What changed in this filing

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Item 1A. Risk Factors

2023-08-08 compared with 2023-02-14 · 68 added, 90 removed, 383 unchanged (29% of the section changed)

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● Our largest OEM customer accounts for a significant percentage of our net revenues.

If this customer, or any of our other major customers, reduces the amount they purchase or stops purchasing our products, our financial position and operating results will suffer.

Any significant order cancellations or order deferrals could adversely affect our operating results.

● The military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates, the decline in the global economic environment and the ongoing COVID-19 global pandemic may continue to adversely affect our financial condition.

If this customer, or any of our other major customers, reduces the amount they purchase, stops purchasing our products or fails to pay us, our financial position and operating results will suffer.

● Rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment may continue to adversely affect our financial condition.

● We have incurred significant losses and may incur losses in the future.

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● We depend upon the sale of our Very Fast SRAMs for most of our revenues and the market for Very Fast SRAMs is highly competitive.

● We are in the process of implementing various cost reduction initiatives, which may result in unintended and adverse impacts on our business and operations and cause us to fail to realize the anticipated benefits of the cost reduction initiatives.

● If we do not successfully implement certain cost reduction initiatives, we may suffer adverse impacts on our business and operations.

● We are dependent on a number of single source suppliers.

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● We are subject to the highly cyclical nature of the networking and telecommunications markets.

● We rely heavily on distributors and our business will be negatively impacted if we are unable to develop and manage distribution channels and accurately predict future sales through our distributors.

● We rely heavily on distributors and our business will be negatively impacted if we are unable to develop and manage distribution channels and accurately forecast future sales through our distributors.

● The average selling prices of our products are expected to decline.

● We are substantially dependent on the continued services and performance of our senior management and other key personnel.

If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed.

● We are substantially dependent on the continued services of our senior management and other key personnel.

If we are unable to recruit or retain qualified personnel, our business could be harmed.

● Cyber-attacks could disrupt our operations or the operations of our partners, and result in reduced revenue, increased costs, liability claims and harm our reputation or competitive position.

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● We may experience difficulties in transitioning our manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

● Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development.

● Manufacturing process technologies are subject to rapid change and require significant expenditures.

● Our products may contain defects, which could reduce revenues or result in claims against us.

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Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future.

For example, in the eleven fiscal quarters ended December 31, 2022, we recorded net revenues of as much as $9.0 million and as little as $6.4 million, and operating losses from $2.9 million to $5.7 million.

For example, in the nine fiscal quarters ended June 30, 2023, we recorded net revenues of as much as $9.0 million and as little as $5.4 million, and operating losses from $2.9 million to $5.1 million.

We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price.

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Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future.

In fiscal years 2021 and 2022, we experienced price increases for raw materials, including a 20% increase in the price of wafers received in early calendar 2022 and a 6% increase in early calendar 2023, and manufacturing services due to the supply chain constraints in the semiconductor market.

In fiscal years 2022 and 2023, we experienced price increases for raw materials, including a 20% increase in the price of wafers that was implemented in early calendar 2022 and a 6% increase that was implemented in early calendar 2023, as well as varying pricing increases for manufacturing services due to the supply chain constraints in the semiconductor market .

We expect to experience additional price increases for raw materials in fiscal year 2024 due to worldwide inflationary pressures.

We will not be able to adjust our spending quickly if our revenues fall short of our expectations.

We may not be able to adjust our spending quickly if our revenues fall short of our expectations.

If this were to occur, our operating results would be harmed.

If our operating results in future quarters fall below the expectations of market analysts and investors, the price of our common stock could fall.

The military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates, the decline in the global economic environment and the ongoing COVID-19 global pandemic have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future.

Rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future.

We expect such impact will in particular affect our SRAM sales and has also impacted the launch of our APU product to some degree and the adoption of RadHard and RadTolerant SRAM products by aerospace and military customers.

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Nokia, our largest customer, purchases our products directly from us and through contract manufacturers and distributors.

Purchases by Nokia represented approximately 16%, 29%, 39% and 38% of our net revenues in the nine months ended December 31, 2022 and in fiscal 2022, 2021 and 2020, respectively.

Purchases by Nokia represented approximately 34%, 17%, 29% and 39% of our net revenues in the three months ended June 30, 2023 and in fiscal 2023, 2022 and 2021, respectively.

We expect that our operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly Nokia, and our future success is dependent to a large degree on the business success of this customer over which we have no control.

