UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(AMENDMENT NO. 1)

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD
ENDED SEPTEMBER 30, 2002

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD
FROM         TO

COMMISSION FILE NUMBER 0-26124

IXYS CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	77-0140882
(State or other jurisdiction of incorporation or organization)	(IRS Employer identification No.)

3540 BASSETT STREET
SANTA CLARA, CALIFORNIA 95054-2704
(Address of principal executive offices)

(408) 982-0700
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [X]  No [  ]

THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK, $0.01 PAR VALUE, OUTSTANDING AS OF NOVEMBER 11, 2002 WAS 31,853,575.

EXPLANATORY NOTE

THIS FORM 10-Q/A IS BEING FILED FOR THE PURPOSE OF AMENDING AND RESTATING (A) ITEMS 1 AND 2 OF PART I OF FORM 10-Q TO REFLECT THE RESTATEMENT OF OUR CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF THE THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 2002 TO CORRECT INVENTORY BALANCES, COST OF SALES AND RELATED DISCLOSURES AND (B) ITEM 4 OF PART I OF FORM 10-Q TO REFLECT THE EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES AND CHANGES IN INTERNAL CONTROLS THAT OCCURRED CONTEMPORANEOUSLY WITH THE RESTATEMENT. ALL ITEMS THAT ARE NOT INCLUDED HEREIN REMAIN UNCHANGED FROM THE INFORMATION SET FORTH IN THE FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002. ALL INFORMATION IN ITEMS 1 AND 2 OF PART I AND ITEM 6 OF PART II OF THIS FORM 10-Q/A IS AS OF SEPTEMBER 30, 2002 AND DOES NOT REFLECT ANY SUBSEQUENT INFORMATION OR EVENTS OTHER THAN THE RESTATEMENT AND REQUIRED CERTIFICATIONS.

2.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 4. CONTROLS AND PROCEDURES.
PART II — OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EXHIBIT 99.2

IXYS CORPORATION

FORM 10-Q/ A,
September 30, 2002

INDEX

PART I - FINANCIAL INFORMATION		4
ITEM 1.	FINANCIAL STATEMENTS	4
	CONDENSED CONSOLIDATED BALANCE SHEETS	4
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	5
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	6
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20
	QUANTITATIVE AND QUALITATIVE DISCLOSURES OF
ITEM 4.	CONTROLS AND PROCEDURES	33
PART II - OTHER INFORMATION		35
ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K	35
SIGNATURES		36
CERTIFICATIONS

3.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

IXYS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)

					September 30,
					2002(as restated			March 31,
					Note 2)			2002
					(unaudited)
				ASSETS
Current assets:
Cash and cash equivalents					$	39,179		$	32,111
Restricted cash						2,549			205
Accounts receivable, net of allowance for doubtful accounts of $2,222 at September 30, 2002 and $1,045 at March 31, 2002						22,627			16,697
Inventory						55,451			46,317
Prepaid expenses and other current assets						2,591			596
Deferred income taxes						2,359			2,553
	Total current assets					124,756			98,479
Plant and equipment, net						30,158			19,238
Goodwill and intangibles						25,345			1,896
Other assets						3,045			2,932
Deferred income taxes						3,938			2,015
	Total assets				$	187,242		$	124,560
			LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capitalized lease Obligations					$	2,996		$	2,391
Current portion of notes payable to bank						800			700
Accounts payable						12,125			5,606
Accrued expenses and other liabilities						11,393			8,383
	Total current liabilities					27,314			17,080
Capitalized lease obligations, net of current portion						4,910			4,770
Other liabilities						134			118
Pension liabilities						8,508			7,373
	Total liabilities					40,866			29,341
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.01 par value:
Authorized: 5,000,000 shares; none issued and outstanding						—			—
Common stock, $0.01 par value:
Authorized: 80,000,000 shares; 31,855,847 shares issued and 31,780,847 shares outstanding at September 30, 2002 and 26,902,192 shares issued and 26,827,192 shares outstanding at March 31, 2002						320			270
Deferred compensation						(50	)		—
Additional paid-in capital						144,425			92,785
Notes receivable from stockholders						(853	)		(853	)
Retained earnings						974			5,827
Less cost of treasury stock: 95,302 shares at September 30, 2002 and at March 31, 2002						(447	)		(447	)
Accumulated other comprehensive income (loss)						2,007			(2,363	)
		Total stockholders’ equity				146,376			95,219
Total liabilities and stockholders’ equity					$	187,242		$	124,560

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

4.

IXYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

		Three Months Ended						Six Months Ended
		September 30,						September 30,
		2002(as						2002(as
		restated						restated
		Note 2)			2001			Note 2)			2001
		(unaudited)						(unaudited)
Net revenues		$	35,311		$	20,739		$	62,748		$	46,344
Cost of goods sold			26,079			13,706			47,141			31,005
	Gross profit		9,232			7,033			15,607			15,339
Operating expenses:
Research, development and engineering			3,629			1,238			5,815			2,419
Selling, general and administrative			7,517			3,069			12,722			6,546
Restructuring charges			750			—			750			—
	Total operating expenses		11,896			4,307			19,287			8,965
Operating income (loss)			(2,664	)		2,726			(3,680	)		6,374
Interest income			239			399			442			740
Interest expense			(32	)		(48	)		(71	)		(243	)
Other expense, net			(1,205	)		(1,397	)		(2,557	)		(2,635	)
Income (loss) before income taxes			(3,662	)		1,680			(5,866	)		4,236
Benefit from (provision for) income tax			227			(639	)		1,013			(1,609	)
Net income (loss)		$	(3,435	)	$	1,041		$	(4,853	)	$	2,627
Net income (loss) per share—basic			($0.11	)	$	0.04		$	(0.16	)	$	0.10
Weighted average shares used in per share calculation— basic			31,842			26,755			29,931			26,734
Net income (loss) per share—diluted		$	(0.11	)	$	0.04		$	(0.16	)	$	0.09
Weighted average shares used in per share calculation— diluted			31,842			28,837			29,931			28,915

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

5.

IXYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

	Three Months Ended					Six Months Ended
	September 30,					September 30,
	2002(as					2002(as
	restated					restated
	Note 2)			2001		Note 2)			2001
	(unaudited)					(unaudited)
Net income (loss)	$	(3,435	)	$	1,041	$	(4,853	)	$	2,627
Other comprehensive income:
Foreign currency translation adjustments		1,396			1,587		4,370			1,661
Comprehensive income (loss)	$	(2,039	)	$	2,628	$	(483	)	$	4,288

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

6.

IXYS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

		Six Months Ended
		September 30,
		2002(as
		restated
		Note 2)			2001
		(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income		$	(4,853	)	$	2,627
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization			2,564			1,755
Provision for doubtful accounts			732			—
Provision for excess and obsolete inventory			87			1,308
Gain on foreign currency transactions			(709	)		(407	)
Deferred income taxes			2,030			—
Changes in operating assets and liabilities:
Accounts receivable			(1,441	)		5,783
Inventories			2,423			(6,939	)
Prepaid expenses			(1,139	)		46
Other assets			(1,064	)		(362	)
Accounts payable			1,892			(5,233	)
Accrued expenses and other liabilities			(788	)		(2,879	)
Pension liabilities			202			169
	Net cash used in operating activities		(64	)		(4,132	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash			(9	)		50
Net cash acquired in acquisition of Clare, Inc.			7,905			—
Purchase of plant and equipment			(131	)		(731	)
	Net cash provided by (used in) investing activities		7,765			(681	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital lease obligations			—			76
Principal payments on capital lease obligations			(218	)		(1,206	)
Proceeds from notes payable from bank			—			46
Repayment of notes payable to bank			—			(2	)
Proceeds from exercise of options			110			328
Proceeds from issuance of common stock			125			194
	Net cash provided by (used in) financing activities		17			(564	)
Effect of foreign exchange rate fluctuations on cash and cash equivalents			(650	)		424
Net increase (decrease) in cash and cash equivalents			7,068			(4,953	)
Cash and cash equivalents at beginning of period		$	32,111		$	44,795
Cash and cash equivalents at end of period		$	39,179		$	39,842

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

7.

IXYS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.     Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The condensed consolidated financial statements include the accounts of IXYS Corporation (“IXYS” or the “Company”) and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. The interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2002 contained in the Company’s Annual Report on Form 10-K, as amended. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year.

Effective as of the beginning of the first quarter of fiscal year 2003, the Company completed the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 141 (“SFAS 141”), “Business Combinations,” and SFAS No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” SFAS 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. As required by SFAS 142, the Company discontinued amortizing the remaining balance of goodwill as of the beginning of the Company’s fiscal year 2003. All remaining and future acquired goodwill will be subject to impairment tests, annually or earlier if indicators of potential impairment exist, using a fair-value-based-approach. All other intangible assets will continue to be amortized over their estimated useful lives and assessed for impairment under SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” In conjunction with the implementation of SFAS 142, the Company has completed a goodwill impairment review as of the beginning of fiscal year 2003 and found no impairment. Had SFAS 142 been implemented at the beginning of the first quarter of fiscal year 2002, the pro forma effect of excluding goodwill amortization expense would have been as follows:

		Three Months Ended		Six Months Ended
		September 30, 2001		September 30, 2001
Reported net income		$	1,041	$	2,627
Add back: Goodwill amortization		$	176	$	352
Pro forma net income		$	1,217	$	2,979
Reported net income
	Basic income per common share	$	0.04	$	0.10
	Diluted income per common share	$	0.04	$	0.09
Add back: Goodwill amortization per share
	Basic income per common share	$	0.01	$	0.01
	Diluted income per common share	$	0.00	$	0.01
Pro forma net income per share
	Basic income per common share	$	0.05	$	0.11
	Diluted income per common share	$	0.04	$	0.10

8.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2.     Restatement:

On May 13, 2003, the Company announced that it had discovered bookkeeping errors in certain prior period financial statements, requiring restatement of the financial statements for these periods. Due to errors in the Company’s accounting for inventories, inventories were overstated as of June 30, 2002, September 30, 2002 and December 31, 2002 and cost of sales, tax benefits and net loss for each quarterly period in the nine months ended December 31, 2002 were understated. As a result, the Company’s condensed consolidated statements of operations and cash flows for the periods ended June 30, 2002, September 30, 2002 and December 31, 2002 and the condensed consolidated balance sheets as of June 30, 2002, September 30, 2002 and December 31, 2002 are being restated.

