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UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended March 31, 2006                                                    
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-33477


GENESIS MICROCHIP INC.


(Exact name of registrant as specified in its charter)


|                                                                                                  |  |                                     
|------------------------------------------------------------------------------------------------- |  | ------------------------------------
|DELAWARE                                                                                          |  | 77-0584301                          
|(State or other jurisdiction of incorporation)                                                    |  | (IRS Employer Identification Number)
|                                                                                                 
|2150 GOLD STREET
    P.O. BOX 2150
    ALVISO, CALIFORNIA(Address of principal executive offices) |  | 95002(Zip Code)                     

(408) 262-6599


(Registrants telephone number, including area code)


Securities registered pursuant to section 12(b) of the
Act:


None.


Securities registered pursuant to section 12(g) of the
Act:


Shares of Common Stock, $0.001 par value





o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


þ o o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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STATEMENT REGARDING FORWARD-LOOKING STATEMENTS




TRADEMARKS


® ® ® ® ® ® ® ® ® ® tm ® ® ® tm tm


AVAILABLE INFORMATION


www.gnss.com. 10-K, 10-Q, 8-K,


1-800-SEC-0330.


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PART I




|        |         
|------- | --------
|ITEM 1. | BUSINESS

OVERVIEW














MARKETS AND APPLICATIONS






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Flat-Panel Computer Monitors. Flat-panel computer
    monitors using liquid crystal displays, or LCDs, are
    increasingly replacing monitors that use CRTs. For the year
    ended March 31, 2006, applications sold into the flat-panel
    computer monitor market represented an estimated 43% of our
    total revenues. Companies whose flat-panel computer monitors
    incorporate our products include AOC, BenQ, Dell, Fujitsu,
    Gateway, HP, Innolux, Lenovo, Legend, Lite-On, NEC, Philips,
    Samsung, Sony, ViewSonic, and many other leading brands.

2



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Television & Video. We are leveraging our
    technologies in video image processing to produce products for
    fast-growing flat-panel television and high definition digital
    television applications. These technologies, which include
    products containing analog video image processing, digital/ MPEG
    video image processing, timing controllers and other
    technologies, may also be designed into other applications such
    as Digital CRT-TVs, home theaters, video projectors, audio/video
    receivers and DVD players. Companies whose televisions
    incorporate our products include leading TV manufacturers,
    including Beko, Changhong, Dell, Eizo, Fujitsu, Haier, Hisense,
    Konka, LG, NEC, Philips, Samsung, Sharp, Skyworth, Sony,
    Toshiba, TTE, Vestel, Westinghouse and Zenith. For the year
    ended March 31, 2006, revenue from applications serving
    these markets represented an estimated 57% of our total revenues.

PRODUCTS




|                                |  |                                                                                                                                               |  |                                                                                   
|------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------
|Product Family                  |  | Description                                                                                                                                   |  | Markets                                                                           
|                                |  |                                                                                                                                               |  |                                                                                   
|FLI22xx/ FLI23xx                |  | Video format conversion and image enhancement processors                                                                                      |  | CRT TVs, flat-panel TVs, DVD players, video projectors                            
|                               
|gm15xx/gm16xx                   |  | Graphics/TV video processors for SXGA-WUXGA resolutions                                                                                       |  | Flat-panel monitors, flat-panel TVs, video projectors                             
|                               
|gm22xx/gm52xx                   |  | Integrated LCD monitor controllers supporting resolutions up to
    SXGA                                                                      |  | Multi-function monitors and entry-level LCD TVs                                   
|                               
|gm23xx/gm53xx                   |  | Integrated LCD monitor controllers supporting resolutions up to
    SXGA                                                                      |  | Flat-panel monitors                                                               
|                               
|gm60xx                          |  | Digital TV video processors                                                                                                                   |  | CRT TV, flat-panel TVs, video projectors                                          
|                               
|gmZAN3xx                        |  | Analog interface LCD monitor controllers (for XGA and SXGA-
    resolution monitors)                                                          |  | LCD monitors and other fixed-resolution pixilated displays                        
|                               
|gm56xx/57xx/26xx/27xx (Phoenix) |  | Pin/firmware compatible family of analog & dual input
    LCD monitor controllers for XGA and SXGA resolutions                                |  | Mainstream LCD monitors using LVDS or RSDS LCD panels                             
|                               
|FLI8125 (Hudson)                |  | Single-chip flat-panel TV controller for cost-sensitive
    applications with 2D NTSC/PAL decoder and DCDi Edge Faroudja
    video processing |  | Entry to mid-level flat panel and digital CRT TVs                                 
|                               
|FLI85xx (Cortez)                |  | Single-chip high-end flat panel TV controller with 3D NTSC/PAL
    decoder and high-end DCDI Cinema Faroudja video processing                 |  | Mid-range to high-end flat panel TVs                                              
|                               
|FLI86xx (Cortez Advanced)       |  | Premium TV video controller with 10-bit DCDi Cinema Faroudja
    video processing and two 3D comb filters                                     |  | LCD/PDP TVs, premium AVR, high definition DVD players, premium
    LCD TV monitors
|                               
|FLI85x1 (Cortez Lite)           |  | Single-chip flat-panel TV controller with 3D NTSC/PAL decoder
    and DCDI Cinema Faroudja video processing                                   |  | Entry- to mid-level TVs                                                           
|                               
|FLI59xx (Oak)                   |  | Single-chip highly integrated, mixed-signal LCD controller for
    multi-function monitors supporting resolutions up to WUXGA                 |  | Multi-function monitors and LCD TVs                                               
|                               
|gm10500 (PurVIEW
    HDtm)      |  | Digital TV audio and video decoder                                                                                                            |  | ATSC/DVB/OpenCabletmcompliant integrated Digital TVs                              
|                               
|gm7746 (TCON)                   |  | Single-chip LCD timing controller (TCON) with built-in LCD
    overdrive and advanced LCD enhancement technologies                            |  | LCD TVs and high-end LCD monitors                                                 

3



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RESEARCH AND DEVELOPMENT






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Algorithm Development Group: focuses on developing high-quality
    image processing technologies and their implementation in
    silicon.                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Product Development Group: focuses on developing standard
    semiconductor components to service our television, monitor and
    computer OEM customers. In addition, we develop semiconductor
    components to serve customers who are designing products for new
    market applications, such as flat-panel television and other
    potential mass markets.                                                                                                                                             
|
| |  | Software Engineering Group: develops the software environment
    required for our products to work within target systems.
    Software is now embedded in many of our products. The other
    major role of software engineering is tool development. We
    provide sophisticated software tools to help our customers
    develop their applications and customize their software to
    improve the productivity of those engineers involved in the
    process of getting their products into production.



CUSTOMERS, SALES AND MARKETING












4



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MANUFACTURING


state-of




QUALITY ASSURANCE






5



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INTELLECTUAL PROPERTY AND LICENSES




COMPETITION


start-up






| |   |                                           
| | - | ------------------------------------------
| |  | image quality,                            
|
| |  | product design features and performance,  
|
| |  | product price,                            
|
| |  | the time to market of our products, and   
|
| |  | the quality and speed of customer support.

6



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BACKLOG


quarter-to


EMPLOYEES






|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

Our quarterly revenues and operating results fluctuate due to
a variety of factors, which may result in volatility or a
decline in our stock price.






| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to gain design wins with our customers
    and ramp new designs into production volumes;                                                                                                                   
|
| |  | Growth rate of the flat-panel TV and LCD monitor markets;                                                                                                                                                                
|
| |  | Seasonal consumer demand for flat-panel TVs and LCD monitors
    into which our products are incorporated;                                                                                                               
|
| |  | Customer inventory levels and market share;                                                                                                                                                                              
|
| |  | Changes in the mix of products we sell, especially between our
    higher-priced TV/video products and our lower-priced monitor
    products, and between our legacy two-chip solutions and newer
    one-chip solutions;
|
| |  | Increased competition and competitive pricing pressures;                                                                                                                                                                 
|
| |  | Availability and pricing of panels and other components for
    flat-panel TVs and LCD monitors;                                                                                                                         
|
| |  | Wafer costs and other product fabrication costs;                                                                                                                                                                         
|
| |  | Foreign exchange rate fluctuations, research and development tax
    credits and other factors that impact tax rates;                                                                                                    
|
| |  | Changes in product costs or manufacturing yields or available
    production capacity at our fabrication facilities; and                                                                                                 
|
| |  | Costs and outcome of legal proceedings.                                                                                                                                                                                  

7



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Our success will depend on the growth of the market for flat
panel televisions and LCD monitors, and our customers
share of those markets.






| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | A continued reduction in the costs of products in the respective
    markets;                                 
|
| |  | The availability, at a reasonable price, of components required
    by such products (such as LCD panels); and
|
| |  | The emergence of competing technologies and standards.                                                        



We must develop new products and enhance our existing
products to react to rapid technological change and market
demands.








We face intense competition and may not be able to compete
effectively.


start-up


8



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Our customers experience fluctuating product cycles and
seasonality, which causes their sales to fluctuate.




A loss of any of our major customers could have a significant
impact on our business.




We must sell our current products in greater volumes, or
introduce new products with improved margins.




Our semiconductor products are complex and are difficult to
manufacture cost-effectively.




9



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Defects in our products could increase our costs, cause
customer claims, and delay our product shipments.




We subcontract our manufacturing, assembly and test
operations.






| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Lack of adequate capacity during periods of excess demand;                                                                                            
|
| |  | Increased manufacturing cost or the unavailability of product in
    the event that manufacturing capacity becomes constrained;                       
|
| |  | Reduced control over manufacturing and delivery schedules of
    products;                                                                            
|
| |  | Reduced control over quality assurance and reliability;                                                                                               
|
| |  | Difficulty of management of manufacturing costs and quantities;                                                                                       
|
| |  | Potential misappropriation of intellectual property; and                                                                                              
|
| |  | Political or environmental risks (including earthquake and other
    natural disasters) in Taiwan, where the manufacturing facilities
    are located;



Intellectual property infringement suits brought against us
or our customers may significantly harm our business.




10



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| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | Stop selling the products or using the technology that are
    allegedly infringing;                                                        
|
| |  | Attempt to obtain a license to the relevant intellectual
    property, which license may not be available on reasonable terms
    or at all;
|
| |  | Incur substantial costs including defense costs, settlements
    and/or judgments; and                                                      
|
| |  | Attempt to redesign those products that are allegedly infringing.                                                                           



We may be required to indemnify our customers against claims
of intellectual property infringement.




We may be unable to adequately protect our intellectual
property. We rely on a combination of patent, copyright,
trademark and trade secret laws, as well as non-disclosure
agreements and other methods to protect our proprietary
technologies.




Our products require licenses of third-party technology that
may not be available to us on reasonable terms, or at all.




11



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The processes used to manufacture our semiconductor products
are periodically retired.




We do not have long-term commitments from our customers, and
we allocate resources based on our estimates of customer
demand.




Our lengthy sales cycle can result in uncertainty and delays
in generating revenues.




A large percentage of our revenues will come from sales
outside of the United States, which creates additional business
risks.






| |   |                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------
| |  | Fluctuations in currency exchange rates, tariffs, import
    restrictions and other trade barriers;
|
| |  | Unexpected changes in regulatory requirements;                                                     
|
| |  | Political and economic instability;                                                                
|
| |  | Exposure to litigation or government investigations in these
    countries;                        
|
| |  | Longer payment periods;                                                                            
|
| |  | Ability to enforce contracts or payment terms;                                                     

12



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| |   |                                                          
| | - | ---------------------------------------------------------
| |  | Potentially adverse tax consequences;                    
|
| |  | Export license requirements; and                         
|
| |  | Unexpected changes in diplomatic and trade relationships.

non-U.S.


We are subject to risks associated with international
operations, which may harm our business.






| |   |                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Unexpected changes in, or impositions of, legislative or
    regulatory requirements;                                                                                                                  
|
| |  | Delays resulting from difficulty in obtaining export licenses
    for certain technology, tariffs, quotas and other trade barriers
    and restrictions;                                               
|
| |  | Imposition of additional taxes and penalties;                                                                                                                                                          
|
| |  | The burdens of complying with a variety of foreign laws; and                                                                                                                                           
|
| |  | Other factors beyond our control, including acts of terrorism,
    which may delay the shipment of our products, impair our ability
    to travel or our ability to communicate with foreign locations.



Our multi-jurisdictional tax structure is complex and we
could be subject to increased taxation.






The cyclical nature of the semiconductor industry may lead to
significant variances in the demand for our products.




13



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A breakdown in our information technology systems could cause
a business interruption, impair our ability to manage our
business or report results, or result in the unauthorized
disclosure of our confidential and proprietary information.


back-up


We may make acquisitions where advisable, and acquisitions
involve numerous risks.






| |   |                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We may experience difficulty in assimilating the acquired
    operations and employees;                                                                                             
|
| |  | We may be unable to retain the key employees of the acquired
    operations;                                                                                                        
|
| |  | The acquisitions may disrupt our ongoing business;                                                                                                                                  
|
| |  | We may not be able to incorporate successfully the acquired
    technologies and operations into our business and maintain
    uniform standards, controls, policies and procedures;
|
| |  | We may lack the experience to enter into new markets, products
    or technologies; and                                                                                             
|
| |  | An acquisition we choose to pursue may require a significant
    amount of capital, which limits our ability to pursue other
    strategic opportunities.                           



We may become subject to judgments for securities class
action suits.




We need to continually evaluate internal financial controls
against evolving standards.




