What changed in this filing

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Item 1A. Risk Factors

2024-02-02 compared with 2023-11-08 · 31 added, 37 removed, 420 unchanged (14% of the section changed)

11 unchanged sentences

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, the evolving conflict in Israel, 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.

● Higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, the military conflict in Ukraine, recent 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.

4 unchanged sentences

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

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

● If we are unable to offset increased wafer fabrication and assembly costs, our gross margins will suffer.

29 unchanged sentences

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

For example, in the ten fiscal quarters ended September 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.

For example, in the eleven fiscal quarters ended December 31, 2023, we recorded net revenues of as much as $9.0 million and as little as $5.3 million, and operating losses from $2.9 million to $6.7 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.

14 unchanged sentences

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

We may 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.

Rising interest rates, worldwide inflationary pressures, the evolving conflict in Israel, 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.

Higher interest rates, worldwide inflationary pressures, the evolving conflict in Israel, the military conflict in Ukraine, recent 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.

3 unchanged sentences

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

Purchases by Nokia represented approximately 27%, 17%, 29% and 39% of our net revenues in the six months ended September 30, 2023 and in fiscal 2023, 2022 and 2021, respectively.

Purchases by Nokia represented approximately 23%, 17%, 29% and 39% of our net revenues in the nine months ended December 31, 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.

2 unchanged sentences

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

Rising interest rates, worldwide inflationary pressures, the evolving conflict in Israel, 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, the evolving conflict in Israel, 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.

Higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, 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 higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, the military conflict in Ukraine and the recent 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, the evolving conflict in Israel , 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.

We expect that a continued rise in interest rates, continued inflationary pressures, the evolving conflict in the Middle East , 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, the evolving conflict in Israel, 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.

Disruptions in the capital and financial markets as a result of higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, the military conflict in Ukraine, recent 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 $16.0 million, $16.4 million and $21.5 million during fiscal 2023, 2022 and 2021, respectively and a net loss of $9.2 million in the six months ended September 30, 2023.

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 $15.7 million in the nine months ended December 31, 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.

3 unchanged sentences

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 September 30, 2023.

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

14 unchanged sentences

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 March 31, 2023 and September 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 September 30, 2023, respectively, from the MikaMonu acquisition.

As of March 31, 2023 and December 31, 2023, we had a goodwill balance of $8.0 million and intangible assets of $1.8 million and $1.6 million at March 31, 2023 and December 31, 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.

46 unchanged sentences

● when introducing new or enhanced products, we may be unable to effectively manage the transition from older products.

If we do not successfully implement the cost reduction initiatives that were announced on November 30, 2022, we may suffer adverse impacts on our business and operations.

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

The cost reduction initiatives resulted in an approximate 15% decrease in our global workforce.

The aim of these initiatives was to

reduce our operating expenses by approximately $7.0 million on an annualized basis, primarily from salary reductions related to reduced headcount, attrition 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 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 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.

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

Securing additional manufacturing and assembly capacity may cause our wafer fabrication and assembly costs to increase.

24 unchanged sentences

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 six months ended September 30, 2023 and in fiscal 2023, 2022 and 2021, our largest distributor Avnet Logistics accounted for 45.4%, 48.1%, 38.0% and 29.8%, respectively, of our net revenues.

For example, in the nine months ended December 31, 2023 and in fiscal 2023, 2022 and 2021, our largest distributor Avnet Logistics accounted for 48.3%, 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.

24 unchanged sentences

We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive than originally anticipated.

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.

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 forecast future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand.

6 unchanged sentences

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 September 30, 2023, three customers accounted for 45%, 19% and 14% of our accounts receivable, respectively.

At December 31, 2023, three customers accounted for 44%, 28% and 19% of our accounts receivable, respectively.

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

14 unchanged sentences

Our sales cycle can take up to 24 months to complete, and because of this lengthy sales cycle, we may experience a delay between increasing expenses for research and development and our sales and marketing efforts and the generation of volume production revenues, if any, from these expenditures.

Moreover, the value of any design win will largely depend on the commercial success of our OEM customers’ products.

Moreover, the value of any design win will largely depend on the commercial success of our

OEM customers’ products.

There can be no assurance that we will continue to achieve design wins or that any design win will result in future revenues.

15 unchanged sentences

Other than the MikaMonu and Sony acquisitions, we have not made any such acquisitions or investments, and therefore our experience as an organization in making such acquisitions and investments is limited.

In connection with the MikaMonu acquisition, we are subject to risks related to potential problems, delays or unanticipated costs that may be encountered in the development of products based on the MikaMonu technology and the establishment of new markets and customer relationships for the potential new

In addition, in connection with any future acquisitions or investments we may make, we face numerous other risks, including:

34 unchanged sentences

In the past, we have been involved in litigation to enforce our intellectual property rights and to protect our trade secrets.

Additional litigation of this type may be necessary in the future.

Additional litigation of this type

may be necessary in the future.

Any such litigation could result in substantial costs and diversion of resources.

25 unchanged sentences

Historically, these migrations to new manufacturing processes have resulted in significant initial design and development costs associated with pre-production mask sets for the manufacture of new products with smaller geometry process technologies.

For example, in the second quarter of fiscal 2019, we incurred approximately $1.0 million in research and development expense associated with a pre-production mask set that will not be used in production as part of the transition to our new 28 nanometer SRAM process technology for our APU product.

For example, in the third quarter of fiscal 2024, we incurred approximately $2.4 million in research and development expense associated with a pre-production mask set that will not be used in production as part of the transition to our new 16 nanometer SRAM process technology for our APU-2 product.

We will incur similar expenses in the future as we continue to transition our products to smaller geometry processes.

21 unchanged sentences

Moreover, the role of the Taiwanese government in the Taiwanese economy is significant.

Taiwanese policies toward economic liberalization, and laws and policies affecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change, resulting in greater restrictions on our

ability and our suppliers’ ability to do business and operate facilities in Taiwan.

If any of these changes were to occur, our business could be harmed and our stock price could decline.

Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 46.6%, 51.4%, 53.5% and 55.4% of our net revenues in the six months ended September 30, 2023 and in fiscal 2023, 2022 and 2021, respectively.

Products shipped to destinations outside of the United States accounted for 45.0%, 51.4%, 53.5% and 55.4% of our net revenues in the nine months ended December 31, 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 where there is an evolving military conflict with Hamas.

25 unchanged sentences

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.

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.

In addition, our business could be harmed if such an outbreak resulted in travel being restricted, the implementation of stay-at-home or shelter-in-place orders or if it adversely affected the operations of our OEM customers or the demand for our products or our OEM customers’ products.

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We do not know if we will be able to obtain additional financing on favorable terms, if at all.

If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, and we may be required to reduce operating costs, which could seriously harm our business.

If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products, take advantage of future opportunities or respond to

competitive pressures or unanticipated requirements, and we may be required to reduce operating costs, which could seriously harm our business.

In addition, if we issue equity securities, our stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of our common stock.

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

As of October 31, 2023 , our executive officers, directors and entities affiliated with them beneficially owned approximately 32% of our outstanding common stock.

As of December 31, 2023 , our executive officers, directors and entities affiliated with them beneficially owned approximately 32% 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.

15 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 September 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.

At December 31, 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