10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period endedJuly 3, 2016

OR

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

For the transition period from        to             

Commission File No. 0-14225

EXAR CORPORATION

(Exact Name of Registrant as specified in its charter)

Delaware	94-1741481
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

48720 Kato Road, Fremont, CA 94538

(Address of principal executive offices, Zip Code)

(510) 668-7000

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  ☒    No  ☐

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

Large accelerated filer    ☐            Accelerated filer    ☒

Non-accelerated filer    ☐          (Do not check if a smaller reporting company)   Smaller reporting company    ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of shares outstanding of the Registrant’s Common Stock was 49,574,599 as of August 5, 2016.

1

EXAR CORPORATION AND SUBSIDIARIES

INDEX TO

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JULY 3, 2016

		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	29
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 6.	Exhibits	31
	Signatures	32
	Index to Exhibits	33

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)

	July 3,			March 27,
	2016			2016
ASSETS
Current assets:
Cash and cash equivalents	$	85,276		$	55,070
Accounts receivable (net of allowances of $886 and $809)		15,539			16,130
Accounts receivable, related party (net of allowances of $425 and $617)		3,184			3,247
Inventories		22,104			20,807
Other current assets		2,179			1,922
Assets held for sale		92,688			93,911
Total current assets		220,970			191,087
Property, plant and equipment, net		5,159			20,299
Goodwill		31,613			31,613
Intangible assets, net		11,012			11,735
Other non-current assets		1,006			639
Total assets	$	269,760		$	255,373
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	11,312		$	11,258
Accrued compensation and related benefits		2,273			2,984
Deferred income and allowances on sales to distributors		3,213			3,053
Deferred income and allowances on sales to distributor, related party		5,885			4,683
Other current liabilities		12,299			10,669
Liabilities held for sale		2,479			3,470
Total current liabilities		37,461			36,117
Long-term lease financing obligations		856			1,285
Other non-current obligations		4,314			3,422
Total liabilities		42,631			40,824
Commitments and contingencies (Notes 14, 15 and 16)
Stockholders’ equity:
Common stock, $.0001 par value; 100,000,000 shares authorized; 48,998,725 and 48,545,311 shares outstanding		5			5
Additional paid-in capital		532,847			529,207
Accumulated deficit		(305,723	)		(314,663	)
Total stockholders’ equity		227,129			214,549
Total liabilities and stockholders’ equity	$	269,760		$	255,373

See Accompanying Notes to Condensed Consolidated Financial Statements.

3

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	July 3,			June 28,
	2016			2015
Sales:
Net sales	$	19,636		$	16,806
Net sales, related party		7,500			11,377
Total net sales		27,136			28,183
Cost of sales:
Cost of sales		10,411			9,776
Cost of sales, related party		2,769			4,916
Amortization of purchased intangible assets		594			613
Total cost of sales		13,774			15,305
Gross profit		13,362			12,878
Operating expenses:
Research and development		4,931			6,429
Selling, general and administrative		6,564			7,746
Merger and acquisition costs		855			544
Restructuring charges and exit costs, net		923			1,230
Impairment of design tools		1,519			-
Gain on sale of land and building under sale-leaseback arrangement		(9,300	)		-
Total operating expenses, net		5,492			15,949
Income (loss) from operations		7,870			(3,071	)
Other income and (expense), net:
Interest income and other, net		2			(22	)
Interest expense		(38	)		(48	)
Total other expense, net		(36	)		(70	)
Income (loss) before income taxes		7,834			(3,141	)
Provision for (benefit from) income taxes		291			(787	)
Net income (loss) from continuing operations		7,543			(2,354	)
Net income (loss) from discontinued operations (See Note 3)		1,397			(156	)
Net income (loss) and comprehensive income (loss)	$	8,940		$	(2,510	)
Net income (loss) per share from continuing operations:
Basic	$	0.15		$	(0.05	)
Diluted	$	0.15		$	(0.05	)
Net income per share from discontinued operations:
Basic	$	0.03		$	-
Diluted	$	0.03		$	-
Net income (loss) per share:
Basic	$	0.18		$	(0.05	)
Diluted	$	0.18		$	(0.05	)
Shares used in computation of net income (loss) from continuing operations per share:
Basic		48,680			47,927
Effect of options and awards		378			-
Diluted		49,058			47,927
Shares used in computation of net income (loss) from discontinued operations per share:
Basic		48,680			47,927
Effect of options and awards		378			-
Diluted		49,058			47,927
Shares used in computation of net income (loss) per share:
Basic		48,680			47,927
Effect of options and awards		378			-
Diluted		49,058			47,927

See Accompanying Notes to Condensed Consolidated Financial Statements.

4

EXAR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	July 3,			June 28,
	2016			2015
Cash flows from operating activities:
Net income (loss)	$	8,940		$	(2,510	)
Income (loss) from discontinued operations		1,397			(156	)
Income (loss) from continuing operations		7,543			(2,354	)
Adjustments to reconcile income from continuing operations to net cash flows from operating activities:
Depreciation and amortization		2,104			2,381
Gain on sale of land and building under sale-leaseback arrangement		(9,300	)		-
Amortization of deferred gain on sale-leaseback arrangement		(199	)		-
Stock-based compensation expense		1,103			1,722
Impairment of design tools		1,519			-
Changes in operating assets and liabilities:
Accounts receivable		654			3,641
Inventories		(1,297	)		(518	)
Prepaid expenses, other current assets and other assets		(6	)		(862	)
Accounts payable		40			2,459
Accrued compensation and related benefits		(711	)		(185	)
Deferred income		1,362			(2,808	)
Other current and non-current liabilities		(245	)		(1,284	)
Net cash provided by operating activities - continuing operations		2,567			2,192
Net cash provided by (used in) operating activities - discontinued operations		1,577			(630	)
Net cash provided by operating activities		4,144			1,562
Cash flows from investing activities:
Purchases of property, plant and equipment and intellectual property, net		(125	)		(105	)
Sale of land and building under sale-leaseback arrangement		24,051			-
Net cash provided by (used in) investing activities - continuing operations		23,926			(105	)
Net cash provided by investing activities - discontinued operations		-			-
Net cash provided by (used in) investing activities		23,926			(105	)
Cash flows from financing activities:
Proceeds from issuance of common stock		2,673			966
Purchase of stock for withholding taxes on vested restricted stock		(84	)		(1,083	)
Cash settlement of equity award		-			(354	)
Payments of lease financing obligations		(453	)		(459	)
Net cash provided by (used in) financing activities - continuing operations		2,136			(930	)
Net cash provided by financing activities - discontinued operations		-			-
Net cash provided by (used in) financing activities		2,136			(930	)
Net increase in cash and cash equivalents		30,206			527
Cash and cash equivalents at the beginning of the period		55,070			55,233
Cash and cash equivalents at the end of the period	$	85,276		$	55,760

See Accompanying Notes to Condensed Consolidated Financial Statements.

5

EXAR CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Description of Business— Exar Corporation (“Exar,” “us,” “our” or “we”) was incorporated in California in 1971 and reincorporated in Delaware in 1991.Exar designs, develops and markets analog mixed-signal solutions serving the Industrial, Infrastructure, Automotive, and Audio/Video markets. Our comprehensive knowledge of end-user markets along our experience in analog and mixed signal technology has enabled us to provide innovative solutions designed to meet the needs of the evolving connected world. Applying both analog and mixed signal technologies, our products are deployed in a wide array of applications such as industrial, instrumentation and medical equipment, networking and telecommunication systems, servers, LED lighting solutions, and digital video recorders. We provide customers with a breadth of component products and sub-system solutions based on advanced silicon integration. Exar’s product portfolio includes Connectivity, Mixed-signal, Power Management, High Performance Analog, Processors and LED lighting.

Basis of Presentation and Use of Management Estimates— The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 27, 2016 as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of July 3, 2016 and our results of operations for the three months ended July 3, 2016 and June 28, 2015, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year.

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the current year’s presentation. Such reclassification had no effect on previously reported results of operations or stockholders’ equity.

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2017 and 2016 consist of 53 and 52 weeks, respectively. The first quarter of fiscal years 2017 and 2016 consist of 14 and 13 weeks, respectively.

Discontinued Operations— On June 1, 2016, we entered into an agreement to sell 100% of the issued and outstanding shares of Integrated Memory Logic Limited (“iML”), a wholly-owned subsidiary. The sale is expected to close before the end of our current fiscal year. As a result, we report the operating results of iML in the net income (loss) from discontinued operations line in the condensed consolidated statements of operations for all periods presented. In addition, the assets and liabilities associated with iML are reported as assets held for sale and liabilities held for sale, in the condensed consolidated balance sheets. Totals for discontinued operation cash flows are separately reported within operating, investing and financing activities within the condensed consolidated statements of cash flows. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company’s continuing operations. See “Note 3-Discontinued Operations”.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process in order to achieve this core principle which may require the use of judgment and estimates. The entity may adopt ASU 2014-09 either by using a full retrospective approach for all periods presented or a modified retrospective approach. This standard is effective for annual reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016. We have not yet selected a transition method and are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

6

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures requirement. ASU 2014-15 (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual periods and interim periods thereafter. We do not expect the adoption of this guidance will have a material impact on our consolidated financial position, results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 primarily provides that an entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This standard is effective for annual reporting periods beginning after December 15, 2016. We are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is not permitted. We are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, Leases: (Topic 842), to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently evaluating the impact of these amendments on our financial statements.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. We are currently evaluating the impact of these amendments on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. An entity that elects early adoption must adopt all of the amendments in the same period. We are currently evaluating the impact of these amendments on our financial statements.

7

In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers, Topic 606 – Identifying Performance Obligations and Licensing, which clarifies implementation issues that will arise when implementing ASU 2014-09. The amendments in this update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Before an entity can identify its performance obligation in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this Update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. Topic 606 includes implementation guidance on determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property or a right to access the entity’s intellectual property. The amendments in this Update are intended to improve the operability and understandability of the licensing implementation guidance. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09). We are currently evaluating the impact of these amendments and the transition alternatives on its consolidated financial statements.

NOTE 3.    DISCONTINUED OPERATIONS

On June 1, 2016, we entered into a definitive agreement to sell iML to Beijing E-town Chipone Technology Co., Ltd for $136 million, payable in cash, and adjusted for iML’s cash and debt at closing. At July 3, 2016, we have classified the iML disposal group as held-for-sale and presented the results of iML’s operations as net income (loss) from discontinued operations in the condensed consolidated statements of operations. The assets and liabilities of iML are recorded as assets held for sale and liabilities held for sale within the condensed consolidated balance sheets, respectively. We are expecting to record a gain on the sale of iML that will be recognized when the transaction closes. The transition services associated with this transaction are expected to be immaterial.

Summarized results from discontinued operations during the first quarter of fiscal 2017 and 216 are as follows:

	July 3,			June 28,
	2016			2015
Net sales	$	13,522		$	12,239
Cost of sales:
Cost of sales		7,702			5,825
Amortization of purchased intangible assets		1,245			1,855
Total cost of sales		8,947			7,680
Gross profit		4,575			4,559
Operating expenses:
Research and development		1,685			1,881
Selling, general and administrative		1,397			1,946
Total operating expenses, net		3,082			3,827
Interest income and other, net		(3	)		(4	)
Income (loss) before income taxes		1,496			736
Provision for income taxes		99			892
Net income (loss) from discontinued operations	$	1,397		$	(156	)

As of July 3, 2016 and March 27, 2016, the aggregate components of assets and liabilities classified as discontinued operations and included in current assets and current liabilities consisted of the following:

	July 3,		March 27,
	2016		2016
Accounts receivables, net	$	14,162	$	13,427
Inventories		7,915		7,944
Deferred income taxes and other assets		118		248
Property, plant and equipment, net		95		88
Goodwill		13,258		13,258
Identifiable intangible assets, net		57,140		58,946
Total assets	$	92,688	$	93,911
Accounts payable	$	1,127	$	2,024
Accrued liabilities		1,307		1,422
Deferred income taxes and other liabilities		45		24
Total liabilities	$	2,479	$	3,470

8

NOTE 4. BALANCE SHEET DETAILS

Our inventories consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Raw materials	$	1,080	$	1,012
Work-in-progress		9,140		9,780
Finished goods		11,884		10,015
Total inventories	$	22,104	$	20,807

Our property, plant and equipment consisted of the following as of the dates indicated below (in thousands):

	July 3,			March 27,
	2016			2016
Land	$	-		$	6,660
Building		-			16,365
Machinery and equipment		37,885			37,813
Software and licenses		22,068			22,045
Leasehold Improvement		763			755
Property, plant and equipment, total		60,716			83,638
Accumulated depreciation and amortization		(55,557	)		(63,339	)
Total property, plant and equipment, net	$	5,159		$	20,299

The decrease in land and building relates to the sale-leaseback of our Fremont office building. The accumulated depreciation and amortization for the three months ended July 3, 2016 includes a $1.5 million write down for impaired design tools. See “Note 13 - Lease Financing Obligation.”   

Our other current liabilities consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Short-term lease financing obligations	$	3,772	$	3,784
Deferred gain on sale of land and building under sale-leaseback arrangement		1,594		-
Accrual for stock awards in connection with Cadeka acquisition		1,200		1,200
Purchase consideration holdback		1,006		1,006
Accrued legal and professional services		867		1,247
Accrued sales and marketing expenses		606		699
Accrued manufacturing expenses, royalties and licenses		318		486
Accrued restructuring charges and exit costs		697		494
Other current liabilities		2,239		1,753
Total other current liabilities	$	12,299	$	10,669

9

Our other non-current obligations consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Long-term taxes payable	$	3,432	$	3,339
Long term deferred gain of land and building under sale-leaseback arrangement		797		-
Deferred tax liability		85		83
Total other non-current obligations	$	4,314	$	3,422

The deferred rent included in other current and non-current liabilities relates to deferred gain associated with our sale-leaseback, net of amortization. See “Note 13. Lease Financing Obligations”.

NOTE 5. FAIR VALUE

 Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

We had no assets or liabilities utilizing Level 3 inputs as of July 3, 2016 or March 27, 2016.

There were no transfers between Level 1 and Level 2 during the fiscal quarter ended July 3, 2016.

As of July 3, 2016, all of our investments, consisting of money market funds with a fair value of $36.3 million, were classified as Level 1 investments.

In June 2016, we donated the 93,000 common shares of CounterPath received in the first quarter of fiscal 2015 resulting from the dissolution of Skypoint Telecom Fund II (US), LP, in which we were a limited partner, and wrote off the related $50 thousand carrying value.

Our cash and cash equivalents as of the dates indicated below were as follows (in thousands):

	July 3,		March 27,
	2016		2016
Cash and cash equivalents
Cash in financial institutions	$	48,953	$	55,066
Money market funds		36,323		4
Total cash and cash equivalents	$	85,276	$	55,070

Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in interest income and other, net within the condensed consolidated statements of operations. During the three months ended July 3, 2016 and June 28, 2015, there were no net realized gains (losses) on the sale of marketable securities.

10

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or when events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one single operating segment and one chief operating decision maker, our Chief Executive Officer (“CEO”), we assess goodwill for impairment at the enterprise level.

As of July 3, 2016, we performed a goodwill impairment analysis from continuing operations and concluded that it was not impaired as the fair value of the continuing operations exceeded the carrying value of the continuing business. Upon entering into a definitive agreement to sell iML, $13.3 million of goodwill was reclassified to assets held for sale based on the respective fair values of the disposal group and continuing operations. See “Note 3. Discontinued Operations”.

Intangible Assets

Our purchased intangible assets for continued operations as of the dates indicated below were as follows (in thousands):

	July 3, 2016									March 27, 2016
	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life		Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life
Amortized intangible assets:
Existing technology	$	53,878	$	(44,097	)	$	9,781		4.3	$	53,878	$	(43,502	)	$	10,376		4.6
Customer relationships		5,225		(3,994	)		1,231		3.4		5,225		(3,890	)		1,335		3.6
Distributor relationships		1,264		(1,264	)		-		-		1,264		(1,261	)		3		-
Patents/Core technology		3,459		(3,459	)		-		-		3,459		(3,459	)		-		-
Trade names		210		(210	)		-		-		210		(189	)		21		-
Total	$	64,036	$	(53,024	)	$	11,012			$	64,036	$	(52,301	)	$	11,735

During the first quarter of fiscal year 2017, $57.1 million of net intangible assets were reclassified to assets held for sale. See “Note 3-Discontinued Operations”.

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Customer relationships are amortized over five to seven years. Distributor relationships are amortized over seven years. Patents/core technology is amortized over six years. Trade names are amortized over three to six years. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life.

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets (or asset group) may not be fully recoverable. Whenever events or changes in circumstances suggest that the carrying amount of long-lived assets may not be recoverable, we estimate the future cash flows expected to be generated by the assets (or asset group) from its use or eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets which is derived using a discounted cash flow model. Significant management judgment is required in the grouping of long-lived assets and forecasts of future operating results that are used in the discounted cash flow method of valuation. If our actual results or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

As of July 3, 2016, we performed a goodwill impairment analysis from continuing operations and concluded that it was not impaired as the fair value of the continuing operations exceeded the carrying value of the continuing business. Upon entering into a definitive agreement to sell iML, $13.3 million of goodwill was reclassified to assets held for sale based on the respective fair values of the disposal group and continuing operations. See “Note 3. Discontinued Operations”.

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	723	$	760

11

The total future amortization expenses for our purchased intangible assets are summarized below (in thousands):

Amortization Expense (by fiscal year)
2017 (9 months remaining)	$	2,115
2018		2,802
2019		2,488
2020		1,989
2021		1,325
2022 and thereafter		293
Total future amortization	$	11,012

NOTE 7. LONG-TERM INVESTMENTS

In July 2001, Exar became a Limited Partner in the Skypoint Telecom Fund II (US), LP. (“Skypoint Fund”), a venture capital fund focused on investments in communications infrastructure companies. We account for this non-marketable equity investment under the cost method in the other non-current assets in the consolidated balance sheet. The partnership was dissolved and the fund distributed stock of investee companies to Exar during first quarter of fiscal year 2015.

We periodically review and determine whether the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

As of the date indicated below, our long-term investments balance, which is included in the other non-current assets line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	July 3,			March 27,
	2016			2016
Beginning balance	$	389		$	394
Donation of Counterpath shares		(50	)		-
Impairment charges		-			(5	)
Ending balance	$	339		$	389

In June 2016, we donated the common shares of Counterpath and recorded the corresponding reduction in long term investment balances. At July 3, 2016 the remaining balance consists of an investment in a privately held company.

NOTE 8. RELATED PARTY TRANSACTIONS

Alonim Investments Inc.

Alonim Investments Inc. (“Alonim”) through its wholly-owned affiliate, Rodfre Holdings LLC, owns approximately 7.6 million shares, or approximately 16%, of our outstanding common stock as of July 3, 2016. As such, Alonim is our largest stockholder. Future Electronics Inc. (“Future”) is also an affiliate of Alonim and our largest distributor. One of our directors is an executive officer of Future. Our related party transactions primarily involved sales to Future.

Related party net sales as a percentage of our total net sales for the periods indicated below were as follows:

	Three Months Ended
	July 3,			June 28,
	2016			2015
Future and affiliates of Alonim		28	%		40	%

12

Related party receivables as a percentage of our net accounts receivables were as follows as of the dates indicated below:

	July 3,			March 27,
	2016			2016
Future and affiliates of Alonim		17	%		17	%

Related party expenses for marketing promotional materials reimbursed were not significant for the three months ended July 3, 2016 and June 28, 2015, respectively.

