What changed in this filing

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Item 1A. Risk Factors

2024-08-02 compared with 2024-02-02 · 84 added, 74 removed, 377 unchanged (30% of the section changed)

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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.

● 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 cannot assure you that our ongoing evaluation of strategic alternatives will result in any particular outcome, and the perceived uncertainties related to the Company could adversely affect our business and our shareholders.

● We depend upon the sale of our Very Fast SRAMs for most of our revenues while we transform the focus of our business to the sale of in-place associative computing products and services, and a downturn in demand for Very Fast SRAM products or we are unable to achieve our revenue goals for our new in-place associative computing products and services, may cause us to experience cash shortfalls that would harm our business and our future prospects.

● Our future success is substantially dependent on the successful introduction of new in-place associative computing products which entails significant risks.

● Higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, the military conflict in Ukraine, and the decline in the global economic environment may adversely affect our revenues, results of operations and financial condition.

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

● We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, our ability to produce timely and accurate financial statements could be impaired.

● Goodwill impairment and related charges, as well as other accounting charges or adjustments could negatively impact our operating results.

● 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.

● If we do not successfully develop and introduce the new in-place associative computing products, which entails certain significant risks, our business will be harmed.

● If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.

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

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

● If we do not successfully develop new products to respond to rapid market changes due to changing technology and evolving industry standards, particularly in the networking and telecommunications markets, our business will be harmed.

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

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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.

● Cyber-attacks and systems integration issues could disrupt our operations or the operations of our partners and result in reduced revenue, increased costs, liability claims, reputational harm.

● Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products.

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● Our business will suffer if we are unable to protect our intellectual property or if there are claims that we infringe third party intellectual property rights.

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

● If our business grows, such growth may place a significant strain on our management and operations.

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● 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.

● Use of a portion of our cash reserves to repurchase shares of our common stock presents potential risks and disadvantages to us and our continuing stockholders.

Risks Related to Our Business and Financial Condition

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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, 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.

For example, in the nine fiscal quarters ended June 30, 2024, we recorded net revenues of as much as $9.0 million and as little as $4.7 million, and in eight of those quarters, operating losses from $3.2 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.

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

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

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.

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

Purchases by Nokia represented approximately 21%, 21%, 17% and 29% of our net revenues in the three months ended June 30, 2024 and in fiscal 2024, 2023 and 2022, 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.

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 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.

We cannot assure you that our ongoing evaluation of strategic alternatives will result in any particular outcome, and the perceived uncertainties related to the Company could adversely affect our business and our stockholders.

On May 2, 2024, we announced that we had initiated a broad strategic review to maximize stockholder value, which includes an evaluation of a wide range of options including equity or debt financing, divestiture of assets, technology licensing or other strategic arrangements including a sale of the Company.

We have not set a timetable for the completion of the strategic review process, nor have we made any decisions relating to any strategic alternative at this time.

No assurance can be given as to the outcome of the process, including whether the process will result in any particular outcome.

Any potential transaction may be dependent on a number of factors that may be beyond our control, for example, market conditions, industry trends or acceptable terms.

The process of reviewing potential strategic alternatives may be time consuming, distracting and disruptive to our business operations.

In addition, given that the exploration of strategic alternatives may eventually result in a potential sale, merger or other strategic transaction, any perceived uncertainty regarding our future operations or employment needs may limit our ability to retain or hire qualified personnel and may contribute to unplanned loss of highly

skilled employees through attrition, and result in the loss of customers, suppliers and other key business partners.

We may ultimately determine that no transaction is in the best interest of our stockholders.

Speculation regarding any developments associated with our review of strategic alternatives and any perceived uncertainties related to the Company or its business could cause the price of our shares to fluctuate significantly.

While we currently depend upon the sale of our Very Fast SRAMs for most of our revenues, we are in the process of transforming the focus of our business to the sale of in-place associative computing products and services, and if there is a downturn in demand for Very Fast SRAMs or we are unable to achieve our revenue goals for our new in-place associative computing products and services, we may experience cash shortfalls that would harm our business and our future prospects.

We currently derive most of our revenues from the sale of Very Fast SRAMs, and we expect that sales of these products will represent a significant majority of our revenues for the next several years.

We are in the process of transforming the focus of our business to the sale of in-place associative computing products and services instead of Very Fast SRAMs.

Our financial results and cash flow depend in large part upon continued demand for our Very Fast SRAM products in the markets we currently serve.

Our future financial results and cash flow will increasingly depend upon our ability to generate revenues from the sale of in-place associative computing products and services.

Market adoption of our in-place associative computing products and services will be dependent upon our ability to increase customer awareness of the benefits of those products and services.

We may not be able to sustain our revenues from sales of our SRAM products or increase our revenues from our in-place associative computing products and services, particularly if the networking and telecommunications markets experience a significant downturn, or we are unable to obtain market traction for our in-place associative computing products and services.

Any decrease in revenues from sales of our Very Fast SRAM products or failure to achieve the revenue goals for our in-place associative computing products and services could result in revenue shortfalls that would leave our business with inadequate cash to finance operations.

Our future success is substantially dependent on the successful introduction of new in-place associative computing products which entails significant risks.

