GSI TECHNOLOGY INC

Previous wording

We are a provider of high-performance semiconductor memory solutions for in-place associative computing applications in high growth markets such as artificial intelligence and high-performance computing, including natural language processing and computer vision. Our initial associative processing unit (“APU”) products are focused on applications using similarity search, but have not resulted in material revenues to date. Similarity search is used in visual search queries for ecommerce, computer vision, drug discovery, cybersecurity and service markets such as NoSQL, Elasticsearch, and OpenSearch. We have solutions to accelerate multimodal vector search as an on-prem or SaaS solution for OpenSearch and general Fast Vector Search, and for processing large area SAR images in real-time at high resolution. We also design, develop and market static random access memories, or SRAMs (our current primary revenue source), that operate at speeds of less than 10 nanoseconds, which we refer to as Very Fast SRAMs, primarily for the networking and telecommunications and the military/defense and aerospace markets. We are subject to the highly cyclical nature of the semiconductor industry, which has experienced significant fluctuations, often in connection with fluctuations in demand for the products in which semiconductor devices are used. Our revenues have been substantially impacted by significant fluctuations in sales to our largest customer, Nokia. We expect that future direct and indirect sales to Nokia will continue to fluctuate significantly on a quarterly basis. The networking and telecommunications market has accounted for a significant portion of our net revenues in the past and has declined during the past several years and is expected to continue to decline. In anticipation of the decline of the networking and telecommunications market, we have been using the revenue generated by the sales of high-speed synchronous SRAM products to finance the development of our new in-place associative computing solutions and the marketing and sale of new types of SRAM products such as radiation-hardened and radiation-tolerant SRAMs.

Current wording

We are a provider of high-performance semiconductor memory solutions for in-place associative computing applications in high growth markets such as artificial intelligence and high-performance computing, including natural language processing and computer vision. Our initial associative processing unit (“APU”) products are focused on applications using similarity search, but have not resulted in material revenues to date. Similarity search is used in visual search queries for ecommerce, computer vision, drug discovery, cybersecurity and service markets such as NoSQL, Elasticsearch, and OpenSearch. We have solutions to accelerate multimodal vector search as an on-prem or SaaS solution for OpenSearch and general Fast Vector Search, and for processing large area SAR images in real-time at high resolution. Our revenue is currently generated from the design, development and marketing of static random access memories, or SRAMs, that operate at speeds of less than 10 nanoseconds, which we refer to as Very Fast SRAMs, primarily for the networking and telecommunications, test equipment and the military/defense and aerospace markets We are subject to the highly cyclical nature of the semiconductor industry, which has experienced significant fluctuations, often in connection with fluctuations in demand for the products in which semiconductor devices are used. Our revenues have been substantially impacted by significant fluctuations in sales to our largest end user customers, Nokia and KYEC. We expect that future direct and indirect sales to Nokia and KYEC will continue to fluctuate significantly on a quarterly basis. The networking and telecommunications market has accounted for a significant portion of our net revenues in the past and has declined during the past several years and is expected to continue to decline. In anticipation of the decline of the networking and telecommunications market, we have been using the revenue generated by the sales of high-speed synchronous SRAM products to finance the development of our new in-place associative computing solutions and the marketing and sale of new types of SRAM products such as radiation-hardened and radiation-tolerant SRAMs.

Previous wording

As of March 31, 2024, we had cash and cash equivalents of $14.4 million, with no debt. We have a team in-place with tremendous depth and breadth of experience and knowledge, with a legacy business that is providing an ongoing source of funding for the development of new product lines. Our balance sheet and liquidity position has been strengthened by the recent sale of our Sunnyvale, California property, which we anticipate will provide further financial flexibility and security in the current environment of economic uncertainty. Generally, our primary source of liquidity is cash equivalents. Our level of cash equivalents has historically been sufficient to meet our current and

Current wording

As of March 31, 2025, we had cash and cash equivalents of $13.4 million, with no debt. We have a team in-place with tremendous depth and breadth of experience and knowledge, with a legacy business that is providing an ongoing source of funding for the development of new product lines. Our balance sheet and liquidity position was strengthened by the sale of our Sunnyvale, California property in June 2024. Generally, our primary source of liquidity is cash equivalents. Our level of cash equivalents has historically been sufficient to meet our current and longer term operating and capital needs. We believe that during the next 12 months, continued inflationary pressures, tariffs and trade disputes, higher interest rates and increasing geopolitical tensions will continue to negatively impact general economic activity and demand in our end markets. Although it is difficult to estimate the length or gravity of the continued inflationary pressures, tariffs and trade disputes, higher interest rates, increasing geopolitical tensions and the decline in the global economic environment, are expected to have an adverse effect on our results of operations, financial position, including potential impairments, and liquidity into fiscal 2026.