FusionOps, Inc.

The former CEO of FusionOps, Inc. is a member of the board of directors for Exar Corporation. For the three months ended July 3, 2016 and June 28, 2015 the Company paid $49,000 and $53,200, respectively to FusionOps, Inc. to build an application for internal data analysis and we recorded these amounts as expense in the period in which such costs were incurred.

Interim President and Chief Executive Officer (“Interim CEO”)

Richard Leza served as our interim CEO through May 31, 2016 when the Board of Directors appointed him as Executive Chairman and Technology Advisor. For the three months ended July 3, 2016 we paid $0.1 million and issued 8,000 fully vested restricted stock units with a grant date fair value of $52,600 for his services provided. On June 30, 2016, Mr. Leza resigned as our Executive Chairman and Technology Advisor.

NOTE 9. COMMON STOCK REPURCHASES

From time to time, we acquire outstanding common stock in the open market to partially offset dilution from our equity award programs, to increase our return on our invested capital and to bring our cash to a more appropriate level for Exar.

On August 28, 2007, we announced the approval of a share repurchase plan and authorized the repurchase of up to $100.0 million of our common stock.

On July 9, 2013, we announced the approval of a share repurchase program under which we were authorized to repurchase an additional $50.0 million of our common stock. The repurchase program does not have a termination date, and may be modified, extended or terminated at any time. We intend to retire all shares repurchased under the stock repurchase plan. The purchase price for the repurchased shares of Exar is reflected as a reduction of common stock and additional paid-in capital. Since inception of the repurchase plan to July 3, 2016, we have repurchased a total of 11.1 million shares for an aggregate purchase price of $105.2 million.

We did not repurchase any common stock during the three months ended July 3, 2016 or June 28, 2015.

NOTE 10. RESTRUCTURING CHARGES AND EXIT COSTS

Restructuring expenses result from the execution of management approved restructuring plans that were generally developed to improve our cost structure and/or operations, sometimes in conjunction with our acquisition integration strategies. Restructuring expenses consist of employee severance costs and may also include contract termination costs to improve our cost structure prospectively.

During the three months ended July 3, 2016, we incurred $0.9 million of restructuring charges and exit costs. The charges consisted primarily of reduction of our workforce, the impairment of certain fixed assets and licensed technologies. During the three months ended June 28, 2015, we incurred immaterial restructuring charges and costs. All restructuring charges and exit costs are included in operating expenses.

13

Our restructuring liabilities were included in the other current liabilities and other non-current obligations lines within our condensed consolidated balance sheets. The following table summarizes the activities affecting the liabilities as of the dates indicated below (in thousands):

	March 27, 2016		Additions/ adjustments		Non-cash charges			Payments			July 3, 2016
Lease termination costs and others	$	130	$	467	$	(27	)	$	(119	)	$	451
Severance		364		456		-			(574	)		246
Total	$	494	$	923	$	(27	)	$	(693	)	$	697

NOTE 11. STOCK-BASED COMPENSATION

Except for the stock compensation expense section, all amounts consist of both continuing and discontinued operations.

Employee Stock Participation Plan (“ESPP”)

Our ESPP permits employees to purchase common stock through payroll deductions at a purchase price that is equal to 95% of our common stock price on the last trading day of each three-calendar-month offering period. Our ESPP is non-compensatory.

The following table summarizes our ESPP transactions during the fiscal periods presented (in thousands, except per share amounts):

	As of		Three Months Ended
	July 3, 2016		July 3, 2016
					Weighted
	Shares of		Shares of		Average
	Common Stock		Common Stock		Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,306
Issued				11	$	6.20

Equity Incentive Plans

At the annual meeting of stockholders on September 18, 2014 (the “Annual Meeting”), our stockholders approved the Exar Corporation 2014 Equity Incentive Plan (“2014 Plan”). The 2014 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in common stock or units of common stock, as well as cash bonus awards.

Prior to the Annual Meeting, we maintained the Exar Corporation 2006 Equity Incentive Plan (the “2006 Plan”) and the Sipex Corporation 2006 Equity Incentive Plan (the “Sipex 2006 Plan”). As of June 30, 2014, a total of 6,555,492 shares of our common stock were then subject to outstanding awards granted under the 2006 Plan and the Sipex 2006 Plan, and an additional 669,008 shares of our common stock were then available for new award grants under the 2006 Plan. As part of the stockholder approval of the 2014 Plan at the Annual Meeting, we agreed that no new awards will be granted under the 2006 Plan and the Sipex 2006 Plan, although awards made under these plans will remain subject to the terms of each such plan.

The maximum number of shares of our common stock that may be issued or transferred pursuant to awards under the 2014 Plan equals the sum of: (1) 5,170,000 shares, plus (2) the number of any shares subject to stock options granted under the 2006 Plan and the Sipex 2006 Plan and outstanding as of the date of the Annual Meeting which expire, or for any reason are cancelled or terminated, after the date of the Annual Meeting without being exercised, plus (3) the number of any shares subject to restricted stock and restricted stock unit awards granted under the 2006 Plan and the Sipex 2006 Plan that are outstanding and unvested as of the date of the Annual Meeting which are forfeited, terminated, cancelled, or otherwise reacquired after the date of the Annual Meeting without having become vested. Awards other than a stock option or stock appreciation right granted under the 2014 Plan are counted against authorized shares available for future issuance on a basis of two shares for each award issued. As of July 3, 2016, there were approximately 1 million shares available for future grants under the 2014 Plan.

14

Stock Option Activities

Our stock option transactions during three months ended July 3, 2016 are summarized below:

						Weighted
						Average				In-the-money
				Weighted		Remaining		Aggregate		Options
	Outstanding			Average		Contractual		Intrinsic		Vested and
	Options /			Exercise		Term		Value		Exercisable
	Quantity			Price per Share		(in years)		(in thousands)		(in thousands)
Balance at March 27, 2016		7,722,383		$	7.96		4.40	$	87		48
Granted		1,161,900			6.78
Exercised		(405,385	)		6.42
Cancelled		(235,726	)		7.95
Forfeited		(462,810	)		7.66
Balance at July 3, 2016		7,780,362			7.88		4.26		6,760		4,353
Vested and expected to vest, July 3, 2016		7,005,891			7.98		4.05		5,783
Vested and exercisable, July 3, 2016		3,654,884		$	8.67		2.45	$	1,745

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value, which is based on the closing price of our common stock of $7.80 and $5.26 as of July 3, 2016 and March 27, 2016, respectively. These are the values which would have been received by option holders if all option holders exercised their options on that date.

In January 2012, we granted 480,000 performance-based stock options to our then CEO. The options were scheduled to vest in four equal annual installments at the end of fiscal years 2013 through 2016 if certain predetermined market based financial measures were met. If the financial measures are not met, each installment would be rolled over to the subsequent fiscal year. In January 2014, we granted 140,000 performance-based stock options to our then CEO. The options were scheduled to vest at the end of fiscal year 2017 if certain predetermined financial measures were met. Due to the departure of our then CEO in October 2015, we recorded a reversal of $34,000 of compensation expense for these options in fiscal year 2016 as the requisite service period for vesting was not completed. No additional compensation expense for these options was recorded since the termination date for our former CEO.

On July 1, 2016 we granted 280,000 and 120,000 performance-based stock options to our CEO and Chief Financial Officer (“CFO”), respectively. The options vest based on the achievement of company performance targets relating to our non-GAAP earnings per share in future periods. If the criteria are met, the options are scheduled to vest over a four-year period, with one-fourth vesting after 12 months from the date of the grant and the remaining shares vesting in equal monthly installments over the remaining three years, subject to the CEO’s and CFO’s continued service with us. As of July 3, 2016, we did not record any compensation expense associated with these performance-based stock options.

Options exercised for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Intrinsic value of options exercised	$	521	$	426

15

RSU Activities

Our RSU transactions during the three months ended July 3, 2016 are summarized as follows:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
				Grant-Date		Term		Value
	Shares			Fair Value		(in years)		(in thousands)
Unvested at March 27, 2016		590,833		$	9.39		1.45	$	3,108
Granted		169,800			7.20
Issued and released		(51,566	)		9.99
Forfeited		(123,196	)		9.39
Unvested at July 3, 2016		585,871		$	8.71		1.34	$	4,570
Vested and expected to vest, July 3, 2016		486,294					1.23		3,793

The aggregate intrinsic value of RSUs represents the closing price per share of our stock at the end of the periods presented, multiplied by the number of unvested RSUs or the number of vested and expected to vest RSUs, as applicable, at the end of each period.

For RSUs, stock-based compensation expense was calculated based on our stock price on the date of grant, multiplied by the number of RSUs granted. The grant date fair value of RSUs less estimated forfeitures was recognized on a straight-line basis, over the vesting period. 

In March 2012, we granted 300,000 performance-based RSUs (“PRSUs”) to our then CEO. The PRSUs were scheduled to vest in three equal installments at the end of fiscal year 2013 through 2015 with three-year vesting periods for each installment if certain predetermined financial measures were met. If the financial measures were not met, each installment would be forfeited at the end of its respective fiscal year. Due to the departure of our then CEO in October, 2015, we recorded a reversal of $41,000 for these PRSUs in fiscal year 2016, as the requisite service period required for vesting was not completed. No additional compensation expense for these options was recorded since the termination date for our former CEO.

In July 2013, as part of the acquisition of Cadeka, in order to encourage retention of five former Cadeka employees, we agreed to recommend to our Board of Directors in July 2015 a bonus, which, if approved by the Board of Directors, would be settled in RSUs subject to fulfillment of the service period. The ultimate approval of these awards was subject to the discretion of the Board of Directors. We recorded no compensation expense and $0.2 million of non- cash compensation expense for these awards in the three months ended July 3, 2016 and June 28, 2015, respectively. The expense is reported in the other current liabilities line on the condensed consolidated balance sheet as the total amount of bonus was to be settled in variable number of RSUs at the completion of the requisite service period. Such non-cash compensation expense was recorded as part of stock compensation expense in the condensed consolidated statements of operations. In July 2015, the Board of Directors ultimately determined not to approve the granting of these RSUs. In fiscal year 2016 we paid three of these five former Cadeka employees $75,000 in cash in exchange for a release of claims, including any claim such former employees may have to the RSUs described above. As a result of obtaining these releases, the proportional amount of liability net of cash payments was removed from our condensed consolidated balance sheet, with a corresponding increase in additional paid in capital. For the two remaining employees, an amount of $1.2 million is included other liabilities as of July 3, 2016, pending the earlier of a settlement with such former employees or the expiration of the relevant statute of limitations.

In October 2013, we granted 70,000 PRSUs to certain executives. The first 50% of the PRSUs was scheduled to start vesting in three equal installments at the end of fiscal year 2015 with a three-year vesting period if certain performance measures were met. The second 50% of the PRSUs was scheduled to start vesting in three equal installments at the end of fiscal year 2016 with a three-year vesting period if certain performance measures were met. We recorded approximately $18,000 and $39,000 of compensation expense for these awards in the three months ended July 3, 2016 and June 28, 2015, respectively. One of the executives’ employment was terminated in fiscal year 2015.

In August and December 2014, we granted 88,448 PRSUs to certain former iML employees. The PRSUs are scheduled to start vesting in three equal annual installments upon achievement of certain performance measures. We modified all stock awards outstanding in June 2016 for iML employees impacted by the pending sale of the iML entity. Under the modification, a certain portion of outstanding stock awards will early vest at the close of the transaction based on continued employment as of that date. As a result, we recorded a one-time reversal of $311,000 in stock compensation expense related to these stock awards in the three months ended July 3, 2016. The fair value of modified awards that are expected to vest is being recognized ratably over the estimated requisite service period.

16

In July 2016, we granted 60,000 and 30,000 PRSUs to our CEO and CFO, respectively, which vests based on the achievement of company stock price targets in future periods. If the performance criteria are met, the PRSUs will vest over a three-year period, with one-third of the PRSUs vesting after 12 months from the date of grant and the remaining PRSUs vesting in equal quarterly installments over the remaining two years, subject to the CEO and CFO’s continued service with Exar. The value of these awards is estimated using a Monte-Carlo simulation model using the following valuation assumptions:

Expected term of grants (years)	3
Risk-free interest rate	0.76	%
Expected volatility	50	%

For the three months ended July 3, 2016, we did not record any compensation expense related to these PRSUs.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to stock options and RSUs during the fiscal periods presented (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Cost of sales	$	114	$	80
Research and development		246		294
Selling, general and administrative		733		1,349
Total stock-based compensation expense	$	1,093	$	1,723

The amount of stock-based compensation cost capitalized in inventory was immaterial for all periods presented.

Unrecognized Stock-Based Compensation Expense 

The following table summarizes unrecognized stock-based compensation expense related to stock options and RSUs, net of reversals, as of July 3, 2016:

	July 3, 2016
			Weighted
			Average
			Remaining
	Amount		Recognition
	(in thousands)		Period (in years)
Options	$	6,402		2.69
RSUs		1,635		1.50
PRSUs		495		2.22
Total unrecognized stock-based compensation expense	$	8,532

Valuation Assumptions

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based compensation represent our estimates, but these estimates involve inherent uncertainties and the application of management’s judgment, which includes the expected term of the stock-based awards, stock price volatility and forfeiture rates. As a result, if factors change and we use different assumptions, our stock-based compensation expense for future grants could be materially different.

17

We used the following weighted average assumptions to calculate the fair values of options granted during the fiscal periods presented:

	Three Months Ended
	July 3, 2016			June 28, 2015
Expected term of options (years)		4.5			4.7
Risk-free interest rate		1.03	%		1.2	%
Expected volatility		34.9	%		32	%
Expected dividend yield		-			-
Weighted average estimated fair value	$	2.08		$	3.08

NOTE 12. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share excludes dilution and is computed by dividing net loss attributable to Exar by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share reflects the potential dilution that would occur if outstanding stock options to purchase common stock were exercised for common stock, using the treasury stock method, and the common stock underlying outstanding RSUs was issued.

The following table summarizes our net income (loss) per share for the periods indicated below (in thousands, except per share amounts):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Net income (loss) from continuing operations	$	7,543	$	(2,354	)
Net income (loss) from discontinued operations	$	1,397	$	(156	)
Net income (loss)	$	8,940	$	(2,510	)
Shares used in computation of net income (loss) from continuing operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) from discontinued operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Net income (loss) per share from continuing operations:
Basic	$	0.15	$	(0.05	)
Diluted	$	0.15	$	(0.05	)
Net income (loss) per share from discontinued operations:
Basic	$	0.03	$	-
Diluted	$	0.03	$	-
Net income (loss) per share:
Basic	$	0.18	$	(0.05	)
Diluted	$	0.18	$	(0.05	)

18

NOTE 13. LEASE FINANCING OBLIGATIONS

We have acquired licenses to engineering design tools (“Design Tools”) under capital leases. We acquired licenses to Design Tools of $6.9 million in January 2015 under a two-year license and two three-year licenses with prepayment of $1.0 million, $4.4 million in October 2014 under a three-year license with a prepayment of $1.5 million for the first year license and $0.9 million in July 2012 under a three-year license all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item in the consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets as of July 3, 2016 and March 27, 2016, respectively. The effective interest rates for the Design Tools range from 2.0% to 7.25%.

Amortization expense related to the Design Tools, which was recorded using the straight-line method over the remaining useful life for the periods indicated below, was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	878	$	1,073

During the three months ended July 3, 2016, we recorded an impairment charge of $1.5 million and a restructuring expense of $0.4 million associated with a portion of these Design Tools.

Future minimum lease and sublease income payments for the lease financing obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Design tools
2017 (9 months remaining)	$	3,950
2018		1,529
Total minimum lease payments		5,479
Less: amount representing interest		(851	)
Present value of future minimum lease payments		4,628
Less: short-term lease financing obligations		(3,772	)
Long-term lease financing obligations	$	856

Interest expense for the lease financing obligations for the periods indicated below was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Interest expense	$	38	$	48

In the course of our business, we enter into arrangements accounted for as operating leases related to rental of office space. Rent expenses for all operating leases for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Rent expense	$	100	$	181

19

Our future minimum lease payments for the lease operating obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Facilities
2017 (9 months remaining)	$	1,277
2018		1,239
2019		155
2020		49
Total future minimum lease payments	$	2,720

 We sold our Fremont Campus in May 2016 for a net sales price of $24.1 million. Our Fremont Campus consists of approximately 151,000 square feet of office space and 4.5 acres of partially developed property adjacent to the buildings. Pursuant to the agreement, we have simultaneously leased back a portion of the Real Property through December 2017. Under the Lease Agreement, our financial obligations include a base monthly rent of $86,338 per month for the property located at 48720 Kato Road, and an additional monthly rent of $600 with respect to the portion of the building located at 48710 Kato Road, Fremont, California. We are also responsible for our monthly share of certain expenses related to the leased facilities, including our share of insurance premiums, taxes and common area expenses. We generated a gain on sale of $11.9 million as a result of this sale and leaseback transaction, $2.6 million of the gain has been deferred and is being recognized on a straight-line basis over the term of the lease. During the three months ended July 3, 2016, we recognized amortization of the deferred gain of $0.2 million, which was reflected as reduction of rent in the accompanying condensed consolidated statement of operations. Based on the terms of the agreement, we have classified and are accounting for the lease as an operating lease. The classification as an operating lease required judgment and estimates in developing key assumptions that include, but are not limited to, the lease term, the discount rate used in discounting future lease payments and the economic useful life of the asset.

NOTE 14.      COMMITMENTS AND CONTINGENCIES

In early 2012, we received correspondences from the California Department of Toxic Substance Control (“DTSC”) regarding its ongoing investigation of hazardous wastes and hazardous waste constituents at a former regulated treatment facility in San Jose, California. In 1985, MPSI made two separate permitted hazmat deliveries to a licensed and regulated site for treatment. DTSC has requested that former or current property owners and companies, that had hazardous waste treated at the site participate in further site assessment and limited remediation activities. We have entered into various agreements with other named generators, former property owners and DTSC limited to the investigation of the sites’ condition and evaluation, and selection of appropriate remedial measures. The designated environmental consulting firm has prepared and submitted to DTSC a site profile and is currently engaged in further study. Given that this matter is under investigation and discussions are ongoing with respect to various related considerations, we are unable to ascertain our exposure, if any, or estimate a reasonably possible range of loss. In the opinion of management, after consulting with legal counsel, and taking into account insurance coverage, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our financial statements, as a whole.

In a letter dated March 27, 2012, we were notified by the Alameda County Water District (“ACWD”) of the recent detection of volatile organic compounds at a site adjacent to a facility that was previously owned and occupied by Sipex. The letter was also addressed to prior and current property owners and tenants (collectively “Property Owners”). ACWD requested that the Property Owners carry out further site investigation activities to determine if the detected compounds are emanating from the site or simply flowing under it. In June 2012, the Property Owners filed with ACWD a report of its investigation/characterization activities and analytical data obtained. Accumulated data suggests that compounds of concern in groundwater appear to be from an offsite source. ACWD is investigating alternative upgradient sites. Given that this investigation is ongoing and we have not received any recent communications from ACWD, we are unable to ascertain our exposure, if any, or estimate a reasonably possible range of loss. In the opinion of management, after consulting with legal counsel, and taking into account insurance coverage, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our financial statements, as a whole.