14



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General economic conditions may reduce our revenues and harm
our business.






|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS



EXECUTIVE OFFICERS




|                   |  |     |    |  |          |                                                           
|------------------ |  | --- | -- |  | -------- | ----------------------------------------------------------
|Name               |  | Age |    |  | Position
|                   |  |     |    |  |         
|Elias Antoun       |  |     | 49 |  |          | Chief Executive Officer and Director                      
|Anders Frisk       |  |     | 50 |  |          | Executive Vice President                                  
|Michael Healy      |  |     | 44 |  |          | Chief Financial Officer and Senior Vice President, Finance
|Behrooz Yadegar(1) |  |     | 46 |  |          | Senior Vice President, Product Development                
|Tzoyao Chan(2)     |  |     | 53 |  |          | Senior Vice President, Strategic Engineering Initiatives  
|Raphael Mehrbians  |  |     | 46 |  |          | Senior Vice President, Product Marketing                  
|Mohammad Tafazzoli |  |     | 46 |  |          | Senior Vice President, Operations                         
|Ernest Lin         |  |     | 52 |  |          | Senior Vice President, Worldwide Sales                    
|Jeffrey Lin        |  |     | 33 |  |          | General Counsel                                           
|Rajeev Munshi(3)   |  |     | 42 |  |          | Vice President, Quality Assurance                         
|Ken Murray(4)      |  |     | 55 |  |          | Vice President, Human Resources                           
|Ava Hahn           |  |     | 33 |  |          | Associate General Counsel and Secretary                   






|    |                                                                                               
|--- | ----------------------------------------------------------------------------------------------
|(1) | On May 16, 2006, Behrooz Yadegar was appointed Senior Vice
    President, Product Development.
|   
|(2) | As of May 16, 2006, Tzoyao Chan ceased being an executive
    officer of the Company.         
|   
|(3) | As of May 16, 2006, Rajeev Munshi ceased being an executive
    officer of the Company.       
|   
|(4) | As of May 16, 2006, Ken Murray ceased being an executive
    officer of the Company.          

15



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16



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|        |           
|------- | ----------
|ITEM 2. | PROPERTIES





|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

Silicon Image Litigation




17



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Mstar Litigation






Securities Class Action Litigation


10b-5






18



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|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



PART II




|        |                                                                
|------- | ---------------------------------------------------------------
|ITEM 5. | MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER
    MATTERS

MARKET INFORMATION




|                   |                                  |      |   |       |     |  |   |       | 
|------------------ | -------------------------------- | ---- | - | ----- | --- |  | - | ----- | 
|                   |                                  | High |   |       | Low | 
|                   |                                  |      |   |       |     | 
|2004 Calendar Year |                                  |      |   |       |     |  |   |      
|                   | First Quarter                    |      | $ | 22.36 |     |  | $ | 14.20 | 
|                   | Second Quarter                   |      | $ | 19.75 |     |  | $ | 13.20 | 
|                   | Third Quarter                    |      | $ | 13.50 |     |  | $ | 9.60  | 
|                   | Fourth Quarter                   |      | $ | 17.29 |     |  | $ | 13.45 | 
|2005 Calendar Year |                                  |      |   |       |     |  |   |      
|                   | First Quarter                    |      | $ | 16.35 |     |  | $ | 11.98 | 
|                   | Second Quarter                   |      | $ | 19.25 |     |  | $ | 13.32 | 
|                   | Third Quarter                    |      | $ | 27.16 |     |  | $ | 18.15 | 
|                   | Fourth Quarter                   |      | $ | 23.13 |     |  | $ | 17.07 | 
|2006 Calendar Year |                                  |      |   |       |     |  |   |      
|                   | First Quarter                    |      | $ | 22.40 |     |  | $ | 17.04 | 
|                   | Second Quarter (to June 8, 2006) |      | $ | 17.37 |     |  | $ | 11.59 | 



DIVIDEND POLICY




19



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SALES OF UNREGISTERED SECURITIES






|        |                                     
|------- | ------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA



|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |         |        |        |   |         |        |        | 
|----------------------------------------------------- | ----------------------------------------- | ------------------------ | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                      |                                           | Year Ended March 31,     |        
|                                                      |                                           |                          |        
|                                                      |                                           | 2006                     |         |        | 2005   |   |         | 2004   |        |   | 2003    |        |        | 2002 |        
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|STATEMENTS OF OPERATIONS DATA:                        |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |         |        |        |   |         |       
|Revenues                                              |                                           | $                        | 269,506 |        |        | $ | 204,115 |        |        | $ | 213,420 |        |        | $    | 194,325 |        |        | $ | 163,370 |       
|Cost of revenues(1)                                   |                                           |                          | 153,039 |        |        |   | 125,394 |        |        |   | 134,735 |        |        |      | 127,110 |        |        |   | 90,152  |       
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|Gross profit                                          |                                           |                          | 116,467 |        |        |   | 78,721  |        |        |   | 78,685  |        |        |      | 67,215  |        |        |   | 73,218  |       
|Operating expenses:                                   |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |         |        |        |   |         |       
|                                                      | Research and development(2)(3)            |                          |         | 48,700 |        |   |         | 41,534 |        |   |         | 38,552 |        |      |         | 39,895 |        |   |         | 24,366 |       
|                                                      | Selling, general and administrative(3)(4) |                          |         | 48,698 |        |   |         | 45,619 |        |   |         | 47,126 |        |      |         | 47,042 |        |   |         | 19,032 |       
|                                                      | Restructuring                             |                          |         |       |        |   |         |       |        |   |         |       |        |      |         |       |        |   |         | 1,858  |       
|                                                      | In-process research and development       |                          |         |       |        |   |         |       |        |   |         |       |        |      |         |       |        |   |         | 4,700  |       
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|                                                      |                                           | Total operating expenses |         |        | 97,398 |   |         |        | 87,153 |   |         |        | 85,678 |      |         |        | 86,937 |   |         |        | 49,956 | 
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|Income (loss) from operations                         |                                           |                          | 19,069  |        |        |   | (8,432  | )      |        |   | (6,993  | )      |        |      | (19,722 | )      |        |   | 23,262  |       
|Interest and other income, net                        |                                           |                          | 5,403   |        |        |   | 1,939   |        |        |   | 1,725   |        |        |      | 946     |        |        |   | 1,463   |       
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|Income (loss) before income taxes                     |                                           |                          | 24,472  |        |        |   | (6,493  | )      |        |   | (5,268  | )      |        |      | (18,776 | )      |        |   | 24,725  |       
|Provision for (recovery of) income taxes              |                                           |                          | 6,082   |        |        |   | 2,954   |        |        |   | (1,063  | )      |        |      | (4,140  | )      |        |   | 6,729   |       
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|Net income (loss)                                     |                                           | $                        | 18,390  |        |        | $ | (9,447  | )      |        | $ | (4,205  | )      |        | $    | (14,636 | )      |        | $ | 17,996  |       
|                                                      |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |        
|Earnings (loss) per share:                            |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |         |        |        |   |         |       
|                                                      | Basic                                     |                          | $       | 0.53   |        |   | $       | (0.29  | )      |   | $       | (0.13  | )      |      | $       | (0.47  | )      |   | $       | 0.82   |       
|                                                      | Diluted                                   |                          | $       | 0.50   |        |   | $       | (0.29  | )      |   | $       | (0.13  | )      |      | $       | (0.47  | )      |   | $       | 0.74   |       
|Weighted average number of common shares outstanding: |                                           |                          |         |        |        |   |         |        |        |   |         |        |        |      |         |        |        |   |         |       
|                                                      | Basic                                     |                          |         | 34,909 |        |   |         | 33,084 |        |   |         | 31,876 |        |      |         | 31,248 |        |   |         | 22,025 |       
|                                                      | Diluted                                   |                          |         | 36,877 |        |   |         | 33,084 |        |   |         | 31,876 |        |      |         | 31,248 |        |   |         | 24,177 |       






|    |                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amortization of acquired intangible assets of $6,835,000 for
    fiscal year 2006; $7,700,000 for each of fiscal years 2005, 2004
    and 2003; and $865,000 for fiscal year 2002, has been
    reclassified to Cost of revenues from Operating expenses.                                                                                                      
|   
|(2) | Amortization of acquired intangible assets of $2,809,000 for
    fiscal year 2006; $2,916,000 for each of fiscal years 2005 and
    2004; $2,927,000 for 2003; and $167,000 for fiscal year 2002,
    have been reclassified to Research & Development from a
    single classification within Operating expenses.                                             
|   
|(3) | Certain expenses of $7,633,000 for fiscal year 2006; $5,270,000
    for fiscal year 2005; $4,653,000 for fiscal year 2004;
    $3,693,000 for fiscal year 2003; and $2,437,000 for fiscal year
    2002, have been reclassified from Selling, general and
    administrative to Research and development to reflect a change
    in the allocation methodology.
|   
|(4) | Certain costs associated with patent litigation of $1,331,000
    for fiscal year 2006; $2,589,000 for fiscal year 2005;
    $12,630,000 for fiscal year 2004; and $14,504,000 for fiscal
    year 2003, have been reclassified to Selling, general and
    administrative from a single classification within Operating
    expenses.                         

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|                                                    |  |           |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|--------------------------------------------------- |  | --------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  |  | - | ------- | 
|                                                    |  | March 31, |        
|                                                    |  |           |        
|                                                    |  | 2006      |         |  | 2005 |   |         | 2004 |  |   | 2003    |  |  | 2002 |        
|                                                    |  |           |         |  |      |   |         |      |  |   |         |  |  |      |        
|BALANCE SHEETS DATA:                                |  |           |         |  |      |   |         |      |  |   |         |  |  |      |         |  |  |   |         | 
|Cash, cash equivalents and short-term investments   |  | $         | 185,379 |  |      | $ | 129,757 |      |  | $ | 118,222 |  |  | $    | 113,138 |  |  | $ | 106,564 | 
|Working capital                                     |  |           | 204,519 |  |      |   | 156,411 |      |  |   | 147,651 |  |  |      | 130,831 |  |  |   | 139,633 | 
|Total assets                                        |  |           | 479,677 |  |      |   | 416,292 |      |  |   | 410,726 |  |  |      | 402,654 |  |  |   | 428,391 | 
|Total long-term liabilities, net of current portion |  |           |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   | 328     | 
|Stockholders equity                                |  |           | 439,424 |  |      |   | 389,496 |      |  |   | 386,855 |  |  |      | 373,833 |  |  |   | 383,571 | 





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

The following contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of
1934, as amended, including statements regarding anticipated
revenues, gross margins, operating expenses, amortization of
intangibles and stock-based compensation, liquidity, business
strategy, demand for our products, average selling prices,
regional market growth, and future competition. Words such as
anticipates, expects,
intends, plans, believes,
seeks, estimates and similar expressions
identify such forward-looking statements. These forward-looking
statements are subject to risks and uncertainties that could
cause actual results to differ materially from those indicated
in the forward-looking statements. Factors which could cause
actual results to differ materially include those set forth in
the following discussion, and, in particular, the risks
discussed below under the subheading Risk Factors
and in other documents we file with the Securities and Exchange
Commission. Unless required by law, we undertake no obligation
to update publicly any forward-looking statements.


10-K.


OVERVIEW




| |            
| | -----------
| | Our Markets



21



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| |                    
| | -------------------
| | Revenue Recognition

point-of




| |                         
| | ------------------------
| | Manufacturing and Supply

set-up




| |                  
| | -----------------
| | Global Operations





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| |                                                
| | -----------------------------------------------
| | Mergers, Acquisitions and Strategic Investments









| |                                           
| | ------------------------------------------
| | Critical Accounting Policies and Estimates







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We record estimated reductions to revenue for customer returns
    based on historical experience. A customer has a right to return
    products only if the product is faulty or upon termination of a
    distributor agreement, although in certain circumstances we
    agree to accept returns if replacement orders are placed for
    other products or to maintain our business relationship. If
    actual customer returns increase, we may be required to
    recognize additional reductions to revenue.
|
| |  | We record the estimated future cost of replacing faulty product
    as an increase to cost of revenues. To date we have not
    experienced significant returns related to quality. If returns
    increase as a result of changes in product quality, we may be
    required to recognize additional warranty expense.                                                                                                                                                                                             
|
| |  | We maintain allowances for estimated losses resulting from the
    inability of our customers to make required payments and other
    disputes. If the financial condition of our customers were to
    deteriorate, resulting in an impairment of their ability to make
    payments, additional allowances may be required. We have not
    suffered any significant loss in this area.                                                                                                                           
|
| |  | We provide for inventory obsolescence reserves against our
    inventory for estimated obsolescence or unmarketable inventory
    equal to the difference between the cost of inventory and the
    estimated market value based upon assumptions about future
    demand and market conditions. If actual market conditions are
    less favorable than those we project, additional inventory
    valuation reserves may be required.                                                                             
|
| |  | We provide for costs associated with settling litigation when we
    believe that we have a reasonable basis for estimating those
    costs. If actual costs associated with settling litigation
    differ from our estimates, we may be required to recognize
    additional costs.                                                                                                                                                                                                                               

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Goodwill, which represents the excess of cost over the fair
    value of net assets acquired in business combinations, is tested
    annually for impairment, and is tested for impairment more
    frequently if events and circumstances indicate that the
    goodwill might be impaired. The impairment tests are performed
    in accordance with FASB Statement of Financial Accounting
    Standards No. 142, Goodwill and Other Intangible
    Assets. Accordingly, an impairment loss is recognized to
    the extent that the carrying amount of goodwill exceeds its
    implied fair value. This determination is made at the reporting
    unit level. We have assigned all goodwill to a single,
    enterprise-level reporting unit. The impairment test consists of
    two steps. First, we determine the fair value of the reporting
    unit. The fair value is then compared to its carrying amount.
    Second, if the carrying amount of the reporting unit exceeds its
    fair value, an impairment loss is recognized for any excess of
    the carrying amount of the reporting units goodwill over
    the implied fair value of that goodwill. The implied fair value
    of goodwill would be determined by allocating the fair value of
    the reporting unit in a manner similar to a purchase price
    allocation in accordance with FASB Statement of Financial
    Accounting Standards No. 141, Business
    Combinations. The residual fair value after this
    allocation is the implied fair value of the reporting unit
    goodwill. We perform our annual impairment test on
    January 1st of each year.



