What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-02-02 · 114 added, 161 removed, 328 unchanged (46% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short-term investments

Accounts receivable, net

Prepaid expenses and other current assets ($ 375 and $ 375 from a related party)

Assets held for sale

Total current assets

30 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATION S

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands, except per share amounts)

Three Months Ended June 30,

(In thousands, except per share amounts)

3 unchanged sentences

Selling, general and administrative

Gain from sale and leaseback transaction

Total operating expenses

Loss from operations

Interest income, net

Other income (expense), net

Loss before income taxes

Income (loss) from operations

Interest income

Other expense, net

Income (loss) before income taxes

Provision for income taxes

Net loss per share:

Net income (loss)

Net income (loss) per share:

Weighted average shares used in per share calculations:

1 unchanged sentence

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30,

(In thousands)

Net income (loss)

Net unrealized gain on available-for-sale investments

Total comprehensive loss

Total comprehensive income (loss)

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

3 unchanged sentences

Stockholders'

Three months ended December 31, 2023

Three months ended June 30, 2024

(In thousands, except share amounts)

Balance, September 30, 2023

Issuance of common stock under employee stock option plans

Stock-based compensation expense

Net unrealized gain on available-for-sale investments

Balance, December 31, 2023

Three months ended December 31, 2022

Balance, September 30, 2022

Balance, March 31, 2024

Issuance of common stock under employee stock option plans

Stock-based compensation expense

Net unrealized gain on available-for-sale investments

Balance, December 31, 2022

Balance, June 30, 2024

Comprehensive

Stockholders'

Nine months ended December 31, 2023

(In thousands, except share amounts)

Balance, March 31, 2023

Issuance of common stock under employee stock option plans

Issuance of common stock pursuant to an At-the-Market offering, net of offering costs of $ 389

Stock-based compensation expense

Net unrealized gain on available-for-sale investments

Balance, December 31, 2023

Nine months ended December 31, 2022

Three months ended June 30, 2023

Balance, March 31, 2023

2 unchanged sentences

Net unrealized gain on available-for-sale investments

Balance, December 31, 2022

Balance, June 30, 2023

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW S

Nine Months Ended December 31,

Three Months Ended June 30,

(In thousands)

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Allowance for credit losses

3 unchanged sentences

Depreciation and amortization

Gain on sale and leaseback transaction

Stock-based compensation

7 unchanged sentences

Cash flows from investing activities:

Proceeds from sale of assets

Maturities of short-term investments

2 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock under At-the-Market offering, net of offering costs of $ 389

Proceeds from issuance of common stock under employee stock plans

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of the period

15 unchanged sentences

However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2024.

The consolidated results of operations for the nine months ended December 31, 2023 are not necessarily indicative of the results to be expected for the entire fiscal year.

The consolidated results of operations for the three months ended June 30, 2024 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

22 unchanged sentences

Risk and uncertainties

The decline in the global economic environment due to, among other things, higher interest rates, worldwide inflationary pressures and recent fluctuations in energy prices has affected the business activities of the Company, its customers, suppliers, and other business partners in the fiscal year ended March 31, 2023 and into the nine months ended December 31, 2023.

The decline in the global economic environment due to, among other things, higher interest rates and worldwide inflationary pressures has affected the business activities of the Company, its customers, suppliers, and other business partners in the fiscal year ended March 31, 2024 and into the three months ended June 30, 2024.

Our software development and certain regional sales activities for our APU product offerings occur in Israel.

Our Vice President, Associative Computing, along with a team of software development experts are based in our Israel facility.

This team is needed for the development of the various levels of software required in the use of our APU product offering.

This team is needed for the development of software required in the use of our APU product offering.

Proof of concept customers for our SAR imagine processing acceleration system are also based in Israel.

1 unchanged sentence

At this time, the impact on GSI Technology is uncertain and subject to change given the volatile nature of the situation, but adverse changes in the military conditions in Israel could harm our business and our stock price could decline.

The Company believes that during the next 12 months disruptions in the capital markets as a result of higher interest rates, worldwide inflationary pressures, recent fluctuations in energy prices and the decline in the global economic environment could impact general economic activity and demand in the Company’s end markets.