We warrant all custom products and application specific products, including cards and boards, against defects in materials and workmanship for a period of 12 months, and occasionally we may provide an extended warranty from the delivery date. We warrant all of our standard products against defects in materials and workmanship for a period of 90 days from the date of delivery. Reserve requirements are recorded in the period of sale and are based on an assessment of the products sold with warranty, historical warranty costs incurred and customer/product specific circumstances. Our liability is generally limited, at our option, to replacing, repairing, or issuing a credit (if it has been paid for). Our warranty does not cover damage which results from accident, misuse, abuse, improper line voltage, fire, flood, lightning or other damage resulting from modifications, repairs or alterations performed other than by us, or resulting from failure to comply with our written operating and maintenance instructions.

20

Our warranty reserve balances as of July 3, 2016 and March 27, 2016 were immaterial.

In the ordinary course of business, we may provide for indemnification of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us, services to be provided by us, intellectual property infringement claims made by third parties or, matters related to our conduct of the business. In addition, we have entered into indemnification agreements with our directors and certain of our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. We maintain director and officer liability insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers, and former directors and officers of acquired companies, in certain circumstances.

It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement and claims. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our condensed consolidated financial statements.

NOTE 15. LEGAL PROCEEDINGS

From time to time, we are involved in various claims, legal actions and complaints arising in the normal course of business. We are not a named party to any ongoing lawsuit or formal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our financial position, results of operations or cash flows.

NOTE 16. INCOME TAXES

During the three months ended July 3, 2016, we recorded an income tax expense from continuing operations of approximately $0.3 million. The income tax expense was primarily due to federal alternative minimum taxes on the building sale gain. During the three months ended June 28, 2015, we recorded an income tax benefit from continuing operations of approximately $0.8 million.  The income tax benefit was primarily due to losses benefited against income from discontinued operations.

During the three months ended July 3, 2016, the unrecognized tax benefits increased by $0.1 million to $16.9 million primarily related to the increase of unrecognized tax benefit on R&D tax credits, offset by the lapsing of the statute of limitations. If recognized, $13.9 million of these unrecognized tax benefits (net of federal benefit) would be recorded as a reduction of future income tax provision before consideration of changes in valuation allowance.

Estimated interest and penalties related to the income taxes are classified as a component of the provision for income taxes in the condensed consolidated statement of operations. Accrued interest and penalties consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Accrued interest and penalties	$	1,433	$	1,364

Our major tax jurisdictions are the United States federal and various states, Canada, China, Hong Kong, Korea and certain other foreign jurisdictions. The fiscal years 2003 through 2015 remain open and subject to examinations by the appropriate governmental agencies in the United States and certain of our foreign jurisdictions.

NOTE 17. SEGMENT AND GEOGRAPHIC INFORMATION

Our foreign operations are conducted primarily through our wholly-owned subsidiaries in Canada, China, France, Germany, Japan, Malaysia, South Korea, Taiwan and the United Kingdom. Our principal markets include Asia Pacific region, North America, and Europe. Net sales by geographic areas represent direct sales principally to original equipment manufacturers (“OEM”), or their designated subcontract manufacturers, and to distributors (affiliated and unaffiliated) who buy our products and resell to their customers.

21

Our net sales by geographic area for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
China	$	11,400	$	8,803
United States		4,674		6,598
Taiwan		1,850		1,616
Korea		696		624
Singapore		3,498		4,185
Germany		2,421		3,673
Rest of world		2,597		2,684
Total net sales	$	27,136	$	28,183

Substantially all of our long-lived assets as of July 3, 2016 and March 27, 2016, respectively, were located in the United States.

The following distributors and customers accounted for 10% or more of our net sales in the periods indicated:

	Three Months Ended
	July 3,			June 28,
	2016			2015
Distributor A +		28	%		40	%
Distributor B		16	%		10	%
Distributor D		12	%		*
Distributor C		11	%		*

—————

*     Net sales for this distributor or customer for this period were less than 10% of our net sales.

+      Related Party

No other distributor or customer accounted for 10% or more of the net sales for the three months ended July 3, 2016 or June 28, 2015, respectively.

The following distributors and customers accounted for 10% or more of our net accounts receivable as of the dates indicated:

	July 3,			March 27,
	2016			2016
Distributor B		22	%		13	%
Distributor D		18	%		14	%
Distributor A+		17	%		17	%
Distributor C		12	%		14	%
Customer A		*			12	%

____________

*      Accounts receivable for this customer for this period were less than 10% of total account balance.

+      Related Party

No other distributor or customer accounted for 10% or more of the net accounts receivable as of July 3, 2016 or March 27, 2016, respectively.

22

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, as well as information contained in “Part II, Item 1A.” below and elsewhere in this Quarterly Report on Form 10-Q, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are generally written in the future tense and/or may generally be identified by words such as “will,” “may,” “should,” “would,” “could,” “expect,” “suggest,” “possible,” “potential,” “target,” “commit,” “continue,” “believe,” “anticipate,” “intend,” “project,” “projected,” “positioned,” “plan,” or other similar words. Forward-looking statements contained in this Quarterly Report include, among others, statements made in Part I, Item 2—“Management’s Discussion and Analysis of Financial Condition and Results of Operations— Third Quarter of Fiscal 2016 Executive Summary” and elsewhere regarding (1) our future strategies and target markets, (2) our future revenues, gross profits and margins, (3) our future research and development (“R&D”) efforts and related expenses, (4) our future selling, general and administrative expenses (“SG&A”), (5) our cash and cash equivalents, short-term marketable securities and cash flows from operations being sufficient to satisfy working capital requirements and capital equipment needs for at least the next 12 months, (6) the possibility of future acquisitions and investments, (7) our ability to accurately estimate our assumptions used in valuing stock-based compensation, (8) our ability to estimate and reconcile distributors’ reported inventories to their activities, (9) our ability to estimate future cash flows associated with long-lived assets, and (10) the volatile global economic and financial market conditions. These statements reflect our current views with respect to future events and our potential financial performance and are subject to risks and uncertainties that could cause our business, operating results and financial condition to differ materially and adversely from what is projected or implied by any forward- looking statement included in this Quarterly Report. Factors that could cause actual results to differ materially from those stated herein include, but are not limited to: the information contained under the caption “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II, Item 1A. Risk Factors,” as well as those risks discussed in our Annual Report on Form 10-K for the fiscal year ended March 27, 2016. We disclaim any obligation to update information in any forward-looking statement, except as required by law.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the condensed consolidated financial statements and notes thereto, included in this Quarterly Report and our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 27, 2016, as filed with the Securities and Exchange Commission (“SEC”). Our results of operations for the three months ended July 3, 2016 are not necessarily indicative of results to be expected for any future period.

Business Overview

Exar Corporation (“Exar,” “us,” “our” or “we”) designs, develops and markets analog mixed-signal application solutions serving for the Industrial, Infrastructure, Automotive, and Audio/Video markets. Our comprehensive knowledge of end-user markets together with our experience in analog and mixed signal technology has enabled us to provide innovative solutions designed to meet the needs of the evolving connected world. Applying both analog and mixed signal technologies, our products are deployed in a wide array of applications such as industrial, instrumentation and medical equipment, networking and telecommunication systems, servers, LED lighting solutions, and digital video recorders. We provide customers with a breadth of component products and sub-system solutions based on advanced silicon integration. Our product portfolio includes Connectivity, Mixed-signal, Power Management, High Performance Analog, Video Processors, data compression and encryption, and LED lighting solutions.

We market our products worldwide with sales offices and personnel located throughout the Americas, Europe, and Asia. Our products are also sold through channel partners, including distributors and manufacturers’ representatives. These channel partners are assisted and managed by our regional sales teams. In addition to our regional sales teams, we also employ a worldwide team of field application engineers (“FAE”) to work directly with our customers.

Our international sales are denominated in U.S. dollars. Our international related operating expenses expose us to fluctuations in currency exchange rates because our foreign operating expenses are denominated in foreign currencies while our sales are denominated in U.S. dollars. Our operating results are subject to fluctuations as a result of several factors that could materially and adversely affect our future profitability as described in “Part II, Item 1A. Risk Factors—Our Financial Results May Fluctuate Significantly Because Of A Number Of Factors, Many Of Which Are Beyond Our Control.”

23

First Quarter of Fiscal 2017 Executive Summary

Recent Developments

Executive Management Changes. In May 2016, the Board of Directors appointed Ryan A. Benton as Exar’s Chief Executive Officer and a member of the Board of Directors. Mr. Benton had been serving as Exar’s Chief Financial Officer.

In May 2016, the Board of Directors appointed Keith Tainsky as Exar’s Chief Financial Officer. Mr. Tainsky had been serving as Exar’s Senior Director of Finance.

On June 10, 2016, Richard L. Leza notified our board that he had decided not to stand for re-election and resigned as a director, Executive Chairman and the Chairman of the Board, effective June 30, 2016.

iML Sale. On June 1, 2016, we entered into an agreement to sell 100% of the issued and outstanding shares of Integrated Memory Logic Limited (“iML”), a wholly-owned subsidiary. The sale is expected to close before the end of our current fiscal year. As a result, we report the operating results of iML in the net income (loss) from discontinued operations line in the condensed consolidated statements of operations for all periods presented. In addition, the assets and liabilities associated with iML are reported as assets held for sale and liabilities held for sale, as appropriate, in the condensed consolidated balance sheets. Totals for discontinued operation cash flows are separately reported within operating, investing and financing activities within the condensed consolidated statements of cash flows. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect Exar’s continuing operations. See “Note 3-Discontinued Operations”.

Sale-Leaseback. We sold our Fremont Campus in May 2016 for a net sales price of $24.1 million. Our Fremont Campus consists of approximately 151,000 square feet of office space and 4.5 acres of partially developed property adjacent to the buildings. Pursuant to the agreement, we have simultaneously leased back a portion of the Real Property through December 2017. Under the Lease Agreement, our financial obligations includes a base monthly rent of $86,338 per month for the property located at 48720 Kato Road, and an additional monthly rent of $600 with respect to the portion of the building located at 48710 Kato Road, Fremont, California. We are also responsible for our monthly share of certain expenses related to the leased facilities, including our share of insurance premiums, taxes and common area expenses. We generated a gain on sale of $11.9 million as a result of this sale and leaseback transaction, $2.6 million of the gain has been deferred and is being recognized on a straight-line basis over the term of the lease. During the three months ended July 3, 2016, we recognized amortization of the deferred gain of $0.2 million, which was reflected as reduction of rent in the accompanying condensed consolidated statement of operations. Based on the terms of the agreement, we have classified and are accounting for the lease as an operating lease. The classification as an operating lease required judgment and estimates in developing key assumptions that include, but are not limited to, the lease term, the discount rate used in discounting future lease payments and the economic useful life of the asset.

Financial Summary

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2017 and 2016 consist of 53 and 52 weeks, respectively. The first quarter of fiscal years 2017 and 2016 consist of 14 and 13 weeks, respectively. The fourth quarter of fiscal year 2016 also consisted of 13 weeks.

Net sales increased $1.8 million for the first quarter of fiscal year 2017, or 7%, compared to the fourth quarter of fiscal year 2016. First quarter net sales were positively impacted by the Chinese New Year rebound and the additional week of sales during the current fiscal quarter, driven by advanced product growth but offset by channel inventory reduction. Net income from continuing operations for the first quarter of fiscal year 2017 was $7.5 million, compared with a loss of $0.4 million for the fourth quarter of fiscal year 2016. Net income for the first quarter of fiscal 2017 includes a gain of $9.3 million associated with the sale of our Fremont Campus. We continue to manage our operating expenses while continuing to invest an appropriate amount in research and development projects for future products.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies during the three months ended July 3, 2016, as compared to the previous disclosures in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 27, 2016.

24

Results of Operations

Our Statements of Operations data were as follows for the periods presented (in thousands, except percentages):

	Three Months Ended
	July 3,			June 28,
	2016			2015			Change
Net Sales:	$	27,136		$	28,183		$	(1,047	)	(4	%)
Cost of sales:
Cost of sales		10,411			9,776			635		6	%
Cost of sales-related party		2,769			4,916			(2,147	)	(44	%)
Amortization of purchased intangible assets		594			613			(19	)	(3	%)
Total cost of sales		13,774			15,305			(1,531	)	(10	%)
Gross profit		13,362			12,878			484		4	%
Operating expenses:
Research and development		4,931			6,429			(1,498	)	(23	%)
Selling, general and administrative		6,564			7,746			(1,182	)	(15	%)
Merger and acquisition costs		855			544			311		57	%
Restructuring charges and exit costs, net		923			1,230			(307	)	(25	%)
Impairment of design tools		1,519			-			1,519
Gain of land and building under sale-leaseback arrangement		(9,300	)		-			(9,300	)
Total operating expenses		5,492			15,949			(10,457	)	(66	%)
Income (loss) from continuing operations		7,870			(3,071	)		10,941		(356	%)
Other income and expense, net:
Interest income and other, net		2			(22	)		24		(109	%)
Interest expense		(38	)		(48	)		10		(21	%)
Income (loss) before income taxes		7,834			(3,141	)		10,975		(349	%)
Provision for (benefit from) income taxes		291			(787	)		1,078		(137	%)
Net income (loss) from continuing operations		7,543			(2,354	)		9,897		(420	%)
Net income (loss) from discontinued operations		1,397			(156	)		1,553		(996	%)
Net income (loss) attributable to Exar Corporation	$	8,940		$	(2,510	)	$	11,450		(456	%)

Net Sales

Geographically, our net sales in dollars and as a percentage of total net sales were as follows for the periods presented (in thousands, except percentages):

	Three Months Ended
	July 3,				June 28,
	2016				2015				Change
Net sales:
Asia	$	18,876	70	%	$	16,625	59	%		14	%
Americas		4,904	18	%		6,829	24	%		-28	%
Europe		3,356	12	%		4,729	17	%		-29	%
Total	$	27,136	100	%	$	28,183	100	%		-4	%

Net sales decreased $1.0 million, or 4% compared to the same period in the prior fiscal year. The decrease was mainly due to a $1.9 million and $1.4 million decrease in sales volume in the Americas and Europe markets, respectively, partially offset by a $2.3 million increase of sales volume in the Asia market. The decrease in net sales was primarily attributable to $1 million from the sale of certain Intellectual Property in the first quarter of the prior year. The increasing sales resulting from the impact of an additional week in the first quarter of fiscal 2017 was offset by a reduction in channel inventory.

25

Gross Profit

Gross profit as a percentage of net sales for the three months ended July 3, 2016 increased from 45.7% in the same period in the prior fiscal year to 49.2%. The increase was primarily a result of our continued cost reduction efforts leading to decreased costs as well as increased Advanced product sales which generally sell at higher margins. This increase was partially offset by an increase in our inventory reserve of $0.8 million. This improvement in overall gross margin percentage resulted in an increase in gross profits of 4% despite the decrease in overall revenues.

We believe that gross profit will fluctuate as a percentage of sales and in absolute dollars due to, among other factors, the inclusion of product mix, the amortization of the costs of acquired intangibles, product and manufacturing costs, our ability to leverage fixed operational costs, shipment volumes, competitive pricing pressure on our products, and currency fluctuations.

Research and Development (“R&D”)

R&D expenses for the three months ended July 3, 2016 decreased by $1.5 million as compared to the same period a year ago. The decrease was primarily due to our strategic restructuring activities resulting in a decrease in average headcount combined with a decrease in depreciation expense of $0.2 million associated with design tools impaired subsequent to the first quarter of the prior fiscal year.

We believe that R&D expenses will fluctuate in absolute dollars due to, among other factors, the inclusion of costs associated with increased investment in software development, variable compensation, incentives, annual merit increases and fluctuations in reimbursements under a research and development contract.

Selling, General and Administrative (“SG&A”)

SG&A expenses for the three months ended July 3, 2016 decreased $1.2 million as compared with the same period a year ago. The decrease was mainly due to a decrease in average headcount resulting from our strategic restructuring activities. Stock based compensation also decreased due to the departure of our former Chief Executive Officer during the third quarter of the prior fiscal year.

We believe that SG&A expenses will fluctuate in absolute dollars due to, among other factors, the inclusion of costs associated with variable commissions, legal costs, variable compensation, incentives and annual merit increases.

Impairment of Design Tools

During the first quarter of fiscal 2017, we recorded an impairment charge of $1.5 million attributable to design tools licensed from third parties. The impairment was due to the restructuring activities during the quarter which resulted in the abandonment of certain design tools.

Gain on sale of land and building under a sale-leaseback arrangement

During the first fiscal quarter of 2017, we sold our Fremont Campus resulting in a gain of $11.9 million. Due to the sale and leaseback provision in the sale agreement, $2.6 million of the gain was deferred and is being recognized on a straight-line basis over the term of the lease. This resulted in a gain of $9.3 million recorded during the quarter.

Restructuring Charges and Exit Costs

Restructuring charges and exit costs for the three months ended July 3, 2016, decreased $0.3 million as compared with the same period a year ago. See “Note 10 – Restructuring Charges and Exit Costs.”

Interest Income and Other, Net

Interest income and other, net primarily consists of interest income, foreign exchange gains or losses, and realized gains or losses on marketable securities.

Interest income and other, net during the three months ended July 3, 2016 each remained consistent with the same period a year ago.

26

Interest Expense and Other, Net

Interest expense for the three months ended July 3, 2016 decreased approximately $10,000 and is attributable to interest paid on capital leases.

Provision for Income Taxes

During the three months ended July 3, 2016, we recorded an income tax expense from continuing operations of approximately $0.3 million. The income tax expense was primarily due to federal alternative minimum taxes on the building sale gain.  During the three months ended June 28, 2015, we recorded an income tax benefit from continuing operations of approximately $0.8 million.  The income tax benefit was primarily due to losses benefited against income from discontinued operations.

Net Income (Loss) from Discontinued Operations

Net income from discontinued operations for the three months ended July 3, 2016 was $1.4 million compared to a loss of $0.2 million for the same period of the prior year. The increase in net income was primarily attributable to a decrease in average headcount resulting from our strategic restructuring activities.

Liquidity and Capital Resources

	Three Months Ended
	July 3,			June 28,
	2016			2015
	(dollars in thousands)
Total cash and cash equivalents	$	85,276		$	55,760
Percentage of total assets		32	%		20	%
Net cash provided by operating activities	$	4,144		$	1,562
Net cash provided by (used in) investing activities		23,926			(105	)
Net cash provided by (used in) financing activities		2,136			(930	)
Net increase in cash and cash equivalents	$	30,206		$	527

The Company has adequate cash and cash equivalents and cash flows to fund its operations for the foreseeable future.

Three months ended July 3, 2016

Cash generated from our operating activities was $4.1 million during the three months ended July 3, 2016. While we recorded net income of $8.9 million, this income included non-cash items such as depreciation and amortization of $2.1 million, stock-based compensation expense of $1.1 million and impairment of design tools of $1.5 million, partially offset by a gain on the sale of our Fremont facility of $9.3 million. Cash flow from changes in assets and liabilities was primarily due to increases in inventory of $1.3 million. The increase was offset by a decrease in deferred income of $1.4 million due to timing of products selling through the distribution channels.

Cash provided from investing activities during the three months ended July 3, 2016 was $23.9 million, primarily from the sale of our Fremont facility.