The Company is restating its condensed consolidated statements of operations and cash flows for the three month and six month periods ended September 30, 2002 and condensed consolidated balance sheet as of September 30, 2002, which are included in this Form 10-Q/A. The statements of operations and cash flows for the period ended September 30, 2001 and the balance sheet as of September 30, 2001 and March 31, 2002 were not impacted by this restatement.

The Company determined that bookkeeping errors were made in the three month and six month periods ended September 30, 2002 which required restatement. These errors resulted in the improper relief of inventory when product was sold, not properly recording the elimination of intercompany profits and not properly recording manufacturing variance related costs.

In the aggregate for the three month and six month period ended September 30, 2002, the adjustments for these entries and related tax effects increased previously reported net loss for the three month period by $0.3 million from $3.1 million to $3.4 million, and increased previously reported basic and diluted net loss by $0.01 per share and, for the six month period, increased previously reported net loss by $1.1 million from $3.8 million to $4.9 million and increased previously reported basic and diluted net loss by $0.03 per share.

9.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following are reconciliations of the Company’s financial position and results of operations from financial statements previously filed to the restated and reclassified financial statements (in thousands, except per share data):

Condensed Balance Sheet as of September 30, 2002

		As
		previously
		reported			Adjustments			As restated
		(unaudited)			(unaudited)			(unaudited)
Current assets:
Cash and cash equivalents		$	39,179					$	39,179
Restricted cash			2,549						2,549
Accounts receivable, net of allowance for doubtful accounts of $2,222 at September 30, 2002 and $1,045 at March 31, 2002			22,627						22,627
Inventory			57,087			(1,636	)		55,451
Prepaid expenses and other current assets			2,591						2,591
Deferred income taxes			2,359						2,359
	Total current assets		126,392			(1,636	)		124,756
Plant and equipment, net			30,158						30,158
Goodwill and intangibles			25,345						25,345
Other assets			3,045						3,045
Deferred income taxes			3,365			573			3,938
	Total assets	$	188,305		$	(1,063	)	$	187,242
Current liabilities:
Current portion of capitalized lease obligations		$	2,996					$	2,996
Current portion of notes payable to bank			800						800
Accounts payable			12,125						12,125
Accrued expenses and other liabilities			11,393						11,393
	Total current liabilities		27,314						27,314
Other liabilities			134						134
Capitalized lease obligations, net of current portion			4,910						4,910
Pension liabilities			8,508						8,508
	Total liabilities		40,866			—			40,866
Commitments and contingencies (Note 11)
Stockholders’ equity
Preferred stock, $0.01 par value: Authorized: 5,000,000 shares; none issued and outstanding			—						—
Common stock, $0.01 par value: Authorized: 80,000,000 shares; 31,855,847 shares issued and 31,780,847 shares outstanding at September 30, 2002 and 26,902,192 shares issued and 26,827,192 shares outstanding at March 31, 2002			320						320
Deferred compensation			(50	)					(50	)
Additional paid-in capital			144,425						144,425
Notes receivable from stockholders			(853	)					(853	)
Retained earnings			2,037			(1,063	)		974
Less cost of treasury stock: 95,302 shares at September 30, 2002 and at March 31, 2002			(447	)					(447	)
Accumulated other comprehensive income (loss)			2,007						2,007
	Total Shareholders’ Equity		147,439			(1,063	)		146,376
Total Shareholders’ Equity and Liabilities		$	188,305		$	(1,063	)	$	187,242

10.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Statement of Operations for the Three Months Ended September 30, 2002

		As previously
		reported			Adjustments			As restated
		(unaudited)			(unaudited)			(unaudited)
Net revenues		$	35,311					$	35,311
Cost of goods sold			25,527			552			26,079
	Gross profit		9,784			(552	)		9,232
Operating expenses:
Research, development and Engineering			3,629						3,629
Selling, general and administrative			7,517						7,517
Restructuring charges			750						750
	Total operating expenses		11,896			—			11,896
Operating loss			(2,112	)		(552	)		(2,664	)
Interest income			239						239
Interest expense			(32	)					(32	)
Other (expense), net			(1,205	)					(1,205	)
Loss before income taxes			(3,110	)		(552	)		(3,662	)
Benefit from income tax			34			193			227
Net loss		$	(3,076	)	$	(359	)	$	(3,435	)
Net loss per share—basic			($0.10	)		($0.01	)		($0.11	)
Weighted average shares used in per share calculation— basic			31,842						31,842
Net loss per share—diluted		$	(0.10	)		($0.01	)	$	(0.11	)
Weighted average shares used in per share Calculation — diluted			31,842						31,842

11.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Statement of Operations for the Six Months Ended September 30, 2002

		As
		previously
		reported			Adjustments			As restated
		(unaudited)			(unaudited)			(unaudited)
Net revenues		$	62,748					$	62,748
Cost of goods sold			45,505		$	1,636			47,141
	Gross profit		17,243			(1,636	)		15,607
Operating expenses:
Research, development and engineering			5,815						5,815
Selling, general and administrative			12,722						12,722
Restructuring charges			750						750
	Total operating expenses		19,287			—			19,287
Operating loss			(2,044	)		(1,636	)		(3,680	)
Interest income			442						442
Interest expense			(71	)					(71	)
Other (expense), net			(2,557	)					(2,557	)
Loss before income taxes			(4,230	)		(1,636	)		(5,866	)
Benefit for income tax			440			573			1,013
Net loss		$	(3,790	)	$	(1,063	)	$	(4,853	)
Net loss per share—basic		$	(0.13	)	$	(0.03	)	$	(0.16	)
Weighted average shares used in per share calculation—basic			29,931						29,931
Net loss per share—diluted		$	(0.13	)	$	(0.03	)	$	(0.16	)
Weighted average shares used in per share calculation—diluted			29,931						29,931

12.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Statement of Cash Flows for the Six Months Ended September 30, 2002

	As previously
	reported			Adjustments			As restated
	(unaudited)			(unaudited)			(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(3,790	)	$	(1,063	)	$	(4,853	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,564						2,564
Provision for doubtful accounts		732						732
Provision for excess and obsolete inventory		87						87
Gain on foreign currency transactions		(709	)					(709	)
Deferred income taxes		2,603			(573	)		2,030
Changes in operating assets and liabilities:
Accounts receivable		(1,441	)					(1,441	)
Inventories		787			1,636			2,423
Prepaid expenses		(1,139	)					(1,139	)
Other assets		(1,064	)					(1,064	)
Accounts payable		1,892						1,892
Accrued expenses and other liabilities		(788	)					(788	)
Pension liabilities		202						202
Net cash used in operating activities		(64	)		—			(64	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted cash		(9	)					(9	)
Net cash acquired in acquisition of Clare, Inc.		7,905						7,905
Purchase of plant and equipment		(131	)					(131	)
Net cash provided by investing activities		7,765						7,765
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations		(218	)					(218	)
Proceeds from exercise of options		110						110
Proceeds from issuance of common stock		125						125
Net cash provided by financing activities		17						17
Effect of foreign exchange rate fluctuations on cash and cash equivalents		(650	)					(650	)
Net increase in cash and cash equivalents		7,068						7,068
Cash and cash equivalents at beginning of period		32,111						32,111
Cash and cash equivalents at end of period	$	39,179					$	39,179

13.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     3.     Foreign Currency Translation

The local currency is considered to be the functional currency of the operations of IXYS’ foreign subsidiaries. Accordingly, assets and liabilities are translated at the exchange rate in effect at period end, and revenues and expenses are translated at average rates during the period. Adjustments resulting from the translation of the accounts of IXYS’ foreign subsidiaries into U.S. dollars are included in cumulative translation adjustment, a separate component of stockholders’ equity. Foreign currency transaction gains and losses are included as a component of non-operating income and expense.

     4.     Acquisition of Clare, Inc.

On June 10, 2002, IXYS completed its acquisition of Clare, Inc. (“Clare”). The acquisition of Clare was intended to allow the combined organization to be more competitive and to achieve greater financial strength, operational efficiencies, access to capital and growth potential than either company could separately achieve. In connection with the acquisition, (a) each outstanding share of Clare common stock was converted into the right to receive 0.49147 of a share of IXYS common stock, which resulted in the issuance of approximately 4.9 million shares of IXYS common stock, and (b) each option to purchase Clare common stock outstanding immediately prior to the consummation of the acquisition was converted into an option to purchase 0.49147 of a share of IXYS common stock, resulting in the assumption of options exercisable for approximately 1.0 million shares of IXYS common stock.

The estimated total purchase price is as follows (in thousands):

Value of IXYS common stock issued	$	47,658
Value of IXYS options issued		3,676
Estimated direct merger cost		1,848
Total purchase price	$	53,182

IXYS has finalized the fair values of identifiable intangible assets acquired and plant and equipment. Replacement cost has been used to determine the fair value of the plant and equipment acquired. However, IXYS is still in the process of determining the deferred taxes associated with the acquisition. IXYS has allocated the purchase price to identifiable intangible assets, tangible assets, liabilities assumed and goodwill as follows (in thousands):

Fair value of tangible assets acquired:
	Current assets		$	24,861
	Deferred tax assets — short term			2,742
		Plant and equipment		10,271
		Other assets		111
			$	37,985
Amortizable intangible assets:						Estimated useful lives
	Core Technology		$	2,700		5 to 6 years
	Tradename/Trademarks			900		3 years
	Other			440		3 months to 6 years
			$	4,040
Total assets acquired			$	42,025
Fair value of liabilities assumed				(8,746	)
	Net assets acquired			33,279
Goodwill				19,903
Total purchase			$	53,182

14.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Disclosure (in thousands, except per share data):

The following unaudited pro forma combined amounts give effect to the acquisition of Clare as if the acquisition had occurred on April 1, 2002 and 2001. On a pro forma basis, the results of operations of Clare for the six-month periods ended September 30, 2002 and 2001 are consolidated with IXYS results for the six-month periods ended September 30, 2002 and 2001. The pro forma amounts do not purport to be indicative of what would have occurred had the acquisition been made as of the beginning of each period or of results which may occur in the future.