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If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed.

The military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates, the decline in the global economic environment and the ongoing COVID-19 global pandemic may continue to adversely affect our revenues, results of operations and financial condition.

Our business may be materially adversely affected by military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates and the ongoing the COVID-19 global pandemic.

Since 2020, national, state and local governments have implemented, and may continue to implement, safety precautions including quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary.

Many organizations and individuals, including the Company and our employees, took additional steps to avoid or reduce infection, including limiting travel and working from home.

These measures have disrupted normal business operations and have had significant negative impacts on businesses and financial markets worldwide.

We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the COVID-19 global pandemic.

Since the outbreak of COVID-19, aside from supply chain shortages from the lengthening of lead times for wafers and assembly services and the impact of ongoing and expected price increases from suppliers, including a 20% increase in the cost of wafers received in early calendar 2022 and a 6% increase in early calendar 2023, we have experienced minimal impact, and continue to experience minimal impact, on our manufacturing operations in Taiwan.

Final testing of our product is conducted in house.

Our revenues were impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that required a significant number of our customer contacts to work from home.

Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, were limited, and continue to be limited due to COVID-19 related restrictions.

We adapted our sales strategies for the COVID-19 environment where we could not do face-to-face meetings and conduct secure meetings with government and defense contractors.

The military conflict in Ukraine and the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates and the decline in the global economic environment may have an adverse impact on our business and financial condition.

We experienced, and are continuing to experience, a number of adverse impacts as a result of the COVID-19 global pandemic, including reductions in demand for our products, delays and cancellations of orders, difficulties in obtaining raw materials and components, shortages of labor to manufacture products, inefficiencies caused by remote worker’s difficulties in performing their normal work outputs, closures of the facilities of some of our suppliers and customers, delays in shipments and delays in collecting accounts receivable.

If the pandemic continues, it may have an adverse effect on our results of operations, financial position, and liquidity the future.

We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Disruptions in the capital markets as a result of the military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures, rising interest rates and the COVID-19 global pandemic may also adversely affect our ability to obtain additional liquidity should the impacts of a decline in the global economic environment continue for a prolonged period.

Rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the resulting decline in the global economic environment are expected to adversely affect our revenues, results of operations and financial condition.

Our business is expected to be materially adversely affected by rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine and the significant fluctuations in energy prices, all of which are contributing to a decline in the global economic environment.

Our quarterly revenues have been flat and trended downward in the past year due to the decline in the global economic environment that has resulted in less demand for GSI’s products.

We expect that a continued rise in interest rates, continued inflationary pressures, recent bank failures, continued uncertainties in the business climate caused by the military conflict in Ukraine and related fluctuations in energy prices will adversely impact demand for new and existing products, and to impact the mindset of potential commercial partners to launch new products using GSI’s technology.

The resulting decline in the global economic environment is expected to have an adverse impact on our business and financial condition.

Disruptions in the capital and financial markets as a result of rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment may also adversely affect our ability to obtain additional liquidity should the impacts of a decline in the global economic environment continue for a prolonged period.

We have incurred significant losses and may incur losses in the future.

We have incurred significant losses.

We incurred net losses of $16.4 million, $21.5 million and $10.3 million during fiscal 2022, 2021 and 2020, respectively and a net loss of $12.0 million in the nine months ended December 31, 2022.

We incurred net losses of $16.0 million, $16.4 million and $21.5 million during fiscal 2023, 2022 and 2021, respectively and a net loss of $5.1 million in the three months ended June 30, 2023.

There can be no assurance that our Very Fast SRAMs will continue to receive broad market acceptance, that our new product development initiatives will be successful or that we will be able to achieve sustained revenue growth or profitability.

We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.

In the course of preparing our financial statements for the fiscal year ended March 31, 2022, we identified a material weakness in our internal control over financial reporting.

In the course of preparing our financial statements for the fiscal year ended March 31, 2022, we identified a material weakness in our internal control over financial reporting which remained un-remediated at March 31, 2023.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness identified pertains to the design of the control over the review of the forecasts used to calculate the contingent consideration liability and used in the recoverability test for intangible assets.

Additionally, forecasts were also used in the goodwill impairment test as of December 1, 2022.

This material weakness has not been remediated as of December 31, 2022.

Our management is taking steps to remediate our material weakness, including re-evaluating the methodology and procedures involved in developing forecasts as well as the review and oversight of the forecasting process.