Cash provided by financing activities during the three months ended July 3, 2016 was $2.1 million which consisted of net receipts of $2.6 million associated with our employee stock plan, partially offset by $0.5 million in repayment of a lease financing obligation.

Three months ended June 28, 2015

Cash provided from our operating activities was $1.6 million during the three months ended June 28, 2015. We recorded a net loss of $2.5 million which included non-cash items such as depreciation and amortization of $2.4 million and stock-based compensation expense of $1.7 million. Cash flow from changes in assets and liabilities was primarily due to decreases in accounts receivable of $3.6 million and an increase in accounts payable of $2.5 million offset by a decrease in deferred income of $2.8 million and a decrease in other current and non-current liabilities of $1.3 million.

Cash used in investing activities during the three months ended June 28, 2015 was $0.1 million due to the purchase of property, plant and equipment.

Cash used in financing activities during the three months ended June 28, 2015 was $0.9 million, which reflects a $0.4 million cash settlement for equity awards and a $0.5 million payment of a lease financing obligation.

27

Recent Accounting Pronouncements

Please refer to “Part I, Item 1. Financial Statements” and “Notes to Condensed Consolidated Financial Statements, Note 2 – Recent Accounting Pronouncements.”

Off-Balance Sheet Arrangements

We have not utilized special purpose entities to facilitate off-balance sheet financing arrangements. However, we have, in the normal course of business, entered into agreements which impose warranty obligations with respect to our products or which obligate us to provide indemnification of varying scope and terms to customers, vendors, lessors and business partners, our directors and executive officers, purchasers of assets or subsidiaries, and other parties with respect to certain matters. These arrangements may constitute “off-balance sheet transactions” as defined in Section 303(a)(4) of Regulation S-K. Please see “Note 14–Commitments and Contingencies” to the condensed consolidated financial statements for further discussion of our product warranty liabilities and indemnification obligations.

As discussed in “Note 14–Commitments and Contingencies,” during the normal course of business, we make certain indemnities and commitments under which we may be required to make payments in relation to certain transactions. These indemnities include non-infringement of patents and intellectual property, indemnities to our customers in connection with the delivery, design, manufacture and sale of our products, indemnities to our directors and officers in connection with legal proceedings, indemnities to various lessors in connection with facility leases for certain claims arising from such facility or lease and indemnities to other parties to certain acquisition agreements. The duration of these indemnities and commitments varies, and in certain cases, is indefinite. We believe that substantially all of our indemnities and commitments provide for limitations on the maximum potential future payments we could be obligated to make. However, we are unable to estimate the maximum amount of liability related to our indemnities and commitments because such liabilities are contingent upon the occurrence of events which are not reasonably determinable.

Contractual Obligations and Commitments

Our contractual obligations and commitments at July 3, 2016 were as follows (in thousands):

	Payments due by period
			Less than			1-3		3-5	More than
Contractual Obligations	Total		1 year		years		years		5 years
Purchase commitments (1)	$	22,750	$	20,404	$	718	$	791	$	837
Operating lease commitments (2)		2,720		1,676		1,032		12		-
Total	$	25,470	$	22,080	$	1,750	$	803	$	837

—————

(1)	We place purchase orders with wafer foundries, back end suppliers and other vendors as part of our normal course of business. We expect to receive and pay for wafers, capital equipment and various service contracts over the next 12 months from our existing cash balances.
(2)	Operating lease payments including real property leases for our worldwide offices.

Other commitments

As of July 3, 2016, our unrecognized tax benefits were $16.9 million, of which $3.4 million was classified as other non-current obligations. We believe that it is reasonably possible that the amount of gross unrecognized tax benefits related to the resolution of income tax matters could be reduced by approximately $0.8 million during the next 12 months as the statute of limitations expires. See “Note 16 – Income Taxes.”                                                  

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk affecting us are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk. As of July 3, 2016, we had cash and cash equivalents of $85.3 million. Cash and cash equivalents consisted of cash and highly liquid money market instruments. We would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest on our portfolio. A hypothetical decrease in market interest rates of 10% from the market rates in effect at July 3, 2016 would cause the fair value of these investments to decrease by an immaterial amount, which would not have significantly impacted our financial position or results of operations. Declines in interest rates over time will result in lower interest income and interest expense.   

28

Foreign Currency Fluctuations. We are exposed to foreign currency fluctuations primarily through our foreign operations. This exposure is the result of foreign operating expenses and cash balances being denominated in foreign currency. Operational currency requirements are typically forecasted for a one-month period. If there is a need to hedge this risk, we may enter into transactions to purchase currency in the open market or enter into forward currency exchange contracts. A hypothetical change of 10% of an exchange rate would not result in a material impact to our financial condition or results of operations.

Except for the foreign exchange rate risk, there have been no material changes in the quantitative or qualitative aspect of our market risk profile since March 27, 2016. For additional information regarding our exposure to certain market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended March 27, 2016.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures (“Disclosure Controls”)

Our management, including our Chief Executive Officer (our principal executive officer) (the “CEO”) and our Chief Financial Officer (our principal financial and accounting officer) (the “CFO”) have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (the “Evaluation”), as of the end of the period covered by this Quarterly Report on Form 10-Q. This Evaluation was performed under the supervision and with the participation of management, including our CEO, as principal executive officer, and CFO, as principal financial officer. Attached as Exhibits 31.1 and 31.2 of this Quarterly Report on Form 10-Q are the certifications of the CEO and the CFO, respectively, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Certifications”). This section of the Quarterly Report on Form 10-Q provides information concerning the Evaluation referred to in the Certifications and should be read in conjunction with the Certifications.

Based on the Evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective at the reasonable assurance level as of July 3, 2016.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

29

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 15 to our unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q for further discussion.

ITEM 1A.      RISK FACTORS

In addition to the cautionary information included in this report, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in our 2016 Annual Report on Form 10-K, filed with the SEC on May 27, 2016, which could materially adversely affect our business, financial condition, and/or results of operations.

Our proposed sale of Integrated Memory Logic, or iML, is subject to a number of conditions beyond our control. Failure to complete the sale within the expected timeframe or at all could materially and adversely affect our future business, results of operations, financial condition and stock price.

On June 1, 2016, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Beijing E-town Chipone Technology Co., Ltd. (the “Buyer”), a limited liability company of the People’s Republic of China, and solely for the purposes of Article 13 and Article 14 of the Purchase Agreement, Beijing E-Town International Investment & Development Co., Ltd., and Chipone Technology Co., Ltd. (collectively, the “Guarantors”). The Purchase Agreement provided that, subject to the terms of the Merger Agreement, we are selling to Buyer 100% of the issued and outstanding shares of iML, a Cayman Islands exempt company and one of our wholly owned subsidiaries (the “Sale”). iML is a leading provider of power management and color calibration solutions for the flat-panel display and LED lighting markets. The purchase price for the sale transaction is $136,000,000, payable in cash, and adjusted for iML’s cash and debt at closing. The purchase price is subject to a downward adjustment if iML’s working capital balance as of the closing of the transaction falls below an agreed upon amount.

The consummation of the Sale is subject to certain conditions, including, without limitation, approval of the transaction by the Committee on Foreign Investment in the United States, approvals from certain PRC governmental authorities and Taiwan government authorities. We cannot predict whether and when these conditions will be satisfied. If one or more of these conditions is not satisfied, and as a result, we do not complete the Sale, or in the event the proposed Sale is not completed or is delayed for any other reason, our business, results of operations, financial condition and stock price may be harmed, including as a result of the following:

• management’s and our employees’ attention may be diverted from our day-to-day operations as they focus on matters related to preparing for the divestiture of iML or seek other divestment approaches in the event the sale is not consummated;

• we could potentially lose customers or vendors, new customer or vendor contracts could be delayed or decreased and we may have difficulty hiring and retaining new employees;

• we could potentially lose key employees, particularly key employees of iML, if such employees experience uncertainty about their future roles with us and decide to pursue other opportunities in light of the proposed Sale;

• we have agreed to restrictions in the Purchase Agreement that limit how we conduct the iML business prior to the consummation of the Sale, including, among other things, restrictions on our ability to make certain capital expenditures in support of iML and committing to operating iML in the ordinary course of business and consistent with past practices. These restrictions may not be in our best interests as an independent company, and may disrupt or otherwise adversely affect our business and our relationships with our customers, prevent us from pursuing otherwise attractive business opportunities, limit our ability to respond effectively to competitive pressures, industry developments and future opportunities, and otherwise harm our business, financial results and operations;

• we have incurred and expect to continue to incur expenses related to the Sale, such as legal, financial advisory and accounting fees, and other expenses that are payable by us whether or not the proposed Sale is completed;

• activities related to the Sale and related uncertainties may lead to a loss of revenue and market position that we may not be able to regain if the proposed Sale does not occur; and

• the failure to, or delays in, consummating the Sale may result in a negative impression of us with customers, potential customers or the investment community.

The occurrence of these or other events individually or in combination could have a material adverse effect on our business, results of operations, financial condition and stock price.

30

The Purchase Agreement contains provisions that could discourage a potential competing acquirer of iML and could also have the practical impact of discouraging a potential acquisition of Exar.

The Purchase Agreement contains “no solicitation” provisions that restrict our ability to solicit, initiate, or knowingly encourage, facilitate or induce third party proposals for the acquisition of iML. In addition, our sale of iML could have the practical impact of discouraging a potential acquisition of Exar until the sale of iML is consummated even though the Purchase Agreement contains an exception from the “no solicitation” provisions that allow us to solicit, initiate and knowingly encourage third party proposals for the sale of Exar, provided that the iML business is excluded from these discussions.

These provisions could discourage a potential third party acquirer from considering or proposing an acquisition of iML, even if it were prepared to pay a higher price than what would be received in the Sale for iML to Buyer. If the Purchase Agreement is terminated and we determine to seek another transaction for the sale of iML, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Sale.

If we consummate the sale of iML, we have agreed to indemnify Buyer for up to the full purchase price for breaches of representations and warranties, covenants and other matters under the Purchase Agreement. If we are required to make indemnification payments, we may not recognize the anticipated benefits from the Sale of iML

Under the terms of the Purchase Agreement, if we consummate the sale of iML, we have agreed to indemnify Buyer for breaches of representations and warranties, covenants and other matters. We have agreed to place $5,000,000 of the total purchase price into an escrow account for a period of 18 months to partially secure our indemnification obligations under the Purchase Agreement. Our indemnification obligations for breaches of representations and warranties survive 12 months from the closing of the transaction, except for breaches of representations and warranties covering intellectual property, which survive 18 months, and breaches of representations and warranties of certain fundamental representations, which survive until the expiration of the applicable statute of limitations. Our maximum indemnification obligations for breaches of representations and warranties, other than intellectual property and fundamental representations, is $13,600,000, our maximum indemnification obligations for breaches of intellectual property representations is $34,000,000, and in the case of fundamental representations, our maximum indemnity obligation is the full purchase price amount. The aggregate amount recovered by Buyer in accordance with the indemnification provisions with respect to matters that are subject to the intellectual property representation, together with the aggregate amount recovered by Buyer in accordance with the indemnification provisions with respect to matters that are subject to the general representations and warranties (other than fundamental representations), will in no event exceed $34,000,000. If we are required to pay any amount to Buyer as a result of these indemnification obligations, which may include the payment of a material amount or all of the purchase price consideration, we may not obtain the expected benefits of the sale of iML, even though we will have no recourse to recover the iML business after the consummation of the Sale.

We will incur significant costs in connection with the Sale of iML, whether or not it is consummated.

We will incur substantial expenses related to the Sale, whether or not it is completed. Payment of these expenses could adversely affect our operating results and financial condition.

ITEM 6. EXHIBITS

(a)Exhibits required by Item 601 of Regulation S-K

See the Exhibit Index, which follows the signature page to this Quarterly Report on Form 10-Q.

31

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q of Exar Corporation to be signed on its behalf by the undersigned thereunto duly authorized.

		EXAR CORPORATION (Registrant)
August 10, 2016	By	/s/ Keith Tainsky
		Keith Tainsky Chief Financial Officer (On the Registrant’s Behalf and as Principal Financial Officer)

August 10, 2016	By	/s/ Jing Lin
		Jing Lin Chief Accounting Officer (On the Registrant’s Behalf and as Principal Accounting Officer)

32

INDEX TO EXHIBITS

		Incorporated by Reference
Exhibit Number	Exhibit	Form	File No.	Exhibit	Filing Date	Filed Herewith
2.1	Share Purchase Agreement, dated June 1, 2016 by and between Exar Corporation and Beijing E-town Chipone Technology Co., Ltd., a limited liability company of the People’s Republic of China, and solely for the purposes of Article 13 and Article 14 of the Purchase Agreement, Beijing E-Town International Investment & Development Co., Ltd., and Chipone Technology (Beijing) Co., Ltd.*	8-K	01-36012	2.1	6/03/2016
10.1	Purchase Agreement, dated May 9, 2016 by and between Exar Corporation and Asus Computer International	8-K	01-36012	10.1	5/10/2016
10.2	Form of Triple Net Lease to be entered into between Exar Corporation and Asus Computer International	8-K	01-36012	10.2	5/10/2016
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)					X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	XBRL Taxonomy Extension Presentation					X

*Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Exar agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedules upon requests.

¹ The certifications contained in Exhibit 32.1 and 32.3 are not deemed “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934 and are not to be incorporated by reference into any filing of Exar under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the filing specifically incorporates by reference.

33 

EX-31.1

EXHIBIT 31.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

I, Ryan A. Benton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2016

/s/    Ryan A. Benton

Ryan A. Benton        

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

PRINCIPAL FINANCIAL OFFICER CERTIFICATION

I, Keith Tainsky, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Exar Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2016

/s/ Keith Tainsky

Keith Tainsky

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Ryan A. Benton, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Exar Corporation on Form 10-Q for the period ended July 3, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Exar Corporation.

Date: August 10, 2016

/s/    Ryan A. Benton

Ryan A. Benton         

Chief Executive Officer

(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Keith Tainsky, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Exar Corporation on Form 10-Q for the period ended July 3, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Exar Corporation.

Date: August 10, 2016

/s/ Keith Tainsky

Keith Tainsky

Chief Financial Officer

(Principal Financial Officer)

XML

Document And Entity Information - shares	3 Months Ended
	Jul. 03, 2016	Aug. 05, 2016
Document Information [Line Items]
Entity Registrant Name	EXAR CORPORATION
Entity Central Index Key	0000753568
Trading Symbol	exar
Current Fiscal Year End Date	--04-02
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		49,574,599
Document Type	10-Q
Document Period End Date	Jul. 03, 2016
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Current assets:
Cash and cash equivalents	$ 85,276	$ 55,070
Accounts receivable (net of allowances of $886 and $809)	15,539	16,130
Accounts receivable, related party (net of allowances of $425 and $617)	3,184	3,247
Inventories	22,104	20,807
Other current assets	2,179	1,922
Assets held for sale	92,688	93,911
Total current assets	220,970	191,087
Property, plant and equipment, net	5,159	20,299
Goodwill	31,613	31,613
Intangible assets, net	11,012	11,735
Other non-current assets	1,006	639
Total assets	269,760	255,373
Current liabilities:
Accounts payable	11,312	11,258
Accrued compensation and related benefits	2,273	2,984
Deferred income and allowances on sales to distributors	3,213	3,053
Deferred income and allowances on sales to distributor, related party	5,885	4,683
Other current liabilities	12,299	10,669
Liabilities held for sale	2,479	3,470
Total current liabilities	37,461	36,117
Long-term lease financing obligations	856	1,285
Other non-current obligations	4,314	3,422
Total liabilities	42,631	40,824
Commitments and contingencies (Notes 14, 15 and 16)
Stockholders' equity:
Common stock, $.0001 par value; 100,000,000 shares authorized; 48,998,725 and 48,545,311 shares outstanding	5	5
Additional paid-in capital	532,847	529,207
Accumulated deficit	(305,723)	(314,663)
Total stockholders’ equity	227,129	214,549
Total liabilities and stockholders’ equity	$ 269,760	$ 255,373

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Related Party [Member]
Accounts receivable, allowances	$ 425	$ 617
Accounts receivable, allowances	$ 886	$ 809
Common stock par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares outstanding (in shares)	48,998,725	48,545,311

XML

Condensed Consolidated Statement of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Continuing Operations [Member]
Net income (loss) per share:
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927
Discontinued Operations [Member]
Net income (loss) per share:
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927
Net sales	$ 19,636	$ 16,806
Net sales, related party	7,500	11,377
Total net sales	27,136	28,183
Cost of sales	(10,411)	(9,776)
Cost of sales, related party	2,769	4,916
Amortization of purchased intangible assets	594	613
Total cost of sales	13,774	15,305
Gross profit	13,362	12,878
Research and development	4,931	6,429
Selling, general and administrative	6,564	7,746
Merger and acquisition costs	855	544
Restructuring Charges	923	1,230
Asset Impairment Charges	1,519
Gain on sale of land and building under sale-leaseback arrangement	(9,300)
Total operating expenses, net	5,492	15,949
Income (loss) from operations	7,870	(3,071)
Interest income and other, net	2	(22)
Interest expense	(38)	(48)
Total other expense, net	(36)	(70)
Income (loss) before income taxes	7,834	(3,141)
Income Tax Expense (Benefit)	291	(787)
Net income (loss) from continuing operations	7,543	(2,354)
Net income (loss) from discontinued operations (See Note 3)	1,397	(156)
Net income (loss) and comprehensive income (loss)	$ 8,940	$ (2,510)
Basic (in dollars per share)	$ 0.15	$ (0.05)
Diluted (in dollars per share)	0.15	(0.05)
Basic (in dollars per share)	0.03
Diluted (in dollars per share)	0.03
Basic (in dollars per share)	0.18	(0.05)
Diluted (in dollars per share)	$ 0.18	$ (0.05)
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Cash flows from operating activities:
Net income (loss)	$ 8,940	$ (2,510)
Income (loss) from discontinued operations	1,397	(156)
Income (loss) from continuing operations	7,543	(2,354)
Adjustments to reconcile income from continuing operations to net cash flows from operating activities:
Depreciation and amortization	2,104	2,381
Gain on sale of land and building under sale-leaseback arrangement	(9,300)
Amortization of deferred gain on sale-leaseback arrangement	(199)
Stock-based compensation expense	1,103	1,722
Impairment of design tools	1,519
Changes in operating assets and liabilities:
Accounts receivable	654	3,641
Inventories	(1,297)	(518)
Prepaid expenses, other current assets and other assets	(6)	(862)
Accounts payable	40	2,459
Accrued compensation and related benefits	(711)	(185)
Deferred income	1,362	(2,808)
Other current and non-current liabilities	(245)	(1,284)
Net cash provided by operating activities - continuing operations	2,567	2,192
Net cash provided by (used in) operating activities - discontinued operations	1,577	(630)
Net cash provided by operating activities	4,144	1,562
Cash flows from investing activities:
Purchases of property, plant and equipment and intellectual property, net	(125)	(105)
Sale of land and building under sale-leaseback arrangement	24,051
Net cash provided by (used in) investing activities - continuing operations	23,926	(105)
Net cash provided by investing activities - discontinued operations
Net cash provided by (used in) investing activities	23,926	(105)
Cash flows from financing activities:
Proceeds from issuance of common stock	2,673	966
Purchase of stock for withholding taxes on vested restricted stock	(84)	(1,083)
Cash settlement of equity award		(354)
Payments of lease financing obligations	(453)	(459)
Net cash provided by (used in) financing activities - continuing operations	2,136	(930)
Net cash provided by financing activities - discontinued operations
Net cash provided by (used in) financing activities	2,136	(930)
Net increase in cash and cash equivalents	30,206	527
Cash and cash equivalents at the beginning of the period	55,070	55,233
Cash and cash equivalents at the end of the period	$ 85,276	$ 55,760

XML

Note 1 - Organization and Basis of Presentation

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Description of Business—

Exar Corporation (“Exar,” “us,” “our” or “we”) was incorporated in California in 1971 and reincorporated in Delaware in 1991.