	Six Months Ended
	September 30,
	2002(as
	restated
	Note 2)			2001
Revenue	$	69,205		$	69,426
Net loss	$	(12,736	)	$	(9,373	)
Net loss per share — basic	$	(0.40	)	$	(0.30	)
Net loss per share — diluted	$	(0.40	)	$	(0.30	)
Shares used in per share calculation		31,818			31,628

5.     Restructuring

In June 2002, the Company adopted a corporate restructuring program to reduce expenses and preserve the Company’s cash. The restructuring mainly relates to a reduction in the workforce designed to eliminate redundant positions at Clare. The restructuring charge, which consists mainly of involuntary employee separation costs of $750,000, was recorded in operating expense in the three and six months ended September 30, 2002. The separation cost is for 33 employees worldwide: 5 in sales and marketing, 7 in research and development, 3 in general and administrative and 9 in operations functions in the United States; and 8 in sales and marketing and 1 in general and administrative outside the United States.

	September 30,
	2002
Accrual for restructuring cost	$	750
Less: Amount paid		(598	)
Balance, September 30, 2002	$	152

6.     Recent Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 144, (“SFAS 144”), “Accounting for Impairment or Disposal of Long-Lived Assets,” which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. SFAS No. 144 addresses financial accounting and reporting for the impairment of certain long-lived assets and for long-lived assets to be disposed of. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of long-lived Assets and Long-Lived Assets to be Disposed of,” and Accounting Principles Board (“APB”) Opinion No. 30; however, SFAS No. 144 retains the requirement of APB Opinion No. 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that has either been disposed of (by sale, abandonment or in a distribution to owners) or is classified as held for sale. IXYS has adopted SFAS No. 144 and the adoption did not have a material impact on its financial position and results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Exit or Disposal Activities” (“SFAS 146”). SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The scope of SFAS

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146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002, and early application is encouraged. IXYS adopted SFAS 146 during the second quarter of this fiscal year. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS 146. SFAS 146 will change, on a prospective basis, the time when restructuring charges are recorded from a commitment date approach to when the liability is incurred. SFAS No. 146 has not had a material impact on its financial position and results of operations.

7.     Inventory

Inventory consists of the following (in thousands):

	September 30,
	2002(as restated		March 31,
	Note 2)		2002
	(unaudited)
Raw materials	$	7,432	$	5,494
Work in process		37,562		32,299
Finished goods		10,457		8,524
Total	$	55,451	$	46,317

8.     Goodwill and Intangibles

	September 30,		March 31,
	2002		2002
	(unaudited)
Goodwill	$	21,799	$	1,896
Intangibles		3,546		—
Total	$	25,345	$	1,896

16.

IXYS CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9.     Computation of Net Income (Loss) Per Share

Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of other securities into common stock. Dilutive net loss per share does not include the weighted average effect of potential common shares, including options and warrants to purchase common stocks, because their effect is anti-dilutive.

Basic and diluted earnings per share are calculated as follows (in thousands, except per share amounts):

	Three Months Ended					Six Months Ended
	September 30,					September 30,
	2002 (as					2002(as
	restated					restated
	Note 2)			2001		Note 2)			2001
	(unaudited)					(unaudited)
BASIC:
Weighted, average shares outstanding for the period		31,842			26,755		29,931			26,734
Shares used in computing per share amounts		31,842			26,755		29,931			26,734
Net income (loss) available for common Stockholders	$	(3,435	)	$	1,041	$	(4,853	)	$	2,627
Net income (loss) available for common stockholders per Share	$	(0.11	)	$	0.04	$	(0.16	)	$	0.10
DILUTED:
Weighted, average shares outstanding for the period		31,842			26,755		29,931			26,734
Net effective dilutive stock options and warrants based on treasury stock method using average market price		—			2,082		—			2,181
Shares used in computing per share Amounts		31,842			28,837		29,931			28,915
Net income (loss) available for common Stockholders	$	(3,435	)	$	1,041	$	(4,853	)	$	2,627
Net income (loss) per share available for common stockholders	$	(0.11	)	$	0.04	$	(0.16	)	$	0.09
Total common stock equivalents excluded for the computation of earnings per share as their effect was anti-dilutive		4,953			1,229		4,953			1,024

10.     Segmental Information

Statement of Financial Accounting Standards No. 131 (“SFAS 131”), “Disclosures about Segments of an Enterprise and Related Information,” establishes annual and interim reporting standards for an enterprise’s business segments and related disclosures about its products, services, geographic areas and major customers. The method for determining the information to be reported under SFAS 131 is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. The Company’s chief operating decision-makers are considered to be the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”). The CEO and CFO review financial information for purposes of making operational decisions and assessing financial performance. IXYS’ chief decision makers currently review operating results on a

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consolidated basis only, and therefore believe that IXYS operates in one industry segment. Segment reporting based on product groups is impractical and not meaningful for management of the business and for disclosure. IXYS’ net revenue by major geographical area (based on destination) were as follows:

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2002		2001		2002		2001
	(unaudited)				(unaudited)
United States	$	15,371	$	7,584	$	26,918	$	16,099
Europe and the Middle East		14,193		10,129		26,065		22,741
Japan		1,172		188		1,636		522
Asia Pacific		4,575		2,838		8,129		6,982
Total	$	35,311	$	20,739	$	62,748	$	46,344

IXYS’ foreign operations mainly consist of those of its subsidiaries, IXYS GmbH and IXYS Berlin in Germany, IXYS CH in Switzerland and Westcode Semiconductors Limited in the United Kingdom. Revenue and net income of IXYS CH were not significant and are combined with German operations. The following table summarizes the sales of IXYS’ U.S. and foreign operations (in thousands):

		Three Months Ended						Six Months Ended
		September 30,						September 30,
		2002 (as						2002 (as
		restated						restated
		Note 2)			2001			Note 2)			2001
		(unaudited)						(unaudited)
Net Revenue:
Foreign		$	16,149		$	10,873		$	30,981		$	24,263
U.S			19,162			9,866			31,767			22,081
	Total	$	35,311		$	20,739		$	62,748		$	46,344
Net Income (Loss):
Foreign		$	457		$	(574	)	$	(563	)	$	(251	)
U.S			(3,892	)		1,615			(4,290	)		2,878
	Total	$	(3,435	)	$	1,041		$	(4,853	)	$	2,627

Tangible long-lived assets by geographical locations are as follows (in thousands):

		September 30,		March 31,
		2002		2002
		(unaudited)
Germany		$	15,285	$	13,550
Switzerland			3,110		2,543
United States			11,113		4,869
United Kingdom			3,696		1,208
	Total	$	33,204	$	22,170

11.     Commitments and Contingencies

Legal Proceedings

On June 22, 2000, International Rectifier Corporation filed an action for patent infringement against IXYS in the United States District Court for the Central District of California, alleging that certain of IXYS’ products sold in the United States infringe U.S. patents owned by International Rectifier. International Rectifier’s complaint against IXYS contended that IXYS’ alleged infringement

of International Rectifier’s patents has been and continues to be willful and deliberate. Subsequently, the U.S. District Court decided that certain of IXYS’ power MOSFETs and IGBTs infringe certain claims of each of three International Rectifier U.S. patents.

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On May 21, 2002, the U.S. District Court entered a permanent injunction, which became effective June 5, 2002, barring IXYS from making, using, offering to sell or selling in, or importing into, the United States, MOSFETs (including IGBTs) covered by the subject patents. On August 2, 2002, a three-judge panel of the United States Court of Appeals for the Federal Circuit permanently granted IXYS’ motion to stay, pending appeal, the permanent injunction issued by the U.S. District Court. In granting this motion, the panel stated, among other things, that IXYS had shown a strong likelihood of success regarding its challenge to the U.S. District Court’s finding that IXYS infringes the International Rectifier patents.

On August 5, 2002, the U.S. District Court entered its ruling that International Rectifier should be awarded damages of $9.1 million for IXYS’ alleged infringement of International Rectifier’s patents. In addition, the U.S. District Court ruled that IXYS has been guilty of willful infringement. Subsequently, the U.S. District Court increased the damages to a total of $27.2 million, plus attorney fees. IXYS has appealed the damages award, and the United States Court of Appeals for the Federal Circuit has granted IXYS’ motion to stay the damages award pending further order of the court.

International Rectifier also contends that IXYS’ importation into the United States of certain IXYS-designed MOSFET products manufactured for IXYS by Samsung Electronics Co., Ltd. (“Samsung”) is in violation of a consent decree and injunction entered against Samsung in another lawsuit to which IXYS was not a party (the “Samsung Injunction”). International Rectifier sought enforcement of the Samsung Injunction against IXYS and Samsung, a contempt citation and a fine. The U.S. District Court deferred a decision about whether IXYS and Samsung were in contempt. On March 19, 2002, the U.S. District Court decided, among other things, that IXYS is bound by, and IXYS devices are not excepted from, the Samsung Injunction. On June 12, 2002, the Federal Circuit stayed the application of the Samsung Injunction to IXYS.

It remains IXYS’ intent to continue to contest the claims of International Rectifier vigorously. Furthermore, IXYS expects to appeal any ruling of contempt. In light of the August 2, 2002 decision by the Federal Circuit, IXYS believes its defenses to the various claims and its arguments on appeal are meritorious. However, there can be no assurance of a favorable outcome. In the event of an adverse outcome, damages or injunctions awarded by the U.S. District Court could be materially adverse to IXYS’ financial condition and results of operations. Management has not accrued any amounts in the accompanying balance sheets for the International Rectifier matter described above.