The Company believes that during the next 12 months disruptions in the capital markets as a result of higher interest rates, worldwide inflationary pressures and the decline in the global economic environment could impact general economic activity and demand in the Company’s end markets.

Additionally, fluctuations in customer demand due to previous buffer stock purchases during the semiconductor supply shortage may negatively impact near-term revenues.

Accounting pronouncements effective for fiscal 2024

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, “Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

For trade and other receivables, loans, and other financial instruments, the Company is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.

Credit losses relating to available-for-sale debt securities are recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date.

Adoption of this standard on April 1, 2023 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting pronouncements not yet adopted by the Company

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which will require the Company to disclose segment expenses that are significant and regularly provided to the Company’s chief operating decision maker (“CODM”).

In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources.

This accounting standard update will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the effect that the updated standard will have on the Company's financial statement disclosures.

NOTE 2—REVENUE RECOGNITION

2 unchanged sentences

(2) identification of the performance obligations in the contract;

(3) determination of the

transaction price;

(3) determination of the transaction price;

(4) allocation of the transaction price to the performance obligations in the contract;

1 unchanged sentence

The Company’s customer contracts, which may be in the form of purchase orders, contracts or purchase agreements, contain performance obligations for delivery of agreed upon products.

Delivery of all performance obligations contained within a contract with a customer typically occurs at the same time (or within the same accounting period).

Delivery of all performance

obligations contained within a contract with a customer typically occurs at the same time (or within the same accounting period).

Transfer of control occurs at the point at which delivery has occurred, title and the risks and rewards of ownership have passed to the customer, and the Company has a right to payment.

12 unchanged sentences

The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues.

Warranty costs and the accrued warranty liability were not material as of and for the periods ended December 31, 2023 and March 31, 2023.

Substantially all of the Company’s revenue is derived from sales of SRAM products, which represent approximately 98 % and 97 % of total revenues in the nine months ended December 31, 2023 and 2022, respectively.

Warranty costs and the accrued warranty liability were not material as of and for the periods ended June 30, 2024 and March 31, 2024.

Substantially all of the Company’s revenue is derived from sales of SRAM products, which represent approximately 99 % of total revenues in each of the three months ended June 30, 2024 and 2023.

Nokia, the Company’s largest customer, purchases products directly from the Company and through contract manufacturers and distributors.

Based on information provided to the Company by its contract manufacturers and distributors, purchases by Nokia represented approximately 15 % and 20 % of the Company’s net revenues in the three months ended December 31, 2023 and 2022, respectively, and 23 % and 16 % of the Company’s net revenues in the nine months ended December 31, 2023 and 2022, respectively.

Based on information provided to the Company by its contract manufacturers and distributors, purchases by Nokia represented approximately 21 % and 34 % of the Company’s net revenues in the three months ended June 30, 2024 and 2023, respectively.

See “Note 12 — Segment and Geographic Information” for revenue by shipment destination.

The following table presents the Company’s revenue disaggregated by customer type.

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

Three Months Ended June 30,

(In thousands)

Contract manufacturers

NOTE 3—NET LOSS PER COMMON SHARE

NOTE 3—NET INCOME (LOSS) PER COMMON SHARE

The Company uses the treasury stock method to calculate the weighted average shares used in computing diluted net loss per share.

The following table sets forth the computation of basic and diluted net loss per share:

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands, except per share amounts)

The following table sets forth the computation of basic and diluted net income (loss) per share:

Three Months Ended June 30,

(In thousands, except per share amounts)

Net income (loss)

Denominators:

3 unchanged sentences

Weighted average shares—Dilutive

Net loss per common share—Basic

Net loss per common share—Diluted

The following shares of common stock underlying outstanding stock options and unissued ESPP shares, determined on a weighted average basis, were excluded from the computation of diluted net loss per share as they had an anti-dilutive effect:

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

Net income (loss) per common share—Basic

Net income (loss) per common share—Diluted

The following shares of common stock underlying outstanding stock options and unissued ESPP shares, determined on a weighted average basis, were excluded from the computation of diluted net income (loss) per share as they had an anti-dilutive effect:

Three Months Ended June 30,

(In thousands)