Exar designs, develops and markets analog mixed-signal solutions serving the Industrial, Infrastructure, Automotive, and Audio/Video markets. Our comprehensive knowledge of end-user markets along our experience in analog and mixed signal technology has enabled us to provide innovative solutions designed to meet the needs of the evolving connected world. Applying both analog and mixed signal technologies, our products are deployed in a wide array of applications such as industrial, instrumentation and medical equipment, networking and telecommunication systems, servers, LED lighting solutions, and digital video recorders. We provide customers with a breadth of component products and sub-system solutions based on advanced silicon integration. Exar’s product portfolio includes Connectivity, Mixed-signal, Power Management, High Performance Analog, Processors and LED lighting.

Basis of Presentation and Use of Management Estimates—

The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 27, 2016

as filed with the SEC. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, that we believe are necessary for a fair statement of Exar’s financial position as of July 3, 2016 and our results of operations for the three months ended July 3, 2016 and June 28, 2015, respectively. These condensed consolidated financial statements are not necessarily indicative of the results to be expected for the entire year

.

The financial statements include management’s estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Actual results could differ from those estimates, and material effects on operating results and financial position may result.

Certain reclassifications have been made to the prior year consolidated financial statements to conform to the current year’s presentation. Such reclassification had no effect on previously reported results of operations or stockholders’ equity.

Our fiscal years consist of 52 or 53 weeks. In a 52-week year, each fiscal quarter consists of 13 weeks. Fiscal years 2017 and 2016 consist of 53 and 52 weeks, respectively. The first quarter of fiscal years 2017 and 2016 consist of 14 and 13 weeks, respectively.

Discontinued Operations

—

On June 1, 2016, we entered into an agreement to sell 100% of the issued and outstanding shares of Integrated Memory Logic Limited (“iML”), a wholly-owned subsidiary. The sale is expected to close before the end of our current fiscal year. As a result, we report the operating results of iML in the net income (loss) from discontinued operations line in the condensed consolidated statements of operations for all periods presented. In addition, the assets and liabilities associated with iML are reported as assets held for sale and liabilities held for sale, in the condensed consolidated balance sheets. Totals for discontinued operation cash flows are separately reported within operating, investing and financing activities within the condensed consolidated statements of cash flows. Unless otherwise indicated, the disclosures accompanying the condensed consolidated financial statements reflect the Company’s continuing operations. See “

Note 3-

Discontinued Operations”.

XML

Note 2 - Recent Accounting Pronouncements Not Yet Adopted

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of ASU 2014-09 is that revenue should be recognized in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 defines a five-step process in order to achieve this core principle which may require the use of judgment and estimates. The entity may adopt ASU 2014-09 either by using a full retrospective approach for all periods presented or a modified retrospective approach. This standard is effective for annual reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016. We have not yet selected a transition method and are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures requirement. ASU 2014-15 (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). ASU 2014-15 is effective for the annual reporting period ending after December 15, 2016, and for annual periods and interim periods thereafter. We do not expect the adoption of this guidance will have a material impact on our consolidated financial position, results of operations or cash flows.

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. ASU 2015-11 primarily provides that an entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost and net realizable value. The new guidance clarifies that net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This standard is effective for annual reporting periods beginning after December 15, 2016.

We are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU 2016-01 will be effective for

fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption is not permitted.

We are currently evaluating the effect of adoption of this standard, if any, on our consolidated financial position, results of operations or cash flows.

In February 2016, the FASB issued ASU No. 2016-02, 

Leases: (Topic 842)

, to provide guidance on recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements, specifically differentiating between different types of leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from all leases. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from previous GAAP. There continues to be a differentiation between finance leases and operating leases. However, the principal difference from previous guidance is that the lease assets and lease liabilities arising from operating leases should be recognized in the statement of financial position. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are currently evaluating the impact of these amendments on our financial statements.

In March 2016, the FASB issued ASU No. 2016-08, 

Revenue from Contracts with Customers (Topic 606):

 Principal versus Agent Considerations, to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. We are currently evaluating the impact of these amendments on our financial statements.

In March 2016, the FASB issued ASU No. 2016-09

, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

, to reduce complexity in accounting standards involving several aspects of the accounting for employee share-based payment transactions, including (1) the income tax consequences, (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and early adoption is permitted. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition, amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively, amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively, and amendments related to the presentation of excess tax benefits on the statement of cash flows can be applied using either a prospective transition method or a retrospective transition method. An entity that elects early adoption must adopt all of the amendments in the same period. We are currently evaluating the impact of these amendments on our financial statements.

In April 2016, the FASB issued ASU No. 2016-10, 

Revenue from Contracts with Customers, Topic 606 – Identifying Performance Obligations and Licensing

, which clarifies implementation issues that will arise when implementing ASU 2014-09. The amendments in this update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Before an entity can identify its performance obligation in a contract with a customer, the entity first identifies the promised goods or services in the contract. The amendments in this Update are expected to reduce the cost and complexity of applying the guidance on identifying promised goods or services. Topic 606 includes implementation guidance on determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property or a right to access the entity’s intellectual property. The amendments in this Update are intended to improve the operability and understandability of the licensing implementation guidance. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by Update 2014-09). We are currently evaluating the impact of these amendments and the transition alternatives on its consolidated financial statements.

XML

Note 3 - Discontinued Operations

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

NOTE 3.    

DISCONTINUED OPERATIONS

On June 1, 2016, we entered into a definitive agreement to sell iML to Beijing E-town Chipone Technology Co., Ltd for $136 million, payable in cash, and adjusted for iML’s cash and debt at closing. At July 3, 2016, we have classified the iML disposal group as held-for-sale and presented the results of iML’s operations as net income (loss) from discontinued operations in the condensed consolidated statements of operations. The assets and liabilities of iML are recorded as assets held for sale and liabilities held for sale within the condensed consolidated balance sheets, respectively. We are expecting to record a gain on the sale of iML that will be recognized when the transaction closes. The transition services associated with this transaction are expected to be immaterial.

Summarized results from discontinued operations during the first quarter of fiscal 2017 and 216 are as follows:

	July 3,			June 28,
	2016			2015
Net sales	$	13,522		$	12,239
Cost of sales:
Cost of sales		7,702			5,825
Amortization of purchased intangible assets		1,245			1,855
Total cost of sales		8,947			7,680
Gross profit		4,575			4,559
Operating expenses:
Research and development		1,685			1,881
Selling, general and administrative		1,397			1,946
Total operating expenses, net		3,082			3,827
Interest income and other, net		(3	)		(4	)
Income (loss) before income taxes		1,496			736
Provision for income taxes		99			892
Net income (loss) from discontinued operations	$	1,397		$	(156	)

As of July 3, 2016 and March 27, 2016, the aggregate components of assets and liabilities classified as discontinued operations and included in current assets and current liabilities consisted of the following:

	July 3,		March 27,
	2016		2016
Accounts receivables, net	$	14,162	$	13,427
Inventories		7,915		7,944
Deferred income taxes and other assets		118		248
Property, plant and equipment, net		95		88
Goodwill		13,258		13,258
Identifiable intangible assets, net		57,140		58,946
Total assets	$	92,688	$	93,911
Accounts payable	$	1,127	$	2,024
Accrued liabilities		1,307		1,422
Deferred income taxes and other liabilities		45		24
Total liabilities	$	2,479	$	3,470

XML

Note 4 - Balance Sheet Details

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Supplemental Balance Sheet Disclosures [Text Block]

NOTE 4. BALANCE SHEET DETAILS

Our inventories consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Raw materials	$	1,080	$	1,012
Work-in-progress		9,140		9,780
Finished goods		11,884		10,015
Total inventories	$	22,104	$	20,807

Our property, plant and equipment consisted of the following as of the dates indicated below (in thousands):

	July 3,			March 27,
	2016			2016
Land	$	-		$	6,660
Building		-			16,365
Machinery and equipment		37,885			37,813
Software and licenses		22,068			22,045
Leasehold Improvement		763			755
Property, plant and equipment, total		60,716			83,638
Accumulated depreciation and amortization		(55,557	)		(63,339	)
Total property, plant and equipment, net	$	5,159		$	20,299

The decrease in land and building relates to the sale-leaseback of our Fremont office building. The accumulated depreciation and amortization for the three months ended July 3, 2016 includes a $1.5 million write down for impaired design tools. See

“

Note 13 - Lease Financing Obligation.

”

Our other current liabilities consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Short-term lease financing obligations	$	3,772	$	3,784
Deferred gain on sale of land and building under sale-leaseback arrangement		1,594		-
Accrual for stock awards in connection with Cadeka acquisition		1,200		1,200
Purchase consideration holdback		1,006		1,006
Accrued legal and professional services		867		1,247
Accrued sales and marketing expenses		606		699
Accrued manufacturing expenses, royalties and licenses		318		486
Accrued restructuring charges and exit costs		697		494
Other current liabilities		2,239		1,753
Total other current liabilities	$	12,299	$	10,669

Our other non-current obligations consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Long-term taxes payable	$	3,432	$	3,339
Long term deferred gain of land and building under sale-leaseback arrangement		797		-
Deferred tax liability		85		83
Total other non-current obligations	$	4,314	$	3,422

The deferred rent included in other current and non-current liabilities relates to deferred gain associated with our sale-leaseback, net of amortization.

See “

Note 13. Lease Financing Obligations

”

.

XML

Note 5 - Fair Value

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

NOTE 5. FAIR VALUE

 Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. GAAP describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Our cash and investment instruments are classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

We had no assets or liabilities utilizing Level 3 inputs as of July 3, 2016 or March 27, 2016.

There were no transfers between Level 1 and Level 2 during the fiscal quarter ended July 3, 2016.

As of July 3, 2016, all of our investments, consisting of money market funds with a fair value of $36.3 million, were classified as Level 1 investments.

In June 2016, we donated the 93,000 common shares of CounterPath received in the first quarter of fiscal 2015 resulting from the dissolution of Skypoint Telecom Fund II (US), LP, in which we were a limited partner, and wrote off the related $50 thousand carrying value.

Our cash and cash equivalents as of the dates indicated below were as follows (in thousands):

	July 3,		March 27,
	2016		2016
Cash and cash equivalents
Cash in financial institutions	$	48,953	$	55,066
Money market funds		36,323		4
Total cash and cash equivalents	$	85,276	$	55,070

Realized gains (losses) on the sale of marketable securities are determined by the specific identification method and are reflected in interest income and other, net within the condensed consolidated statements of operations. During the three months ended July 3, 2016 and June 28, 2015, there were no net realized gains (losses) on the sale of marketable securities.

XML

Note 6 - Goodwill and Intangible Assets

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We evaluate goodwill for impairment on an annual basis or when events and changes in circumstances suggest that the carrying amount may not be recoverable. We conduct our annual impairment analysis in the fourth quarter of each fiscal year. Impairment of goodwill is tested at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. Estimations and assumptions regarding the number of reporting units, future performances, results of our operations and comparability of our market capitalization and net book value will be used. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of impairment loss. Because we have one single operating segment and one chief operating decision maker, our Chief Executive Officer (“CEO”), we assess goodwill for impairment at the enterprise level.

As of July 3, 2016, we performed a goodwill impairment analysis from continuing operations and concluded that it was not impaired as the fair value of the continuing operations exceeded the carrying value of the continuing business. Upon entering into a definitive agreement to sell iML, $13.3 million of goodwill was reclassified to assets held for sale based on the respective fair values of the disposal group and continuing operations. See “

Note 3.

Discontinued Operations

”.

Intangible Assets

Our purchased intangible assets for continued operations as of the dates indicated below were as follows (in thousands):

	July 3, 2016									March 27, 2016
	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life		Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life
Amortized intangible assets:
Existing technology	$	53,878	$	(44,097	)	$	9,781		4.3	$	53,878	$	(43,502	)	$	10,376		4.6
Customer relationships		5,225		(3,994	)		1,231		3.4		5,225		(3,890	)		1,335		3.6
Distributor relationships		1,264		(1,264	)		-		-		1,264		(1,261	)		3		-
Patents/Core technology		3,459		(3,459	)		-		-		3,459		(3,459	)		-		-
Trade names		210		(210	)		-		-		210		(189	)		21		-
Total	$	64,036	$	(53,024	)	$	11,012			$	64,036	$	(52,301	)	$	11,735

During the first quarter of fiscal year 2017, $57.1 million of net intangible assets were reclassified to assets held for sale. See “

Note 3-Discontinued Operations”.

Long-lived assets are amortized on a straight-line basis over their respective estimated useful lives. Existing technology is amortized over two to nine years. Customer relationships are amortized over five to seven years. Distributor relationships are amortized over seven years. Patents/core technology is amortized over six years. Trade names are amortized over three to six years. We evaluate the remaining useful life of our long-lived assets that are being amortized each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of an intangible asset’s remaining useful life is changed, the remaining carrying amount of the long-lived asset is amortized prospectively over the remaining useful life.

Long-lived assets are evaluated for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets (or asset group) may not be fully recoverable. Whenever events or changes in circumstances suggest that the carrying amount of long-lived assets may not be recoverable, we estimate the future cash flows expected to be generated by the assets (or asset group) from its use or eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets which is derived using a discounted cash flow model. Significant management judgment is required in the grouping of long-lived assets and forecasts of future operating results that are used in the discounted cash flow method of valuation. If our actual results or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur additional impairment charges.

As of July 3, 2016, we performed a goodwill impairment analysis from continuing operations and concluded that it was not impaired as the fair value of the continuing operations exceeded the carrying value of the continuing business. Upon entering into a definitive agreement to sell iML, $13.3 million of goodwill was reclassified to assets held for sale based on the respective fair values of the disposal group and continuing operations. See “

Note 3.

Discontinued Operations

”.

The aggregate amortization expenses for our purchased intangible assets for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	723	$	760

The total future amortization expenses for our purchased intangible assets are summarized below (in thousands):

Amortization Expense (by fiscal year)
2017 (9 months remaining)	$	2,115
2018		2,802
2019		2,488
2020		1,989
2021		1,325
2022 and thereafter		293
Total future amortization	$	11,012

XML

Note 7 - Long-term Investment

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Investment [Text Block]

NOTE 7. LONG-TERM INVESTMENTS

In July 2001, Exar became a Limited Partner in the Skypoint Telecom Fund II (US), LP. (“Skypoint Fund”), a venture capital fund focused on investments in communications infrastructure companies. We account for this non-marketable equity investment under the cost method in the other non-current assets in the consolidated balance sheet. The partnership was dissolved and the fund distributed stock of investee companies to Exar during first quarter of fiscal year 2015.

We periodically review and determine whether the investment is other-than-temporarily impaired, in which case the investment is written down to its impaired value.

As of the date indicated below, our long-term investments balance, which is included in the other non-current assets line item on the condensed consolidated balance sheets, consisted of the following (in thousands):

	July 3,			March 27,
	2016			2016
Beginning balance	$	389		$	394
Donation of Counterpath shares		(50	)		-
Impairment charges		-			(5	)
Ending balance	$	339		$	389

In June 2016, we donated the common shares of Counterpath and recorded the corresponding reduction in long term investment balances. At July 3, 2016 the remaining balance consists of an investment in a privately held company.

XML

Note 8 - Related Party Transactions

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

NOTE 8. RELATED PARTY TRANSACTIONS

Alonim Investments Inc.

Alonim Investments Inc. (“Alonim”) through its wholly-owned affiliate, Rodfre Holdings LLC, owns approximately 7.6 million shares, or approximately 16%, of our outstanding common stock as of July 3, 2016. As such, Alonim is our largest stockholder. Future Electronics Inc. (“Future”) is also an affiliate of Alonim and our largest distributor. One of our directors is an executive officer of Future. Our related party transactions primarily involved sales to Future.

Related party net sales as a percentage of our total net sales for the periods indicated below were as follows:

	Three Months Ended
	July 3,			June 28,
	2016			2015
Future and affiliates of Alonim		28	%		40	%

Related party receivables as a percentage of our net accounts receivables were as follows as of the dates indicated below:

	July 3,			March 27,
	2016			2016
Future and affiliates of Alonim		17	%		17	%

Related party expenses for marketing promotional materials

reimbursed were not significant for the three months ended July 3, 2016 and June 28, 2015, respectively.

FusionOps, Inc.

The former CEO of FusionOps, Inc. is a member of the board of directors for Exar Corporation. For the three months ended July 3, 2016 and June 28, 2015 the Company paid $49,000 and $53,200, respectively to FusionOps, Inc. to build an application for internal data analysis and we recorded these amounts as expense in the period in which such costs were incurred.

Interim President and Chief Executive Officer (“Interim CEO”)

Richard Leza served as our interim CEO through May 31, 2016 when the Board of Directors appointed him as Executive Chairman and Technology Advisor. For the three months ended July 3, 2016 we paid $0.1 million and issued 8,000 fully vested restricted stock units with a grant date fair value of $52,600 for his services provided. On June 30, 2016, Mr. Leza resigned as our Executive Chairman and Technology Advisor.

XML

Note 9 - Common Stock Repurchases

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE 9 . COMMON STOCK REPURCHASES

From time to time, we acquire outstanding common stock in the open market to partially offset dilution from our equity award programs, to increase our return on our invested capital and to bring our cash to a more appropriate level for Exar.

On August 28, 2007, we announced the approval of a share repurchase plan and authorized the repurchase of up to $100.0 million of our common stock.

On July 9, 2013, we announced the approval of a share repurchase program under which we were authorized to repurchase an additional $50.0 million of our common stock. The repurchase program does not have a termination date, and may be modified, extended or terminated at any time. We intend to retire all shares repurchased under the stock repurchase plan. The purchase price for the repurchased shares of Exar is reflected as a reduction of common stock and additional paid-in capital. Since inception of the repurchase plan to July 3, 2016, we have repurchased a total of 11.1 million shares for an aggregate purchase price of $105.2 million.

We did not repurchase any common stock during the three months ended July 3, 2016 or June 28, 2015.

XML

Note 10 - Restructuring Charges and Exit Costs

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

NOTE 1 0 . RESTRUCTURING CHARGES AND EXIT COSTS

Restructuring expenses result from the execution of management approved restructuring plans that were generally developed to improve our cost structure and/or operations, sometimes in conjunction with our acquisition integration strategies. Restructuring expenses consist of employee severance costs and may also include contract termination costs to improve our cost structure prospectively.

During the three months ended July 3, 2016, we incurred $0.9 million of restructuring charges and exit costs. The charges consisted primarily of reduction of our workforce, the impairment of certain fixed assets and licensed technologies. During the three months ended June 28, 2015, we incurred immaterial restructuring charges and costs. All restructuring charges and exit costs are included in operating expenses.