Since 2015, our principal strategic objective has been the development of our first in-place associative computing products.

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 2025 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.

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.

Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major product introduction effort, then the price of our common stock could fall.

Higher interest rates, worldwide inflationary pressures, the evolving conflict in the Middle East, the military conflict in Ukraine, 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 and the military conflict in Ukraine, 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 our products.

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 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.

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, 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 $15.7 million in the nine months ended December 31, 2023.

We incurred net losses of $20.1 million, $16.0 million and $16.4 million during fiscal 2024, 2023 and 2022.

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.

We identified a material weakness in our internal control over financial reporting in the past.

If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud.

Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations.

In addition, any testing by us conducted in connection with Section 404(a) of the Sarbanes-Oxley Act, or any testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.

Inferior internal control over financial reporting could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

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 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 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.

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.

Until this material weakness is remediated, we plan to continue to perform additional analyses and other procedures to ensure that our consolidated financial statements are prepared in accordance with GAAP .

If we are unable to further implement and maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.

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.

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

Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.

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.

During fiscal 2024, we identified and implemented remedial measures to address the control deficiencies that led to the material weakness and determined that the material weakness was remediated as of March 31, 2024.

However, there can be no assurance that remedial measures will continue to operate or that they will prevent other control deficiencies or material weaknesses in our control over financial reporting in the future.

We are a non-accelerated filer.

For so long as we remain a non-accelerated filer, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

An independent assessment of the effectiveness of our internal control over financial reporting could detect problems that our management’s assessment might not.

Undetected material weaknesses in our internal control over financial reporting could lead to financial statement restatements and require us to incur the expense of remediation.

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 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.

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.

As of March 31, 2024 and June 30, 2024, we had a goodwill balance of $8.0 million and intangible assets of $1.6 million and $1.5 million at March 31, 2024 and June 30, 2024, respectively, from the MikaMonu acquisition.

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.

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.

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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 .

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 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.

We may not be able to sustain or increase our revenues from sales of our products, particularly if the networking and telecommunications markets were to experience another significant downturn in the future.

Any decrease in revenues from sales of our products could harm our business more than it would if we offered a more diversified line of products.

Our future success is substantially dependent on the successful introduction of new in-place associative computing products which entails significant risks.

Since 2015, our principal strategic objective has been the development of our first in-place associative computing product.

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 2024 and will be subject to significant risks.

Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major product introduction effort, then the price of our common stock could fall.

There were no impairment indicators at March 31, 2024 or June 30, 2024.

We are dependent on a number of single source suppliers, and if we fail to obtain adequate supplies, our business will be harmed and our prospects for growth will be curtailed.

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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 time period.

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.

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We may experience development, marketing and other technological difficulties that may delay or limit our ability to respond to technological changes, evolving industry standards, competitive developments or end-user requirements.

For example, because we have limited experience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce new products may not be successful and our business may suffer.

For example, because we

have limited experience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce new products may not be successful and our business may suffer.

Other challenges that we face include:

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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.

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

As a 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.

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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, 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.

For example, in the three months ended June 30, 2024 and in fiscal 2024, 2023 and 2022, our largest distributor Avnet Logistics accounted for 36.8%, 50.6%, 48.1% and 38.0%, 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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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.

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

At June 30, 2024, four customers accounted for 26%, 22%, 19% and 14% 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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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.

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Activist stockholders or others may create perceived uncertainties as to the future direction of our business or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential customers, and may affect our relationships with current customers, vendors, investors, and other third parties.

In addition, a proxy contest for the election of directors at our annual meeting would require us to incur significant legal fees and proxy solicitation expenses and require significant time and attention by management and our board of directors.

and our board of directors.

The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.

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We may encounter difficulties in recruiting and retaining a sufficient number of qualified engineers, which could harm our ability to develop new products and adversely impact our relationships with existing and future end-users at a critical stage of development.

The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new OEM customers and develop new products.

The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new customers and develop new products.

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

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.

property rights or that our use of intellectual property otherwise violates the law.

Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturers against the alleged infringement.

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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.

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We are endeavoring to expand our business, and any growth that we are successful in achieving could place a significant strain on our management systems, infrastructure and other resources.

To manage the potential growth of our operations and resulting increases in the number of our personnel, we will need to invest the necessary capital to continue to improve our operational, financial and management controls and our reporting systems and procedures.

Our controls, systems and procedures may prove to be inadequate should we experience significant growth.

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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

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

We are closely monitoring developments in the evolving military conflict with Hamas that began on October 7, 2023, including potential impacts to our business, customers, employees and operations in Israel.

At this time, the impact on GSI Technology are 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.

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.

Changes in Taiwan’s political, social and economic environment may affect our business performance.

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Our international business exposes us to additional risks.

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.

Products shipped to destinations outside of the United States accounted for 66.5%, 47.3%, 51.4% and 53.5% of our net revenues in the three months ended June 30, 2024 and in fiscal 2024, 2023 and 2022, 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.

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

As of July 29, 2024 , our executive officers, directors and entities affiliated with them beneficially owned approximately 34% 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.

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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.

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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 $25.0 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, 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 June 30, 2024, 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