1 unchanged sentence

NOTE 4—BALANCE SHEET DETAIL

December 31, 2023

June 30, 2024

March 31, 2024

3 unchanged sentences

Inventory at distributors

December 31, 2023

June 30, 2024

March 31, 2024

3 unchanged sentences

Allowances for credit losses

December 31, 2023

June 30, 2024

March 31, 2024

4 unchanged sentences

Other prepaid expenses and other current assets

December 31, 2023

June 30, 2024

March 31, 2024

2 unchanged sentences

Computer and other equipment

Building and building improvements

Furniture and fixtures

1 unchanged sentence

Accumulated depreciation

Depreciation expense was $ 155,000 and $ 195,000 for the three months ended December 31, 2023 and 2022, respectively, and $ 543,000 and $ 588,000 for the nine months ended December 31, 2023 and 2022, respectively.

The following tables summarize the components of intangible assets and related accumulated amortization balances at December 31, 2023 and March 31, 2023 (in thousands):

As of December 31, 2023

Depreciation expense was $ 134,000 and $ 217,000 for the three months ended June 30, 2024 and 2023, respectively.

The following tables summarize the components of intangible assets and related accumulated amortization balances at June 30, 2024 and March 31, 2024 (in thousands):

As of June 30, 2024

Intangible assets:

3 unchanged sentences

Product designs

Amortization of intangible assets included in cost of revenues was $ 58,000 for each of the three months ended December 31, 2023 and 2022, respectively, and $ 175,000 for each of the nine months ended December 31, 2023 and 2022.

Amortization of intangible assets included in cost of revenues was $ 58,000 and $ 59,000 in the three months ended June 30, 2024 and 2023, respectively.

The Company reviews identifiable amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of

the asset and its eventual disposition.

Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition.

Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value.

The Company identified a potential impairment indicator for the finite lived intangible assets and performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows of the asset group to the carrying amount as of December 31, 2023.

The result of the recoverability test indicated that the sum of the expected future cash flows was greater than the carrying amount of the finite lived intangible assets.

Based on the uncertainty of forecasts inherent with a new product, events such as the failure to generate forecasted revenue from the APU product could result in a non-cash impairment charge in future periods.

As of December 31, 2023, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):

There were no impairment indicators noted as of June 30, 2024.

As of June 30, 2024, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):

Fiscal year ending March 31,

2024 (remaining three months)

December 31, 2023

2025 (remaining nine months)

June 30, 2024

March 31, 2024

4 unchanged sentences

Income taxes payable

Outsourced design resources

Research and development mask set

Miscellaneous accrued expenses

On November 30, 2022, the Company announced cost reduction initiatives which included an approximate 15 % reduction in the Company’s global workforce.

The Company incurred $ 0.3 million in severance related charges during the three and nine months ended December 31, 2022 including $ 0.1 million recorded as cost of revenues and $ 0.2 million recorded as selling, general and administrative expenses.

There were no severance related charges in the three and nine months ended December 31, 2023.

NOTE 5—GOODWILL

3 unchanged sentences

The Company has one reporting unit.

The Company had a goodwill balance of $ 8.0 million as of both December 31, 2023 and March 31, 2023.

The Company had a goodwill balance of $ 8.0 million as of both June 30, 2024 and March 31, 2024.

The goodwill resulted from the acquisition of MikaMonu Group Ltd.

in fiscal 2016.

The Company completed its annual impairment test during the fourth quarter of fiscal 2023 and concluded that there was no impairment, as the fair value of its sole reporting unit exceeded its carrying value.

The Company completed its annual impairment test during the fourth quarter of fiscal 2024 and concluded that there was no impairment, as it was more likely than not that the fair value of its sole reporting unit exceeded its carrying value and the performance of a quantitative impairment test was not required.

NOTE 6—INCOME TAXES

The current portion and long-term portion of the Company’s income tax liability related to unrecognized tax benefits was $ 0 at both December 31, 2023 and March 31, 2023.

Due to historical losses in the United States, the

Company has a full valuation allowance on its United States federal and state deferred tax assets.

Due to historical losses in the United States, the Company has a full valuation allowance on its United States federal and state deferred tax assets.

Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance.

Management believes that within the next twelve months the Company will not have a significant reduction in uncertain tax benefits, including interest and penalties, related to positions taken with respect to credits and loss carryforwards on previously filed tax returns.