Our restructuring liabilities were included in the other current liabilities and other non-current obligations lines within our condensed consolidated balance sheets. The following table summarizes the activities affecting the liabilities as of the dates indicated below (in thousands):

	March 27, 2016		Additions/ adjustments		Non-cash charges			Payments			July 3, 2016
Lease termination costs and others	$	130	$	467	$	(27	)	$	(119	)	$	451
Severance		364		456		-			(574	)		246
Total	$	494	$	923	$	(27	)	$	(693	)	$	697

XML

Note 11 - Stock-based Compensation

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 1 1 . STOCK-BASED COMPENSATION

Except for the stock compensation expense section, all amounts consist of both continuing and discontinued operations.

Employee Stock Participation Plan (“ESPP”)

Our ESPP permits employees to purchase common stock through payroll deductions at a purchase price that is equal to 95% of our common stock price on the last trading day of each three-calendar-month offering period. Our ESPP is non-compensatory.

The following table summarizes our ESPP transactions during the fiscal periods presented (in thousands, except per share amounts):

	As of		Three Months Ended
	July 3, 2016		July 3, 2016
					Weighted
	Shares of		Shares of		Average
	Common Stock		Common Stock		Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,306
Issued				11	$	6.20

Equity Incentive Plans

At the annual meeting of stockholders on September 18, 2014 (the “Annual Meeting”), our stockholders approved the Exar Corporation 2014 Equity Incentive Plan (“2014 Plan”). The 2014 Plan authorizes the issuance of stock options, stock appreciation rights, restricted stock, stock bonuses and other forms of awards granted or denominated in common stock or units of common stock, as well as cash bonus awards.

Prior to the Annual Meeting, we maintained the Exar Corporation 2006 Equity Incentive Plan (the “2006 Plan”) and the Sipex Corporation 2006 Equity Incentive Plan (the “Sipex 2006 Plan”). As of June 30, 2014, a total of 6,555,492 shares of our common stock were then subject to outstanding awards granted under the 2006 Plan and the Sipex 2006 Plan, and an additional 669,008 shares of our common stock were then available for new award grants under the 2006 Plan. As part of the stockholder approval of the 2014 Plan at the Annual Meeting, we agreed that no new awards will be granted under the 2006 Plan and the Sipex 2006 Plan, although awards made under these plans will remain subject to the terms of each such plan.

The maximum number of shares of our common stock that may be issued or transferred pursuant to awards under the 2014 Plan equals the sum of: (1) 5,170,000 shares, plus (2) the number of any shares subject to stock options granted under the 2006 Plan and the Sipex 2006 Plan

and outstanding as of the date of the Annual Meeting which expire, or for any reason are cancelled or terminated, after the date of the Annual Meeting without being exercised, plus (3) the number of any shares subject to restricted stock and restricted stock unit awards granted under the 2006 Plan and the Sipex 2006 Plan that are outstanding and unvested as of the date of the Annual Meeting which are forfeited, terminated, cancelled, or otherwise reacquired after the date of the Annual Meeting without having become vested. Awards other than a stock option or stock appreciation right granted under the 2014 Plan are counted against authorized shares available for future issuance on a basis of two shares for each award issued. As of July 3, 2016, there were

approximately 1 million shares available for future grants under the 2014 Plan.

Stock Option Activities

Our stock option transactions during three months ended July 3, 2016 are summarized below:

						Weighted
						Average				In-the-money
				Weighted		Remaining		Aggregate		Options
	Outstanding			Average		Contractual		Intrinsic		Vested and
	Options /			Exercise		Term		Value		Exercisable
	Quantity			Price per Share		(in years)		(in thousands)		(in thousands)
Balance at March 27, 2016		7,722,383		$	7.96		4.40	$	87		48
Granted		1,161,900			6.78
Exercised		(405,385	)		6.42
Cancelled		(235,726	)		7.95
Forfeited		(462,810	)		7.66
Balance at July 3, 2016		7,780,362			7.88		4.26		6,760		4,353
Vested and expected to vest, July 3, 2016		7,005,891			7.98		4.05		5,783
Vested and exercisable, July 3, 2016		3,654,884		$	8.67		2.45	$	1,745

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value, which is based on the closing price of our common stock of $7.80 and $5.26 as of

July 3, 2016 and

March 27, 2016, respectively.

These are the values which would have been received by option holders if all option holders exercised their options on that date.

In January 2012, we granted 480,000 performance-based stock options to our then CEO. The options were scheduled to vest in four equal annual installments at the end of fiscal years 2013 through 2016 if certain predetermined market based financial measures were met. If the financial measures are not met, each installment would be rolled over to the subsequent fiscal year. In January 2014, we granted 140,000 performance-based stock options to our then CEO. The options were scheduled to vest at the end of fiscal year 2017 if certain predetermined financial measures were met. Due to the departure of our then CEO in October 2015, we recorded a reversal of $34,000 of compensation expense for these options in fiscal year 2016 as the requisite service period for vesting was not completed. No additional compensation expense for these options was recorded since the termination date for our former CEO.

On July 1, 2016 we granted 280,000 and 120,000 performance-based stock options to our CEO and Chief Financial Officer (“CFO”), respectively. The options vest based on the achievement of company performance targets relating to our non-GAAP earnings per share in future periods. If the criteria are met, the options are scheduled to vest over a four-year period, with one-fourth vesting after 12 months from the date of the grant and the remaining shares vesting in equal monthly installments over the remaining three years, subject to the CEO’s and CFO’s continued service with us. As of July 3, 2016, we did not record any compensation expense associated with these performance-based stock options.

Options exercised for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Intrinsic value of options exercised	$	521	$	426

RSU Activities

Our RSU transactions during the three months ended July 3, 2016 are summarized as follows:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
				Grant-Date		Term		Value
	Shares			Fair Value		(in years)		(in thousands)
Unvested at March 27, 2016		590,833		$	9.39		1.45	$	3,108
Granted		169,800			7.20
Issued and released		(51,566	)		9.99
Forfeited		(123,196	)		9.39
Unvested at July 3, 2016		585,871		$	8.71		1.34	$	4,570
Vested and expected to vest, July 3, 2016		486,294					1.23		3,793

The aggregate intrinsic value of RSUs represents the closing price per share of our stock at the end of the periods presented, multiplied by the number of unvested RSUs or the number of vested and expected to vest RSUs, as applicable, at the end of each period.

For RSUs, stock-based compensation expense was calculated based on our stock price on the date of grant, multiplied by the number of RSUs granted. The grant date fair value of RSUs less estimated forfeitures was recognized on a straight-line basis, over the vesting period. 

In March 2012, we granted 300,000 performance-based RSUs (“PRSUs”) 

to our then CEO. The PRSUs were scheduled to vest in three equal installments at the end of fiscal year 2013 through 2015 with three-year vesting periods for each installment if certain predetermined financial measures were met. If the financial measures were not met, each installment would be forfeited at the end of its respective fiscal year. Due to the departure of our then CEO in October, 2015, we recorded a reversal of $41,000 for these PRSUs in fiscal year 2016, as the requisite service period required for vesting was not completed. No additional compensation expense for these options was recorded since the termination date for our former CEO.

In July 2013, as part of the acquisition of Cadeka, in order to encourage retention of five former Cadeka employees, we agreed to recommend to our Board of Directors in July 2015 a bonus, which, if approved by the Board of Directors, would be settled in RSUs subject to fulfillment of the service period. The ultimate approval of these awards was subject to the discretion of the Board of Directors. We recorded no compensation expense and $0.2 million of non- cash compensation expense for these awards in the three months ended July 3, 2016 and June 28, 2015, respectively. The expense is reported in the other current liabilities line on the condensed consolidated balance sheet as the total amount of bonus was to be settled in variable number of RSUs at the completion of the requisite service period. Such non-cash compensation expense was recorded as part of stock compensation expense in the condensed consolidated statements of operations. In July 2015, the Board of Directors ultimately determined not to approve the granting of these RSUs. In fiscal year 2016 we paid three of these five former Cadeka employees $75,000 in cash in exchange for a release of claims, including any claim such former employees may have to the RSUs described above. As a result of obtaining these releases, the proportional amount of liability net of cash payments was removed from our condensed consolidated balance sheet, with a corresponding increase in additional paid in capital. For the two remaining employees, an amount of $1.2 million is included other liabilities as of July 3, 2016, pending the earlier of a settlement with such former employees or the expiration of the relevant statute of limitations.

In October 2013, we granted 70,000 PRSUs to certain executives. The first 50% of the PRSUs was scheduled to start vesting in three equal installments at the end of fiscal year 2015 with a three-year vesting period if certain performance measures were met. The second 50% of the PRSUs was scheduled to start vesting in three equal installments at the end of fiscal year 2016 with a three-year vesting period if certain performance measures were met. We recorded approximately $18,000 and $39,000 of compensation expense for these awards in the three months ended July 3, 2016 and June 28, 2015, respectively. One of the executives’ employment was terminated in fiscal year 2015.

In August and December 2014, we granted 88,448 PRSUs to certain former iML employees. The PRSUs are scheduled to start vesting in three equal annual installments upon achievement of certain performance measures. We modified all stock awards outstanding in June 2016 for iML employees impacted by the pending sale of the iML entity. Under the modification, a certain portion of outstanding stock awards will early vest at the close of the transaction based on continued employment as of that date. As a result, we recorded a one-time reversal of $311,000 in stock compensation expense related to these stock awards in the three months ended July 3, 2016. The fair value of modified awards that are expected to vest is being recognized ratably over the estimated requisite service period.

In July 2016, we granted 60,000 and 30,000 PRSUs to our CEO and CFO, respectively, which vests based on the achievement of company stock price targets in future periods. If the performance criteria are met, the PRSUs will vest over a three-year period, with one-third of the PRSUs vesting after 12 months from the date of grant and the remaining PRSUs vesting in equal quarterly installments over the remaining two years, subject to the CEO and CFO’s continued service with Exar. The value of these awards is estimated using a Monte-Carlo simulation model using the following valuation assumptions:

Expected term of grants (years)	3
Risk-free interest rate	0.76	%
Expected volatility	50	%

For the three months ended July 3, 2016, we did not record any compensation expense related to these PRSUs.

Stock-Based Compensation Expense

The following table summarizes stock-based compensation expense related to stock options and RSUs during the fiscal periods presented

(in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Cost of sales	$	114	$	80
Research and development		246		294
Selling, general and administrative		733		1,349
Total stock-based compensation expense	$	1,093	$	1,723

The amount of stock-based compensation cost capitalized in inventory was immaterial for all periods presented.

Unrecognized Stock-Based Compensation Expense

The following table summarizes unrecognized stock-based compensation expense related to stock options and RSUs, net of reversals,

as of July 3, 2016:

	July 3, 2016
			Weighted
			Average
			Remaining
	Amount		Recognition
	(in thousands)		Period (in years)
Options	$	6,402		2.69
RSUs		1,635		1.50
PRSUs		495		2.22
Total unrecognized stock-based compensation expense	$	8,532

Valuation Assumptions

We estimate the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. The assumptions used in calculating the fair value of stock-based compensation represent our estimates, but these estimates involve inherent uncertainties and the application of management’s judgment, which includes the expected term of the stock-based awards, stock price volatility and forfeiture rates. As a result, if factors change and we use different assumptions, our stock-based compensation expense for future grants could be materially different.

We used the following weighted average assumptions to calculate the fair values of options granted during the fiscal periods presented:

	Three Months Ended
	July 3, 2016			June 28, 2015
Expected term of options (years)		4.5			4.7
Risk-free interest rate		1.03	%		1.2	%
Expected volatility		34.9	%		32	%
Expected dividend yield		-			-
Weighted average estimated fair value	$	2.08		$	3.08

XML

Note 12 - Net Income (Loss) Per Share

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE 1

2

. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share excludes dilution and is computed by dividing net loss attributable to Exar by the weighted average number of common shares outstanding for the applicable period. Diluted earnings per share reflects the potential dilution that would occur if outstanding stock options to purchase common stock were exercised for common stock, using the treasury stock method, and the common stock underlying outstanding RSUs was issued.

The following table summarizes our net income (loss) per share for the

periods indicated below (in thousands, except per share amounts):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Net income (loss) from continuing operations	$	7,543	$	(2,354	)
Net income (loss) from discontinued operations	$	1,397	$	(156	)
Net income (loss)	$	8,940	$	(2,510	)
Shares used in computation of net income (loss) from continuing operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) from discontinued operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Net income (loss) per share from continuing operations:
Basic	$	0.15	$	(0.05	)
Diluted	$	0.15	$	(0.05	)
Net income (loss) per share from discontinued operations:
Basic	$	0.03	$	-
Diluted	$	0.03	$	-
Net income (loss) per share:
Basic	$	0.18	$	(0.05	)
Diluted	$	0.18	$	(0.05	)

XML

Note 13 - Lease Financing Obligations

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Debt and Capital Leases Disclosures [Text Block]

NOTE 1 3. LEASE FINANCING OBLIGATIONS

We have acquired licenses to engineering design tools (“Design Tools”) under capital leases. We acquired licenses to Design Tools of $6.9 million in January 2015 under a two-year license and two three-year licenses with prepayment of $1.0 million, $4.4 million in October 2014 under a three-year license with a prepayment of $1.5 million for the first year license and $0.9 million in July 2012 under a three-year license all of which were accounted for as capital leases and recorded in the property, plant and equipment, net line item in the consolidated balance sheets. The obligations related to the Design Tools were included in other current liabilities and long-term lease financing obligations in our condensed consolidated balance sheets as of July 3, 2016 and March 27, 2016, respectively. The effective interest rates for the Design Tools range from 2.0% to 7.25%.

Amortization expense related to the Design Tools, which was recorded using the straight-line method over the remaining useful life for the periods indicated below, was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	878	$	1,073

During the three months ended July 3, 2016, we recorded an impairment charge of $1.5 million and a restructuring expense of $0.4 million associated with a portion of these Design Tools.

Future minimum lease and sublease income payments for the lease financing obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Design tools
2017 (9 months remaining)	$	3,950
2018		1,529
Total minimum lease payments		5,479
Less: amount representing interest		(851	)
Present value of future minimum lease payments		4,628
Less: short-term lease financing obligations		(3,772	)
Long-term lease financing obligations	$	856

Interest expense for the lease financing obligations for the periods indicated below was as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Interest expense	$	38	$	48

In the course of our business, we enter into arrangements accounted for as operating leases related to rental of office space. Rent expenses for all operating leases for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
Rent expense	$	100	$	181

Our future minimum lease payments for the lease operating obligations as of July 3, 2016 are as follows (in thousands):

Fiscal Years	Facilities
2017 (9 months remaining)	$	1,277
2018		1,239
2019		155
2020		49
Total future minimum lease payments	$	2,720

 

We sold our Fremont Campus in May 2016 for a net sales price of $24.1 million. Our Fremont Campus consists of approximately 151,000 square feet of office space and 4.5 acres of partially developed property adjacent to the buildings. Pursuant to the agreement, we have simultaneously leased back a portion of the Real Property through December 2017.

Under the Lease Agreement, our financial obligations include a base monthly rent of $86,338 per month for the property located at 48720 Kato Road, and an additional monthly rent of $600 with respect to the portion of the building located at 48710 Kato Road, Fremont, California. We are also responsible for our monthly share of certain expenses related to the leased facilities, including our share of insurance premiums, taxes and common area expenses. We generated a gain on sale of $11.9 million as a result of this sale and leaseback transaction, $2.6 million of the gain has been deferred and is being recognized on a straight-line basis over the term of the lease. During the three months ended July 3, 2016, we recognized amortization of the deferred gain of $0.2 million, which was reflected as reduction of rent in the accompanying condensed consolidated statement of operations. Based on the terms of the agreement, we have classified and are accounting for the

lease as an operating lease. The classification as an operating lease required judgment and estimates in developing key assumptions that include, but are not limited to, the lease term, the discount rate used in discounting future lease payments and the economic useful life of the asset.

XML

Note 14 - Commitments and Contingencies

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE 1

4

.      COMMITMENTS AND CONTINGENCIES

In early 2012, we received correspondences from the California Department of Toxic Substance Control (“DTSC”) regarding its ongoing investigation of hazardous wastes and hazardous waste constituents at a former regulated treatment facility in San Jose, California. In 1985, MPSI made two separate permitted hazmat deliveries to a licensed and regulated site for treatment. DTSC has requested that former or current property owners and companies, that had hazardous waste treated at the site participate in further site assessment and limited remediation activities. We have entered into various agreements with other named generators, former property owners and DTSC limited to the investigation of the sites’ condition and evaluation, and selection of appropriate remedial measures. The designated environmental consulting firm has prepared and submitted to DTSC a site profile and is currently engaged in further study. Given that this matter is under investigation and discussions are ongoing with respect to various related considerations, we are unable to ascertain our exposure, if any, or

estimate a reasonably possible range of loss. I

n the opinion of management, after consulting with legal counsel, and taking into account insurance coverage, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our financial statements, as a whole.

In a letter dated March 27, 2012, we were notified by the Alameda County Water District (“ACWD”) of the recent detection of volatile organic compounds at a site adjacent to a facility that was previously owned and occupied by Sipex. The letter was also addressed to prior and current property owners and tenants (collectively “Property Owners”). ACWD requested that the Property Owners carry out further site investigation activities to determine if the detected compounds are emanating from the site or simply flowing under it. In June 2012, the Property Owners filed with ACWD a report of its investigation/characterization activities and analytical data obtained. Accumulated data suggests that compounds of concern in groundwater appear to be from an offsite source. ACWD is investigating alternative upgradient sites. Given that this investigation is ongoing and we have not received any recent communications from ACWD, we are unable to ascertain our exposure, if any, or

estimate a reasonably possible range of loss. I

n the opinion of management, after consulting with legal counsel, and taking into account insurance coverage, any ultimate liability related to current outstanding claims and lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our financial statements, as a whole.

We warrant all custom products and application specific products, including cards and boards, against defects in materials and workmanship for a period of 12 months, and occasionally we may provide an extended warranty from the delivery date. We warrant all of our standard products against defects in materials and workmanship for a period of 90 days from the date of delivery. Reserve requirements are recorded in the period of sale and are based on an assessment of the products sold with warranty, historical warranty costs incurred and customer/product specific circumstances. Our liability is generally limited, at our option, to replacing, repairing, or issuing a credit (if it has been paid for). Our warranty does not cover damage which results from accident, misuse, abuse, improper line voltage, fire, flood, lightning or other damage resulting from modifications, repairs or alterations performed other than by us, or resulting from failure to comply with our written operating and maintenance instructions.

Our warranty reserve balances as of July 3, 2016 and March 27, 2016 were immaterial.

In the ordinary course of business, we may provide for indemnification of varying scope and terms to customers, vendors, lessors, business partners, purchasers of assets or subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us, services to be provided by us, intellectual property infringement claims made by third parties or, matters related to our conduct of the business. In addition, we have entered into indemnification agreements with our directors and certain of our executive officers that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or executive officers. We maintain director and officer liability insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers, and former directors and officers of acquired companies, in certain circumstances.

It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the unique facts and circumstances involved in each particular agreement and claims. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our condensed consolidated financial statements.

XML

Note 15 - Legal Proceedings

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Legal Matters and Contingencies [Text Block]

NOTE 1 5 . LEGAL PROCEEDINGS

From time to time, we are involved in various claims, legal actions and complaints arising in the normal course of business. We are not a named party to any ongoing lawsuit or formal proceeding that, in the opinion of our management, is likely to have a material adverse effect on our financial position, results of operations or cash flows.