We are in the process of implementing a detailed plan for the remediation of the material weakness identified in the fourth quarter of fiscal 2022, including enhancing management's review controls over the forecasts used to calculate the contingent consideration liability, used in the recoverability test for intangible assets and used in the goodwill impairment test .

The material weakness identified pertains to the design and maintenance of control over the review of the forecasts used to calculate the contingent consideration liability, used in the goodwill impairment test and used in the recoverability test for intangible assets.

This material weakness has not been remediated as of June 30, 2023.

Our management continues to take steps to remediate our material weakness, including re-evaluating the methodology and procedures involved in developing forecasts as well as the review and oversight of the forecasting process.

We are in the process of implementing our detailed plan for the remediation of the material weakness, including enhancing management’s review controls over the forecasts used to calculate the contingent consideration liability, used in the recoverability test for intangible assets and used in the goodwill impairment test .

Although we have begun implementing the enhancements described above, the material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

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If we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.

Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.

control over financial reporting or that they will prevent or avoid potential future material weaknesses.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.

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Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.

Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that are filed with the SEC.

Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations.

If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

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If the carrying value of a material asset is determined to be impaired, it will be written down to fair value by a charge to operating earnings.

As of both March 31, 2022 and December 31, 2022, we had a goodwill balance of $8.0 million and intangible assets of $2.0 million and $1.8 million, respectively, from the MikaMonu acquisition.

An adverse change in market conditions, including a sustained decline in our stock price, loss of significant customers, or a weakened demand for our

products could be considered to be an impairment triggering event.

As of March 31, 2023 and June 30, 2023, we had a goodwill balance of $8.0 million and intangible assets of $1.8 million and $1.7 million at March 31, 2023 and June 30, 2023, respectively, from the MikaMonu acquisition.

An adverse change in market conditions, including a sustained decline in our stock price, loss of significant customers, or a weakened demand for our products could be considered to be an impairment triggering event.

If such change has the effect of changing one of our critical assumptions or estimates, a change to the estimation of fair value could result in an impairment charge to our goodwill or intangible assets, which would negatively impact our operating results and harm our business.

During the three months ended December 31, 2022, we identified a sustained decline in our stock price that resulted in our market capitalization being below the carrying value of our stockholders’ equity.

We concluded the sustained decline in our stock price was a triggering event and proceeded with a quantitative goodwill impairment assessment.

The results of the quantitative goodwill impairment assessment that we performed indicated the fair value of our sole reporting unit exceeded its carrying value as of December 31, 2022.

In the fiscal year ended March 31, 2023, we identified sustained declines in our stock price that resulted in our market capitalization being below the carrying value of our stockholders’ equity.

We concluded the sustained declines in our stock price were triggering events and proceeded with quantitative goodwill impairment assessments.

The results of the quantitative goodwill impairment assessments that we performed indicated the fair value of our sole reporting unit exceeded its carrying value as of December 31, 2022, February 28, 2023 and March 31, 2023.

The Company believes that no triggering event has taken place subsequent to the fiscal 2023 annual assessment.

We depend upon the sale of our Very Fast SRAMs for most of our revenues, and a downturn in demand for these products could significantly reduce our revenues and harm our business.

We derive most of our revenues from the sale of Very Fast SRAMs, and we expect that sales of these products will represent the substantial majority of our revenues for the foreseeable future.

Our business depends in large part upon continued demand for our products in the markets we currently serve, which will continue to be adversely impacted by the COVID-19 global pandemic, and adoption of our products in new markets.

Our business depends in large part upon continued demand for our products in the markets we currently serve, which will continue to be adversely impacted by the decline in the global economic environment, and adoption of our products in new markets.

Market adoption will be dependent upon our ability to increase customer awareness of the benefits of our products and to prove their high-performance and cost-effectiveness.

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We have devoted, and will continue to devote, substantial efforts and resources to the development of our new family of in-place associative computing products.

This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2023 and beyond and will be subject to significant risks.

This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2024 and will be subject to significant risks.

In addition to the typical risks associated with the development of technologically advanced products, this project will be subject to enhanced risks of technological problems related to the development of this entirely new category of products, substantial risks of delays or unanticipated costs that may be encountered, and risks associated with the establishment of entirely new markets and customer and partner relationships.

The establishment of new customer and partner relationships and selling our in-place associative computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations.

The establishment of new customer and partner relationships and selling our in-place associative

computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations.

