What changed in this filing

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Item 1A. Risk Factors

2025-02-10 compared with 2024-11-01 · 48 added, 35 removed, 426 unchanged (16% of the section changed)

14 unchanged sentences

● 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.

● Higher interest rates, worldwide inflationary pressures, increasing geopolitical tensions, 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.

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● The international political, social and economic environment, including the risks for escalating military conflicts, particularly relating to Israel and Taiwan, may affect our business performance.

● United States export controls could impair our ability to compete in international markets or subject us to liability if we violate the controls.

● Certain of our independent suppliers and OEM customers have operations in the Pacific Rim, an area subject to significant risk of natural disasters and outbreak of contagious diseases.

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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 ten fiscal quarters ended September 30, 2024, we recorded net revenues of as much as $9.0 million and as little as $4.6 million, and in nine of those quarters, operating losses from $3.2 million to $6.7 million.

For example, in the eleven fiscal quarters ended December 31, 2024, we recorded net revenues of as much as $9.0 million and as little as $4.6 million, and in ten 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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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, 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, increasing geopolitical tensions, 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.

However, the magnitude of such impact on our business and its duration is highly uncertain.

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

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

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

Purchases by Nokia represented approximately 20%, 21%, 17% and 29% of our net revenues in the six months ended September 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.

We do not have long-term contracts with Nokia or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products.

We expect that future direct and indirect sales to Nokia and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods.

KYEC and Nokia account for a significant percentage of our net revenues.

If these customers, or any of our other major customers, reduces the amount they purchase or stop purchasing our products, our operating results will suffer.

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

Purchases by Nokia represented approximately 14%, 21%, 17% and 29% of our net revenues in the nine months ended December 31, 2024 and in fiscal 2024, 2023 and 2022, respectively.

In fiscal 2025, KYEC is expected to be our largest end user customer.

Purchases by KYEC represented approximately 20%, 3%, 2% and 1% of our net revenues in the nine months ended December 31, 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 KYEC and Nokia, and our future success is dependent to a large degree on the business success of these customers over which we have no control.

We do not have long-term contracts with KYEC and Nokia or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products.

We expect that future direct and indirect sales to KYEC and Nokia and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods.

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

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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.

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.

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.

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

This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2025 and will be subject to significant risks.

This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2025 and beyond 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.

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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.

Higher interest rates, worldwide inflationary pressures, increasing geopolitical tensions, 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, increasing geopolitical tensions, 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 other than the quarter ended December 31, 2024, have 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, increasing geopolitical tensions, 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, 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, increasing geopolitical tensions, 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.

18 unchanged sentences

in fiscal 2016.

We test for goodwill impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired.

We test for goodwill impairment on an annual basis, or more frequently if events or

changes in circumstances indicate that the asset is more likely than not impaired.

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, 2024 and September 30, 2024, we had a goodwill balance of $8.0 million and intangible assets of $1.6 million and $1.4 million at March 31, 2024 and September 30, 2024, respectively, from the MikaMonu acquisition.

As of March 31, 2024 and December 31, 2024, we had a goodwill balance of $8.0 million and intangible assets of $1.6 million and $1.4 million at March 31, 2024 and December 31, 2024, 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.

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

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

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

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

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.

There were no impairment indicators at March 31, 2024 or December 31, 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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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, 2024 and in fiscal 2024, 2023 and 2022, our largest distributor Avnet Logistics accounted for 42.9%, 50.6%, 48.1% and 38.0%, respectively, of our net revenues.

For example, in the nine months ended December 31, 2024 and in fiscal 2024, 2023 and 2022, our largest distributor Avnet Logistics accounted for 48.6%, 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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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, 2024, four customers accounted for 28%, 27%, 17% and 13% of our accounts receivable, respectively.

At December 31, 2024, two customers accounted for 53% and 35% 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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If any of these changes were to occur, our business could be harmed, and our stock price could decline.

We are subject to governmental export and import controls that could impair our ability to compete in international markets or subject us to liability if we violate the controls.

Our offerings are subject to export controls and economic sanctions laws and regulations that prohibit the delivery of certain solutions and services without the required export authorizations or export to locations, governments, and persons targeted by applicable sanctions.

While we have processes to prevent our offerings from being exported in violation of these laws, including obtaining authorizations as appropriate and screening against U.S.

government and international lists of restricted and prohibited persons, we cannot guarantee that these processes will prevent all violations of export control and sanctions laws.

If our channel distributors fail to obtain appropriate import, export, or re-export licenses or permits, we may also be adversely affected, through reputational harm as well as other negative consequences including government investigations and penalties.

We presently incorporate export control and sanctions compliance requirements in our channel distributor agreements.

Complying with export control and sanctions regulations for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities.

Violations of applicable sanctions or export control laws can result in fines or penalties.

Changes in trade policy in the United States and other countries, including the imposition of tariffs and the resulting consequences, may adversely impact our business, results of operations and financial condition.

International trade disputes, geopolitical tensions, and military conflicts have led, and continue to lead, to new and increasing export restrictions, trade barriers, tariffs, and other trade measures that can increase our manufacturing and transportation costs, limit our ability to sell to certain customers or markets, impede or slow the movement of our goods across borders, or otherwise restrict our ability to conduct operations.

Increasing protectionism, economic nationalism, and national security concerns may also lead to further changes in trade policy.

We cannot predict what actions may be taken with respect to export regulations, tariffs or other trade regulations between the United States and other countries, what products or companies may be subject to such actions, or what actions may be taken by other countries in retaliation.

If any of these actions were to occur, they could result in the loss of customers and harm to our revenue, market share, competitive position and operating performance.

Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 62.6%, 47.3%, 51.4% and 53.5% of our net revenues in the six months ended September 30, 2024 and in fiscal 2024, 2023 and 2022, respectively.

Products shipped to destinations outside of the United States accounted for 59.6%, 47.3%, 51.4% and 53.5% of our net revenues in the nine months ended December 31, 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 growing military conflict.

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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.

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.

We do not maintain sufficient business interruption and other insurance policies to compensate us for all losses that may occur.

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

As of October 28, 2024 , our executive officers, directors and entities affiliated with them beneficially owned approximately 27% of our outstanding common stock.

As of January 31, 2025 , our executive officers, directors and entities affiliated with them beneficially owned approximately 27% 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 September 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.

At December 31, 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:

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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