| |                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We did not record any goodwill impairment charges in fiscal
    2006, 2005, or 2004. Goodwill balances may also be affected by
    changes in other estimates, for example, related to the ability
    to utilize acquired tax benefits, made at the time of
    acquisitions.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We record a valuation allowance to reduce our deferred tax
    assets to the amount that we believe is more likely than not to
    be realized. Should we determine that we will not be able to
    realize all or part of our gross deferred tax asset, an
    adjustment to the deferred tax asset would be charged to income
    in the period such determination was made. In making this
    determination, we project taxable income by jurisdiction for the
    next three years based on market assumptions and company plans,
    and other jurisdictional history.
|
| |  | We record an estimated royalty cost based on our assessment of
    the potential liability arising from our Memorandum of
    Understanding (MOU) with Silicon Image, Inc. If actual costs
    associated with the MOU differ from our estimates, we may be
    required to adjust the costs.                                                                                                                                                                                                                                                                               
|
| |  | From time to time, we incur costs related to potential merger
    activities. When we assess that we will be the acquirer for
    accounting purposes in such transactions and we expect to
    complete the transaction, direct costs associated with the
    acquisition are deferred and form part of the final purchase
    price. In the event these assessments change, any such deferred
    costs would be expensed. Costs associated with other merger
    activities are expensed as incurred.                                                                    

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RESULTS OF OPERATIONS




| |                         
| | ------------------------
| | REVENUE AND GROSS PROFIT

|                        |  |                     |         |  |      |   |         |      |  |   |         | 
|----------------------- |  | ------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                        |  | Year Ended March 31 |        
|                        |  |                     |        
|                        |  | 2006                |         |  | 2005 |   |         | 2004 | 
|                        |  |                     |         |  |      |   |         |      | 
|                        |  | (In thousands)      |        
|Total revenue           |  | $                   | 269,506 |  |      | $ | 204,115 |      |  | $ | 213,420 | 
|Gross profit            |  |                     | 116,467 |  |      |   | 78,721  |      |  |   | 78,685  | 
|Gross profit percentage |  |                     | 43.2%   |  |      |   | 38.6%   |      |  |   | 36.9%   | 
|Revenue by geography:   |  |                     |         |  |      |   |         |      |  |   |         | 
|United States           |  | $                   | 3,493   |  |      | $ | 8,803   |      |  | $ | 7,160   | 
|China                   |  |                     | 115,016 |  |      |   | 78,167  |      |  |   | 87,065  | 
|Japan                   |  |                     | 27,356  |  |      |   | 15,289  |      |  |   | 16,519  | 
|South Korea             |  |                     | 51,487  |  |      |   | 52,871  |      |  |   | 53,556  | 
|Taiwan                  |  |                     | 28,704  |  |      |   | 28,824  |      |  |   | 27,209  | 
|Europe                  |  |                     | 31,131  |  |      |   | 13,334  |      |  |   | 4,736   | 
|Rest of world           |  |                     | 12,319  |  |      |   | 6,827   |      |  |   | 17,175  | 
|                        |  |                     |         |  |      |   |         |      | 
|Total revenue           |  | $                   | 269,506 |  |      | $ | 204,115 |      |  | $ | 213,420 | 
|                        |  |                     |         |  |      |   |         |      | 



| |        
| | -------
| | Revenue











| |             
| | ------------
| | Gross Profit



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OPERATING EXPENSES




| |                         
| | ------------------------
| | Research and Development

|                                                    |  |                        |        |  |      |   |        |      |  |   |        | 
|--------------------------------------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                    |  | Year Ended March 31    |       
|                                                    |  |                        |       
|                                                    |  | 2006                   |        |  | 2005 |   |        | 2004 | 
|                                                    |  |                        |        |  |      |   |        |      | 
|                                                    |  | (Dollars in thousands) |       
|Research and development                            |  | $                      | 48,700 |  |      | $ | 41,534 |      |  | $ | 38,552 | 
|Research and development as a percentage of revenue |  |                        | 18.1%  |  |      |   | 20.3%  |      |  |   | 18.1%  | 





| |                                    
| | -----------------------------------
| | Selling, General and Administrative

|                                                                            |  |                        |        |  |      |   |        |      |  |   |        | 
|--------------------------------------------------------------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                                                            |  | Year Ended March 31    |       
|                                                                            |  |                        |       
|                                                                            |  | 2006                   |        |  | 2005 |   |        | 2004 | 
|                                                                            |  |                        |        |  |      |   |        |      | 
|                                                                            |  | (Dollars in thousands) |       
|Selling, general and administrative expenses                                |  | $                      | 48,698 |  |      | $ | 45,619 |      |  | $ | 47,126 | 
|Selling, general and administrative expenses as a percentage of
    revenue |  |                        | 18.1%  |  |      |   | 22.3%  |      |  |   | 22.1%  | 







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NON OPERATING INCOME AND EXPENSES




| |                          
| | -------------------------
| | Interest and Other Income

|                           |  |                     |       |  |      |   |       |      |  |   |       | 
|-------------------------- |  | ------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                           |  | Year Ended March 31 |      
|                           |  |                     |      
|                           |  | 2006                |       |  | 2005 |   |       | 2004 | 
|                           |  |                     |       |  |      |   |       |      | 
|                           |  | (In thousands)      |      
|Interest income            |  | $                   | 5,403 |  |      | $ | 1,939 |      |  | $ | 1,062 | 
|Gain on sale of investment |  |                     |      |  |      |   |      |      |  |   | 663   | 
|                           |  |                     |       |  |      |   |       |      | 
|                           |  | $                   | 5,403 |  |      | $ | 1,939 |      |  | $ | 1,725 | 
|                           |  |                     |       |  |      |   |       |      | 







| |                           
| | --------------------------
| | Provision for Income Taxes

|                                       |  |                     |       |  |      |   |        |      |  |   |        |  
|-------------------------------------- |  | ------------------- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | -
|                                       |  | Year Ended March 31 |      
|                                       |  |                     |      
|                                       |  | 2006                |       |  | 2005 |   |        | 2004 | 
|                                       |  |                     |       |  |      |   |        |      | 
|                                       |  | (In thousands)      |      
|Current income tax expense             |  | $                   | 3,177 |  |      | $ | 6,386  |      |  | $ | 3,300  |  
|Deferred income tax expense (recovery) |  |                     | 2,905 |  |      |   | (3,432 | )    |  |   | (4,363 | )
|                                       |  |                     |       |  |      |   |        |      | 
|                                       |  | $                   | 6,082 |  |      | $ | 2,954  |      |  | $ | (1,063 | )
|                                       |  |                     |       |  |      |   |        |      | 







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QUARTERLY RESULTS OF OPERATIONS




|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |        |       |   |        |        |       |   |        |        |       |  
|-------------------------------------------------------------- | ----------------------------------------- | ------------------ | ------ | ------ | ----- | - | ------ | ------ | ---- | - | ------ | ------ | ---- | ---- | ------ | ------ | ---- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | - | ------ | ------ | ----- | -
|                                                               |                                           | Three Months Ended |       
|                                                               |                                           |                    |       
|                                                               |                                           | Mar.               |        |        | Dec.  |   |        | Sep.   |      |   | Jun.   |        |      | Mar. |        |        | Dec. |   |        | Sep.   |       |   | Jun.   |       
|                                                               |                                           | 2006               |        |        | 2005  |   |        | 2005   |      |   | 2005   |        |      | 2005 |        |        | 2004 |   |        | 2004   |       |   | 2004   |       
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|                                                               |                                           | (Unaudited)        |       
|Revenues                                                       |                                           | $                  | 60,862 |        |       | $ | 73,965 |        |      | $ | 74,854 |        |      | $    | 59,825 |        |      | $ | 52,905 |        |       | $ | 48,286 |        |       | $ | 50,078 |        |       | $ | 52,846 |       
|Cost of revenues(1)                                            |                                           |                    | 35,684 |        |       |   | 39,762 |        |      |   | 41,974 |        |      |      | 35,619 |        |      |   | 32,503 |        |       |   | 28,534 |        |       |   | 30,743 |        |       |   | 33,614 |       
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|Gross profit                                                   |                                           |                    | 25,178 |        |       |   | 34,203 |        |      |   | 32,880 |        |      |      | 24,206 |        |      |   | 20,402 |        |       |   | 19,752 |        |       |   | 19,335 |        |       |   | 19,232 |       
|Operating expenses:                                            |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                                               | Research and development(2)(3)            |                    |        | 13,655 |       |   |        | 12,541 |      |   |        | 11,542 |      |      |        | 10,962 |      |   |        | 10,675 |       |   |        | 10,053 |       |   |        | 10,456 |       |   |        | 10,350 |      
|                                                               | Selling, general and administrative(3)(4) |                    |        | 13,658 |       |   |        | 12,195 |      |   |        | 12,092 |      |      |        | 10,753 |      |   |        | 10,687 |       |   |        | 14,218 |       |   |        | 9,946  |       |   |        | 10,768 |      
|Total operating expenses                                       |                                           |                    | 27,313 |        |       |   | 24,736 |        |      |   | 23,634 |        |      |      | 21,715 |        |      |   | 21,362 |        |       |   | 24,271 |        |       |   | 20,402 |        |       |   | 21,118 |       
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|Income (loss) from operations                                  |                                           |                    | (2,135 | )      |       |   | 9,467  |        |      |   | 9,246  |        |      |      | 2,491  |        |      |   | (960   | )      |       |   | (4,519 | )      |       |   | (1,067 | )      |       |   | (1,886 | )     
|Interest and other income, net                                 |                                           |                    | 1,907  |        |       |   | 1,519  |        |      |   | 1,067  |        |      |      | 910    |        |      |   | 686    |        |       |   | 534    |        |       |   | 407    |        |       |   | 312    |       
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|Income (loss) before income taxes                              |                                           |                    | (228   | )      |       |   | 10,986 |        |      |   | 10,313 |        |      |      | 3,401  |        |      |   | (274   | )      |       |   | (3,985 | )      |       |   | (660   | )      |       |   | (1,574 | )     
|Provision for (recovery of) income taxes                       |                                           |                    | 89     |        |       |   | 3,621  |        |      |   | 1,032  |        |      |      | 1,340  |        |      |   | 6,570  |        |       |   | (2,985 | )      |       |   | (346   | )      |       |   | (285   | )     
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|Net income (loss)                                              |                                           | $                  | (317   | )      |       | $ | 7,365  |        |      | $ | 9,281  |        |      | $    | 2,061  |        |      | $ | (6,844 | )      |       | $ | (1,000 | )      |       | $ | (314   | )      |       | $ | (1,289 | )     
|                                                               |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |       
|Earnings (loss) per share:                                     |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|                                                               |                                           | Basic              |        | $      | (0.01 | ) |        | $      | 0.21 |   |        | $      | 0.27 |      |        | $      | 0.06 |   |        | $      | (0.20 | ) |        | $      | (0.03 | ) |        | $      | (0.01 | ) |        | $      | (0.04 | )
|                                                               |                                           | Diluted            |        | $      | (0.01 | ) |        | $      | 0.20 |   |        | $      | 0.25 |      |        | $      | 0.06 |   |        | $      | (0.20 | ) |        | $      | (0.03 | ) |        | $      | (0.01 | ) |        | $      | (0.04 | )
|Weighted average number of shares of common stock outstanding: |                                           |                    |        |        |       |   |        |        |      |   |        |        |      |      |        |        |      |   |        |        |       |   |        |        |       |   |        |        |       |   |        |       
|Basic                                                          |                                           |                    | 35,760 |        |       |   | 35,413 |        |      |   | 34,826 |        |      |      | 33,624 |        |      |   | 33,437 |        |       |   | 33,151 |        |       |   | 33,030 |        |       |   | 32,723 |       
|Diluted                                                        |                                           |                    | 35,760 |        |       |   | 37,295 |        |      |   | 37,534 |        |      |      | 35,060 |        |      |   | 33,437 |        |       |   | 33,151 |        |       |   | 33,030 |        |       |   | 32,723 |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Certain costs of $1,925,000 for each of the first, second and
    third quarters of fiscal year 2006 and $1,060,000 for the fourth
    quarter of fiscal year 2006 associated with Amortization of
    acquired intangible assets have been reclassified to Cost of
    revenues from Operating expenses. Certain costs of $1,925,000
    for each of the first, second, third and fourth quarters of
    fiscal year 2005 associated with Amortization of acquired
    intangible assets have been reclassified to Cost of revenues
    from Operating expenses.                                                                                 
|   
|(2) | Certain costs of $729,000 for the first, second and third
    quarters of fiscal year 2006 and $622,000 for the fourth quarter
    of fiscal year 2006 associated with Amortization of acquired
    intangible assets have been reclassified to Research &
    development from a single classification within Operating
    expenses. Certain costs of $729,000 for each of the first,
    second, third and fourth quarters of fiscal year 2005 associated
    with Amortization of acquired intangible assets have been
    reclassified to Research & development from a single
    classification within Operating expenses.                 
|   
|(3) | Certain costs of $1,443,000, $1,629,000, $2,084,000 and
    $2,477,000 for the first, second, third and fourth quarters of
    fiscal year 2006, respectively, have been reclassified from
    Selling, general and administrative to Research and development
    to reflect a change in the allocation methodology. Certain
    expenses of $1,260,000, $1,339,000, $1,396,000 and $1,275,000
    for the first, second, third and fourth quarters of fiscal year
    2005, respectively, have been reclassified from Selling, general
    and administrative to Research and development to reflect a
    change in the allocation methodology.

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Certain costs of $319,000, $419,000, $330,000 and $263,000 for
    the first, second, third and fourth quarters of fiscal year 2006
    associated with patent litigation have been reclassified to
    Selling, general and administrative from a single classification
    within Operating expenses. Certain costs of $757,000, $610,000,
    $989,000 and $233,000 for the first, second, third and fourth
    quarters of fiscal year 2005 associated with patent litigation
    have been reclassified to Selling, general and administrative
    from a single classification within Operating expenses.