Our inability to successfully establish a market for the product that we have developed will have a material adverse effect on our future financial and business success, including our prospects for increased revenues.

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If any of these suppliers cannot provide components on a timely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business will suffer.

For example, due to the COVID-19 global pandemic, we could see additional disruptions in our supply chain beyond the longer lead-times for the purchase of wafers and assembly services that we are currently experiencing.

For example, due to worldwide inflationary pressures, the cost of wafers and assembly services have increased by approximately 25% since the beginning of fiscal 2021.

Most significantly, we obtain wafers for our Very Fast SRAM and APU products from a single foundry, TSMC, and most of them are packaged at ASE.

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We do not have supply agreements with TSMC, ASE or any of our other independent assembly and test suppliers, and instead obtain manufacturing services and products from these suppliers on a purchase-order basis.

Our suppliers, including TSMC, have no obligation to supply products or services to us for any specific product, in any specific quantity, at any specific price or for any specific

Our suppliers, including TSMC, have no obligation to supply products or services to us for any specific product, in any specific quantity, at any specific price or for any specific time period.

As a result, the loss or failure to perform by any of these suppliers could adversely affect our business and operating results.

Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by the COVID-19 global pandemic, natural disaster or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminate deliveries to us for any other reason, we likely will not be able to enforce fulfillment of any delivery commitments and we would have to identify and qualify acceptable replacements from alternative sources of supply.

Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by natural disaster, military action or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminate deliveries to us for any other reason, we likely will not be able to enforce fulfillment of any delivery commitments and we would have to identify and qualify acceptable replacements from alternative sources of supply.

In particular, if TSMC is unable to supply us with sufficient quantities of wafers to meet all of our requirements, we would have to allocate our products among our customers, which would constrain our growth and might cause some of them to seek alternative sources of supply.

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On November 30, 2022, we announced the implementation of cost reduction initiatives.

The cost reduction initiatives are expected to be completed by March 31, 2023, and will result in an approximate 15% decrease in our

global workforce.

The aim of these initiatives is to reduce GSI Technology’s operating expenses by approximately $7.0 million on an annualized basis, primarily from salary reductions related to reduced headcount and salary decreases for certain retained employees, as well as targeted reductions in research and development spending.

The cost reduction initiatives are expected to be completed by September 30, 2023, and will result in an approximate 15% decrease in our global workforce.

The aim of these initiatives is to reduce our operating expenses by approximately $7.0 million on an annualized basis, primarily from salary reductions related to reduced headcount and salary decreases for certain retained employees, as well as targeted reductions in research and development spending.

The implementation of these cost reduction initiatives may result in unintended and adverse impacts on our business and operations.

Any failure to successfully implement the cost reduction initiatives could prevent us from focusing our operational resources on advancing GSI Technology’s proprietary APU technology.

Any failure to successfully implement the cost reduction initiatives could prevent us from focusing our operational resources on advancing our proprietary APU technology.

If we are unable to offset increased wafer fabrication and assembly costs by increasing the average selling prices of our products, our gross margins will suffer.

If there is a significant upturn in the demand for the manufacturing and assembly of semiconductor products as has occurred in recent quarters as a result of the COVID-19 global pandemic, the available supply of wafers and packaging services may be limited.

If there is a significant upturn in the demand for the manufacturing and assembly of semiconductor products as occurred in fiscal 2022, the available supply of wafers and packaging services may be limited.

As a result, we could be required to obtain additional manufacturing and assembly capacity in order to meet increased demand.

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Some of our competitors maintain their own semiconductor fabrication facilities, which may provide them with capacity, cost and technical advantages over us.

We cannot assure you that we will be able to compete successfully against any of these competitors.

We cannot assure you that we will be able to compete successfully against any of these

Our ability to compete successfully in this market depends on factors both within and outside of our control, including:

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● the supply and cost of wafers.

We recently experienced a 20% increase in wafer fabrication costs due to supply chain constraints, which resulted in us increasing the cost of our products.

In fiscal 2022 and 2023 we experienced increases of 20% and 6%, respectively, in wafer fabrication costs due to supply chain constraints, which resulted in us increasing the cost of our products.

Inflationary pressures are expected to result in additional increases in our wafer fabrication costs, which may require us to further increase the cost of our products.

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A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate our products into end products for OEMs.

For example, in the nine months ended December 31, 2022 and in fiscal 2022, 2021 and 2020, our largest distributor Avnet Logistics accounted for 48.0%, 38.0%, 29.8% and 34.3%, respectively, of our net revenues.