Management believes that within the next twelve months the Company could have a reduction in uncertain tax benefits of up to $ 767,000 , including interest and penalties, as a result of the lapse of statute of limitations.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes in the Condensed Consolidated Statements of Operations.

2 unchanged sentences

Fiscal years 2020 through 2023 are subject to audit by the Israeli tax authorities.

For the nine months ended December 31, 2023 and December 31, 2022, the Company incurred income tax expense of $ 155,000 and $ 181,000 on net losses before income taxes of ($ 15.6 million) and ($ 11.8 million), respectively.

For the three months ended June 30, 2024 and June 30, 2023, the Company incurred income tax expense of $ 57,000 and $ 51,000 on net income before income taxes of $ 1.1 million and a net loss before income taxes of ($ 5.1 million), respectively.

The provision was calculated using the annualized effective tax rate method.

The Company’s estimated annual effective income tax rate, including discrete items, was approximately ( 1.44 %) and ( 2.16 %) as of December 31, 2023 and 2022, respectively.

The annual effective tax rates as of December 31, 2023 and 2022 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits or foreign tax differential.

The Company’s estimated annual effective income tax rate, excluding discrete items, was approximately ( 2.89 %) and ( 2.25 %) as of June 30, 2024 and 2023, respectively.

The annual effective tax rates as of June 30, 2024 and 2023 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and foreign tax differential.

NOTE 7—FINANCIAL INSTRUMENTS

5 unchanged sentences

The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market.

As of December 31, 2023, the Level 1 category included money market funds of $ 9.6 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

As of June 30, 2024, the Level 1 category included money market funds of $ 13.2 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date;

2 unchanged sentences

The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers.

As of December 31, 2023, there were no Level 2 category short-term investments.

As of June 30, 2024 and March 31, 2024, there were no Level 2 category short-term investments.

Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.

As of December 31, 2023, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu.

As of June 30, 2024, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu.

The fair value of the contingent consideration liability was initially determined as of the acquisition date using unobservable inputs.

These inputs included the estimated amount and timing of future cash flows, the probability achievement of the forecast and a risk-adjusted discount rate of approximately 14.8 % used to adjust the probability-weighted cash flows to their present value.

Significant increases (decreases) to the estimated amount and timing of future cash flows or the probability of achievement of the forecast would result in a significantly higher (lower) fair value measurement.

Conversely, a significant increase or (decrease) in the risk-adjusted discount rate would result in a significantly

(lower) higher fair value measurement.

Generally, changes used in the assumptions for future cash flows and probability of achievement of the forecast would be accompanied by a directionally similar change in the fair value measurement and expense.

Significant increases (decreases) to the estimated amount and timing of future revenues or the probability of achievement of the revenue forecast would result in a significantly higher (lower) fair value measurement.

Conversely, a significant increase (decrease) in the risk-adjusted discount rate would result in a significantly (lower) higher fair value measurement.

Generally, changes used in the assumptions for future revenues and probability of achievement of the revenue forecast would be accompanied by a directionally similar change in the fair value measurement and expense.

Conversely, changes in the risk-adjusted discount rate would be accompanied by a directionally opposite change in the related fair value measurement and expense.

Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

During the most recent re-measurement of the contingent consideration liability as of December 31, 2023, the Company used a risk-adjusted discount rate of approximately 15.6 % to adjust the probability-weighted cash flows to their present value using probabilities ranging from 25 % to 70 % for the remaining contingent events.

The contingent consideration liability is included in contingent consideration, non-current on the Condensed Consolidated Balance Sheets at December 31, 2023 and March 31, 2023 in the amount of $ 495,000 and $ 1.1 million, respectively.

The continued appropriateness of the Monte Carlo valuation model selected or any decision to change the valuation model may also lead to changes in fair value measurement.

During the most recent re-measurement of the contingent consideration liability as of June 30, 2024, the Company used a risk-adjusted discount rate of approximately 15.8 % to adjust the probability-weighted cash flows to their present value using probabilities ranging from 25 % to 70 % for the remaining contingent events.