LIQUIDITY AND CAPITAL RESOURCES






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|                                                  |  |                        |         |  |      |   |         | 
|------------------------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                                  |  | March 31,              |        
|                                                  |  |                        |        
|                                                  |  | 2006                   |         |  | 2005 |  
|                                                  |  |                        |         |  |      |  
|                                                  |  | (Dollars in thousands) |        
|Cash and cash equivalents                         |  | $                      | 154,630 |  |      | $ | 129,757 | 
|Short-term investments                            |  |                        | 30,749  |  |      |   |        | 
|                                                  |  |                        |         |  |      |  
|Cash, cash equivalents and short-term Investments |  |                        | 185,379 |  |      |   | 129,757 | 
|                                                  |  |                        |         |  |      |  
|Working capital                                   |  | $                      | 204,519 |  |      | $ | 156,411 | 
|Current ratio                                     |  |                        | 6.08    |  |      |   | 6.84    | 
|Days Sales Outstanding                            |  |                        | 54      |  |      |   | 52      | 
|Inventory days                                    |  |                        | 45      |  |      |   | 51      | 











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| |                        
| | -----------------------
| | Contractual Obligations



|                 |  |                             |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |   |     |  |  |   |     | 
|---------------- |  | --------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  | ---- | - | --- |  |  | - | --- | 
|                 |  | Payments Due By Fiscal Year |      
|                 |  |                             |      
|                 |  | Total                       |       |  | 2007 |   |       | 2008 |  |   | 2009  |  |  | 2010 |       |  | 2011 |  
|                 |  |                             |       |  |      |   |       |      |  |   |       |  |  |      |       |  |      |  
|Operating Leases |  | $                           | 9,741 |  |      | $ | 4,347 |      |  | $ | 2,348 |  |  | $    | 2,179 |  |      | $ | 572 |  |  | $ | 295 | 









| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements





| |                    
| | -------------------
| | Capital commitments





| |                 
| | ----------------
| | Subsequent Event





33



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##### Table of Contents









|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK







34



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##### Table of Contents





|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Managements Annual Report on Internal Control Over
Financial Reporting


13a-15(f) 15d-15(f)




| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of the assets of the company;                                                                                                                                                                                        
|
| |  | provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
|
| |  | provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.                                                                                                                                       



35



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##### 










FINANCIAL STATEMENTS TABLE OF CONTENTS


|                                                             |  |             |     | 
|------------------------------------------------------------ |  | ----------- | --- | 
|                                                             |  | Page Number |    
|                                                             |  |             |    
|Reports of Independent Registered Public
    Accounting Firm |  |             | F-2 | 
|Consolidated Balance Sheets                                  |  |             | F-4 | 
|Consolidated Statements of Operations                        |  |             | F-5 | 
|Consolidated Statements of
    Stockholders Equity          |  |             | F-6 | 
|Consolidated Statements of Cash Flows                        |  |             | F-7 | 
|Notes to Consolidated Financial
    Statements               |  |             | F-8 | 
|EXHIBIT 10.40                                               
|EXHIBIT 10.42                                               
|EXHIBIT 21                                                  
|EXHIBIT 23.1                                                
|EXHIBIT 31.1                                                
|EXHIBIT 31.2                                                
|EXHIBIT 32.1                                                



F-1



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##### Table of Contents






Report of Independent Registered Public Accounting Firm




















F-2



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##### Table of Contents



Report of Independent Registered Public Accounting Firm














.










F-3



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##### Table of Contents



Genesis Microchip Inc.





Consolidated Balance Sheets


|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |    |         |         |         |    | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------- | -- | ------- | ------- | ------- | -- | 
|                                        |                                                                                                        | March 31,                                  |                                                                                                                                                          
|                                        |                                                                                                        |                                            |                                                                                                                                                          
|                                        |                                                                                                        | 2006                                       |                                                                                                                                                           |         | 2005    |   
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | (In thousands, except per                  |                                                                                                                                                          
|                                        |                                                                                                        | share amounts)                             |                                                                                                                                                          
|ASSETS                                 
|Current assets:                         |                                                                                                        |                                            |                                                                                                                                                           |         |         |    |         |        
|                                        | Cash and cash equivalents                                                                              |                                            | $                                                                                                                                                         | 154,630 |         |    | $       | 129,757 |        
|                                        | Short-term investments                                                                                 |                                            |                                                                                                                                                           | 30,749  |         |    |         |        |        
|                                        | Accounts receivable trade, net of allowance for doubtful
    accounts of $401 in 2006 and $282 in 2005 |                                            |                                                                                                                                                           | 36,184  |         |    |         | 30,310  |        
|                                        | Inventories (note 3)                                                                                   |                                            |                                                                                                                                                           | 17,175  |         |    |         | 17,557  |        
|                                        | Prepaids and other                                                                                     |                                            |                                                                                                                                                           | 6,034   |         |    |         | 5,583   |        
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | Total current assets                       |                                                                                                                                                           |         | 244,772 |    |         |         | 183,207 |   
|Property and equipment, net (note 4)    |                                                                                                        |                                            | 16,459                                                                                                                                                    |         |         |    | 15,987  |        
|Intangible assets, net (note 5)         |                                                                                                        |                                            | 9,055                                                                                                                                                     |         |         |    | 17,265  |        
|Goodwill (note 6)                       |                                                                                                        |                                            | 181,981                                                                                                                                                   |         |         |    | 181,981 |        
|Deferred income taxes (note 10)         |                                                                                                        |                                            | 11,151                                                                                                                                                    |         |         |    | 14,056  |        
|Other long-term assets (note 7)         |                                                                                                        |                                            | 16,259                                                                                                                                                    |         |         |    | 3,796   |        
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | Total assets                               |                                                                                                                                                           | $       | 479,677 |    |         | $       | 416,292 |   
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                       
|LIABILITIES AND STOCKHOLDERS EQUITY   
|                                       
|Current liabilities:                    |                                                                                                        |                                            |                                                                                                                                                           |         |         |    |         |        
|                                        | Accounts payable                                                                                       |                                            | $                                                                                                                                                         | 14,911  |         |    | $       | 12,044  |        
|                                        | Accrued liabilities                                                                                    |                                            |                                                                                                                                                           | 21,778  |         |    |         | 11,634  |        
|                                        | Income taxes payable                                                                                   |                                            |                                                                                                                                                           | 3,565   |         |    |         | 3,118   |        
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | Total current liabilities                  |                                                                                                                                                           |         | 40,254  |    |         |         | 26,796  |   
|Stockholders equity (note 8):          |                                                                                                        |                                            |                                                                                                                                                           |         |         |    |         |        
|                                        | Capital stock:                                                                                         |                                            |                                                                                                                                                           |         |         |    |         |         |        
|                                        |                                                                                                        | Preferred stock:                           |                                                                                                                                                           |         |         |    |         |         |         |   
|                                        |                                                                                                        |                                            | Authorized  5,000 preferred shares, $0.001 par
    value Issued and outstanding  none at March 31,
    2006 and at March 31, 2005                       |         |         |   |         |         |         |   | 
|                                        |                                                                                                        | Common stock:                              |                                                                                                                                                           |         |         |    |         |         |         |   
|                                        |                                                                                                        |                                            | Authorized  100,000 common shares, $0.001 par
    value Issued and outstanding  35,899 shares at
    March 31, 2006 and 33,479 shares at March 31, 2005 |         |         | 36 |         |         |         | 33 | 
|                                        | Additional paid-in capital                                                                             |                                            |                                                                                                                                                           | 441,197 |         |    |         | 405,323 |        
|                                        | Cumulative other comprehensive loss                                                                    |                                            |                                                                                                                                                           | (94     | )       |    |         | (94     | )      
|                                        | Deferred stock-based compensation                                                                      |                                            |                                                                                                                                                           | (4,572  | )       |    |         | (232    | )      
|                                        | Retained Earnings (deficit)                                                                            |                                            |                                                                                                                                                           | 2,856   |         |    |         | (15,534 | )      
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | Total stockholders equity                 |                                                                                                                                                           |         | 439,423 |    |         |         | 389,496 |   
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|                                        |                                                                                                        | Total liabilities and stockholders equity |                                                                                                                                                           | $       | 479,677 |    |         | $       | 416,292 |   
|                                        |                                                                                                        |                                            |                                                                                                                                                           |         |         |   
|Commitments and contingencies (note 12) |                                                                                                        |                                            |                                                                                                                                                           |         |         |    |         |        



F-4



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##### Table of Contents



Genesis Microchip Inc.





Consolidated Statements of Operations


|                                                                                        |  |   |         |                                 |  |   |         |   |  |      |         |   |  |  |  | 
|--------------------------------------------------------------------------------------- |  | - | ------- | ------------------------------- |  | - | ------- | - |  | ---- | ------- | - |  |  |  | 
|                                                                                        |  |   |         | Year Ended March 31,            | 
|                                                                                        |  |   |         |                                 | 
|                                                                                        |  |   |         | 2006                            |  |   | 2005    |   |  | 2004 |        
|                                                                                        |  |   |         |                                 |  |   |         |   |  |      |        
|                                                                                        |  |   |         | (In thousands, except per share | 
|                                                                                        |  |   |         | amounts)                        | 
|Revenues                                                                                |  | $ | 269,506 |                                 |  | $ | 204,115 |   |  | $    | 213,420 |  
|Cost of revenues(1)(4)                                                                  |  |   | 153,039 |                                 |  |   | 125,394 |   |  |      | 134,735 |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Gross profit                                                                            |  |   | 116,467 |                                 |  |   | 78,721  |   |  |      | 78,685  |  
|Operating expenses:                                                                     |  |   |         |                                 |  |   |         |   |  |      |         |  
|Research and development(2)(5)                                                          |  |   | 48,700  |                                 |  |   | 41,534  |   |  |      | 38,552  |  
|Selling, general and administrative(3)(6)                                               |  |   | 48,698  |                                 |  |   | 45,619  |   |  |      | 47,126  |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Total operating expenses                                                                |  |   | 97,398  |                                 |  |   | 87,153  |   |  |      | 85,678  |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Income (loss) from operations                                                           |  |   | 19,069  |                                 |  |   | (8,432  | ) |  |      | (6,993  | )
|Interest and other income:                                                              |  |   |         |                                 |  |   |         |   |  |      |         |  
|Interest income                                                                         |  |   | 5,403   |                                 |  |   | 1,939   |   |  |      | 1,062   |  
|Gain on sale of investment                                                              |  |   |        |                                 |  |   |        |   |  |      | 663     |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Interest and other income, net                                                          |  |   | 5,403   |                                 |  |   | 1,939   |   |  |      | 1,725   |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Income (loss) before income taxes                                                       |  |   | 24,472  |                                 |  |   | (6,493  | ) |  |      | (5,268  | )
|Provision for (recovery of) income taxes (note 10)                                      |  |   | 6,082   |                                 |  |   | 2,954   |   |  |      | (1,063  | )
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Net income (loss)                                                                       |  | $ | 18,390  |                                 |  | $ | (9,447  | ) |  | $    | (4,205  | )
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|Earnings (loss) per share (note 11):                                                    |  |   |         |                                 |  |   |         |   |  |      |         |  
|Basic                                                                                   |  | $ | 0.53    |                                 |  | $ | (0.29   | ) |  | $    | (0.13   | )
|Diluted                                                                                 |  | $ | 0.50    |                                 |  | $ | (0.29   | ) |  | $    | (0.13   | )
|Weighted average number of common shares outstanding
    (note 11):                     |  |   |         |                                 |  |   |         |   |  |      |         |  
|Basic                                                                                   |  |   | 34,909  |                                 |  |   | 33,084  |   |  |      | 31,876  |  
|Diluted                                                                                 |  |   | 36,877  |                                 |  |   | 33,084  |   |  |      | 31,876  |  
|                                                                                        |  |   |         |                                 |  |   |         |   | 
|(1) Amount includes amortization of acquired developed
    product technology           |  | $ | 6,835   |                                 |  | $ | 7,700   |   |  | $    | 7,700   |  
|(2) Amount includes stock-based compensation                                            |  | $ | 421     |                                 |  | $ | 1,941   |   |  | $    | 2,893   |  
|(3) Amount includes stock-based compensation                                            |  | $ | 577     |                                 |  | $ | 2,553   |   |  | $    | 937     |  
|(4) Amount includes stock-based compensation                                            |  | $ | 63      |                                 |  | $ |        |   |  | $    |        |  
|(5) Amount includes amortization of acquired developed
    product technology           |  | $ | 2,809   |                                 |  | $ | 2,916   |   |  | $    | 2,916   |  
|(6) Amount includes provision for costs associated with
    patent litigation (note 12) |  | $ | 1,331   |                                 |  | $ | 2,589   |   |  | $    | 12,630  |  



F-5



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##### Table of Contents



Genesis Microchip Inc.