In response to International Rectifier’s claims, Samsung contends that IXYS is contractually obligated under the terms of IXYS’ wafer supply agreement with Samsung to defend it against the contempt claims made by International Rectifier and indemnify and hold Samsung harmless in connection with such claims. While IXYS believes that neither it nor Samsung are or could be in violation of the injunction for various reasons IXYS believes to be meritorious, including an express reservation as to IXYS’ designed parts in the consent decree, there can be no assurance of a favorable outcome. In the event of an adverse ruling against IXYS on the ultimate issue of contempt, or if IXYS is obligated to defend and indemnify Samsung, any damages awarded or injunction entered by the U.S. District Court could be materially adverse to IXYS’ financial condition and results of operations.

In November 2000, IXYS filed a lawsuit for patent infringement against International Rectifier GmbH in the County Court of Mannheim, Germany. The lawsuit charged International Rectifier with infringing at least two of IXYS’ German patents. These patents cover key design features of IXYS’ proprietary integrated power module technology. The lawsuit sought damages and an injunction prohibiting the continued infringement by International Rectifier.

On April 27, 2001, the County Court of Mannheim rendered a judgment in IXYS’ favor that enjoined International Rectifier from marketing, utilizing, importing or possessing two of IXYS’ German patents, and imposed a fine of up to (EUR) 256,000 to the state or imprisonment of International Rectifier’s managing director for each violation of the injunction. International Rectifier was also ordered to pay attorney fees and past and future damages and unjustified enrichment resulting from International Rectifier’s infringing practices. International Rectifier appealed the judgment to the Court of Appeals in Karlsruhe. After a hearing on this appeal in March, the Court of Appeals in Karlsruhe ruled in favor of IXYS and the judgment entered by the County Court of Mannheim is now final. IXYS intends to request that the County Court of Mannheim rule on the damages and fees due from International Rectifier to IXYS.

On February 8, 2001, IXYS filed a lawsuit against International Rectifier Italia S.p.A. in the Civil Court of Monza, Italy, for patent infringement of at least two of IXYS’ European patents, which correspond to the German patents involved in the above-described legal proceeding in Germany. The lawsuit seeks the seizure of semiconductor modules produced by International Rectifier that infringe on IXYS’ patents and an injunction against further production of such modules by International Rectifier in Italy. On June 27, 2001, the Civil Court of Monza rendered a preliminary injunction in IXYS’ favor with respect to certain claims of infringement by International Rectifier S.p.A. Under the terms of this preliminary injunction, IXYS is permitted to seize, and International Rectifier S.p.A. is prohibited from distributing, certain of the allegedly infringing semiconductor modules. The injunction is an interlocutory

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measure that remains in effect until there has been a judgment on the merits. Hearings on the merits of the law suit were held on December 12, 2001, January 24, 2002 and February 21, 2002. It could be as long as several years before a judgment on the merits is rendered.

While IXYS believes its claims against International Rectifier in the Civil Court of Monza, Italy are meritorious, there can be no assurance of a favorable outcome. IXYS does not believe that an adverse ruling by the Civil Court of Monza would have a significant negative impact on the results of operations, financial performance or liquidity of IXYS.

On January 17, 2002, IXYS sued International Rectifier in the United States District Court for the Northern District Court of California for infringement of three IXYS U.S. patents. On April 1, 2002, IXYS amended its complaint to assert a modified group of five IXYS U.S. patents. The asserted patents include those corresponding to IXYS’ module patents asserted in the litigation in Germany and Italy. In addition, the patents include IXYS’ patents for direct copper bond technology. On July 12, 2002, the U.S. District Court denied International Rectifier’s motions to dismiss and for summary judgment and set the matter for trial to begin on June 2, 2003. IXYS’ lawsuit seeks damages and an injunction against continued infringement.

In August 2002, IXYS filed an action for patent infringement against Advanced Power Technology, Inc. (“APT”) in the United States District Court for the Northern District of California, claiming that APT is infringing two of IXYS’ patents. APT has denied IXYS’ claim of infringement, has asserted several affirmative defenses and has filed a counterclaim against IXYS, claiming that IXYS is infringing one of APT’s patents.

IXYS is currently a party to various legal proceedings, including those noted above. While management currently believes that the ultimate outcome of these proceedings, individually and in the aggregate, will not have a material adverse effect on IXYS’ financial position or overall trends of operations, litigation is subject to inherent uncertainties. Were an unfavorable ruling to occur, there exists the possibility of a material adverse impact on the results of operations of the period in which the ruling occurs.

Discussions of additional details relating to the above-described legal proceedings may be found in IXYS’ prior SEC filings and reports.

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

This discussion contains forward-looking statements, which are subject to certain risks and uncertainties, including without limitation those described elsewhere in this Item 2. Actual results may differ materially from the results discussed in the forward-looking statements. All forward-looking statements included in this document are made as of the date hereof, based on the information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

Overview

We are a leading company in the design, development, manufacture and marketing of high power, high performance power semiconductors. Our power semiconductors improve system efficiency and reliability by converting electricity at relatively high voltage and current levels into the finely regulated power required by electronic products. We focus on the market for power semiconductors that are capable of processing greater than 500 watts of power.

On June 10, 2002, we completed the acquisition of Clare, Inc., a provider of high-voltage analog and mixed-signal semiconductor integrated packages and discrete components for use in electronic communications, computer, and industrial equipment. In connection with this acquisition, we issued approximately 4.9 million shares of IXYS common stock to the holders of outstanding shares of Clare common stock and assumed options to purchase approximately 1.0 million shares of IXYS common stock.

In the three-month period ended September 30, 2002, North American sales represented approximately 43.5%, and international sales represented approximately 56.5%, of our net revenues. Of our international sales, approximately 71.2% were derived from sales in Europe and the Middle East and approximately 28.8% were derived from sales in Asia. In the six-month period ended September 30, 2002, North American sales represented approximately 42.9%, and international sales represented approximately 57.1%, of our net revenues. Of our international sales, approximately 72.7% were derived from sales in Europe and the Middle East and approximately 27.3% were derived from sales in Asia. No single end customer accounted for more than 10% of our net revenues in the three-month and six-month periods ended September 30, 2002 and 2001.

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Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Our critical accounting policies include inventories, valuation of plant, equipment and intangible assets, revenue recognition, accounting for legal contingencies, accounting for income taxes and accounting for non-recurring engineering work. A discussion of all of these critical accounting policies except for non-recurring engineering work can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the fiscal year ended March 31, 2002, as amended, and a discussion of the critical accounting policy relating to non-recurring engineering work can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Quarterly Report on Form 10-Q/A for the fiscal quarter ended June 30, 2002.

Results of Operations, as restated-Three-Month and Six-month Periods Ended September 30, 2002 and September 30, 2001

     On May 13, 2003, we announced that we had discovered bookkeeping errors in certain prior period financial statements, requiring restatement of the financial statements for these periods. Due to errors in our accounting for inventories, inventories were overstated as of June 30, 2002, September 30, 2002 and December 31, 2002 and cost of sales, tax benefits and net loss for each quarterly period in the nine months ended December 31, 2002 were understated. As a result, our condensed consolidated statements of operations and cash flows for the periods ended June 30, 2002, September 30, 2002 and December 31, 2002 and the condensed consolidated balance sheets as of June 30, 2002, September 30, 2002 and December 31, 2002 are being restated.

We are restating our condensed consolidated statements of operations and cash flows for the three month and six month periods ended September 30, 2002 and condensed consolidated balance sheet as of September 30, 2002, which are included in this Form 10-Q/A. The statements of operations and cash flows for the period ended September 30, 2001 and the balance sheet as of September 30, 2001 were not impacted by this restatement.

We determined that bookkeeping errors were made in the three month and six month periods ended September 30, 2002 which required restatement. These errors resulted in the improper relief of inventory when product was sold, not properly recording the elimination of intercompany profits and not properly recording manufacturing variance related costs.

In the aggregate for the three month and six month period ended September 30, 2002, the adjustments for these entries and related tax effects increased previously reported net loss for the three month period by $0.3 million from $3.1 million to $3.4 million, and increased previously reported basic and diluted net loss by $0.01 per share and, for the six month period, increased previously reported net loss by $1.1 million from $3.8 million to $4.9 million and increased previously reported basic and diluted net loss by $0.03 per share.

Net Revenues. Net revenues in the three-month period ended September 30, 2002 were $35.3 million, a 70.3% increase from net revenues of $20.7 million in the three-month period ended September 30, 2001. Net revenues in the six-month period ended September 30, 2002 were $62.7 million, a 35.4% increase from net revenues of $46.3 million in the six-month period ended September 30, 2001. The increase in net revenues in both the three-month period and six-month period ended September 30, 2002, as compared to the respective periods in the prior fiscal year, was due to the inclusion of revenue from the Westcode and Clare acquisitions, as well as a 19.7% increase and 7.5% increase in average selling prices across our traditional product line in the three-month and six-month periods ended September 30, 2002, respectively, as compared to the respective periods in the prior fiscal year, partially offset by a 14.6% decrease in units shipped from our traditional product line in the three-month period ended September 30, 2002, as compared to the three-month period ended September 30, 2001, and a 17.7% decrease in units shipped from our traditional product line in the six-month period ended September 30, 2002, as compared to the six-month period ended September 30, 2001.

Gross Profit. Gross profit was $9.2 million, or 26.1% of net revenues, in the three-month period ended September 30, 2002, as compared to $7.0 million, or 33.9% of net revenues, in the three-month period ended September 30, 2001. Gross profit was $15.6 million, or 24.9% of net revenues, in the six-month period ended September 30, 2002, as compared to $15.3 million, or 33.1% of net revenues, in the six-month period ended September 30, 2001. The increase in the dollar amount of gross profit in both the three-month period and the six-month period ended September 30, 2002, as compared to the respective periods in the prior fiscal year, was due to the inclusion of gross profit from the Westcode and Clare acquisitions, as well as a 19.7% increase and a 7.5% increase in average selling prices across our traditional product line in the three-month and the six-month periods ended September 30, 2002, respectively,

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as compared to the same periods in the prior fiscal year, offset by the underutilization of our manufacturing capacity as well as a decrease of 14.6% and 17.7% in units shipped from our traditional product line, respectively. Open for revision.