The contingent consideration liability is included in contingent consideration, non-current on the Condensed Consolidated Balance Sheets at June 30, 2024 and March 31, 2024 in the amount of $ 74,000 and $ 160,000 , respectively.

The fair value of financial assets measured on a recurring basis is as follows (in thousands):

3 unchanged sentences

and Liabilities

December 31, 2023

June 30, 2024

Money market funds

9 unchanged sentences

Contingent consideration

The following table sets forth the changes in fair value of contingent consideration for the nine months ended December 31, 2023 and 2022, respectively:

Nine Months Ended December 31,

The following table sets forth the changes in fair value of contingent consideration for the three months ended June 30, 2024 and 2023, respectively:

Three Months Ended June 30,

(In thousands)

4 unchanged sentences

Short-term investments

All of the Company’s short-term investments are classified as available-for-sale.

Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations.

Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.

The Company had money market funds of $ 9.6 million and $ 7.8 million at December 31, 2023 and March 31, 2023, respectively, included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

The Company had money market funds of $ 13.2 million and $ 5.7 million at June 30, 2024 and March 31, 2024, respectively, included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

The following table summarizes the Company’s available-for-sale investments.

There were no available-for-sale investments at December 31, 2023.

March 31, 2023

(In thousands)

Short-term investments:

Certificates of deposit

Supranational obligations

Total short-term investments

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that do not have an allowance for credit losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position as of March 31, 2023.

March 31, 2023

Less Than 12 Months

12 Months or Greater

(In thousands)

Certificates of deposit

Supranational obligations

The deferred tax asset related to unrecognized gains and losses on short-term investments was $ 10,000 at March 31, 2023.

There were no available-for-sale investments at June 30, 2024 or March 31, 2024, respectively.

NOTE 8—LEASES

1 unchanged sentence

The Company’s leases have remaining lease terms of 26 months to 119 months , some of which include options to extend for up to 10 years .

On June 29, 2023, the Company entered into a lease agreement in Taiwan, wherein the lease for the Company’s existing office and warehouse space was extended through August 31, 2026.

The lease has been extended for a three-year period under substantially the same terms and conditions of the original lease agreement.

The Company identified this extension as a lease modification and reassessed the discount rate at the remeasurement date, at 3.9 % based on local rates in Taiwan, and the Company has remeasured its ROU asset and lease liability on the condensed consolidated balance sheet using the discount rate that applies as of the date of the modification.

On June 6, 2024, the Company completed a sale and leaseback transaction pursuant to a previously executed purchase and sale agreement (the “Agreement”) with an unrelated party, as purchaser, for the sale of the Company’s 1213 Elko Drive property in Sunnyvale, California (the “Sunnyvale Property”) for a purchase price, net of closing and other expenses payable by the Company, of $ 11.3 million in cash.

Concurrent with the sale, the Company entered into a lease agreement (the “Lease”) to lease all of the Sunnyvale Property that it occupied from the purchaser for an initial term of ten years from the closing of the sale of the Sunnyvale Property.

The Company has the option to renew the term of the Lease for two additional five-year periods.

Pursuant to the Lease, the Company is responsible for base rent initially at a rate of approximately $ 90,768 per month and the monthly operational expenses, such as maintenance, insurance, property taxes and utilities.

The rental rate will increase three percent (3%) per year beginning on the first anniversary of the closing.

The transaction was accounted for as a sale and leaseback and operating lease accounting classification.

The Company recorded a gain of $ 5.7 million which is recorded in the gain from sale and leaseback transaction in the Condensed Consolidated Statements of Operations in the quarter ended June 30, 2024.

Supplemental balance sheet information related to leases was as follows:

December 31, 2023

June 30, 2024

March 31, 2024

6 unchanged sentences

The following table provides the details of lease costs:

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

Three Months Ended June 30,

(In thousands)

2 unchanged sentences

The following table provides other information related to leases:

Nine Months Ended December 31,

Three Months Ended June 30,

(In thousands)

7 unchanged sentences

Operating leases

The following table provides the maturities of the Company’s operating lease liabilities as of December 31, 2023:

The following table provides the maturities of the Company’s operating lease liabilities as of June 30, 2024:

Operating Lease

(In thousands)

2024 (remaining three months)

2025 (remaining nine months)

Total undiscounted future cash flows

8 unchanged sentences

Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by it under these agreements.