Consolidated Statements of Stockholders Equity


|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        |  |   |         |   |  |   |         |  
|---------------------------------------------------------------------------------------------------- |  | -------------- | ------ |  | ---------- | ---------- | -- | ------------- |  | - | ------------ | - |  | ------------ | --- | - | ------------- | - | ------ | ------ |  | - | ------- | - |  | - | ------- | -
|                                                                                                     |  |                |        |  |            | Cumulative |    |               |  |   |              |   | 
|                                                                                                     |  | Common Shares  |        |  | Additional |            |    | Other         |  |   | Deferred     |   |  | Retained     |     |   | Total         |  
|                                                                                                     |  |                |        |  | Paid-In    |            |    | Comprehensive |  |   | Stock- Based |   |  | Earnings/    |     |   | Stockholders |  
|                                                                                                     |  | Number         |        |  | Amount     |            |    | Capital       |  |   | Loss         |   |  | Compensation |     |   | (Deficit)     |   |        | Equity | 
|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        | 
|                                                                                                     |  | (In thousands) |       
|Balances, March 31, 2003                                                                             |  |                | 31,184 |  |            | $          | 31 |               |  | $ | 382,587      |   |  | $            | (94 | ) |               | $ | (6,809 | )      |  | $ | (1,882  | ) |  | $ | 373,833 |  
|Net loss                                                                                             |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   |       |        |  |   | (4,205  | ) |  |   | (4,205  | )
|Issued under stock option and stock purchase plans                                                   |  |                | 1,469  |  |            |            | 1  |               |  |   | 13,396       |   |  |              |    |   |               |   |       |        |  |   |        |   |  |   | 13,397  |  
|Tax benefits associated with non-qualified stock option
    exercises and disqualifying dispositions |  |                |       |  |            |            |   |               |  |   | 119          |   |  |              |    |   |               |   | (119   | )      |  |   |        |   |  |   |        |  
|Stock-based compensation                                                                             |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   | 3,830  |        |  |   |        |   |  |   | 3,830   |  
|Reversal of stock-based compensation related to terminations                                         |  |                |       |  |            |            |   |               |  |   | (265         | ) |  |              |    |   |               |   | 265    |        |  |   |        |   |  |   |        |  
|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        | 
|Balances, March 31, 2004                                                                             |  |                | 32,653 |  |            |            | 32 |               |  |   | 395,837      |   |  |              | (94 | ) |               |   | (2,833 | )      |  |   | (6,087  | ) |  |   | 386,855 |  
|Net loss                                                                                             |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   |       |        |  |   | (9,447  | ) |  |   | (9,447  | )
|Issued under stock option and stock purchase plans                                                   |  |                | 826    |  |            |            | 1  |               |  |   | 7,593        |   |  |              |    |   |               |   |       |        |  |   |        |   |  |   | 7,594   |  
|Stock-based compensation related to acceleration of vesting in
    terminations                      |  |                |       |  |            |            |   |               |  |   | 2,000        |   |  |              |    |   |               |   | (2,000 | )      |  |   |        |   |  |   |        |  
|Stock-based compensation                                                                             |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   | 4,494  |        |  |   |        |   |  |   | 4,494   |  
|Reversal of stock-based compensation related to terminations                                         |  |                |       |  |            |            |   |               |  |   | (107         | ) |  |              |    |   |               |   | 107    |        |  |   |        |   |  |   |        |  
|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        | 
|Balances, March 31, 2005                                                                             |  |                | 33,479 |  |            |            | 33 |               |  |   | 405,323      |   |  |              | (94 | ) |               |   | (232   | )      |  |   | (15,534 | ) |  |   | 389,496 |  
|Net income                                                                                           |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   |       |        |  |   | 18,390  |   |  |   | 18,390  |  
|Issued under stock option and stock purchase plans                                                   |  |                | 2,420  |  |            |            | 3  |               |  |   | 30,473       |   |  |              |    |   |               |   |       |        |  |   |        |   |  |   | 30,476  |  
|Stock-based compensation related to acceleration of vesting in
    terminations                      |  |                |       |  |            |            |   |               |  |   | 62           |   |  |              |    |   |               |   | (62    | )      |  |   |        |   |  |   |        |  
|Unamortized portion of restricted stock units                                                        |  |                |       |  |            |            |   |               |  |   | 5,342        |   |  |              |    |   |               |   | (5,342 | )      |  |   |        |   |  |   |        |  
|Stock-based compensation                                                                             |  |                |       |  |            |            |   |               |  |   |             |   |  |              |    |   |               |   | 1,061  |        |  |   |        |   |  |   | 1,061   |  
|Unrealized portion of stock-based compensation related to
    terminations                           |  |                |       |  |            |            |   |               |  |   | (3           | ) |  |              |    |   |               |   | 3      |        |  |   |        |   |  |   |        |  
|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        | 
|Balances, March 31, 2006                                                                             |  |                | 35,899 |  |            | $          | 36 |               |  | $ | 441,197      |   |  | $            | (94 | ) |               | $ | (4,572 | )      |  | $ | 2,856   |   |  | $ | 439,423 |  
|                                                                                                     |  |                |        |  |            |            |    |               |  |   |              |   |  |              |     |   |               |   |        |        | 



F-6



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##### Table of Contents



Genesis Microchip Inc.





Consolidated Statements of Cash Flows


|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |          |        |          |        |  
|--------------------------------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------------------------------------------------------ | --------------------------------------------------- | ------------------------- | ----- | ------- | ------- | -------- | ------ | ------ | ------- | -------- | ------ | -------- | ------ | -
|                                                                            |                                                                             | Year Ended March 31                                                      |                                                    
|                                                                            |                                                                             |                                                                          |                                                    
|                                                                            |                                                                             | 2006                                                                     |                                                     |                           | 2005  |         |         | 2004     |       
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|                                                                            |                                                                             | (In thousands)                                                           |                                                    
|Cash flows from operating activities:                                       |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |         
|                                                                            | Net Income (loss)                                                           |                                                                          | $                                                   | 18,390                    |       |         | $       | (9,447   | )      |        | $       | (4,205   | )     
|                                                                            | Adjustments to reconcile net loss to cash used in operating
    activities: |                                                                          |                                                     |                           |       |         |         |          |        |        |         |          |       
|                                                                            |                                                                             | Depreciation and amortization                                            |                                                     |                           | 9,044 |         |         |          | 6,970  |        |         |          | 5,053  |         
|                                                                            |                                                                             | Amortization of intangible assets                                        |                                                     |                           | 9,644 |         |         |          | 10,616 |        |         |          | 10,616 |         
|                                                                            |                                                                             | Non-cash stock-based compensation                                        |                                                     |                           | 1,061 |         |         |          | 4,494  |        |         |          | 3,830  |         
|                                                                            |                                                                             | Deferred income taxes                                                    |                                                     |                           | 2,905 |         |         |          | (2,773 | )      |         |          | (4,363 | )       
|                                                                            |                                                                             | Gain on sale of investment                                               |                                                     |                           |      |         |         |          |       |        |         |          | (663   | )       
|                                                                            |                                                                             | Other                                                                    |                                                     |                           | 727   |         |         |          | 224    |        |         |          | 427    |         
|                                                                            |                                                                             | Change in operating assets and liabilities, net of amounts
    acquired: |                                                     |                           |       |         |         |          |        |        |         |          |        |         
|                                                                            |                                                                             |                                                                          |                                                     | Accounts receivable trade |       |         | (5,874  | )        |        |        | (1,985  | )        |        |          | (2,738 | )
|                                                                            |                                                                             |                                                                          |                                                     | Inventories               |       |         | 382     |          |        |        | 1,216   |          |        |          | (4,234 | )
|                                                                            |                                                                             |                                                                          |                                                     | Prepaids and other        |       |         | (451    | )        |        |        | 614     |          |        |          | (775   | )
|                                                                            |                                                                             |                                                                          |                                                     | Accounts payable          |       |         | 2,867   |          |        |        | 2,196   |          |        |          | 1,208  |  
|                                                                            |                                                                             |                                                                          |                                                     | Accrued liabilities       |       |         | 10,144  |          |        |        | 131     |          |        |          | (6,661 | )
|                                                                            |                                                                             |                                                                          |                                                     | Income taxes payable      |       |         | 447     |          |        |        | 598     |          |        |          | 1,798  |  
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|                                                                            |                                                                             |                                                                          | Net cash provided by (used in) operating activities |                           |       | 49,286  |         |          |        | 12,854 |         |          |        | (707     | )     
|Cash flows from investing activities:                                       |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |         
|                                                                            | Purchase of short-term investments                                          |                                                                          |                                                     | (102,482                  | )     |         |         | (174,683 | )      |        |         | (129,055 | )     
|                                                                            | Proceeds on sales and maturities of short-term investments                  |                                                                          |                                                     | 71,733                    |       |         |         | 273,664  |        |        |         | 30,074   |       
|                                                                            | Additions to property and equipment                                         |                                                                          |                                                     | (8,597                    | )     |         |         | (4,712   | )      |        |         | (9,417   | )     
|                                                                            | Deferred merger-related costs (note 14)                                     |                                                                          |                                                     |                          |       |         |         |         |        |        |         | 2,502    |       
|                                                                            | Investments (note 7)                                                        |                                                                          |                                                     | (10,190                   | )     |         |         |         |        |        |         |         |       
|                                                                            | Other                                                                       |                                                                          |                                                     | (5,354                    | )     |         |         | (4,201   | )      |        |         | (357     | )     
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|                                                                            |                                                                             |                                                                          | Net cash provided by (used in) investing activities |                           |       | (54,890 | )       |          |        | 90,068 |         |          |        | (106,253 | )     
|Cash flows from financing activities:                                       |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |         
|                                                                            | Proceeds from issue of common stock                                         |                                                                          |                                                     | 30,477                    |       |         |         | 7,594    |        |        |         | 13,397   |       
|                                                                            | Repayment of loan payable                                                   |                                                                          |                                                     |                          |       |         |         |         |        |        |         | (334     | )     
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|                                                                            |                                                                             |                                                                          | Net cash provided by financing activities           |                           |       | 30,477  |         |          |        | 7,594  |         |          |        | 13,063   |       
|Increase (decrease) in cash and cash equivalents                            |                                                                             |                                                                          | 24,873                                              |                           |       |         | 110,516 |          |        |        | (93,897 | )       
|Cash and cash equivalents, beginning of year                                |                                                                             |                                                                          | 129,757                                             |                           |       |         | 19,241  |          |        |        | 113,138 |         
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|Cash and cash equivalents, end of year                                      |                                                                             | $                                                                        | 154,630                                             |                           |       | $       | 129,757 |          |        | $      | 19,241  |         
|                                                                            |                                                                             |                                                                          |                                                     |                           |       |         |         |          |       
|Supplemental cash flow information:                                         |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |         
|                                                                            | Cash received for interest                                                  |                                                                          | $                                                   | 5,365                     |       |         | $       | 1,994    |        |        | $       | 1,068    |       
|                                                                            | Cash paid for income taxes                                                  |                                                                          | $                                                   | 3,218                     |       |         | $       | 5,687    |        |        | $       | 1,502    |       
|Supplemental disclosure of non-cash investing and financing
    activities: |                                                                             |                                                                          |                                                     |                           |       |         |         |          |        |        |         |         
|                                                                            | Stock-based compensation                                                    |                                                                          | $                                                   | (3                        | )     |         | $       | (107     | )      |        | $       | (265     | )     
|                                                                            | Additional paid-in capital                                                  |                                                                          | $                                                   | 62                        |       |         | $       | 2,000    |        |        | $       | 119      |       



F-7



---



##### Table of Contents



Genesis Microchip Inc.





Notes to Consolidated Financial Statements


(tabular amounts are in thousands, except per share
amounts)




|   |                     
|-- | --------------------
|1. | NATURE OF OPERATIONS





|   |                                
|-- | -------------------------------
|2. | SIGNIFICANT ACCOUNTING POLICIES



| |                       
| | ----------------------
| | Basis of consolidation





| |                                           
| | ------------------------------------------
| | Critical accounting policies and estimates





F-8



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                          
| | -------------------------
| | Cash and cash equivalents





| |                       
| | ----------------------
| | Short-term investments





| |                    
| | -------------------
| | Accounts receivable



|                                |  |           |      |   |           |   |     |           |  |   |     |  
|------------------------------- |  | --------- | ---- | - | --------- | - | --- | --------- |  | - | --- | -
|                                |  | Year      |      |   | Year      |   |     | Year      | 
|                                |  | Ended     |      |   | Ended     |   |     | Ended     | 
|                                |  | March 31, |      |   | March 31, |   |     | March 31, | 
|                                |  | 2006      |      |   | 2005      |   |     | 2004      | 
|                                |  |           |      |   |           |   |     |           | 
|Balance as of beginning of year |  | $         | 282  |   |           | $ | 422 |           |  | $ | 493 |  
|Provision (recovery)            |  |           | 259  |   |           |   | (75 | )         |  |   | 20  |  
|Write offs                      |  |           | (140 | ) |           |   | (65 | )         |  |   | (91 | )
|                                |  |           |      |   |           |   |     |           | 
|Balance as of end of year       |  | $         | 401  |   |           | $ | 282 |           |  | $ | 422 |  
|                                |  |           |      |   |           |   |     |           | 



| |            
| | -----------
| | Inventories

work-in first-in,




|                                |  |           |       |   |           |   |        |           |  |   |        |  
|------------------------------- |  | --------- | ----- | - | --------- | - | ------ | --------- |  | - | ------ | -
|                                |  | Year      |       |   | Year      |   |        | Year      | 
|                                |  | Ended     |       |   | Ended     |   |        | Ended     | 
|                                |  | March 31, |       |   | March 31, |   |        | March 31, | 
|                                |  | 2006      |       |   | 2005      |   |        | 2004      | 
|                                |  |           |       |   |           |   |        |           | 
|Balance as of beginning of year |  | $         | 2,954 |   |           | $ | 3,243  |           |  | $ | 3,630  |  
|Increase to provision           |  |           | 1,080 |   |           |   | 883    |           |  |   | 771    |  
|Write offs                      |  |           | (369  | ) |           |   | (1,172 | )         |  |   | (1,158 | )
|                                |  |           |       |   |           |   |        |           | 
|Balance as of end of year       |  | $         | 3,665 |   |           | $ | 2,954  |           |  | $ | 3,243  |  
|                                |  |           |       |   |           |   |        |           | 

F-9



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                       
| | ----------------------
| | Property and equipment



|                       |  |                                         
|---------------------- |  | ----------------------------------------
|Property and equipment |  | 10% to 30% declining balance            
|Software               |  | 1 to 5 years straight-line              
|Leasehold improvements |  | Straight line over the term of the lease





| |                                  
| | ---------------------------------
| | Goodwill and acquired intangibles





| |                  
| | -----------------
| | Asset impairments







| |                    
| | -------------------
| | Revenue recognition



point-of


F-10



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |                 
| | ----------------
| | Warranty program



|                                |  |           |      |   |           |   |      |           |  |   |      |  
|------------------------------- |  | --------- | ---- | - | --------- | - | ---- | --------- |  | - | ---- | -
|                                |  | Year      |      |   | Year      |   |      | Year      | 
|                                |  | Ended     |      |   | Ended     |   |      | Ended     | 
|                                |  | March 31, |      |   | March 31, |   |      | March 31, | 
|                                |  | 2006      |      |   | 2005      |   |      | 2004      | 
|                                |  |           |      |   |           |   |      |           | 
|Balance as of beginning of year |  | $         | 230  |   |           | $ | 200  |           |  | $ | 500  |  
|Increase to provision           |  |           | 157  |   |           |   | 288  |           |  |   | 233  |  
|Write offs                      |  |           | (223 | ) |           |   | (258 | )         |  |   | (533 | )
|                                |  |           |      |   |           |   |      |           | 
|Balance as of end of year       |  | $         | 164  |   |           | $ | 230  |           |  | $ | 200  |  
|                                |  |           |      |   |           |   |      |           | 



| |          
| | ---------
| | Royalties





| |                     
| | --------------------
| | Currency translation





| |                                  
| | ---------------------------------
| | Research and development expenses





| |                                                           
| | ----------------------------------------------------------
| | Financial instruments and concentration of credit
    risk



F-11



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)






| |                             
| | ----------------------------
| | Risk of technological change





| |                           
| | --------------------------
| | Concentration of suppliers





| |                          
| | -------------------------
| | Earnings (loss) per share





| |                         
| | ------------------------
| | Stock-based compensation