XML

Note 16 - Income Taxes

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 1 6 . INCOME TAXES

During the three months ended July 3, 2016, we recorded an income tax expense from continuing operations of approximately $0.3 million. The income tax expense was primarily due to federal alternative minimum taxes on the building sale gain. During the three months ended June 28, 2015, we recorded an income tax benefit from continuing operations of approximately $0.8 million.  The income tax benefit was primarily due to losses benefited against income from discontinued operations.

During the three months ended July 3, 2016, the unrecognized tax benefits increased by $0.1 million to $16.9 million primarily related to the increase of unrecognized tax benefit on R&D tax credits, offset by the lapsing of the statute of limitations. If recognized, $13.9 million of these unrecognized tax benefits (net of federal benefit) would be recorded as a reduction of future income tax provision before consideration of changes in valuation allowance.

Estimated interest and penalties related to the income taxes are classified as a component of the provision for income taxes in the condensed consolidated statement of operations. Accrued interest and penalties consisted of the following as of the dates indicated (in thousands):

	July 3,		March 27,
	2016		2016
Accrued interest and penalties	$	1,433	$	1,364

Our major tax jurisdictions are the United States federal and various states, Canada, China, Hong Kong, Korea and certain other foreign jurisdictions. The fiscal years 2003 through 2015 remain open and subject to examinations by the appropriate governmental agencies in the United States and certain of our foreign jurisdictions.

XML

Note 17 - Segment and Geographic Information

3 Months Ended

Jul. 03, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE 1 7 . SEGMENT AND GEOGRAPHIC INFORMATION

Our foreign operations are conducted primarily through our wholly-owned subsidiaries in Canada, China, France, Germany, Japan, Malaysia, South Korea, Taiwan and the United Kingdom. Our principal markets include Asia Pacific region, North America, and Europe. Net sales by geographic areas represent direct sales principally to original equipment manufacturers (“OEM”), or their designated subcontract manufacturers, and to distributors (affiliated and unaffiliated) who buy our products and resell to their customers.

Our net sales by geographic area for the periods indicated below were as follows (in thousands):

	Three Months Ended
	July 3,		June 28,
	2016		2015
China	$	11,400	$	8,803
United States		4,674		6,598
Taiwan		1,850		1,616
Korea		696		624
Singapore		3,498		4,185
Germany		2,421		3,673
Rest of world		2,597		2,684
Total net sales	$	27,136	$	28,183

Substantially all of our long-lived assets as of July 3, 2016 and March 27, 2016, respectively, were located in the United States.

The following distributors and customers accounted for 10% or more of our net sales in the periods indicated:

	Three Months Ended
	July 3,			June 28,
	2016			2015
Distributor A +		28	%		40	%
Distributor B		16	%		10	%
Distributor D		12	%		*
Distributor C		11	%		*

—————

*     Net sales for this distributor or customer for this period were less than 10% of our net sales.

+      Related Party

No other distributor or customer accounted for 10% or more of the net sales for the three months ended July 3, 2016 or June 28, 2015, respectively.

The following distributors and customers accounted for 10% or more of our net accounts receivable as of the dates indicated:

	July 3,			March 27,
	2016			2016
Distributor B		22	%		13	%
Distributor D		18	%		14	%
Distributor A+		17	%		17	%
Distributor C		12	%		14	%
Customer A		*			12	%

____________

*      Accounts receivable for this customer for this period were less than 10% of total account balance.

+      Related Party

No other distributor or customer accounted for 10% or more of the net accounts receivable as of July 3, 2016 or March 27, 2016, respectively.

XML

Note 3 - Discontinued Operations (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Disposal Groups, Including Discontinued Operations [Table Text Block]

	July 3,			June 28,
	2016			2015
Net sales	$	13,522		$	12,239
Cost of sales:
Cost of sales		7,702			5,825
Amortization of purchased intangible assets		1,245			1,855
Total cost of sales		8,947			7,680
Gross profit		4,575			4,559
Operating expenses:
Research and development		1,685			1,881
Selling, general and administrative		1,397			1,946
Total operating expenses, net		3,082			3,827
Interest income and other, net		(3	)		(4	)
Income (loss) before income taxes		1,496			736
Provision for income taxes		99			892
Net income (loss) from discontinued operations	$	1,397		$	(156	)

	July 3,		March 27,
	2016		2016
Accounts receivables, net	$	14,162	$	13,427
Inventories		7,915		7,944
Deferred income taxes and other assets		118		248
Property, plant and equipment, net		95		88
Goodwill		13,258		13,258
Identifiable intangible assets, net		57,140		58,946
Total assets	$	92,688	$	93,911
Accounts payable	$	1,127	$	2,024
Accrued liabilities		1,307		1,422
Deferred income taxes and other liabilities		45		24
Total liabilities	$	2,479	$	3,470

XML

Note 4 - Balance Sheet Details (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	July 3,		March 27,
	2016		2016
Raw materials	$	1,080	$	1,012
Work-in-progress		9,140		9,780
Finished goods		11,884		10,015
Total inventories	$	22,104	$	20,807

Property, Plant and Equipment [Table Text Block]

	July 3,			March 27,
	2016			2016
Land	$	-		$	6,660
Building		-			16,365
Machinery and equipment		37,885			37,813
Software and licenses		22,068			22,045
Leasehold Improvement		763			755
Property, plant and equipment, total		60,716			83,638
Accumulated depreciation and amortization		(55,557	)		(63,339	)
Total property, plant and equipment, net	$	5,159		$	20,299

Other Current Liabilities [Table Text Block]

	July 3,		March 27,
	2016		2016
Short-term lease financing obligations	$	3,772	$	3,784
Deferred gain on sale of land and building under sale-leaseback arrangement		1,594		-
Accrual for stock awards in connection with Cadeka acquisition		1,200		1,200
Purchase consideration holdback		1,006		1,006
Accrued legal and professional services		867		1,247
Accrued sales and marketing expenses		606		699
Accrued manufacturing expenses, royalties and licenses		318		486
Accrued restructuring charges and exit costs		697		494
Other current liabilities		2,239		1,753
Total other current liabilities	$	12,299	$	10,669

Other Noncurrent Liabilities [Table Text Block]

	July 3,		March 27,
	2016		2016
Long-term taxes payable	$	3,432	$	3,339
Long term deferred gain of land and building under sale-leaseback arrangement		797		-
Deferred tax liability		85		83
Total other non-current obligations	$	4,314	$	3,422

XML

Note 5 - Fair Value (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Fair Value, Liabilities Measured on Recurring Basis [Table Text Block]

	July 3,		March 27,
	2016		2016
Cash and cash equivalents
Cash in financial institutions	$	48,953	$	55,066
Money market funds		36,323		4
Total cash and cash equivalents	$	85,276	$	55,070

XML

Note 6 - Goodwill and Intangible Assets (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	July 3, 2016									March 27, 2016
	Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life		Carrying Amount		Accumulated Amortization			Net Carrying Amount		Weighted Average Life
Amortized intangible assets:
Existing technology	$	53,878	$	(44,097	)	$	9,781		4.3	$	53,878	$	(43,502	)	$	10,376		4.6
Customer relationships		5,225		(3,994	)		1,231		3.4		5,225		(3,890	)		1,335		3.6
Distributor relationships		1,264		(1,264	)		-		-		1,264		(1,261	)		3		-
Patents/Core technology		3,459		(3,459	)		-		-		3,459		(3,459	)		-		-
Trade names		210		(210	)		-		-		210		(189	)		21		-
Total	$	64,036	$	(53,024	)	$	11,012			$	64,036	$	(52,301	)	$	11,735

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	723	$	760

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization Expense (by fiscal year)
2017 (9 months remaining)	$	2,115
2018		2,802
2019		2,488
2020		1,989
2021		1,325
2022 and thereafter		293
Total future amortization	$	11,012

XML

Note 7 - Long-term Investment (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Investment Holdings, Schedule of Investments [Table Text Block]

	July 3,			March 27,
	2016			2016
Beginning balance	$	389		$	394
Donation of Counterpath shares		(50	)		-
Impairment charges		-			(5	)
Ending balance	$	339		$	389

XML

Note 8 - Related Party Transactions (Tables)

3 Months Ended

Jul. 03, 2016

Net Accounts Receivable [Member]

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

	Three Months Ended
	July 3,			June 28,
	2016			2015
Future and affiliates of Alonim		28	%		40	%

	July 3,			March 27,
	2016			2016
Future and affiliates of Alonim		17	%		17	%

XML

Note 10 - Restructuring Charges and Exit Costs (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Restructuring and Related Costs [Table Text Block]

	March 27, 2016		Additions/ adjustments		Non-cash charges			Payments			July 3, 2016
Lease termination costs and others	$	130	$	467	$	(27	)	$	(119	)	$	451
Severance		364		456		-			(574	)		246
Total	$	494	$	923	$	(27	)	$	(693	)	$	697

XML

Note 11 - Stock-based Compensation (Tables)

3 Months Ended

Jul. 03, 2016

Performance-based Restricted Stock Units [Member]

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Expected term of grants (years)	3
Risk-free interest rate	0.76	%
Expected volatility	50	%

Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity [Table Text Block]

	As of		Three Months Ended
	July 3, 2016		July 3, 2016
					Weighted
	Shares of		Shares of		Average
	Common Stock		Common Stock		Price per Share
Authorized to issue		4,500
Reserved for future issuance		1,306
Issued				11	$	6.20

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

						Weighted
						Average				In-the-money
				Weighted		Remaining		Aggregate		Options
	Outstanding			Average		Contractual		Intrinsic		Vested and
	Options /			Exercise		Term		Value		Exercisable
	Quantity			Price per Share		(in years)		(in thousands)		(in thousands)
Balance at March 27, 2016		7,722,383		$	7.96		4.40	$	87		48
Granted		1,161,900			6.78
Exercised		(405,385	)		6.42
Cancelled		(235,726	)		7.95
Forfeited		(462,810	)		7.66
Balance at July 3, 2016		7,780,362			7.88		4.26		6,760		4,353
Vested and expected to vest, July 3, 2016		7,005,891			7.98		4.05		5,783
Vested and exercisable, July 3, 2016		3,654,884		$	8.67		2.45	$	1,745

Schedule of Cash Proceeds Received from Share-based Payment Awards [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Intrinsic value of options exercised	$	521	$	426

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
				Grant-Date		Term		Value
	Shares			Fair Value		(in years)		(in thousands)
Unvested at March 27, 2016		590,833		$	9.39		1.45	$	3,108
Granted		169,800			7.20
Issued and released		(51,566	)		9.99
Forfeited		(123,196	)		9.39
Unvested at July 3, 2016		585,871		$	8.71		1.34	$	4,570
Vested and expected to vest, July 3, 2016		486,294					1.23		3,793

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Three Months Ended
	July 3, 2016			June 28, 2015
Expected term of options (years)		4.5			4.7
Risk-free interest rate		1.03	%		1.2	%
Expected volatility		34.9	%		32	%
Expected dividend yield		-			-
Weighted average estimated fair value	$	2.08		$	3.08

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Cost of sales	$	114	$	80
Research and development		246		294
Selling, general and administrative		733		1,349
Total stock-based compensation expense	$	1,093	$	1,723

Schedule of Unrecognized Compensation Cost, Nonvested Awards [Table Text Block]

	July 3, 2016
			Weighted
			Average
			Remaining
	Amount		Recognition
	(in thousands)		Period (in years)
Options	$	6,402		2.69
RSUs		1,635		1.50
PRSUs		495		2.22
Total unrecognized stock-based compensation expense	$	8,532

XML

Note 12 - Net Income (Loss) Per Share (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Net income (loss) from continuing operations	$	7,543	$	(2,354	)
Net income (loss) from discontinued operations	$	1,397	$	(156	)
Net income (loss)	$	8,940	$	(2,510	)
Shares used in computation of net income (loss) from continuing operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) from discontinued operations per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Shares used in computation of net income (loss) per share:
Basic		48,680		47,927
Effect of options and awards		378		-
Diluted		49,058		47,927
Net income (loss) per share from continuing operations:
Basic	$	0.15	$	(0.05	)
Diluted	$	0.15	$	(0.05	)
Net income (loss) per share from discontinued operations:
Basic	$	0.03	$	-
Diluted	$	0.03	$	-
Net income (loss) per share:
Basic	$	0.18	$	(0.05	)
Diluted	$	0.18	$	(0.05	)

XML

Note 13 - Lease Financing Obligations (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Amortization Expense [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Amortization expense	$	878	$	1,073

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

Fiscal Years	Design tools
2017 (9 months remaining)	$	3,950
2018		1,529
Total minimum lease payments		5,479
Less: amount representing interest		(851	)
Present value of future minimum lease payments		4,628
Less: short-term lease financing obligations		(3,772	)
Long-term lease financing obligations	$	856

Schedule of Interest Expense [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Interest expense	$	38	$	48

Schedule of Rent Expense [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
Rent expense	$	100	$	181

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

Fiscal Years	Facilities
2017 (9 months remaining)	$	1,277
2018		1,239
2019		155
2020		49
Total future minimum lease payments	$	2,720

XML

Note 16 - Income Taxes (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Interest and Penalty Related to Underpayment of Tax [Table Text Block]

	July 3,		March 27,
	2016		2016
Accrued interest and penalties	$	1,433	$	1,364

XML

Note 17 - Segment and Geographic Information (Tables)

3 Months Ended

Jul. 03, 2016

Notes Tables

Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area [Table Text Block]

	Three Months Ended
	July 3,		June 28,
	2016		2015
China	$	11,400	$	8,803
United States		4,674		6,598
Taiwan		1,850		1,616
Korea		696		624
Singapore		3,498		4,185
Germany		2,421		3,673
Rest of world		2,597		2,684
Total net sales	$	27,136	$	28,183

Schedule of Revenue by Major Customers by Reporting Segments [Table Text Block]

	Three Months Ended
	July 3,			June 28,
	2016			2015
Distributor A +		28	%		40	%
Distributor B		16	%		10	%
Distributor D		12	%		*
Distributor C		11	%		*

Schedule of Major Distributors [Table Text Block]

	July 3,			March 27,
	2016			2016
Distributor B		22	%		13	%
Distributor D		18	%		14	%
Distributor A+		17	%		17	%
Distributor C		12	%		14	%
Customer A		*			12	%

XML

Note 3 - Discontinued Operations (Details Textual) $ in Millions	Jun. 01, 2016 USD ($)
IML [Member] | Beijing E-Town Chipone Technology Co. [Member]
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment	$ 136

XML

Note 3 - Summarized Results From Discontinued Operations (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015	Mar. 27, 2016
Net sales	$ 13,522	$ 12,239
Cost of sales	7,702	5,825
Amortization of purchased intangible assets	1,245	1,855
Total cost of sales	8,947	7,680
Gross profit	4,575	4,559
Research and development	1,685	1,881
Selling, general and administrative	1,397	1,946
Total operating expenses, net	3,082	3,827
Interest income and other, net	(3)	(4)
Income (loss) before income taxes	1,496	736
Provision for income taxes	99	892
Net income (loss) from discontinued operations	1,397	$ (156)
Accounts receivables, net	14,162		$ 13,427
Inventories	7,915		7,944
Deferred income taxes and other assets	118		248
Property, plant and equipment, net	95		88
Goodwill	13,258		13,258
Identifiable intangible assets, net	57,140		58,946
Total assets	92,688		93,911
Accounts payable	1,127		2,024
Accrued liabilities	1,307		1,422
Deferred income taxes and other liabilities	45		24
Total liabilities	$ 2,479		$ 3,470

XML

Note 4 - Balance Sheet Details (Details Textual) $ in Millions	3 Months Ended
	Jul. 03, 2016 USD ($)
Design Tool Impairment	$ 1.5

XML

Note 4 - Inventories (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Raw materials	$ 1,080	$ 1,012
Work-in-progress	9,140	9,780
Finished goods	11,884	10,015
Total inventories	$ 22,104	$ 20,807

XML

Note 4 - Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Land		$ 6,660
Building		16,365
Machinery and equipment	37,885	37,813
Software and licenses	22,068	22,045
Leasehold Improvement	763	755
Property, plant and equipment, total	60,716	83,638
Accumulated depreciation and amortization	(55,557)	(63,339)
Total property, plant and equipment, net	$ 5,159	$ 20,299

XML

Note 4 - Other Current Liabilities (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Short-term lease financing obligations	$ 3,772	$ 3,784
Deferred gain on sale of land and building under sale-leaseback arrangement	1,594
Accrual for stock awards in connection with Cadeka acquisition	1,200	1,200
Purchase consideration holdback	1,006	1,006
Accrued legal and professional services	867	1,247
Accrued sales and marketing expenses	606	699
Accrued manufacturing expenses, royalties and licenses	318	486
Accrued restructuring charges and exit costs	697	494
Other current liabilities	2,239	1,753
Total other current liabilities	$ 12,299	$ 10,669

XML

Note 4 - Other Noncurrent Obligations (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Long-term taxes payable	$ 3,432	$ 3,339
Long term deferred gain of land and building under sale-leaseback arrangement	797
Deferred tax liability	85	83
Total other non-current obligations	$ 4,314	$ 3,422

XML

Note 5 - Fair Value (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	Jun. 30, 2016	Jul. 03, 2016	Jun. 28, 2015	Mar. 27, 2016
Fair Value, Inputs, Level 3 [Member]
Assets, Fair Value Disclosure		$ 0		$ 0
Financial and Nonfinancial Liabilities, Fair Value Disclosure		0		$ 0
Fair Value, Inputs, Level 1 [Member] | Money Market Funds [Member]
Assets, Fair Value Disclosure		36,300,000
CounterPath [Member]
Donated Common Shares	93,000
Donated Common Shares, Carrying Value, Write-off	$ 50,000
Available-for-sale Securities, Gross Unrealized Gain (Loss)		$ 0	$ 0

XML

Note 5 - Investment Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016	Jun. 28, 2015	Mar. 29, 2015
Fair Value, Inputs, Level 1 [Member]
Investment Assets	$ 36,323	$ 4
Cash in financial institutions	48,953	55,066
Total cash and cash equivalents	$ 85,276	$ 55,070	$ 55,760	$ 55,233

XML

Note 6 - Goodwill and Intangible Assets (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Jul. 03, 2016	Jun. 28, 2015	Mar. 27, 2016
Reclassification of Goodwill to Assets Held For Sale [Member]
Current Period Reclassifications Adjustment	$ 13,300,000
reclassification of Intangible Assets to Assets Held for Sale [Member]
Current Period Reclassifications Adjustment	$ 57,100,000
Minimum [Member] | Existing Technology [Member]
Finite-Lived Intangible Asset, Useful Life	2 years
Minimum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life	5 years
Minimum [Member] | Trade Names [Member]
Finite-Lived Intangible Asset, Useful Life	3 years
Maximum [Member] | Existing Technology [Member]
Finite-Lived Intangible Asset, Useful Life	9 years
Maximum [Member] | Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life	7 years
Maximum [Member] | Distribution Rights [Member]
Finite-Lived Intangible Asset, Useful Life	7 years
Maximum [Member] | Patented Technology [Member]
Finite-Lived Intangible Asset, Useful Life	6 years
Maximum [Member] | Trade Names [Member]
Finite-Lived Intangible Asset, Useful Life	6 years
Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life	3 years 146 days		3 years 219 days
Goodwill, Impairment Loss	$ 0	$ 0