For example, in the three months ended June 30, 2023 and in fiscal 2023, 2022 and 2021, our largest distributor Avnet Logistics accounted for 43.6%, 48.1%, 38.0% and 29.8%, respectively, of our net revenues.

Avnet Logistics and our other existing distributors may choose to devote greater resources to marketing and supporting the products of other companies.

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System security risks, data protection, cyber-attacks and systems integration issues could disrupt our internal operations or the operations of our business partners, and any such disruption could harm our reputation or cause a reduction in our expected revenue, increase our expenses, negatively impact our results of operation or otherwise adversely affect our stock price.

Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated in recent years and may increase in the future due to a number of our employees working from home and the potential for retaliatory cyber-attacks as a result of the military conflict in Ukraine.

Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated and may increase in the future due to a number of our employees working from home and the potential for retaliatory cyber-attacks as a result of the military conflict in Ukraine.

Experienced computer programmers and hackers may be able to penetrate our network security or the network security of our business partners, and misappropriate or compromise our confidential and proprietary information, create system disruptions or cause shutdowns.

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Such disruptions could adversely impact our ability to attract and retain customers, fulfill orders and interrupt other processes and could adversely affect our business, financial results, stock price and reputation.

We may be unable to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand.

We may be unable to accurately forecast future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand.

Our financial results, quarterly product sales, trends and comparisons are affected by fluctuations in the buying patterns of the OEMs that purchase our products from our distributors.

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This could result in distributors returning unsold inventory to us, or in us not having sufficient inventory to meet the demand for our products.

If we are not able to accurately predict sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.

If we are not able to accurately forecast sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.

A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our financial position and operating results will suffer.

At December 31, 2022, three customers accounted for 48%, 32% and 10% of our accounts receivable, respectively.

At June 30, 2023, three customers accounted for 37%, 24% and 23% of our accounts receivable, respectively.

If any of these customers do not pay us, our financial position and operating results will be harmed.

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We may be subject to actions or proposals from stockholders or others that may not align with our business strategies or the interests of our other stockholders.

Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our board of directors, management, and employees from the pursuit of our business strategies.

Responding to such actions can be costly and time-consuming, disrupt our business and operations, and divert the attention of our board of directors, management, and employees

from the pursuit of our business strategies.

Such activities could interfere with our ability to execute our strategic plan.

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Claims that we infringe third party intellectual property rights could seriously harm our business and require us to incur significant costs.

In recent years, there has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.

There has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.

We were previously involved in protracted patent infringement litigation, and we could become subject to additional claims or litigation in the future as a result of allegations that we infringe others’ intellectual property rights or that our use of intellectual property otherwise violates the law.

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Any such litigation regarding intellectual property could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations.

Similarly, changing our products or processes to avoid infringing the

rights of others may be costly or impractical.

Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical.

If any claims received in the future were to be upheld, the consequences to us could require us to:

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● obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms or at all;

● pay damages;

● redesign those products that use the disputed technology.

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If our management fails to respond effectively to changes in our business, our business may suffer.

Our operations involve the use of hazardous and toxic materials, and we must comply with environmental laws and regulations, which can be expensive, and may affect our business and operating results.

We are subject to federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxic materials.

If we were to violate or become liable under environmental laws in the future as a result of our inability to obtain permits, human error, accident, equipment failure or other causes,

we could be subject to fines, costs, or civil or criminal sanctions, face property damage or personal injury claims or be required to incur substantial investigation or remediation costs, which could be material, or experience disruptions in our operations, any of which could have a material adverse effect on our business.

In addition, environmental laws could become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could harm our business.

We face increasing complexity in our product design as we adjust to new and future requirements relating to the material composition of our products, including the restrictions on lead and other hazardous substances that apply to specified electronic products put on the market in the European Union, China and California.

Other countries, including at the federal and state levels in the United States, are also considering similar laws and regulations.

Certain electronic products that we maintain in inventory may be rendered obsolete if they are not in compliance with such laws and regulations, which could negatively impact our ability to generate revenue from those products.

Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, or in the worst case decreased revenue, and could even require that we redesign or change how we manufacture our products.

Such redesigns result in additional costs and possible delayed or lost revenue.

Risks Related to Manufacturing and Product Development

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A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.

wafers and other components used in our products and arising from the manufacturing of these products may not be fully recoverable from TSMC or our other suppliers.