F-12



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                              |  |           |      |   |           |  |      |           |  |  |      |  
|----------------------------- |  | --------- | ---- | - | --------- |  | ---- | --------- |  |  | ---- | -
|                              |  | Year      |      |   | Year      |  |      | Year      | 
|                              |  | Ended     |      |   | Ended     |  |      | Ended     | 
|                              |  | March 31, |      |   | March 31, |  |      | March 31, | 
|                              |  | 2006      |      |   | 2005      |  |      | 2004      | 
|                              |  |           |      |   |           |  |      |           | 
|Stock option plans:           |  |           |      |   |           |  |      |           |  |  |      |  
|Risk-free interest rates      |  |           | 4.8  | % |           |  | 3.6  | %         |  |  | 2.8  | %
|Volatility                    |  |           | 78   | % |           |  | 90   | %         |  |  | 104  | %
|Expected life (in years)      |  |           | 4.25 |   |           |  | 4.25 |           |  |  | 5    |  
|Employee stock purchase plan: |  |           |      |   |           |  |      |           |  |  |      |  
|Risk-free interest rates      |  |           | 4.8  | % |           |  | 3.1  | %         |  |  | 1.1  | %
|Volatility                    |  |           | 78   | % |           |  | 90   | %         |  |  | 108  | %
|Expected life (in years)      |  |           | 1.25 |   |           |  | 1.25 |           |  |  | 1.25 |  



|                                                       |                                    |           |   |         |           |  |   |           |   |  |   |         |  
|------------------------------------------------------ | ---------------------------------- | --------- | - | ------- | --------- |  | - | --------- | - |  | - | ------- | -
|                                                       |                                    | Year      |   |         | Year      |  |   | Year      |  
|                                                       |                                    | Ended     |   |         | Ended     |  |   | Ended     |  
|                                                       |                                    | March 31, |   |         | March 31, |  |   | March 31, |  
|                                                       |                                    | 2006      |   |         | 2005      |  |   | 2004      |  
|                                                       |                                    |           |   |         |           |  |   |           |  
|Net income (loss) attributable to common stockholders: |                                    |           |   |         |           |  |   |           |   |  |   |        
|                                                       | As reported                        |           | $ | 18,390  |           |  | $ | (9,447    | ) |  | $ | (4,205  | )
|                                                       | Stock compensation, as reported    |           |   | 1,061   |           |  |   | 4,494     |   |  |   | 3,830   |  
|                                                       | Stock compensation, under SFAS 123 |           |   | (22,432 | )         |  |   | (28,345   | ) |  |   | (25,092 | )
|                                                       |                                    |           |   |         |           |  |   |           |  
|                                                       | Pro forma                          |           | $ | (2,981  | )         |  | $ | (33,298   | ) |  | $ | (25,467 | )
|                                                       |                                    |           |   |         |           |  |   |           |  
|Basic earnings (loss) per share:                       |                                    |           |   |         |           |  |   |           |   |  |   |        
|                                                       | As reported                        |           | $ | 0.53    |           |  | $ | (0.29     | ) |  | $ | (0.13   | )
|                                                       | Pro forma                          |           | $ | (0.09   | )         |  | $ | (1.01     | ) |  | $ | (0.80   | )
|Diluted earnings (loss) per share:                     |                                    |           |   |         |           |  |   |           |   |  |   |        
|                                                       | As reported                        |           | $ | 0.50    |           |  | $ | (0.29     | ) |  | $ | (0.13   | )
|                                                       | Pro forma                          |           | $ | (0.08   | )         |  | $ | (1.01     | ) |  | $ | (0.80   | )



F-13



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                     
| | --------------------
| | Comprehensive income





| |             
| | ------------
| | Income taxes







| |                                 
| | --------------------------------
| | Recent accounting pronouncements



| |          
| | ---------
| | SFAS 123R









F-14



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)








| |         
| | --------
| | SFAS 151





|   |            
|-- | -----------
|3. | INVENTORIES



|                              |  |           |        |   |           |   |        |  
|----------------------------- |  | --------- | ------ | - | --------- | - | ------ | -
|                              |  | March 31, |        |   | March 31, |  
|                              |  | 2006      |        |   | 2005      |  
|                              |  |           |        |   |           |  
|Finished goods                |  | $         | 10,717 |   |           | $ | 11,156 |  
|Work-in-process               |  |           | 10,123 |   |           |   | 9,355  |  
|                              |  |           |        |   |           |  
|                              |  |           | 20,840 |   |           |   | 20,511 |  
|Less reserve for obsolescence |  |           | (3,665 | ) |           |   | (2,954 | )
|                              |  |           |        |   |           |  
|Total                         |  | $         | 17,175 |   |           | $ | 17,557 |  
|                              |  |           |        |   |           |  



|   |                       
|-- | ----------------------
|4. | PROPERTY AND EQUIPMENT



|                              |  |           |         |   |           |   |         |  
|----------------------------- |  | --------- | ------- | - | --------- | - | ------- | -
|                              |  | March 31, |         |   | March 31, |  
|                              |  | 2006      |         |   | 2005      |  
|                              |  |           |         |   |           |  
|Property and equipment        |  | $         | 17,429  |   |           | $ | 17,636  |  
|Software                      |  |           | 21,632  |   |           |   | 18,123  |  
|Leasehold improvements        |  |           | 6,215   |   |           |   | 5,085   |  
|                              |  |           |         |   |           |  
|                              |  |           | 45,276  |   |           |   | 40,844  |  
|Less accumulated amortization |  |           | (28,817 | ) |           |   | (24,857 | )
|                              |  |           |         |   |           |  
|Total                         |  | $         | 16,459  |   |           | $ | 15,987  |  
|                              |  |           |         |   |           |  

F-15



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




|   |                  
|-- | -----------------
|5. | INTANGIBLE ASSETS



|                    |  |                |        |             |                |   |        |     |  |   |             |  |  |              |        |  |     |   |        |  |  |   |        | 
|------------------- |  | -------------- | ------ | ----------- | -------------- | - | ------ | --- |  | - | ----------- |  |  | ------------ | ------ |  | --- | - | ------ |  |  | - | ------ | 
|                    |  | March 31, 2006 |        |             | March 31, 2005 |  
|                    |  |                |        |             |                |  
|                    |  |                |        | Accumulated |                |   |        |     |  |   | Accumulated |  |  |             
|                    |  | Cost           |        |             | Amortization   |   |        | Net |  |   | Cost        |  |  | Amortization |        |  | Net |  
|                    |  |                |        |             |                |   |        |     |  |   |             |  |  |              |        |  |     |  
|Acquired technology |  | $              | 47,953 |             |                | $ | 42,029 |     |  | $ | 5,924       |  |  | $            | 47,100 |  |     | $ | 32,489 |  |  | $ | 14,611 | 
|Patents             |  |                | 4,118  |             |                |   | 987    |     |  |   | 3,131       |  |  |              | 3,235  |  |     |   | 685    |  |  |   | 2,550  | 
|Other               |  |                | 500    |             |                |   | 500    |     |  |   |            |  |  |              | 500    |  |     |   | 396    |  |  |   | 104    | 
|                    |  |                |        |             |                |   |        |     |  |   |             |  |  |              |        |  |     |  
|Total               |  | $              | 52,571 |             |                | $ | 43,516 |     |  | $ | 9,055       |  |  | $            | 50,835 |  |     | $ | 33,570 |  |  | $ | 17,265 | 
|                    |  |                |        |             |                |   |        |     |  |   |             |  |  |              |        |  |     |  





|                   |  |          |       | 
|------------------ |  | -------- | ----- | 
|For the Year Ended |  | March 31 |      
|                   |  |          |      
|2007               |  | $        | 2,229 | 
|2008               |  |          | 2,200 | 
|2009               |  |          | 2,143 | 
|2010               |  |          | 397   | 
|2011               |  |          | 201   | 
|Thereafter         |  |          | 1,885 | 
|                   |  |          |      
|Total              |  | $        | 9,055 | 
|                   |  |          |      



|   |         
|-- | --------
|6. | GOODWILL





|   |                       
|-- | ----------------------
|7. | OTHER LONG TERM ASSETS



|                                                                                                          |  |           |        |  |           |   |       | 
|--------------------------------------------------------------------------------------------------------- |  | --------- | ------ |  | --------- | - | ----- | 
|                                                                                                          |  | March 31, |        |  | March 31, |  
|                                                                                                          |  | 2006      |        |  | 2005      |  
|                                                                                                          |  |           |        |  |           |  
|Investments (at cost)                                                                                     |  | $         | 11,177 |  |           | $ | 987   | 
|Production mask sets, net of accumulated amortization of $2,775
    in fiscal 2006, $1,432 in fiscal 2005 |  |           | 5,082  |  |           |   | 2,809 | 
|                                                                                                          |  |           |        |  |           |  
|Total                                                                                                     |  | $         | 16,259 |  |           | $ | 3,796 | 
|                                                                                                          |  |           |        |  |           |  

F-16



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)








|   |                     
|-- | --------------------
|8. | STOCKHOLDERS EQUITY



| |                         
| | ------------------------
| | Authorized Capital Stock





| |             
| | ------------
| | Common Stock





| |                
| | ---------------
| | Preferred Stock





| |                                 
| | --------------------------------
| | Preferred Stock Rights Agreement





F-17



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)






|   |                                      
|-- | -------------------------------------
|9. | STOCK OPTION AND STOCK PURCHASE PLANS



| |                                
| | -------------------------------
| | 1997 Employee Stock Option Plan





| |                                
| | -------------------------------
| | 1997 Paradise Stock Option Plan



1997
Non-Employee Stock Option Plan






| |                                    
| | -----------------------------------
| | 2000 Nonstatutory Stock Option Plan



F-18



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                                    
| | -----------------------------------
| | 2001 Nonstatutory Stock Option Plan





| |                
| | ---------------
| | 2003 Stock Plan





| |                       
| | ----------------------
| | Sage Stock Option Plan





| |                             
| | ----------------------------
| | Employee Stock Purchase Plan



F-19



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)


Summary of Stock
Options




|                         |           |           |       |        |              |                  |              |                |  |   |       |       | 
|------------------------ | --------- | --------- | ----- | ------ | ------------ | ---------------- | ------------ | -------------- |  | - | ----- | ----- | 
|                         |           |           |       |        |              | Weighted Average |             
|                         |           | Number of |       |        | Option Price |                  |              | Exercise Price | 
|                         |           | Options   |       |        | Per Share    |                  |              | Per Share      | 
|                         |           |           |       |        |              |                  |              |                | 
|Balances, March 31, 2003 |           |           | 6,484 |        |              | $                | 0.17 - 69.81 |                |  | $ | 14.52 |      
|                         | Issued    |           |       | 2,264  |              |                  |              | 7.50 - 27.89   |  |   |       | 15.96 | 
|                         | Exercised |           |       | (1,008 | )            |                  |              | 0.17 - 18.50   |  |   |       | 9.89  | 
|                         | Cancelled |           |       | (468   | )            |                  |              | 0.78 - 69.81   |  |   |       | 23.16 | 
|                         |           |           |       |        |              |                  |              |                | 
|Balances, March 31, 2004 |           |           | 7,272 |        |              |                  | 0.17 - 68.18 |                |  |   | 15.01 |      
|                         | Issued    |           |       | 2,729  |              |                  |              | 9.71 - 17.28   |  |   |       | 14.93 | 
|                         | Exercised |           |       | (423   | )            |                  |              | 0.99 - 17.00   |  |   |       | 8.79  | 
|                         | Cancelled |           |       | (773   | )            |                  |              | 5.64 - 58.38   |  |   |       | 15.79 | 
|                         |           |           |       |        |              |                  |              |                | 
|Balances, March 31, 2005 |           |           | 8,805 |        |              |                  | 0.17 - 68.18 |                |  |   | 15.22 |      
|                         | Issued    |           |       | 760    |              |                  |              | 13.69 - 26.72  |  |   |       | 19.98 | 
|                         | Exercised |           |       | (2,065 | )            |                  |              | 0.78 - 25.29   |  |   |       | 12.66 | 
|                         | Cancelled |           |       | (373   | )            |                  |              | 5.64 - 51.85   |  |   |       | 15.88 | 
|                         |           |           |       |        |              |                  |              |                | 
|Balances, March 31, 2006 |           |           | 7,127 |        |              | $                | 0.17 - 68.18 |                |  | $ | 16.43 |      
|                         |           |           |       |        |              |                  |              |                | 



|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |       |  |  |   |       | 
|------------------------ |  | ------------------- | ----- | -------- | ------------------- |  | -------- | --------- | -------- | - | ----------- | -------- |  | --------- | ----- |  |  | - | ----- | 
|                         |  | Options Outstanding |       |          | Options Exercisable | 
|                         |  |                     |       |          |                     | 
|                         |  |                     |       | Weighted |                     |  |          |           | Weighted |  
|                         |  |                     |       | Weighted |                     |  | Average  |           |          |   |             | Average  | 
|                         |  |                     |       | Average  |                     |  | Exercise |           |          |   |             | Exercise | 
|                         |  | Number              |       |          | Remaining           |  |          | Price Per |          |   | Number      |          |  | Price Per |      
|Range of Exercise Prices |  | Outstanding         |       |          | Life (Years)        |  |          | Option    |          |   | Exercisable |          |  | Option    |      
|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |      
|$ 0.17 - 8.14            |  |                     | 768   |          |                     |  | 6.24     |           |          | $ | 7.01        |          |  |           | 625   |  |  | $ | 7.01  | 
|8.15 - 11.63             |  |                     | 726   |          |                     |  | 5.94     |           |          |   | 9.91        |          |  |           | 516   |  |  |   | 9.71  | 
|11.64 - 15.76            |  |                     | 1,821 |          |                     |  | 7.74     |           |          |   | 14.38       |          |  |           | 889   |  |  |   | 14.17 | 
|15.77 - 22.85            |  |                     | 3,134 |          |                     |  | 6.84     |           |          |   | 17.95       |          |  |           | 1,639 |  |  |   | 17.81 | 
|22.86 - 68.18            |  |                     | 678   |          |                     |  | 5.08     |           |          |   | 32.47       |          |  |           | 598   |  |  |   | 33.33 | 
|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |      
|Total at March 31, 2006  |  |                     | 7,127 |          |                     |  | 6.74     |           |          | $ | 16.43       |          |  |           | 4,267 |  |  | $ | 16.67 | 
|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |      
|Total at March 31, 2005  |  |                     | 8,805 |          |                     |  | 7.49     |           |          | $ | 15.22       |          |  |           | 4,362 |  |  | $ | 16.12 | 
|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |      
|Total at March 31, 2004  |  |                     | 7,272 |          |                     |  | 7.90     |           |          | $ | 15.01       |          |  |           | 2,922 |  |  | $ | 16.71 | 
|                         |  |                     |       |          |                     |  |          |           |          |   |             |          |  |           |      