XML

Note 6 - Purchased Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jul. 03, 2016	Mar. 27, 2016
Technology-Based Intangible Assets [Member]
Amortized intangible assets:
Carrying Amount	$ 53,878	$ 53,878
Accumulated Amortization	(44,097)	(43,502)
Net Carrying Amount	$ 9,781	$ 10,376
Weighted Average Life	4 years 109 days	4 years 219 days
Customer Relationships [Member]
Amortized intangible assets:
Carrying Amount	$ 5,225	$ 5,225
Accumulated Amortization	(3,994)	(3,890)
Net Carrying Amount	$ 1,231	$ 1,335
Weighted Average Life	3 years 146 days	3 years 219 days
Distribution Rights [Member]
Amortized intangible assets:
Carrying Amount	$ 1,264	$ 1,264
Accumulated Amortization	(1,264)	(1,261)
Net Carrying Amount		3
Patents [Member]
Amortized intangible assets:
Carrying Amount	3,459	3,459
Accumulated Amortization	(3,459)	(3,459)
Net Carrying Amount
Trade Names [Member]
Amortized intangible assets:
Carrying Amount	210	210
Accumulated Amortization	(210)	(189)
Net Carrying Amount		21
Carrying Amount	64,036	64,036
Accumulated Amortization	(53,024)	(52,301)
Net Carrying Amount	$ 11,012	$ 11,735

XML

Note 6 - Aggregate Amortization Expenses for Purchased Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Amortization expense	$ 723	$ 760

XML

Note 6 - Estimated Future Amortization Expenses for Purchased Intangible Assets (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
2017 (9 months remaining)	$ 2,115
2018	2,802
2019	2,488
2020	1,989
2021	1,325
2022 and thereafter	293
Total future amortization	$ 11,012	$ 11,735

XML

Note 7 - Summary of Long-term Investment (Details) - Other Noncurrent Assets [Member] - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Jul. 03, 2016	Mar. 27, 2016
Beginning balance	$ 389	$ 394
Donated Common Shares, Carrying Value, Write-off	(50)
Impairment charges		(5)
Ending balance	$ 339	$ 389

XML

Note 8 - Related Party Transactions (Details Textual) - USD ($)	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015	Mar. 27, 2016
Alonim Investments Inc. [Member]
Common Stock, Shares, Outstanding	7,600,000
Percentage of Common Stock Shares Outstanding	16.00%
Fusionops [Member]
Related Party Transaction, Amounts of Transaction	$ 49,000	$ 53,200
Chief Executive Officer [Member] | Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	8,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Grant Date Fair Value	$ 52,600
Chief Executive Officer [Member]
Related Party Transaction, Amounts of Transaction	$ 100,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	169,800
Common Stock, Shares, Outstanding	48,998,725		48,545,311

XML

Note 8 - Related Party Receivables As a Percentage of Net Accounts Receivable (Details) - Alonim Investments Inc. [Member] - Customer Concentration Risk [Member]	3 Months Ended		12 Months Ended
	Jul. 03, 2016	Jun. 28, 2015	Mar. 27, 2016
Sales Revenue, Net [Member]
Net Accounts Receivable	28.00%	40.00%
Accounts Receivable [Member]
Net Accounts Receivable	17.00%		17.00%

XML

Note 9 - Common Stock Repurchases (Details Textual) - USD ($) $ in Millions	3 Months Ended		106 Months Ended
	Jul. 03, 2016	Jun. 28, 2015	Jul. 03, 2016	Jul. 09, 2013	Aug. 28, 2007
August 2007 Repurchase Plan [Member]
Stock Repurchase Program, Authorized Amount					$ 100.0
July 2013 Repurchase Program [Member]
Stock Repurchase Program, Authorized Amount				$ 50.0
Stock Repurchased During Period, Shares	11,100,000
Stock, Repurchased and Retired, Balance Value			$ 105.2
Treasury Stock, Shares, Acquired	0	0

XML

Note 10 - Restructuring Charges and Exit Costs (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Restructuring Charges	$ 923	$ 1,230

XML

Note 10 - Summary of Activities Affecting Liabilities (Details) $ in Thousands	3 Months Ended
	Jul. 03, 2016 USD ($)
Lease Contract Termination Costs [Member]
Beginning Balance	$ 130
Additions/ adjustments	467
Non-cash charges	(27)
Payments	(119)
Ending balance	451
Employee Severance [Member]
Beginning Balance	364
Additions/ adjustments	456
Payments	(574)
Ending balance	246
Beginning Balance	494
Additions/ adjustments	923
Non-cash charges	(27)
Payments	(693)
Ending balance	$ 697

XML

Note 11 - Stock-based Compensation (Details Textual)			1 Months Ended				3 Months Ended		5 Months Ended	9 Months Ended		12 Months Ended
	Jul. 03, 2016 USD ($) $ / shares shares	Jul. 01, 2016 shares	Jan. 31, 2014 shares	Oct. 31, 2013 shares	Mar. 31, 2012 shares	Jan. 31, 2012 shares	Jul. 03, 2016 USD ($) $ / shares Rate shares	Jun. 28, 2015 USD ($)	Dec. 31, 2014 shares	Dec. 27, 2015 shares	Dec. 28, 2014	Mar. 27, 2016 USD ($) $ / shares shares	Sep. 18, 2014 shares	Jun. 30, 2014 shares
Employee Stock Participation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Purchase Price of Common Stock, Percent | Rate							95.00%
2006 Plan and Sipex 2006 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number														6,555,492
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized														669,008
2014 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized													5,170,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Per Award										2
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	1,000,000						1,000,000
Chief Executive Officer [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			140,000			480,000
Share-based Compensation Arrangement by Share-based Payment Award Vesting Number of Installments						4
Allocated Share-based Compensation Expense, Adjustment | $												$ (34,000)
Chief Executive Officer [Member] | Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		280,000
Chief Executive Officer [Member] | Performance-Based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award Vesting Number of Installments					3
Allocated Share-based Compensation Expense, Adjustment | $							$ 0					$ (41,000)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	60,000				300,000
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period					3 years
Chief Financial Officer [Member] | Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		120,000
Chief Financial Officer [Member] | Performance-Based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	30,000
Former Cadeka Employees [Member] | Restricted Stock Units (RSUs) [Member]
Allocated Share-based Compensation Expense | $								$ 200,000
Former Cadeka Employees [Member] | Other Current Liabilities [Member]
Accrued Bonuses, Current | $	$ 1,200,000						1,200,000
Former Cadeka Employees [Member]
Former Employees, Number												5
Payments to Employees | $												$ 75,000
Employees Unsettled, Number | $												2
Certain Executives [Member] | October 2013 PRSUs [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award Vesting Number of Installments				3
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				3 years
Allocated Share-based Compensation Expense | $							18,000	39,000
Certain Executives [Member] | October 2013 PRSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period				70,000
Number of Executives Terminated											1
Former IML Employees [Member] | Performance-Based RSUs [Member]
Allocated Share-based Compensation Expense, Adjustment | $							$ (311,000)
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period									88,448
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period									3 years
Performance-Based RSUs [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	33.33%
Performance-Based RSUs [Member] | Share-based Compensation Award, Tranche Two [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	2 years
Performance-Based RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period							169,800
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number	7,780,362,000						7,780,362,000					7,722,383,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	4,500,000						4,500,000
Share Price | $ / shares	$ 7.80						$ 7.80					$ 5.26
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross							1,161,900,000
Allocated Share-based Compensation Expense | $							$ 1,093,000	$ 1,723,000
Accrued Bonuses, Current | $	$ 1,200,000						$ 1,200,000					$ 1,200,000

XML

Note 11 - ESPP Transactions (Details) shares in Thousands	3 Months Ended
	Jul. 03, 2016 $ / shares shares
Authorized to issue (in shares)	4,500
Reserved for future issuance (in shares)	1,306
Issued (in shares)	11
Issued (in dollars per share) | $ / shares	$ 6.20

XML

Note 11 - Summary of Stock Option Transactions (Details) - USD ($) $ / shares in Units, shares in Thousands	3 Months Ended	12 Months Ended
	Jul. 03, 2016	Mar. 27, 2016	Jul. 03, 2016	Mar. 27, 2016
Balance, outstanding options (in shares)	7,722,383
Balance, weighted average exercise price (in dollars per share)			$ 7.88	$ 7.96
Balance, weighted average remaining contractual term	4 years 94 days	4 years 146 days
Balance, aggregate intrinsic value	$ 87,000
Balance, in-the-money options vested and exercisable (in shares)	4,353	48	4,353	48
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	1,161,900
Granted, weighted average exercise price (in dollars per share)	$ 6.78
Exercised, outstanding options (in shares)	(405,385)
Exercised, weighted average exercise price (in dollars per share)	$ 6.42
Cancelled, outstanding options (in shares)	(235,726)
Cancelled, weighted average exercise price (in dollars per share)	$ 7.95
Forfeited, outstanding options (in shares)	(462,810)
Forfeited, weighted average exercise price (in dollars per share)	$ 7.66
Balance, outstanding options (in shares)	7,780,362	7,722,383
Balance, aggregate intrinsic value	$ 6,760,000	$ 87,000
Balance, in-the-money options vested and exercisable (in shares)	4,353	48
Vested and expected to vest, outstanding options (in shares)			7,005,891
Vested and expected to vest, July 3, 2016 (in dollars per share)			$ 7.98
Vested and expected to vest, July 3, 2016	4 years 18 days
Vested and expected to vest, July 3, 2016			$ 5,783
Vested and exercisable, outstanding options (in shares)			3,654,884
Vested and exercisable, July 3, 2016 (in dollars per share)			$ 8.67
Vested and exercisable, July 3, 2016	2 years 164 days
Vested and exercisable, July 3, 2016			$ 1,745

XML

Note 11 - Options Exercised (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Intrinsic value of options exercised	$ 521	$ 426

XML

Note 11 - RSU Transactions (Details) - Restricted Stock Units (RSUs) [Member] $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Jul. 03, 2016 USD ($) $ / shares shares	Mar. 27, 2016 USD ($) $ / shares shares
Shares (in shares)	590,833
Unvested (in dollars per share) | $ / shares		$ 9.39
Unvested	1 year 124 days	1 year 164 days
Unvested | $	$ 3,108
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	169,800
Granted (in dollars per share) | $ / shares	$ 7.20
Issued and released (in shares)	(51,566)
Issued and released (in dollars per share) | $ / shares	$ 9.99
Forfeited (in shares)	(123,196)
Forfeited (in dollars per share) | $ / shares	$ 9.39
Shares (in shares)	585,871	590,833
Unvested (in dollars per share) | $ / shares	$ 8.71
Unvested | $	$ 4,570	$ 3,108
Vested and expected to vest, July 3, 2016 (in shares)	486,294
Vested and expected to vest, July 3, 2016	1 year 83 days
Vested and expected to vest, July 3, 2016 | $	$ 3,793

XML

Note 11 - Valuation Assumption of Performance-based Restricted Stock Units (Details)		3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Expected term of grants (years)	3 years	4 years 255 days
Risk-free interest rate	0.76%	1.20%
Expected volatility	50.00%	32.00%

XML

Note 11 - Stock-Based Compensation Expense Related to Stock Options and RSUs (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Cost of Sales [Member]
Allocated Share-based Compensation Expense	$ 114	$ 80
Research and Development Expense [Member]
Allocated Share-based Compensation Expense	246	294
Selling, General and Administrative Expenses [Member]
Allocated Share-based Compensation Expense	733	1,349
Allocated Share-based Compensation Expense	$ 1,093	$ 1,723

XML

Note 11 - Unrecognized Stock-based Compensation Expense Related to Stock Options and RSUs (Details) $ in Thousands	3 Months Ended
	Jul. 03, 2016 USD ($)
Employee Stock Option [Member]
Amount	$ 6,402
Weighted Average Remaining Recognition Period	2 years 251 days
Restricted Stock Units (RSUs) [Member]
Amount	$ 1,635
Weighted Average Remaining Recognition Period	1 year 182 days
Performance-Based RSUs [Member]
Amount	$ 495
Weighted Average Remaining Recognition Period	2 years 80 days
Amount	$ 8,532

XML

Note 11 - Weighted Average Assumptions (Details) - $ / shares		3 Months Ended
	Jul. 03, 2016	Jul. 03, 2016	Jun. 28, 2015
Minimum [Member]
Expected term of options (years)		4 years 182 days
Risk-free interest rate		1.03%
Expected volatility		34.90%
Expected term of options (years)	3 years		4 years 255 days
Risk-free interest rate	0.76%		1.20%
Expected volatility	50.00%		32.00%
Weighted average estimated fair value (in dollars per share)		$ 2.08	$ 3.08

XML

Note 12 - Summary of Net Income (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Continuing Operations [Member]
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927
Discontinued Operations [Member]
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927
Net income (loss) from continuing operations	$ 7,543	$ (2,354)
Net income (loss) from discontinued operations (See Note 3)	1,397	(156)
Net income (loss)	$ 8,940	$ (2,510)
Basic (in shares)	48,680	47,927
Effect of options and awards (in shares)	378
Diluted (in shares)	49,058	47,927
Net income (loss) per share from continuing operations:
Basic (in dollars per share)	$ 0.15	$ (0.05)
Diluted (in dollars per share)	0.15	(0.05)
Net income per share from discontinued operations:
Basic (in dollars per share)	0.03
Diluted (in dollars per share)	0.03
Net income (loss) per share:
Basic (in dollars per share)	0.18	(0.05)
Diluted (in dollars per share)	$ 0.18	$ (0.05)

XML

Note 13 - Lease Financing Obligations (Details Textual)	1 Months Ended				3 Months Ended
	May 30, 2016 USD ($) a ft²	Jan. 31, 2015 USD ($)	Oct. 31, 2014 USD ($)	Jul. 31, 2012 USD ($)	Jul. 03, 2016 USD ($)	Jun. 28, 2015 USD ($)	Mar. 27, 2016
Property, Plant and Equipment, Net [Member] | January Two Thousand Fifteen Two-Year And Two Three-Year License [Member]
Capital Lease Obligations Incurred		$ 6,900,000
Property, Plant and Equipment, Net [Member] | October 2014 Three-Year License [Member]
Capital Lease Obligations Incurred			$ 4,400,000
Property, Plant and Equipment, Net [Member] | July 2012 Three-Year License [Member]
Capital Lease Obligations Incurred				$ 900,000
January Two Thousand Fifteen Two-Year And Two Three-Year License [Member]
Repayments of Long-term Capital Lease Obligations		$ 1,000,000
October 2014 Three-Year License [Member]
Repayments of Long-term Capital Lease Obligations			$ 1,500,000
Capital Lease Obligations [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Effective Percentage							2.00%
Capital Lease Obligations [Member] | Maximum [Member]
Debt Instrument, Interest Rate, Effective Percentage							7.25%
Design Tool Impairment [Member]
Restructuring Costs					$ 400,000
Fremont Campus [Member] | Portion of Building Located at 48720 Kato Road [Member]
Sale Leaseback Transaction, Monthly Rental Payments	$ 86,338
Fremont Campus [Member] | Portion of Building Located at 48710 Kato Road [Member]
Sale Leaseback Transaction, Monthly Rental Payments	$ 600
Fremont Campus [Member]
Sale of Land and Building, Selling Price					24,100,000
Area of Real Estate Property | ft²	151,000
Area of Land | a	4.5
Sale Leaseback Transaction, Gain on Sale, Gross	$ 11,900,000
Sale Leaseback Transaction, Deferred Gain, Net	$ 2,600,000
Repayments of Long-term Capital Lease Obligations					453,000	$ 459,000
Asset Impairment Charges					1,519,000
Sale Leaseback Transaction, Amortization of Deferred Gain					$ 200,000

XML

Note 13 - Amortization Expense Related to the Design Tools (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Design Tools [Member]
Amortization expense	$ 878	$ 1,073

XML

Note 13 - Future Minimum Lease and Sublease Income Payments for Lease Financing Obligations (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
2017 (9 months remaining)	$ 3,950
2018	1,529
Total minimum lease payments	5,479
Less: amount representing interest	(851)
Present value of future minimum lease payments	4,628
Less: short-term lease financing obligations	(3,772)	$ (3,784)
Long-term lease financing obligations	$ 856

XML

Note 13 - Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended	15 Months Ended
	Jul. 03, 2016	Jun. 28, 2016
Design Tools [Member]
Interest expense	$ 38	$ 48

XML

Note 13 - Rent Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
Rent expense	$ 100	$ 181

XML

Note 13 - Operating Lease (Details) $ in Thousands	Jul. 03, 2016 USD ($)
2017 (9 months remaining)	$ 1,277
2018	1,239
2019	155
2020	49
Total future minimum lease payments	$ 2,720

XML

Note 14 - Commitments and Contingencies (Details Textual)	3 Months Ended
	Jul. 03, 2016	Jul. 03, 2016
Warranty Term, Customer Products	1 year
Warranty Term, Standard Products		90 days

XML

Note 16 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jul. 03, 2016	Jun. 28, 2015
Earliest Tax Year [Member]
Open Tax Year		2003
Latest Tax Year [Member]
Open Tax Year		2015
Income Tax Expense (Benefit)	$ 291		$ (787)
Unrecognized Tax Benefits, Period Increase (Decrease)		$ 100
Unrecognized Tax Benefits	16,900	16,900
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	$ 13,900	$ 13,900

XML

Note 16 - Estimated Interest and Penalties Related to the Underpayment of Income Taxes (Details) - USD ($) $ in Thousands	Jul. 03, 2016	Mar. 27, 2016
Accrued interest and penalties	$ 1,433	$ 1,364

XML

Note 17 - Net Sales by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended
	Jul. 03, 2016	Jun. 28, 2015
CHINA
Net sales	$ 11,400	$ 8,803
UNITED STATES
Net sales	4,674	6,598
TAIWAN, PROVINCE OF CHINA
Net sales	1,850	1,616
KOREA, REPUBLIC OF
Net sales	696	624
SINGAPORE
Net sales	3,498	4,185
GERMANY
Net sales	2,421	3,673
Rest of the World [Member]
Net sales	2,597	2,684
Net sales	$ 27,136	$ 28,183

XML

Note 17 - Major Distributors and Customer of Net Revenue (Details) - Sales Revenue, Net [Member] - Customer Concentration Risk [Member]		3 Months Ended
		Jul. 03, 2016 Rate	Jun. 28, 2015 Rate
Distributor A [Member]
Distributor	[1]	28.00%	40.00%
Distributor B [Member]
Distributor		16.00%	10.00%
Distributor D [Member]
Distributor		12.00%
Distributor C [Member]
Distributor		11.00%

[1] Net sales for this distributor for this period were less than 10% of our net sales.

XML

Note 17 - Major Distributors of Net Account Receivables (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member]		3 Months Ended	12 Months Ended
		Jul. 03, 2016	Mar. 27, 2016
Distributor B [Member]
Net Accounts Receivable		22.00%	13.00%
Distributor D [Member]
Net Accounts Receivable		18.00%	14.00%
Distributor A [Member]
Net Accounts Receivable	[1]	17.00%	17.00%
Distributor C [Member]
Net Accounts Receivable		12.00%	14.00%
Customer A [Member]
Net Accounts Receivable			12.00%

[1] Related party