Research, Development and Engineering. During the three-month period ended September 30, 2002, research, development and engineering (“R&D”) expense was $3.6 million, representing 10.3% of net revenues, as compared to $1.2 million, representing 6.0% of net revenues, in the three-month period ended September 30, 2001. During the six-month period ended September 30, 2002, R&D expense was $5.8 million, representing 9.3% of net revenues, as compared to $2.4 million for the six-month period ended September 30, 2001, representing 5.2% of net revenues. The increase in absolute dollar amount of R&D expenses was primarily due to the inclusion of R&D expenses incurred by Westcode and Clare as well as the increase in the number of R&D projects.

Selling, General and Administrative. During the three-month period ended September 30, 2002, selling, general and administrative (“SG&A”) expense was $7.5 million, or 21.3% of net revenues, as compared to $3.1 million, or 14.8% of net revenues, in the three-month period ended September 30, 2001. During the six-month period ended September 30, 2002, SG&A expense was $12.7 million, or 20.3% of net revenues, as compared to $6.5 million, or 14.1% of net revenues, in the six-month period ended September 30, 2001. The increase in absolute dollar amount of SG&A expenses for both the three- and six-month periods was primarily due to the inclusion of SG&A expenses incurred by Westcode and Clare.

Restructuring charges. In June 2002, we adopted a corporate restructuring program to reduce expenses and preserve cash. The restructuring mainly relates to a reduction in the workforce designed to eliminate redundant positions at Clare. The restructuring charge, which consists mainly of involuntary employee separation costs of $750,000, was recorded in the three and six months ended September 30, 2002. The separation cost are for 33 employees worldwide: 5 in sales and marketing, 7 in research and development, 3 in general and administrative and 9 in operations functions in the United States; and 8 in sales and marketing and 1 in general and administrative outside the United States.

Interest Income (Expense), Net. During the three-month period ended September 30, 2002, interest income, net was $207,000, as compared to interest income, net of $351,000 in the three-month period ended September 30, 2001. During the six-month period ended September 30, 2002, interest income, net was $371,000, as compared to interest income, net of $497,000 in the six-month period ended September 30, 2001. The decrease in interest income, net in the three-month period and the six-month period ended September 30, 2002, relative to the same periods in the prior fiscal year, is mainly due to our lower cash position as well as lower interest rates.

Other Expense, Net. Other expense, net, including gain on foreign currency transactions, in the three-month period ended September 30, 2002 was $1.2 million as compared to $1.4 million of other expense, net in the three-month period ended September 30, 2001. Other expense, net, including gain on foreign currency transactions, in the six-month periods ended September 30, 2002 and 2001 were $2.6 million. For the six-month periods ended September 30, 2002 and 2001, other expenses, net included $2.0 million and $2.5 million of legal expenses, respectively.

Provision For Income Taxes. The provision for income taxes in the three-month period and the six-month period ended September 30, 2002, reflects an effective tax rate of 35.0%, compared to the effective tax rate in the prior fiscal year of 38%. In the three-month period ended September 30, 2002, IXYS recorded tax expense of approximately $1.2 million to reflect the outcome of a tax assessment in Germany for the years 1997 to 2000.

Liquidity and Capital Resources, as restated

Cash and cash equivalents. As of September 30, 2002, our cash and cash equivalents were $39.2 million, an increase of $7.1 million from cash and cash equivalents of $32.1 million at March 31, 2002. The increase in cash and cash equivalents was primarily due to cash provided by the acquisition of Clare.

Cash flows from operating activities. Net cash used in operating activities in the six-month period ended September 30, 2002 was $64,000, which represents a decrease of $4.1 million from net cash used in operating activities of $4.1 million in the six-month period ended September 30, 2001. The decrease in net cash used in operating activities was primarily attributable to depreciation and amortization as well as a tax refund received for loss carrybacks related to Clare’s operations.

Cash flows from investing activities. Net cash provided by investing activities in the six-month period ended September 30, 2002 was $7.8 million, an increase of $8.4 million from the $681,000 used in investing activities in the six-month period ended September 30, 2001. This increase in net cash from investing activities is primarily due to cash acquired in the acquisition of Clare.

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Cash flows from financing activities. During the six-month period ended September 30, 2002, net cash provided by financing activities was $17,000, an increase of $581,000 from net cash used in financing activities of $564,000 during the six-month period ended September 30, 2001. The increase in net cash from financing activities is primarily due to a reduction in the amount of principal repayment of capital lease obligations.

We have a number of credit facilities available to us. We have one line of credit with a U.S. bank that consists of a $5.0 million commitment amount, which is automatically renewed on a monthly basis. The line bears interest at the bank’s prime rate (4.75% at September 30, 2002). The line is collateralized by certain assets and contains certain general and financial covenants. At September 30, 2002, we had drawn $700,000 against such line of credit.

We have another line of credit with a U.S. bank that consists of a $100,000 commitment, which is automatically renewed on a monthly basis. The line bears interest at a fixed rate of 9.5% . The line is collateralized by a $100,000 certificate of deposit that we have with the bank. At September 30, 2002, we had drawn $100,000 against such line of credit.

As of September 30, 2002, Clare had $2.0 million of letter of credits outstanding under a revolving credit facility in connection with certain leases. The letters of credit were collateralized by $2.3 million cash on deposit. The letters of credit expire through July 2003 and will automatically renew annually at the discretion of the lessor. The cash collateral is included in restricted cash in the accompanying condensed balance sheet at September 30, 2002.

In Germany, at September 30, 2002, we had a $5.0 million line of credit with a German bank with no outstanding balance. This line supports a letter of credit facility.

In July 2000, a German bank issued to us a commitment letter for a Euro 3.8 million (approximately $3.8 million) equipment lease facility. Our existing equipment leases, Euro 2.8 million (approximately $2.8 million) at September 30, 2002, were charged against the facility. The equipment leases provide financing at varying pricing for periods up to 48 months. In addition to the rights to the equipment, the bank holds a security interest in other assets and up to $512,000 deposited with the bank.

In July 2000, in the same commitment letter discussed above, the bank also committed to issue a credit line to us of up to Euro 5.1 million (approximately $5.0 million) for a wafer fabrication facility in Germany, including leasehold improvements, clean room construction and fabrication, computer and office equipment. At September 30, 2002, we had drawn Euro 241,266 (approximately $237,500) under this commitment. The security interest of the bank under the equipment lease facility also collateralizes this line.

In December 2001, IXYS entered into a term loan with a Swiss bank in the amount of SFR 200,000 (approximately $134,000). The loan bears interest of 5.25% and is due in November 2006.

As of September 30, 2002, we had $39.2 million in cash and cash equivalents. We believe that these balances, including interest to be earned thereon, and borrowings available under our credit facilities will be sufficient to fund our working and other capital requirements, including potential investments in other companies and other assets to support the strategic growth of our business, over the next twelve months. In the ordinary course of business, we evaluate opportunities to acquire businesses, products and technologies and we expect to use our cash to fund these types of activities in the future. In the event additional needs for cash arise, we may raise additional funds from a combination of sources including the potential issuance of debt or equity securities. Additional financing might not be available on terms favorable to us, or at all, particularly in light of the recent decline in the capital markets. If adequate funds were not available or were not available on acceptable terms, our ability to take advantage of unanticipated opportunities or respond to competitive pressures could be limited.

Disclosures about Contractual Obligations and Commercial Commitments

Details of our contractual obligations and commitments, as of September 30, 2002 to make future payments under contracts are set forth below:

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Payments Due by Period

Contractual
Obligations	Total		Less than 1 year		1-3 years		4-5 years		After 5 years
Line of Credit	$	800	$	800		—		—		—
Term Loan		134		—		—		—		134
Capital Lease Obligations		7,906		1,227		5,470		1,209		—
Operating Leases		18,991		5,497		7,248		1,605		4,641
Purchase Obligations		2,042		2,042		—		—		—
Total Contractual Cash Obligations	$	29,873	$	9,566	$	12,718	$	2,814	$	4,775

On September 22, 2000, we entered into a guaranty for $5.0 million in favor of Commerzbank AG to obtain a line of credit granted by Commerzbank AG to IXYS Semiconductor GmbH. At September 30, 2002, the available amount under the line of credit was $5.0 million.

New Accounting Standards

In October 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 144 (“SFAS 144”), “Accounting for Impairment or Disposal of Long-Lived Assets,” which is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal periods. SFAS No. 144 addresses financial accounting and reporting for the impairment of certain long-lived assets and for the disposition of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 and APB Opinion No. 30; however, SFAS No. 144 retains the requirement of APB Opinion No. 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that has either been disposed of (by sale, abandonment or in a distribution to owners) or is classified as held for sale. We have adopted SFAS No. 144 and the adoption did not have a material impact on its financial position and results of operations.

In June 2002, the FASB issued SFAS No. 146 (“SFAS 146”), “Accounting for Exit or Disposal Activities.” SFAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs that are associated with exit and disposal activities, including restructuring activities that are currently accounted for under EITF No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The scope of SFAS 146 also includes costs related to terminating a contract that is not a capital lease and termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred-compensation contract. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002 and early application is encouraged. We adopted SFAS 146 during the second quarter of this fiscal year. The provisions of EITF No. 94-3 shall continue to apply for an exit activity initiated under an exit plan that met the criteria of EITF No. 94-3 prior to the adoption of SFAS 146. SFAS 146 will change, on a prospective basis, the time when restructuring charges are recorded from a commitment date approach to when the liability is incurred. SFAS No. 146 has not had a material impact on our financial position and results of operations.