F-20



---



##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)


Summary of Restricted Share Units




|                         |           |                   |         |                  |            |   |       |        |  
|------------------------ | --------- | ----------------- | ------- | ---------------- | ---------- | - | ----- | ------ | -
|                         |           |                   |         | Weighted Average |           
|                         |           |                   |         | Grant-Date       |           
|                         |           | Number of Options |         |                  | Fair Value |  
|                         |           |                   |         |                  |            |  
|Balances, March 31, 2005 |           |                   |        |                  |            | $ |      |       
|                         | Issued    |                   |         | 270,022          |            |   |       | 19.93  |  
|                         | Cancelled |                   |         | (4,102           | )          |   |       | (19.80 | )
|                         |           |                   |         |                  |            |  
|Balances, March 31, 2006 |           |                   | 265,920 |                  |            | $ | 19.93 |       
|                         |           |                   |         |                  |            |  



|    |             
|--- | ------------
|10. | INCOME TAXES



|         |  |           |       |  |           |   |        |           |  |   |        |  
|-------- |  | --------- | ----- |  | --------- | - | ------ | --------- |  | - | ------ | -
|         |  | Year      |       |  | Year      |   |        | Year      | 
|         |  | Ended     |       |  | Ended     |   |        | Ended     | 
|         |  | March 31, |       |  | March 31, |   |        | March 31, | 
|         |  | 2006      |       |  | 2005      |   |        | 2004      | 
|         |  |           |       |  |           |   |        |           | 
|Current  |  | $         | 3,177 |  |           | $ | 6,386  |           |  | $ | 3,300  |  
|Deferred |  |           | 2,905 |  |           |   | (3,432 | )         |  |   | (4,363 | )
|         |  |           |       |  |           |   |        |           | 
|Total    |  | $         | 6,082 |  |           | $ | 2,954  |           |  | $ | (1,063 | )
|         |  |           |       |  |           |   |        |           | 



|                                                                                         |                                                                |           |       |        |           |   |        |           |   |   |        |        |  
|---------------------------------------------------------------------------------------- | -------------------------------------------------------------- | --------- | ----- | ------ | --------- | - | ------ | --------- | - | - | ------ | ------ | -
|                                                                                         |                                                                | Year      |       |        | Year      |   |        | Year      |  
|                                                                                         |                                                                | Ended     |       |        | Ended     |   |        | Ended     |  
|                                                                                         |                                                                | March 31, |       |        | March 31, |   |        | March 31, |  
|                                                                                         |                                                                | 2006      |       |        | 2005      |   |        | 2004      |  
|                                                                                         |                                                                |           |       |        |           |   |        |           |  
|Basic federal rate applied to income before provision for
    (recovery of) income taxes |                                                                | $         | 8,320 |        |           | $ | (2,208 | )         |   | $ | (1,791 | )     
|Adjustments resulting from:                                                              |                                                                |           |       |        |           |   |        |           |   |   |        |       
|                                                                                         | State and provincial income taxes                              |           |       | 1,468  |           |   |        | (390      | ) |   |        | (316   | )
|                                                                                         | Non-deductible expenses and other permanent differences        |           |       | 324    |           |   |        | 2,672     |   |   |        | 1,519  |  
|                                                                                         | Research and development deductions and investment tax credits |           |       | (3,668 | )         |   |        | (1,276    | ) |   |        | (1,195 | )
|                                                                                         | Foreign exchange and tax rate differences                      |           |       | (9,870 | )         |   |        | (9,371    | ) |   |        | (6,774 | )
|                                                                                         | Tax on repatriation from foreign subsidiary                    |           |       |       |           |   |        | 3,701     |   |   |        |       |  
|                                                                                         | Change in valuation allowance                                  |           |       | 9,403  |           |   |        | 9,745     |   |   |        | 7,153  |  
|                                                                                         | Other items                                                    |           |       | 105    |           |   |        | 81        |   |   |        | 341    |  
|                                                                                         |                                                                |           |       |        |           |   |        |           |  
|Total                                                                                    |                                                                | $         | 6,082 |        |           | $ | 2,954  |           |   | $ | (1,063 | )     
|                                                                                         |                                                                |           |       |        |           |   |        |           |  





F-21



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)






|                                  |  |           |         |   |           |   |         |  
|--------------------------------- |  | --------- | ------- | - | --------- | - | ------- | -
|                                  |  | March 31, |         |   | March 31, |  
|                                  |  | 2006      |         |   | 2005      |  
|                                  |  |           |         |   |           |  
|Acquisition-related intangibles   |  | $         | (1,864  | ) |           | $ | (5,020  | )
|Net operating loss carryforwards  |  |           | 55,616  |   |           |   | 50,940  |  
|Research tax credit carryforwards |  |           | 20,317  |   |           |   | 16,557  |  
|Net capital loss carryforwards    |  |           | 7,137   |   |           |   | 6,847   |  
|Other                             |  |           | 2,596   |   |           |   | 2,558   |  
|                                  |  |           |         |   |           |  
|Net deferred tax asset            |  |           | 83,802  |   |           |   | 71,882  |  
|Less valuation allowance          |  |           | (72,651 | ) |           |   | (57,826 | )
|                                  |  |           |         |   |           |  
|Total                             |  | $         | 11,151  |   |           | $ | 14,056  |  
|                                  |  |           |         |   |           |  







F-22



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




|    |                          
|--- | -------------------------
|11. | EARNINGS (LOSS) PER SHARE



|                                                                          |                                |           |        |        |           |   |        |           |   |   |        |        |  
|------------------------------------------------------------------------- | ------------------------------ | --------- | ------ | ------ | --------- | - | ------ | --------- | - | - | ------ | ------ | -
|                                                                          |                                | Year      |        |        | Year      |   |        | Year      |  
|                                                                          |                                | Ended     |        |        | Ended     |   |        | Ended     |  
|                                                                          |                                | March 31, |        |        | March 31, |   |        | March 31, |  
|                                                                          |                                | 2006      |        |        | 2005      |   |        | 2004      |  
|                                                                          |                                |           |        |        |           |   |        |           |  
|Numerator for basic and diluted earnings (loss) per share:                |                                |           |        |        |           |   |        |           |   |   |        |       
|                                                                          | Net income (loss)              |           | $      | 18,390 |           |   | $      | (9,447    | ) |   | $      | (4,205 | )
|                                                                          |                                |           |        |        |           |   |        |           |  
|Denominator for basic earnings (loss) per share:                          |                                |           |        |        |           |   |        |           |   |   |        |       
|                                                                          | Weighted average common shares |           |        | 34,909 |           |   |        | 33,084    |   |   |        | 31,876 |  
|                                                                          |                                |           |        |        |           |   |        |           |  
|Basic earnings (loss) per share                                           |                                | $         | 0.53   |        |           | $ | (0.29  | )         |   | $ | (0.13  | )     
|                                                                          |                                |           |        |        |           |   |        |           |  
|Denominator for diluted earnings (loss) per share:                        |                                |           |        |        |           |   |        |           |   |   |        |       
|                                                                          | Weighted average common shares |           |        | 34,909 |           |   |        | 33,084    |   |   |        | 31,876 |  
|                                                                          | Stock options                  |           |        | 1,968  |           |   |        |          |   |   |        |       |  
|                                                                          |                                |           |        |        |           |   |        |           |  
|Shares used in computing diluted earnings (loss) per share                |                                |           | 36,877 |        |           |   | 33,084 |           |   |   | 31,876 |       
|                                                                          |                                |           |        |        |           |   |        |           |  
|Diluted earnings (loss) per share                                         |                                | $         | 0.50   |        |           | $ | (0.29  | )         |   | $ | (0.13  | )     
|                                                                          |                                |           |        |        |           |   |        |           |  
|Anti-dilutive potential common shares excluded from above
    calculation |                                |           | 5,804  |        |           |   | 8,251  |           |   |   | 7,255  |       
|                                                                          |                                |           |        |        |           |   |        |           |  





|    |                              
|--- | -----------------------------
|12. | COMMITMENTS AND CONTINGENCIES



| |                  
| | -----------------
| | Lease commitments



|           |  |   |       | 
|---------- |  | - | ----- | 
|2007       |  | $ | 4,347 | 
|2008       |  |   | 2,348 | 
|2009       |  |   | 2,179 | 
|2010       |  |   | 572   | 
|2011       |  |   | 295   | 
|Thereafter |  |   |      | 
|           |  |   |      
|Total      |  | $ | 9,741 | 
|           |  |   |      



F-23



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




| |                  
| | -----------------
| | Legal proceedings



| |                         
| | ------------------------
| | Silicon Image Litigation











| |                 
| | ----------------
| | MStar Litigation







| |                                   
| | ----------------------------------
| | Securities Class Action Litigation



F-24



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)


10b-5








| |                    
| | -------------------
| | Supply arrangements





| |                                
| | -------------------------------
| | Guarantees and indemnifications





|    |                    
|--- | -------------------
|13. | SEGMENT INFORMATION





| |                       
| | ----------------------
| | Geographic information



F-25



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




|              |  |           |         |  |           |   |         |           |  |   |         | 
|------------- |  | --------- | ------- |  | --------- | - | ------- | --------- |  | - | ------- | 
|              |  | Year      |         |  | Year      |   |         | Year      | 
|              |  | Ended     |         |  | Ended     |   |         | Ended     | 
|              |  | March 31, |         |  | March 31, |   |         | March 31, | 
|              |  | 2006      |         |  | 2005      |   |         | 2004      | 
|              |  |           |         |  |           |   |         |           | 
|United States |  | $         | 3,493   |  |           | $ | 8,803   |           |  | $ | 7,160   | 
|China         |  |           | 115,016 |  |           |   | 78,167  |           |  |   | 87,065  | 
|Japan         |  |           | 27,356  |  |           |   | 15,289  |           |  |   | 16,519  | 
|South Korea   |  |           | 51,487  |  |           |   | 52,871  |           |  |   | 53,556  | 
|Taiwan        |  |           | 28,704  |  |           |   | 28,824  |           |  |   | 27,209  | 
|Europe        |  |           | 31,131  |  |           |   | 13,334  |           |  |   | 4,736   | 
|Rest of world |  |           | 12,319  |  |           |   | 6,827   |           |  |   | 17,175  | 
|              |  |           |         |  |           |   |         |           | 
|Total         |  | $         | 269,506 |  |           | $ | 204,115 |           |  | $ | 213,420 | 
|              |  |           |         |  |           |   |         |           | 



|              |  |           |         |  |           |   |         | 
|------------- |  | --------- | ------- |  | --------- | - | ------- | 
|              |  | March 31, |         |  | March 31, |  
|              |  | 2006      |         |  | 2005      |  
|              |  |           |         |  |           |  
|United States |  | $         | 197,561 |  |           | $ | 206,728 | 
|Rest of world |  |           | 9,934   |  |           |   | 8,505   | 
|              |  |           |         |  |           |  
|Total         |  | $         | 207,495 |  |           | $ | 215,233 | 
|              |  |           |         |  |           |  



| |                          
| | -------------------------
| | Concentration information



|           |  |            |    |   |      |  |    |  
|---------- |  | ---------- | -- | - | ---- |  | -- | -
|           |  | Year Ended |   
|           |  | March 31,  |   
|           |  |            |   
|           |  | 2006       |    |   | 2005 | 
|           |  |            |    |   |      | 
|Customer A |  |            | 15 | % |      |  | 15 | %
|Customer B |  |            | 10 | % |      |  |   |  
|Customer C |  |            | 10 | % |      |  |   |  
|Customer D |  |            |   |   |      |  | 10 | %



|           |  |            |     |  |      |  |    |  
|---------- |  | ---------- | --- |  | ---- |  | -- | -
|           |  | Year Ended |    
|           |  | March 31,  |    
|           |  |            |    
|           |  | 2006       |     |  | 2005 | 
|           |  |            |     |  |      | 
|Customer 1 |  |            | 22% |  |      |  | 29 | %
|Customer 2 |  |            | 12% |  |      |  |   |  
|Customer 3 |  |            | 12% |  |      |  |   |  
|Customer 4 |  |            | 11% |  |      |  |   |  

F-26



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##### Table of Contents



Genesis Microchip Inc.


Notes to Consolidated Financial
Statements  (Continued)




|    |                              
|--- | -----------------------------
|14. | DEFERRED MERGER-RELATED COSTS







|    |                    
|--- | -------------------
|15. | COMPARATIVE FIGURES



F-27



---



##### Table of Contents





|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure:





|         |                         
|-------- | ------------------------
|Item 9A. | Controls and Procedures:



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Evaluation of disclosure controls and procedures. Our
    management evaluated, with the participation of our Chief
    Executive Officer and our Chief Financial Officer, the
    effectiveness of our disclosure controls and procedures as of
    the end of the period covered by this report. Based on this
    evaluation, our Chief Executive Officer and our Chief Financial
    Officer have concluded that our disclosure controls and
    procedures as of the end of the period covered by this report
    are effective to ensure that information we are required to
    disclose in reports that we file or submit under the Securities
    Exchange Act of 1934 is recorded, processed, summarized and
    reported within the time periods specified in the Securities and
    Exchange Commissions rules and forms.
|   
|    |  | Managements Report on Internal Control Over Financial
    Reporting. Please see Managements Annual Report on
    Internal Control over Financial Reporting under Item 8 on
    page 35 of this
    Form 10-K, which
    report is incorporated herein by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(b) |  | Changes in internal control over financial reporting.
    There was no change in our internal control over financial
    reporting that occurred during the fourth quarter of 2006 that
    has materially affected, or is reasonably likely to materially
    affect, our internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|         |                   
|-------- | ------------------
|ITEM 9B. | Other Information.



