>
<S> <C> <C>
INSILICON CORPORATION

By: /s/ WAYNE C. CANTWELL
----------------------------------------
Wayne C. Cantwell
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WAYNE C. CANTWELL President, Chief Executive Officer and February 23, 2000
- ---------------------------- Director (Principal Executive Officer)
Wayne C. Cantwell

/s/ WILLIAM E. MEYER Chief Financial Officer (Principal February 23, 2000
- ---------------------------- Financial Officer and Principal
William E. Meyer Accounting Officer)

ALBERT E. SISTO* Director February 23, 2000
- ----------------------------
Albert E. Sisto

E. THOMAS HART* Director February 23, 2000
- ----------------------------
E. Thomas Hart

RAYMOND J. FARNHAM* Director February 23, 2000
- ----------------------------
Raymond J. Farnham

JOHN R. HARDING* Director February 23, 2000
- ----------------------------
John R. Harding
</TABLE>

*By: /s/ WAYNE C. CANTWELL
---------------------------------------------
Wayne C. Cantwell
Attorney-in-fact

II-4
<PAGE>
INSILICON CORPORATION

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
DESCRIPTION BEGINNING OF YEAR PROVISIONS WRITE-OFFS END OF YEAR
- ----------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended September 30, 1999....... $198 224 $(58) $364
Year ended September 30, 1998....... 224 (21) (5) 198
Year ended September 30, 1997....... 25 199 -- 224
</TABLE>

S-1
<PAGE>
EXHIBIT INDEX

- ------------------------

* Previously filed

** To be filed by amendment.

<PAGE>
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference of our firm under the caption "Experts" and to
the use of our report dated December 17, 1999, except for Notes 5 and 10 as to
which the date is February 11, 2000, in Amendment No. 2 to the Registration
Statement (Form S-1) and related Prospectus of inSilicon Corporation for the
registration of 3,500,000 shares of its common stock.

Our audits also included the financial statement schedule listed in
Item 16(b) of this Registration Statement. This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.

/s/ ERNST & YOUNG LLP

San Jose, California
February 22, 2000

<PAGE>
EXHIBIT 23.2

CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 30, 1998, relating to the financial statements of Sand
Microelectronics, Inc., which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.

/S/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
February 22, 2000