RISK FACTORS

In addition to the other information in this Quarterly Report on Form 10-Q, the following risk factors should be considered carefully in evaluating us and our business. Additional risks not presently known to us or that we currently believe are not serious may also impair our business and its financial condition. The trading price of our common stock could decline at any time due to any of these risks, and investors could lose all or part of their investment.

Our operating results fluctuate significantly because of a number of factors, many of which are beyond our control.

Our operating results may fluctuate significantly. Some of the factors that may affect our quarterly and annual results are:

• the reduction, rescheduling or cancellation of orders by customers;

• fluctuations in timing and amount of customer requests for product shipments;

• the cyclical nature of the semiconductor industry;

• fluctuations in our manufacturing yields and significant yield losses;

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• availability of production capacity;

• changes in the mix of products that our customers purchase;

• competitive pressures on selling prices;

• the amount and timing of costs associated with product warranties and returns;

• the amount and timing of investments in research and development;

• market acceptance of our products;

• changes in our product distribution channels and the timeliness of receipt of distributor resale information;

• the impact of vacation schedules and holidays, largely during the second and third fiscal quarters of our fiscal year; and

• difficulties in forecasting demand for our products and the planning and managing of inventory levels.

As a result of these factors, many of which are difficult to control or predict, as well as the other risk factors discussed in this Quarterly Report on Form 10-Q, we may experience material adverse fluctuations in our future operating results on a quarterly or annual basis.

The semiconductor industry is cyclical, and an industry downturn could adversely affect our operating results.

Business conditions in the semiconductor industry have rapidly changed from periods of strong demand. The industry is characterized by:

• periods of overcapacity and production shortages;

• cyclical demand for semiconductors;

• changes in product mix in response to changes in demand;

• variations in manufacturing costs and yields;

• rapid technological change and the introduction of new products;

• significant price erosion; and

• significant expenditures for capital equipment and product development.

These factors could harm our business and cause our operating results to suffer.

Our ability to grow and sustain growth levels may be adversely affected by the recent slowdown in the U.S. economy.

Due to the recent decrease in corporate profits, capital spending and consumer confidence, we have experienced weakness in certain of our end markets. We market our products to several commercial markets, including telecommunications infrastructure, medical electronics and industrial motor drives, that have been affected by the recent slowdown in the U.S. economy. If the economic slowdown continues, our business, financial condition and results of operations may be adversely affected.

Our gross margin and net income may be negatively affected if we are not able to fully utilize, or reduce the expenses of, our Beverly, Massachusetts wafer fabrication facility.

As a result of our acquisition of Clare, we have assumed Clare’s lease of its wafer fabrication facility in Beverly, Massachusetts. Historically, customer demand for wafer fabrication was not adequate to allow Clare to utilize the Beverly fabrication facility’s full

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capacity and, as a result, Clare incurred substantial negative cash flow associated with the facility. If we are not able to increase the utilization of the fabrication facility, identify new customers for the fabrication services, expand orders from current customers or reduce expenses at the facility, then we could incur significant negative cash flow. If we attempt to shift fabrication of any of our current products to the Beverly fabrication facility, we may incur costs, such as costs associated with qualifying the facility with customers. As a result, fabrication at the Beverly facility could be more costly than our current fabrication suppliers.

We may not be successful in our acquisitions.

We have in the past made, and may in the future make, acquisitions. These acquisitions involve numerous risks, including:

• diversion of management’s attention during the acquisition process;

• disruption of our ongoing business;

• the potential strain on our managerial and internal controls and reporting systems and procedures;

• unanticipated expenses and potential delays related to integration of an acquired business;

• failure to successfully integrate the research and development, sales and marketing efforts of an acquired company with our own;

• failure to retain key personnel of the acquired business;

• the challenges inherent in managing an increased number of employees and facilities and the need to implement appropriate systems, policies, benefits and compliance programs;

• customer dissatisfaction or performance problems with an acquired company;

• the cost associated with acquisitions and the integration of acquired operations; and

• assumption of known or unknown liabilities or other unanticipated events or circumstances.

We cannot assure you that we will be able to successfully acquire other businesses or product lines or integrate them into our operations without substantial expense, delay in implementation or other operational or financial problems.

We could be harmed by litigation involving patents and other intellectual property rights.

As a general matter, the semiconductor industry is characterized by substantial litigation regarding patent and other intellectual property rights. Although none of our patents or other intellectual property rights has been successfully challenged to date, we have been sued on occasion for purported patent infringement. For example, we have been sued by International Rectifier for purportedly infringing some of its patents covering power MOSFETs. The U.S. District Court has enjoined us from continuing infringement and has awarded damages against us for the infringement of International Rectifier’s patents. We have appealed the injunction, and the United States Court of Appeals for the Federal Circuit has stayed the injunction pending appeal. We intend to appeal the U.S. District Court’s rulings (including the award of damages), and to contest International Rectifier’s claims vigorously, but the outcome of this litigation remains uncertain. See “Commitments and Contingencies — Legal Proceedings” provided elsewhere in Item 1 to this Quarterly Report on Form 10-Q.

Additionally, in the future, we could be accused of infringing the intellectual property rights of other third parties. We also have certain indemnification obligations to customers with respect to the infringement of third party intellectual property rights by our products. No assurance can be provided that any future infringement claims by third parties or claims for indemnification by customers or end users of our products resulting from infringement claims will not be asserted or that assertions of infringement, if proven to be true, will not harm our business.

In the event of any adverse ruling in any intellectual property litigation, including the pending litigation with International Rectifier, we could be required to pay substantial damages, cease the manufacturing, use and sale of infringing products, discontinue the use of certain processes or obtain a license from the third party claiming infringement with royalty payment obligations by us. An adverse

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decision in the International Rectifier litigation or any other infringement could materially and adversely affect our financial condition and results of operations.

Any litigation relating to the intellectual property rights of third parties, whether or not determined in our favor or settled by us, is costly and may divert the efforts and attention of our management and technical personnel.

We depend on external foundries to manufacture many of our products.

Forty percent of our revenues in the first six months of fiscal year 2003 came from wafers manufactured for us by external foundries. Our dependence on external foundries may grow. We have arrangements with four wafer foundries, two of which produce substantially all of the wafers that we purchase from external foundries. Samsung Electronics’ facility in Kiheung, South Korea is our principal external foundry.

Our relationships with our external foundries do not guarantee prices, delivery or lead times, or wafer or product quantities sufficient to satisfy current or expected demand. These foundries manufacture our products on a purchase order basis. We provide these foundries with rolling forecasts of our production requirements; however, the ability of each foundry to provide wafers to us is limited by the foundry’s available capacity. At any given time, these foundries could choose to prioritize capacity for their own use or other customers or reduce or eliminate deliveries to us on short notice. Accordingly, we cannot be certain that these foundries will allocate sufficient capacity to satisfy our requirements. In addition, we cannot be certain that we will continue to do business with these or other foundries on terms as favorable as our current terms. If we are not able to obtain additional foundry capacity as required, our relationships with our customers could be harmed and our revenues would likely be reduced. Moreover, even if we are able to secure additional foundry capacity, we may be obligated to utilize all of that capacity or incur penalties. These penalties could be expensive and could harm our operating results. Other risks associated with our reliance on external foundries include:

• the lack of control over delivery schedules;

• the unavailability of, or delays in obtaining access to, key process technologies;

• limited control over quality assurance, manufacturing yields and production costs; and

• potential misappropriation of our intellectual property.

Our requirements typically represent a small portion of the total production of the external foundries that manufacture our wafers and products. We cannot be certain these external foundries will continue to devote resources to the production of our wafers and products or continue to advance the process design technologies on which the manufacturing of our products is based. These circumstances could harm our ability to deliver our products on time or increase our costs.

Our success depends on our ability to manufacture our products efficiently.

We manufacture our products in facilities that are owned and operated by us, as well as in external wafer foundries and independent subcontract assembly facilities. The fabrication of semiconductors is a highly complex and precise process, and a substantial percentage of wafers could be rejected or numerous die on each wafer could be nonfunctional as a result of, among other factors:

• minute levels of contaminants in the manufacturing environment;

• defects in the masks used to print circuits on a wafer;

• manufacturing equipment failure; or

• wafer breakage.

For these and other reasons, we could experience a decrease in manufacturing yields. Additionally, as we increase our manufacturing output, we may also experience a decrease in manufacturing yields. As a result, we may not be able to cost effectively expand our production capacity in a timely manner.

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We may not be able to protect our intellectual property rights adequately.

Our ability to compete is affected by our ability to protect our intellectual property rights. We rely on a combination of patents, trademarks, copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual property rights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will be adequate to prevent misappropriation of our technology, or that our competitors will not independently develop technology that is substantially similar or superior to our technology. More specifically, we cannot assure you that our pending patent applications or any future applications will be approved, or that any issued patents will provide us with competitive advantages or will not be challenged by third parties. Nor can we assure you that, if challenged, our patents will be found to be valid or enforceable, or that the patents of others will not have an adverse effect on our ability to do business. Furthermore, others may independently develop similar products or processes, duplicate our products or processes or design their products around any patents that may be issued to us.

Our international operations expose us to material risks.

During the first six months of fiscal year 2003, our product sales by region were approximately 43% in North America, approximately 40% in Europe and the Middle East and approximately 17% in Asia. We expect revenues from foreign markets to continue to represent a significant portion of total revenues. IXYS maintains significant operations in Germany and the United Kingdom and contracts with suppliers and manufacturers in South Korea, Japan and elsewhere in Europe and Asia. Some of the risks inherent in doing business internationally are:

• foreign currency fluctuations;

• changes in the laws, regulations or policies of the countries in which we manufacture or sell our products;

• trade restrictions;

• transportation delays; work stoppages; and

• economic or political instability.