It is not possible to predict the maximum potential amount of future payments that may be required under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement.

circumstances involved in each particular agreement.

Historically, payments made by the Company under these agreements have not had a material effect on its business, financial condition, cash flows or results of operations.

NOTE 10—STOCK-BASED COMPENSATION

As of December 31, 2023, 2,905,696 shares of common stock were available for grant under the Company’s Amended and Restated 2016 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the nine months ended December 31, 2023:

As of June 30, 2024, 2,623,851 shares of common stock were available for grant under the Company’s Amended and Restated 2016 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the three months ended June 30, 2024:

Number of Shares

1 unchanged sentence

Balance at March 31, 2024

Balance at December 31, 2023

Balance at June 30, 2024

Options vested and exercisable

1 unchanged sentence

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to employee stock plans:

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

Three Months Ended June 30,

(In thousands)

3 unchanged sentences

NOTE 11—RELATED PARTY TRANSACTION

The Company incurred engineering service expense and production charges of approximately $ 500,000 and $ 4,000 during the three months ended December 31, 2023 and 2022, respectively, and $ 500,000 and $ 201,000 during the nine months ended December 31, 2023 and 2022, respectively, from Wistron Neweb Corp (“WNC”) in connection with the manufacturing of single-APU PCIe boards, to be used in the Company’s in-place associative computing product.

The Company incurred manufacturing services of approximately $ 8,000 and $ 0 during the three months ended June 30, 2024 and 2023, respectively, from Wistron Neweb Corp (“WNC”) in connection with the manufacturing of single-APU PCIe boards, to be used in the Company’s in-place associative computing product.

Haydn Hsieh, a member of the Company’s board of directors, is the Chairman and Chief Strategy Officer of WNC.

The amount owed to WNC, of $ 394,000 and $ 8,000 at December 31, 2023 and March 31, 2023, respectively, is included in accounts payable in the Condensed Consolidated Balance Sheets.

The amount owed to WNC, $ 6,000 and $ 0 at June 30, 2024 and March 31, 2024, respectively, is included in accounts payable in the Condensed Consolidated Balance Sheets.

NOTE 12—SEGMENT AND GEOGRAPHIC INFORMATION

2 unchanged sentences

The following is a summary of net revenues by geographic area based on the location to which product is shipped:

Three Months Ended December 31,

Nine Months Ended December 31,

(In thousands)

Three Months Ended June 30,

(In thousands)

5 unchanged sentences

Under the Prototype Agreement, the Company will receive an award funded by the Small Business Innovation Research program.

Pursuant to an agreed-upon schedule, the Company will receive milestone payments totaling an estimated $ 1.25 million upon successful completion of each milestone.

The Prototype Agreement is unrelated to the Company’s ordinary business activities.

Pursuant to an agreed-upon schedule, the Company will receive milestone payments which total an estimated $ 1.25 million upon successful completion of each milestone.

In November 2023, the Company entered into a second prototype agreement with the U.S.

Air Force Research Laboratory (“AFRL”) for the development of specialized algorithms for a Next-Generation Compute-In-Memory Associative Processing Unit (APU2) to Enable High-Performance Computing in Space.

Pursuant to an agreed-upon schedule, the Company will receive milestone payments which total- an estimated $ 1.1 million upon successful completion of each milestone.

The Prototype Agreements are unrelated to the Company’s ordinary business activities.

The Company has discretion in managing the activities under the Prototype Agreement and retains all developed intellectual property.

The Company applies IAS 20, by analogy, and recognizes the award as a reduction of research and development expenses based on a cost incurred method.

During the three and nine months ended December 31, 2023, the Company recognized $ 175,000 and $ 435,000 , respectively, as a reduction to research and development expense in the Condensed Consolidated Statements of Operations.

As of December 31, 2023, the Company had received total milestone payments of $ 435,000 under the Prototype Agreement.

During the three months ended June 30, 2024, the Company recognized $ 281,000 as a reduction to research and development expense in the Condensed Consolidated Statements of Operations.

During the quarter ended June 30, 2024, the Company received total milestone payments of $ 79,000 under the Prototype Agreements.

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 1. Financial Statements