36



---



##### Table of Contents



PART III




|         |                                 
|-------- | --------------------------------
|Item 10. | Directors and Executive Officers

10-K


10-K


Code of Ethics






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | 1. From our main Web page, first click on
    Company,                                     
|
| | 2. Next, click on Corporate Governance.                                                    
|
| | 3. Finally, click on Code of Business Conduct and
    Ethics or Code of Ethics-Financial.

8-K




|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

10-K




|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters





|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions





|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services



37



---



##### Table of Contents



PART IV




|         |                                            
|-------- | -------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules:

Documents filed with this report:


Consolidated Financial
Statements.




| |   |                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |  | Report of Independent Registered Public Accounting firm.                                                                      
|
| |  | Consolidated Balance Sheets at March 31, 2006 and 2005.                                                                       
|
| |  | Consolidated Statements of Operations for the years ended
    March 31, 2006, March 31, 2005 and March 31, 2004.              
|
| |  | Consolidated Statements of Stockholders Equity for the
    years ended March 31, 2006, March 31, 2005 and
    March 31, 2004.
|
| |  | Consolidated Statements of Cash Flows for the years ended
    March 31, 2006, March 31, 2005 and March 31, 2004.              
|
| |  | Notes to Consolidated Financial Statements                                                                                    

Consolidated Financial
Statement Schedules.


Exhibits.


38



---



##### Table of Contents



SIGNATURES






| |                       
| | ----------------------
| | GENESIS MICROCHIP INC.



| |     |                 
| | --- | ----------------
| | By: | /s/ Elias Antoun

| |                                     
| | ------------------------------------
| |                                     
| | Elias Antoun                        
| | Chief Executive Officer and Director



| |     |                  
| | --- | -----------------
| | By: | /s/ Michael Healy

| |                                   
| | ----------------------------------
| |                                   
| | Michael Healy                     
| | Chief Financial Officer           
| | (and Principal Accounting Officer)



attorney-in 10-K, attorney-in




|                                 |  |                                      |  |               |  | 
|-------------------------------- |  | ------------------------------------ |  | ------------- |  | 
|Name                             |  | Title                                |  | Date         
|                                 |  |                                      |  |              
|                                
|/s/ Elias AntounElias
    Antoun |  | Chief Executive Officer and Director |  | June 14, 2006
|                                
|/s/ Jon CastorJon
    Castor     |  | Director                             |  | June 14, 2006
|                                
|/s/ Chieh ChangChieh
    Chang   |  | Director                             |  | June 14, 2006



---



##### Table of Contents



|                                                     |  |                       |  |               |  | 
|---------------------------------------------------- |  | --------------------- |  | ------------- |  | 
|Name                                                 |  | Title                 |  | Date         
|                                                     |  |                       |  |              
|                                                    
|/s/ Tim ChristoffersenTim
    Christoffersen         |  | Director              |  | June 14, 2006
|                                                    
|/s/ Jeffrey DiamondJeffrey
    Diamond               |  | Chairman of the Board |  | June 14, 2006
|                                                    
|/s/ Robert H. KiddRobert
    H. Kidd                 |  | Director              |  | June 14, 2006
|                                                    
|/s/ Chandrashekar M. ReddyChandrashekar
    M. Reddy |  | Director              |  | June 14, 2006



---



##### Table of Contents



EXHIBIT INDEX


|        |    |                     |  |                                                                                                                                                                                         
|------- | -- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 2  | .1(1)               |  | Agreement and Plan of Merger and Reorganization, dated as of
    September 27, 2001, by and between Genesis Microchip
    Incorporated and Sage, Inc.                                   
|        | 2  | .2(1)               |  | Share Exchange and Arrangement Agreement and Plan of Arrangement
    by and among the Registrant, Genesis Microchip Nova Scotia
    Corp., and Genesis Microchip Incorporated.          
|        | 2  | .3(2)               |  | Agreement and Plan of Merger, dated as of March 17, 2003,
    among Genesis Microchip Inc., Display Acquisition Corporation
    and Pixelworks, Inc. (with Forms of Voting Agreements). 
|        | 3  | .1(1)               |  | Certificate of Incorporation of the Registrant.                                                                                                                                         
|        | 3  | .2(3)               |  | Amended and Restated Bylaws of the Registrant.                                                                                                                                          
|        | 3  | .3(4)               |  | Certificate of Designation of Rights, Preferences and Privileges
    of Series A Participating Preferred Stock of the Registrant.                                                       
|        | 4  | .1(1)               |  | Form of Common Stock Certificate of the Registrant.                                                                                                                                     
|        | 4  | .2(4)               |  | Preferred Stock Rights Agreement, dated as of June 27,
    2002, between the Registrant and Mellon Investor Services,
    L.L.C., as amended on March 16, 2003.                         
|        | 10 | .1(5)               |  | Agreement, dated January 20, 1997, between Yves Faroudja
    and Faroudja Laboratories, Inc.                                                                                            
|        | 10 | .2                  |  | [Intentionally omitted]                                                                                                                                                                 
|        | 10 | .3(6)*              |  | Offer of employment to James E. Donegan dated June 25, 2002.                                                                                                                            
|        | 10 | .4(6)*              |  | Settlement Agreement and Release with Amnon Fisher.                                                                                                                                     
|        | 10 | .5(9)*              |  | Offer Letter of Employment with Anders Frisk, dated
    February 15, 2000.                                                                                                              
|        | 10 | .6(9)*              |  | Offer Letter of Employment with Matthew Ready, dated
    April 12, 2000.                                                                                                                
|        | 10 | .7(9)*              |  | Offer Letter of Employment from Paradise Electronics, Inc. to
    Mohammad Tafazzoli, dated February 17, 1998.                                                                          
|        | 10 | .8(7)*              |  | Form of Change of Control Severance Agreement (as entered into
    between Genesis and, among others, each of Anders Frisk, Raphael
    Mehrbians, Tzayao Chan, and Mohammad Tafazzoli).
|        | 10 | .9(9)*              |  | Separation Agreement and Release with Chandrashekar Reddy.                                                                                                                              
|        | 10 | .10(9)*             |  | Consulting Agreement with Chandrashekar Reddy.                                                                                                                                          
|        | 10 | .11(8)*             |  | 1987 Stock Option Plan.                                                                                                                                                                 
|        | 10 | .12(8)*             |  | 1997 Employee Stock Option Plan.                                                                                                                                                        
|        | 10 | .13(9)*             |  | 1997 Employee Stock Purchase Plan, as last amended on
    September 17, 2002.                                                                                                           
|        | 10 | .14(8)*             |  | 1997 Non-Employee Stock Option Plan.                                                                                                                                                    
|        | 10 | .15(8)*             |  | 2000 Nonstatutory Stock Option Plan.                                                                                                                                                    
|        | 10 | .16(8)*             |  | 2001 Nonstatutory Stock Option Plan.                                                                                                                                                    
|        | 10 | .17(8)*             |  | Paradise Electronics, Inc. 1997 Employee Stock Option Plan.                                                                                                                             
|        | 10 | .18(8)*             |  | Sage, Inc. Second Amended and Restated 1997 Stock Plan.                                                                                                                                 
|        | 10 | .19(9)*             |  | 2001 Employee Stock Purchase Loan Plan (for non-officers).                                                                                                                              
|        | 10 | .20(9)              |  | Lease Termination Agreement with 1601 McCarthy Boulevard, L.L.C.
    regarding premises located in Milpitas, California.                                                                
|        | 10 | .21(12)             |  | Settlement Agreement and Release with James E. Donegan.                                                                                                                                 
|        | 10 | .22(10)             |  | Termination and Release Agreement, dated as of August 5,
    2003, among Genesis Microchip Inc., Display Acquisition
    Corporation and Pixelworks, Inc.                               
|        | 10 | .23(11)*            |  | Offer Letter with Michael Healy.                                                                                                                                                        
|        | 10 | .24(11)*            |  | Change of Control Severance Agreement with Michael Healy.                                                                                                                               
|        | 10 | .25(11)*            |  | Option Exchange Agreement with Raphael Mehrbians.                                                                                                                                       
|        | 10 | .26(14)*            |  | Interim CEO Employment Agreement with Eric Erdman.                                                                                                                                      
|        | 10 | .27(14)*            |  | Form of director and officer indemnification agreement.                                                                                                                                 
|        | 10 | .28(13)*            |  | 2003 Stock Plan.                                                                                                                                                                        



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##### Table of Contents



|        |    |                     |  |                                                                                                                                                                                
|------- | -- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                    
|Number  |    | Exhibit Description
|        |    |                    
|        | 10 | .29(15)*            |  | Form of 2000 Nonstatutory Stock Option Plan Stock Option
    Agreement with Nonemployee Directors.                                                                             
|        | 10 | .30(15)*            |  | Form of 2000 Nonstatutory Stock Option Plan International Stock
    Option Agreement.                                                                                          
|        | 10 | .31(15)*            |  | Form of 2000 Nonstatutory Stock Option Plan Stock Option
    Agreement for China.                                                                                              
|        | 10 | .32(16)*            |  | Amendment No. 1 to Separation Agreement and Release with
    Chandrashekar Reddy, dated November 10, 2004.                                                                     
|        | 10 | .33(17)*            |  | Offer Letter of Employment with Elias Antoun, dated
    November 10, 2004.                                                                                                     
|        | 10 | .34(18)*            |  | Change in Control Severance Agreement with Elias Antoun, dated
    November 29, 2004.                                                                                          
|        | 10 | .35(19)*            |  | Separation Agreement and Release with Eric Erdman, dated
    December 3, 2004.                                                                                                 
|        | 10 | .36(19)*            |  | Consulting Agreement with Eric Erdman, dated December 3,
    2004.                                                                                                             
|        | 10 | .37(20)*            |  | Separation Agreement and Release with Young Ahn, dated
    December 28, 2004.                                                                                                  
|        | 10 | .38(21)*            |  | 1997 Employee Stock Option Plan, as amended on
    September 19, 2005, and form of Notice of Grant of
    Restricted Stock Units.                                              
|        | 10 | .39(21)*            |  | 2000 Nonstatutory Stock Option Plan, as amended on
    September 19, 2005.                                                                                                     
|        | 10 | .40*                |  | Separation Agreement and Release with Ken Murray, dated
    March 6, 2006.                                                                                                     
|        | 10 | .41(22)*            |  | Offer Letter with Behrooz Yadegar, dated April 11, 2006.                                                                                                                       
|        | 10 | .42*                |  | Fiscal Year 2007 Executive Bonus Plan, dated June 10, 2006.                                                                                                                    
|        | 21 |                     |  | Subsidiaries.                                                                                                                                                                  
|        | 23 | .1                  |  | Consent of KPMG LLP.                                                                                                                                                           
|        | 31 | .1                  |  | Certification of Chief Executive Officer, as required by
    Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934.                                      
|        | 31 | .2                  |  | Certification of Chief Financial Officer, as required by
    Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934.                                      
|        | 32 | .1                  |  | Certification of Chief Executive Officer and Chief Financial
    Officer, as required by Section 1350 of Chapter 63 of
    Title 18 of the United States Code (18 U.S.C. 1350).






| |     |                                                                                                                                                                                                                                                                                                                    
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-4 (File
    No. 333-72202)
    filed with the Securities and Exchange Commission on
    October 25, 2001, as amended.                                                                                                       
|
| | (2) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities and Exchange Commission on
    March 20, 2003.                                                                                                                                                          
|
| | (3) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed
    with the Securities and Exchange Commission on July 1,
    2002, as amended.                                                                                                                                                
|
| | (4) | Incorporated by reference to the Registrants Registration
    Statement on
    Form 8-A12G filed
    with the Securities and Exchange Commission on August 5,
    2002, as amended by the Registrants Statement on
    Form 8-12G/ A
    filed with the Securities and Exchange Commission on
    March 31, 2003.
|
| | (5) | Incorporated by reference to Faroudja Laboratories, Inc.s
    Form S-1 (File
    No. 333-32375)
    filed with the Securities and Exchange Commission on
    July 30, 1997, as amended.                                                                                                                           
|
| | (6) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q filed
    with the Securities and Exchange Commission on August 14,
    2002.                                                                                                                                                  
|
| | (7) | Incorporated by reference to Registration Statement on
    Form S-4 filed by
    Pixelworks, Inc. with the Securities and Exchange Commission on
    April 18, 2003, as amended.                                                                                                                                   
|
| | (8) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-8 filed
    with the Securities Exchange Commission on February 21,
    2002.                                                                                                                                               
|
| | (9) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed
    with the Securities Exchange Commission on June 20, 2003.                                                                                                                                                                   



|     |                                                                                                                                                      
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on August 6,
    2003.



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##### Table of Contents





|     |                                                                                                                                                                
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(11) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q filed
    with the Securities Exchange Commission on February 13,
    2004.
|    
|(12) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K/ A
    filed with the Securities Exchange Commission on July 29,
    2003.        
|    
|(13) | Incorporated by reference to the Registrants Registration
    Statement on
    Form S-8 filed
    with the Securities Exchange Commission on October 15, 2003.
|    
|(14) | Incorporated by reference to the Registrants Annual Report
    on Form 10-K filed
    with the Securities Exchange Commission on June 10, 2004.               
|    
|(15) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q filed
    with the Securities Exchange Commission on November 9, 2004.     
|    
|(16) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on
    November 15, 2004.       
|    
|(17) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on
    November 19, 2004.       
|    
|(18) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on
    December 3, 2004.        
|    
|(19) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on
    December 8, 2004.        
|    
|(20) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on January 3,
    2005.         
|    
|(21) | Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q filed
    with the Securities Exchange Commission on November 8, 2005.     
|    
|(22) | Incorporated by reference to the Registrants Current
    Report on Form 8-K
    filed with the Securities Exchange Commission on May 10,
    2006.            



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Identifies a management contract or compensatory plan of
    arrangement required to be filed as an exhibit to this report
    pursuant to Item 14(c) of this report.