Our sales of products manufactured in our Lampertheim, Germany facility and our costs at that facility are denominated in Euros, and sales of products manufactured in our Chippenham, U.K. facility and our costs at that facility are primarily denominated in British pounds and Euros. Fluctuations in the value of the Euro and the British pound against the U.S. dollar could have a significant impact on our balance sheet and results of operations, including our net income. We currently do not enter into foreign currency hedging transactions to control or minimize these risks. Fluctuations in currency exchange rates could cause our products to become more expensive to customers in a particular country, leading to a reduction in sales or profitability in that country. If we expand our international operations or change our pricing practices to denominate prices in other foreign currencies, we could be exposed to even greater risks of currency fluctuations.

In addition, the laws of certain foreign countries may not protect our products or intellectual property rights to the same extent as do U.S. laws regarding the manufacture and sale of our products in the U.S. Therefore, the risk of piracy of our technology and products may be greater when we manufacture or sell our products in these foreign countries.

Our revenues are dependent upon our products being designed into our customers’ products.

Some of our new products are incorporated into customers’ products or systems at the design stage. The value of any design win largely depends upon the commercial success of the customer’s product and on the extent to which the design of the customer’s electronic system also accommodates incorporation of components manufactured by our competitors. In addition, our customers could subsequently redesign their products or systems so that they no longer require our products. We may not achieve design wins or our design wins may not result in future revenues.

Because our products typically have lengthy sales cycles, we may experience substantial delays between incurring expenses related to research and development and the generation of revenues.

The time from initiation of design to volume production of new power semiconductor products often takes 18 months or longer. We first work with customers to achieve a design win, which may take nine months or longer. Our customers then complete the design,

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testing and evaluation process and begin to ramp up production, a period which may last an additional nine months or longer. As a result, a significant period of time may elapse between our research and development efforts and our realization of revenues, if any, from volume purchasing of our products by our customers.

Our backlog may not result in future revenues.

Our business is characterized by short term orders and shipment schedules. Customer orders typically can be cancelled or rescheduled without penalty to the customer. As a result, our backlog at any particular date is not necessarily indicative of actual revenues for any succeeding period. A reduction of backlog during any particular period, or the failure of our backlog to result in future revenues, could harm our results of operations.

The markets in which we participate are intensely competitive.

Certain of our target markets are intensely competitive. Our ability to compete successfully in our target markets depends on the following factors:

• product quality, reliability and performance;

• product features;

• timely delivery of products;

• price;

• breadth of product line;

• design and introduction of new products; and

• technical support and service.

In addition, our competitors or customers may offer new products based on new technologies, industry standards or end user or customer requirements, including products that have the potential to replace, or provide lower cost or higher performance alternatives to, our products. The introduction of new products by our competitors or customers could render our existing and future products obsolete or unmarketable.

Our primary competitors include Advanced Power Technology, Fuji, International Rectifier, Infineon, On Semiconductor, Semikron International, Powerex, STMicroelectronics, Siemens and Toshiba. Many of our competitors have greater financial, technical, marketing and management resources than we have. Some of these competitors may be able to sell their products at prices below which it would be profitable for us to sell our products or benefit from established customer relationships that provide them with a competitive advantage.

We rely on our distributors and sales representatives to sell many of our products.

A substantial majority of our products are sold through distributors and sales representatives. Our distributors and sales representatives could reduce or discontinue sales of our products. They may not devote the resources necessary to sell our products in the volumes and within the time frames that we expect. In addition, we depend upon the continued viability and financial resources of these distributors and sales representatives, some of which are small organizations with limited working capital. These distributors and sales representatives, in turn, depend substantially on general economic conditions and conditions within the semiconductor industry. We believe that our success will continue to depend upon these distributors and sales representatives.

At September 30, 2002, no distributor accounted for greater than 10% of our outstanding receivables. If any distributor or sales representative experiences financial difficulties, or otherwise becomes unable or unwilling to promote and sell our products, our business could be harmed.

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Our future success depends on the continued service of management and key engineering personnel and our ability to identify, hire and retain additional personnel.

Our success depends, to a significant extent, upon the efforts and abilities of Nathan Zommer, Ph.D., our president and chief executive officer, and other members of senior management. The loss of the services of one or more of our senior management or other key employees could adversely affect our business. We do not maintain key person life insurance on any of our officers, employees or consultants. There is intense competition for qualified employees in the semiconductor industry, particularly for highly skilled design, applications and test engineers. Competition is especially intense in the Silicon Valley, where our U.S. design facility is located. We may not be able to continue to attract and retain engineers or other qualified personnel necessary for the development of our business or to replace engineers or other qualified individuals who could leave us at any time in the future. Our anticipated growth is expected to place increased demands on our resources, and will likely require the addition of new management and engineering staff as well as the development of additional expertise by existing management employees. If we lose the services of or fail to recruit key engineers or other technical and management personnel, our business could be harmed.

Periods of rapid growth and expansion could continue to place a significant strain on our resources, including our employee base.

To manage our possible future growth effectively, we will be required to continue to improve our operational, financial and management systems. In doing so, we will periodically implement new software and other systems that will affect our internal operations regionally or globally. The process of implementation is complex and requires, among other things, that data from our existing systems be made compatible with the upgraded systems. During a transition to an upgrade, we could experience delays in ordering materials, inventory tracking problems and other inefficiencies, which could cause delays in shipments of products to our customers.

Future growth will also require us to successfully hire, train, motivate and manage our employees. In addition, our continued growth and the evolution of our business plan will require significant additional management, technical and administrative resources. We may not be able to effectively manage the growth and evolution of our current business.

Our stock price is volatile.

The market price of our common stock has fluctuated significantly to date. The future market price of our common stock may also fluctuate significantly due to:

• variations in our actual or expected quarterly operating results;

• announcements or introductions of new products;

• technological innovations by our competitors or development setbacks by us;

• conditions in the communications and semiconductor markets;

• the commencement or adverse outcome of litigation;

• changes in analysts’ estimates of our performance or changes in analysts’ forecasts regarding our industry, competitors or customers;

• announcements of merger or acquisition transactions or a failure to achieve the expected benefits of an acquisition as rapidly or to the extent anticipated by financial or analysts; or

• general economic and market conditions.

In addition, the stock market in recent years has experienced extreme price and volume fluctuations that have affected the market prices of many high technology companies, including semiconductor companies. These fluctuations have often been unrelated or disproportionate to the operating performance of companies in our industry, and could harm the market price of our common stock.

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Our dependence on independent subcontractors to assemble and test our products subject us to a number of risks, including an inadequate supply of products and higher materials costs.

We depend on independent subcontractors for the assembly and testing of our products. During the first six months of fiscal year 2003, the majority of our products were assembled by independent subcontractors. Our reliance on these subcontractors involves the following significant risks:

• reduced control over delivery schedules and quality;

• the potential lack of adequate capacity during periods of excess demand;

• difficulties selecting and integrating new subcontractors;

• limited warranties by subcontractors or other vendors on products supplied to us;

• potential increases in prices due to capacity shortages and other factors; and

• potential misappropriation of our intellectual property.

These risks may lead to delayed product delivery or increased costs, which would harm our profitability and customer relationships.

In addition, we use a limited number of subcontractors to assemble a significant portion of our products. If one or more of these subcontractors experiences financial, operational, production or quality assurance difficulties, we could experience a reduction or interruption in supply. Although we believe alternative subcontractors are available, our operating results could temporarily suffer until we engage one or more of those alternative subcontractors.

Our markets are subject to technological change and our success depends on our ability to develop and introduce new products.

The markets for our products are characterized by:

• changing technologies;

• changing customer needs;

• frequent new product introductions and enhancements;

• increased integration with other functions; and

• product obsolescence.

To develop new products for our target markets, we must develop, gain access to and use leading technologies in a cost effective and timely manner and continue to expand our technical and design expertise. Failure to do so could cause us to lose our competitive position and seriously impact our future revenues.

Our operating expenses are relatively fixed, and we may order materials in advance of anticipated customer demand. Therefore, we have limited ability to reduce expenses quickly in response to any revenue shortfalls.

Our operating expenses are relatively fixed, and, therefore, we have limited ability to reduce expenses quickly in response to any revenue shortfalls. Consequently, our operating results will be harmed if our revenues do not meet our revenue projections.

We also typically plan our production and inventory levels based on internal forecasts of customer demand, which are highly unpredictable and can fluctuate substantially. From time to time, in response to anticipated long lead times to obtain inventory and materials from our external suppliers and foundries, we may order materials or production in advance of anticipated customer demand. This advance ordering may result in excess inventory levels or unanticipated inventory write downs if expected orders fail to materialize.

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Regulations may adversely affect our ability to sell our products.

Power semiconductors are occasionally subject to regulations intended to address the safety, reliability and quality of the products. These regulations relate to processes, design, materials and assembly. For example, in the United States some high voltage products are required to pass Underwriters Laboratory recognition for voltage isolation and fire hazard tests. Sales of power semiconductors outside of the United States are subject to international regulatory requirements that vary from country to country. The process of obtaining and maintaining required regulatory clearances can be lengthy, expensive and uncertain. The time required to obtain approval for sale internationally may be longer than that required for U.S. approval, and the requirements may differ.

Approximately 12% of our revenues in the first six months of fiscal year 2003 were derived from the sale of products included in medical devices that are subject to extensive regulation by numerous governmental authorities in the United States and internationally, including the U.S. Food and Drug Administration, or FDA. The FDA and certain foreign regulatory authorities impose numerous requirements for medical device manufacturers to meet, including adherence to Good Manufacturing Practices, or GMP, regulations and similar regulations in other countries, which include testing, control and documentation requirements. Ongoing compliance with GMP and other applicable regulatory requirements is monitored through periodic inspections by federal and state agencies, including the FDA, and by comparable agencies in other countries. Our failure to comply with applicable regulatory requirements could prevent our products from being included in approved medical devices.

Our business could also be harmed by delays in receiving or the failure to receive required approvals or clearances, the loss of previously obtained approvals or clearances or the failure to comply with existing or future regulatory requirements.

Business interruptions may damage our facilities or those of our suppliers.