Defects in wafers and other components used in our products and arising from the manufacturing of these products may not be fully recoverable from TSMC or our other suppliers.

Risks Related to Our International Business and Operations

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Because much of the manufacturing and testing of our products is conducted in Taiwan, our business performance may be affected by changes in Taiwan’s political, social and economic environment.

For example, political instability resulting from changes in the relationship among the United States, Taiwan and the People’s Republic of China could negatively impact our business.

For example, political instability or restrictions on transportation logistics for our products resulting from changes in the relationship among the United States, Taiwan and the People’s Republic of China could negatively impact our business.

Any significant armed conflict related to this matter would be expected to materially and adversely damage our business.

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Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 52.1%, 53.5%, 55.4% and 59.6% of our net revenues in the nine months ended December 31, 2022 and in fiscal 2022, 2021 and 2020, respectively.

Products shipped to destinations outside of the United States accounted for 44.7%, 51.4%, 53.5% and 55.4% of our net revenues in the three months ended June 30, 2023 and in fiscal 2023, 2022 and 2021, respectively.

Moreover, a substantial portion of our products is manufactured and tested in Taiwan, and the software development for our associative computing products occurs in Israel.

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Conducting business outside of the United States subjects us to additional risks and challenges, including:

potential political and economic instability in, or foreign conflicts that involve or affect, the countries in which we, our customers and our suppliers are located;

local authorities’ decisions regarding travel restrictions, stay-at-home orders, testing requirements and other policies to address public health crises such as the COVID-19 global pandemic which have an adverse impact on the economy and demand for our products;

● potential political and economic instability in, or armed conflicts that involve or affect, the countries in which we, our customers and our suppliers are located;

● uncertainties regarding taxes, tariffs, quotas, export controls and license requirements, trade wars, policies that favor domestic companies over nondomestic companies, including government efforts to provide for the development and growth of local competitors, and other trade barriers;

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As a result, appreciation or depreciation of other currencies in relation to the U.S.

dollar could result

in transaction gains or losses that could impact our operating results.

dollar could result in transaction gains or losses that could impact our operating results.

We do not currently engage in currency hedging activities to reduce the risk of financial exposure from fluctuations in foreign exchange rates.

TSMC, as well as our other independent suppliers and many of our OEM customers, have operations in the Pacific Rim, an area subject to significant risk of earthquakes, typhoons and other natural disasters and adverse consequences related to the outbreak of contagious diseases such as COVID-19.

The foundry that manufactures our Fast SRAM and APU products, TSMC, and all of the principal independent suppliers that assemble and test our products are located in Taiwan.

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In such an event, we may not be able to obtain alternate foundry capacity on favorable terms, or at all.

The COVID-19 global pandemic, along with the previous outbreaks of SARS, H1N1 and the Avian Flu, has curtailed travel between and within countries, including in the Asia-Pacific region.

The recent COVID-19 global pandemic, along with the previous outbreaks of SARS, H1N1 and the Avian Flu, curtailed travel between and within countries, including in the Asia-Pacific region.

Outbreaks of new contagious diseases or the resurgence of existing diseases that significantly affect the Asia-Pacific region could disrupt the operations of our key suppliers and manufacturing partners.

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Our executive officers, directors and entities affiliated with them hold a substantial percentage of our common stock.

As of December 31, 2022 , our executive officers, directors and entities affiliated with them beneficially owned approximately 31% of our outstanding common stock.

As a result, these stockholders will be able to exercise

substantial influence over, and may be able to effectively control, matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over or merging with us.

As of July 31, 2023 , our executive officers, directors and entities affiliated with them beneficially owned approximately 31% of our outstanding common stock.

As a result, these stockholders will be able to exercise substantial influence over, and may be able to effectively control, matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over or merging with us.

The provisions of our charter documents might inhibit potential acquisition bids that a stockholder might believe are desirable, and the market price of our common stock could be lower as a result.

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As a result, the market price of our common stock and the voting and other rights of our stockholders might be adversely affected.

The issuance of preferred stock might result in the loss of voting control to other stockholders.

The issuance of preferred stock might result in the loss of voting control to

other stockholders.

We have no current plans to issue any shares of preferred stock.

8 unchanged sentences

Since November 2008, we have repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional shares repurchased in the open market pursuant to our stock repurchase program.

At December 31, 2022, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.

At June 30, 2023, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.

Although our Board has determined that these repurchases are in the best interests of our stockholders, they expose us to certain risks including:

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors