3. Business Combinations

RadioPulse, Inc.

On May 1, 2015, we acquired RadioPulse, Inc., or RadioPulse, for a total consideration of $15.7 million.

Based in South Korea, RadioPulse is a fabless semiconductor company that develops, manufactures and sells wireless network technology solutions based on the ZigBee® protocol, which combines microcontrollers and radio frequency devices. RadioPulse’s solutions are designed to enable a broad range of power-sensitive applications in the industrial, medical, consumer, smart grid and Internet of Things, or IoT, markets. RadioPulse offers a complementary product portfolio to our product lines. The consideration includes cash consideration paid at closing of $14.7 million and $1.0 million related to an adjustment to eliminate debt owed to us for funds advanced prior to closing. The acquisition also includes potential earnout payments aggregating up to $6.0 million payable over three years. The earnout payments are subject to certain financial thresholds related to net revenues, gross profit and net income in calendar years 2015, 2016 and 2017. Based on our valuation, the fair value of the liability for the earnout payment is estimated to be nil. In connection with the acquisition, we incurred and expensed $248,000 in legal and consulting costs and $249,000 in acquisition-related compensation costs.

The following table summarizes the values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Consideration Allocation

Cash, restricted cash and cash equivalents	$	196
Accounts receivable		1,497
Inventories		534
Property, plant and equipment		24
Prepaid expenses and other current assets		547
Identifiable intangible assets		2,867
Short-term borrowings		(2,354	)
Accounts payable		(614	)
Accruals and other liabilities		(1,926	)
Total identifiable net liabilities		771
Goodwill		14,887
Total purchase consideration	$	15,658

During the quarter ended March 31, 2016, we recorded a reduction in the value of accruals and other liabilities of $1.0 million along with a corresponding increase in the purchase consideration of $1.0 million related to an adjustment to eliminate the debt owed to us for funds advanced prior to closing. We also recorded adjustments that that reduced the value of goodwill by $275,000 due to an increase in the fair value of identifiable intangible assets of $344,000 and a decrease in the value of prepaid expenses and other current assets of $69,000. The change in the value of the intangible assets did not have a significant impact on the amortization recorded in the financial statements for the quarter ended March 31, 2016.

Identifiable intangible assets consisted of developed intellectual property, in-process research and development expenses, customer relationships and contract backlog. The valuation of the acquired intangibles was classified as a level 3 measurement under the fair value measurement guidance because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. We did not recognize any liability with respect to the contingent consideration based upon our analysis.

Identified intangible assets resulting from the RadioPulse acquisition consisted of the following (in thousands):

				Estimated
	Fair Value		Amortization	Useful Life
	(In thousands)		Method	(In months)


Developed intellectual property	$	1,005	Accelerated		60
In-process research and development expenses (1)		1,188	Straight-line		60
Customer relationships		500	Accelerated		36
Contract backlog		174	Straight-line		6
Total	$	2,867

(1) Amortization will start after the completion of the research and development activities of the related projects.

In determining the fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach was used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, in-process research and development expenses, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of RadioPulse

. and to the workforce acquired in the transaction.

The goodwill is not deductible for tax purposes.

RadioPulse contributed net revenues of $4.1 million, from the date of purchase, May 1, 2015

to our unaudited condensed consolidated statements of operations for the fiscal year ended March 31, 2016. The net loss of RadioPulse duringincluded in our operating results for

the year

ended March 31, 2016 was $3.6 million, based on the purchase consideration valuation. The results of operations and

financial statementsposition

of RadioPulse were immaterial compared to our financial statements and therefore pro-forma financial statements have not been separately presented.

Acquired MCU Business

On June 27, 2013, we completed the acquisition of an 8-bit microcontroller product line, or the Acquired MCU Business, from the System LSI Division of Samsung Electronics Co., Ltd. The acquired product line includes microcontrollers potentially useful in a number of applications, which have to date been principally used in consumer product applications. The acquisition was intended to bolster our product portfolio and empower customers to utilize products from across our multiple product lines.

The aggregate purchase price for the acquired assets was $50.0 million. The closing payment was $20.0 million and we were obligated to pay $30.0 million in two installment payments of $15.0 million each. The first installment and interest were paid on June 26, 2014 and the second installment and interest were paid on December 23, 2014. The installment payments and interest were included in “Accrued expenses and other current liabilities” on our audited consolidated balance sheet.

We incurred $403,000 in legal and consulting costs related to the acquisition in fiscal 2014. The costs incurred were fully expensed and included in “Selling, general and administrative” expenses, or SG&A expenses, on our audited consolidated statements of operations.

The following table summarizes the values of the assets acquired at the acquisition date (in thousands):

	Purchase Price Allocation
Inventories	$	800
Property, plant and equipment		36
Identifiable intangible assets		24,000
Total identifiable net assets		24,836
Goodwill		25,164
Total purchase price	$	50,000

Identifiable intangible assets consisted of developed intellectual property, customer relationships, contract backlog and a

non-competition agreement. The valuation of the acquired intangibles was classified as a Level 3 measurement under the fair value measurement guidance, because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. In determining fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach and cost approach were used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, the non-competition agreement, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of the Acquired MCU Business. The goodwill is not deductible for tax purposes. See Note 7, “Goodwill and Intangible Assets” for the valuation of identified intangible assets resulting from the acquisition.

The Acquired MCU Business contributed revenues of $36.1 million in our audited consolidated statements of operations for fiscal 2014. As the Acquired MCU Business is fully integrated within our existing operations we are not able to calculate and report the net income contribution specific to the Acquired MCU Business.

Supplemental Pro Forma Financial Information

The following pro forma summary gives effect to the acquisition of the Acquired MCU Business as if it had occurred at the beginning of fiscal 2013. The pro forma financial information reflects the business combination accounting effects resulting from this acquisition including our amortization charges from acquired intangible assets, the acquisition related expenses and the interest expenses on installment payments of the acquisition. The summary is provided for illustrative purposes only and is not necessarily indicative of the consolidated results of operations for future periods.

The Acquired MCU Business’s fiscal year ended on December 31, while our fiscal year ends on March 31. As such, the financial information of the Acquired MCU Business is included in the following unaudited pro forma table so as to align with the reporting periods of our fiscal quarters. In the following unaudited pro forma table, the financial information for fiscal 2014 includes the historical financial results of IXYS Corporation for the twelve months ended March 31, 2014 and the historical financial results of the Acquired MCU Business for the three months ended March 31, 2013 (in thousands, except per share data):

	Years Ended
	March 31, 2014

	(unaudited)
Pro forma net revenues	$	360,228
Pro forma net income	$	15,364
Pro forma net income per share (basic)	$	0.49
Pro forma net income per share (diluted)	$	0.48

Other Acquisition

In the quarter ended June 30, 2014 we completed a business acquisition for a cash consideration of $2.3 million, net of cash acquired of approximately $204,000. The acquisition resulted in a goodwill of $2.8 million and we assumed debt of $723,000. At

March 31, 2016, this goodwill balance

reflected a cumulative reduction of $477,000 caused by changes in the foreign exchange translation rate. This acquisition was not significant to our consolidated financial statements.