Our operations are vulnerable to interruption by fire, earthquake and other natural disasters, as well as power loss, telecommunications failure and other events beyond our control. We do not have a detailed disaster recovery plan and do not have backup generators. Our corporate headquarters in California is located near major earthquake fault lines and has experienced earthquakes in the past. California also has recently been subject to shortages of electrical power and is subject to power outages. If power outages occur, our ability to conduct administrative matters and test our products could be seriously impaired, which could harm our business, financial condition and results of operations. We cannot be sure that the insurance we maintain against general business interruptions will be adequate to cover all our losses.

In addition, some of our suppliers are located in California and are subject to the same earthquake and power outage risks. A fire, major earthquake or other natural disaster near one or more of our facilities or those of our major suppliers could disrupt our operations and those of our suppliers, which could in turn limit the supply of our products and harm our business.

We may be affected by environmental laws and regulations.

We are subject to a variety of laws, rules and regulations in the United States and in Germany related to the use, storage, handling, discharge and disposal of certain chemicals and gases used in our manufacturing process.

Any of those regulations could require us to acquire expensive equipment or to incur substantial other expenses to comply with them. If we incur substantial additional expenses, product costs could significantly increase. Our failure to comply with present or future environmental laws, rules and regulations could result in fines, suspension of production or cessation of operations.

We face the risk of financial exposure to product liability claims alleging that the use of devices that incorporate our products resulted in adverse effects.

Approximately 12% of our net revenues in the first six months of fiscal year 2003 were derived from sales of products used in medical devices such as defibrillators. Product liability risks may exist even for those medical devices that have received regulatory approval for commercial sale. We do not currently carry product liability insurance, and any defects in our products used in these devices could result in significant recall or product liability costs to us.

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ABB AG and Nathan Zommer, Ph.D. own a controlling interest in our common stock.

ABB AG and Nathan Zommer, Ph.D., our president and chief executive officer, collectively beneficially own, as of October 15, 2002, approximately 40% of the outstanding shares of our common stock. As a result, ABB AG and Dr. Zommer, acting together, could exercise significant control over all matters requiring stockholder approval, including the election of the board of directors. These concentrated holdings could result in a delay of, or serve as a deterrent to, possible changes in control of IXYS, which may reduce the market price of our common stock.

The anti-takeover provisions of our amended and restated certificate of incorporation and of the Delaware General Corporation Law may delay, defer or prevent a change of control.

Our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences and privileges and restrictions, including voting rights, of those shares without any further vote or action by our stockholders. The rights of the holders of common stock will be subject to, and may be harmed by, the rights of the holders of any shares of preferred stock that may be issued in the future. The issuance of preferred stock may delay, defer or prevent a change in control because the terms of any issued preferred stock could potentially prohibit our consummation of any merger, reorganization, sale of substantially all of our assets, liquidation or other extraordinary corporate transaction, without the approval of the holders of the outstanding shares of preferred stock. In addition, the issuance of preferred stock could have a dilutive effect on our stockholders.

Our stockholders must give substantial advance notice prior to the relevant meeting to nominate a candidate for director or present a proposal to our stockholders at a meeting. These notice requirements could inhibit a takeover by delaying stockholder action. The Delaware anti-takeover law restricts business combinations with some stockholders once the stockholder acquires 15% or more of our common stock. The Delaware statute makes it more difficult for us to be acquired without the consent of our board of directors and management.

ITEM 4. CONTROLS AND PROCEDURES.

Within the 90-day period immediately preceding the filing of this Form 10-Q/A, an evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act). This evaluation included various processes that were carried out in an effort to ensure that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified by the SEC. This evaluation also included consideration of our internal controls and procedures for the preparation of our financial statements.

In evaluating these internal controls we sought to determine whether there were any “significant deficiencies” and in particular whether there were any “material weaknesses.” Under the applicable accounting literature, “significant deficiencies” are referred to as “reportable conditions,” which are control issues that could have a significant adverse effect on our ability to record, process, summarize and report financial data in the financial statements. A “material weakness” is defined as a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by the error may occur in amounts that would be material in relation to the financial statements and that such misstatements would not be detected timely by employees in the normal course of performing their assigned functions.

Our audit committee has been made aware of three specific reportable conditions relating to our operations which were considered to be “material weaknesses” for the year ended March 31, 2003 under standards established by the American Institute of Certified Public Accountants, and a fourth material weakness resulting from the effect of a number of reportable conditions taken together or in combination.

Our auditors, PricewaterhouseCoopers LLP, or PwC, as a result of their annual financial statement audit procedures for the fiscal year March 31, 2003 have informed us of certain material weaknesses and reportable conditions. In the planning and performance of the audit, PwC considered the internal controls in order to determine the auditing procedures for the purpose of expressing PwC’s opinion on the financial statements and not to provide assurance on internal controls. Had PwC performed an attestation engagement of the internal controls as of March 31, 2003, other reportable conditions and/or material weaknesses may have come to the attention of PwC. The identified material weaknesses as a result of the PwC audit procedures are as follows:

• financial statement consolidations that place a great strain on the limited personnel resources of our finance organization, resulting in inadequate time for management to adequately perform its financial review on a timely basis;

33.

• deficiencies in our inventory accounting, including the need to establish, compute and adequately update standard inventory costs, completely eliminate intercompany profits, track inventory variances and establish a formal policy to reconcile and review inventory balances, as well as inadequate monthly reconciliations of the general ledger with the inventory subsystem and insufficient review by management of such reconciliations;

• problems with the monthly close at Clare, particularly in its timing, procedures and the content of the reports prepared, and limited personnel resources at Clare, resulting in inadequate time for review by our finance management and for adjustment prior to the audit; and

• several additional conditions relating to the Company’s internal accounting and disclosure controls that, in the context of the overall control environment and the current lack of accounting personnel resources, are considered reportable conditions and that, when taken together, represent a material weakness in internal controls.

The Company’s Chief Executive Officer, Chief Financial Officer, and Audit Committee are aware of these conditions. The following factors contributed to the aforementioned control conditions.

• rapid growth of the Company through acquisitions;

• significant turnover and other issues related to key finance personnel; and,

• integration of legacy accounting and information systems.

In connection with our announcement of May 13, 2003, regarding certain errors discovered in our accounting for inventories at our Santa Clara, California location, as of June 30, 2002, September 30, 2002, and December 31, 2002, the audit committee engaged an independent accounting firm other than PwC to review among other items, our inventory system and its impact on the financial statements. The independent accounting firm has completed their assignment and has reported to the audit committee. Their observations regarding the problems in our inventory accounting and related internal controls largely paralleled those of PwC.

Certain of the material weaknesses and reportable conditions may also constitute deficiencies in our disclosure controls. In light of these material weaknesses and reportable conditions and the requirements enacted in the Sarbanes-Oxley Act of 2002 and the related rules and regulations adopted by the SEC, our Chief Executive Officer and Chief Financial Officer concluded, as of the date of the evaluation, that our disclosure controls and procedures needed improvement and were not adequately effective. We have performed additional procedures designed to limit the risk that these material weaknesses and reportable conditions would lead to inaccuracies in our financial statements and to enable the completion of PwC’s audit of the year ended March 31, 2003. Management believes there are no material inaccuracies or omissions in this Form 10-Q/A.

We have taken the following steps to address our material weaknesses:

• we employed a controller at Clare and

• designing and implementing additional procedures for the accounting of inventories.

We intend to implement additional changes to our internal controls in the future to address the material weaknesses and reportable conditions. We will consider implementation of the following, as well as other additional procedures:

• employing additional finance and accounting personnel;

• designing and implementing procedures to strengthen our internal controls;

• reviewing our accounting systems with a view towards upgrading them; and

• developing a strategy for formalizing the consolidated enterprise’s internal controls and procedures for financial reporting in accordance with the SEC’s proposed rules to implement the internal control report requirements included in Section 404 of the Sarbanes-Oxley Act. It is possible that additional changes will be made to our internal controls as a result of these efforts.

34.

We have committed significant resources to address the internal control deficiencies identified to date. However, many of the salutary procedures and actions deemed desirable by management have not been implemented to date. It will take additional time to complete implementation and realize the benefits of our actions.

We are committed to ongoing periodic reviews of our controls and their effectiveness. Controls are improving and we have no reason to believe that the financial statements included in this report are not fairly stated in all material respects. However, new problems could be identified in the future. We expect to continue to improve controls during each quarter in a multi-period effort to achieve disclosure controls and procedures and internal controls satisfactory for a company of our size in the semiconductor industry.

PART II — OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) See Index to Exhibits.

(b) The Company filed a Current Report on Form 8-K on July 29, 2002 to announce financial results for the first quarter of its fiscal year ending March 31, 2003.

35.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

IXYS CORPORATION

By: /s/ Arnold P. Agbayani

Arnold P. Agbayani, Senior Vice President of

Finance and Administration and Chief Financial

Officer (Principal Financial Officer)

Date: July 14, 2003

36.

CERTIFICATIONS

I, Nathan Zommer, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 14, 2003

/s/ Nathan Zommer
Nathan Zommer
President, Chief Executive Officer and Chairman
(Principal Executive Officer)

I, Arnold P. Agbayani, certify that:

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

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

     a) designed such disclosure controls and procedures 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 quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: July 14, 2003

/s/ Arnold P. Agbayani
Arnold P. Agbayani
Senior Vice President,
Finance and Administration and Chief Financial
Officer
(Principal Financial Officer)

EXHIBIT INDEX

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of the Registrant. (1)
3.2	Amended and Restated Bylaws of the Registrant.(2)
99.1	Certification.(3)
99.2	Certification.

(1)	Filed as Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2001 (000-26124) and incorporated herein by reference.
(2)	Filed as Exhibit 3.2 to the Quarterly Report on Form 10-Q for the period ended September 30, 2002 (000-26124) and incorporated herein by reference.
(3)	Filed as Exhibit 99.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2002 (000-26124) and incorporated herein by reference.