Previous wording

Revenues. Substantially all of our revenues are derived from sales of our Very Fast SRAM products. Sales to networking and telecommunications OEMs accounted for 32% to 49% of our net revenues during our last three fiscal years. We also sell our products to OEMs that manufacture products for military and aerospace applications such as radar and guidance systems and satellites, for test and measurement applications such as high-speed testers, for automotive applications such as smart cruise control, and for medical applications such as ultrasound and CAT scan equipment**.**

Current wording

Revenues. Substantially all of our revenues are derived from sales of our Very Fast SRAM products. Sales to networking and telecommunications OEMs accounted for 19% to 34% of our net revenues during our last three fiscal years. We also sell our products to OEMs that manufacture products for military and aerospace applications such as radar and guidance systems and satellites, for test and measurement applications such as high-speed testers, for automotive applications such as smart cruise control, and for medical applications such as ultrasound and CAT scan equipment**.**

Previous wording

As is typical in the semiconductor industry, the selling prices of our products generally decline over the life of the product. Our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products. Although we expect the average selling prices of individual products to decline over time, we believe that, over the next several quarters, our overall average selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price, higher density products, and to a lesser extent, recent price increases to our customers due to supply constraints. Our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but, particularly in periods of increasing demand, can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from TSMC, our wafer supplier, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities.

Current wording

The average selling price of our products has increased or remained unchanged in recent years. However, as is typical in the semiconductor industry, the selling prices of our products has historically declined over the life of the product. If prices decline, our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products. Our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but, particularly in periods of increasing demand, can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from TSMC, our wafer supplier, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities.

Previous wording

We sell our products through our direct sales force, international and domestic sales representatives and distributors. Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to changes in working habits that have resulted in a significant number of our customer contacts working from home. Our 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). Transfer of control occurs at the time of shipment, title and the risks and rewards of ownership have passed to the customer, and we have a right to payment. Thus, we will recognize revenue upon shipment of the product for direct sales and sales to our distributors.

Current wording

We sell our products through our direct sales force, international and domestic sales representatives and distributors. Our 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). Transfer of control occurs at the time of shipment, title and the risks and rewards of ownership have passed to the customer, and we have a right to payment. Thus, we will recognize revenue upon shipment of the product for direct sales and sales to our distributors.

Previous wording

Historically, a small number of OEM customers have accounted for a substantial portion of our net revenues, and we expect that significant customer concentration will continue for the foreseeable future. Many of our OEMs use contract manufacturers to manufacture their equipment. Accordingly, a significant percentage of our net revenues is derived from sales to these contract manufacturers. In addition, a significant portion of our sales are

Current wording

Historically, a small number of OEM customers have accounted for a substantial portion of our net revenues, and we expect that significant customer concentration will continue for the foreseeable future. Many of our OEMs use contract manufacturers to manufacture their equipment. Accordingly, a significant percentage of our net revenues is derived from sales to these contract manufacturers. In addition, a significant portion of our sales are made to foreign and domestic distributors who resell our products to OEMs, as well as their contract manufacturers.

Previous wording

made to foreign and domestic distributors who resell our products to OEMs, as well as their contract manufacturers. Direct sales to contract manufacturers accounted for 20.5%, 19.8% and 31.0% of our net revenues for fiscal 2024, 2023 and 2022, respectively. Sales to foreign and domestic distributors accounted for 76.4%, 77.5% and 66.8%** **of our net revenues for fiscal 2024, 2023 and 2022, respectively. The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:

Current wording

Direct sales to contract manufacturers accounted for 7.9%, 20.5% and 19.8% of our net revenues for fiscal 2025, 2024 and 2023, respectively. Sales to foreign and domestic distributors accounted for 91.7%, 76.4% and 77.5%** **of our net revenues for fiscal 2025, 2024 and 2023, respectively. The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:

Previous wording

Nokia was our largest customer in fiscal 2024, 2023 and 2022. Nokia purchases products directly from us and through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 21%, 17% and 29% of our net revenues in fiscal 2024, 2023 and 2022, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to Nokia, and we expect that future direct and indirect sales to Nokia will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2024, 2023 or 2022.

Current wording

KYEC was our largest end user customer in fiscal 2025. Nokia was our largest end user customer in fiscal 2024 and 2023. KYEC purchases product through contract manufacturers and distributors. Based on information provided to us by KYEC’s contract manufacturers and distributors, purchases by KYEC represented approximately 23%, 3% and 2% of our net revenues in fiscal 2025, 2024 and 2023, respectively. Nokia purchases products directly from us and through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 12%, 21% and 17% of our net revenues in fiscal 2025, 2024 and 2023, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to Nokia and KYEC, and we expect that future direct and indirect sales to Nokia and KYEC will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2025, 2024 or 2023.

Previous wording

Cost of Revenues. Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test and burn-in expenses, the amortized cost of production mask sets, stock-based compensation and the cost of materials and overhead from operations. All of our wafer manufacturing and assembly operations, and a significant portion of our wafer sort testing operations, are outsourced. Accordingly, most of our cost of revenues consists of payments to TSMC and independent assembly and test houses. Because we do not have long-term, fixed-price supply contracts, our wafer fabrication, assembly and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors. We have experienced increased costs as a result of supply chain constraints for wafers and outsourced assembly, burn-in and test operations. We review our manufacturing costs on a regular basis and pass on any cost increases to our customers when it makes sense to do so. Cost of revenues also includes expenses related to supply chain management, quality assurance, and final product testing and documentation control activities conducted at our headquarters in Sunnyvale, California and our branch operations in Taiwan.

Current wording

Cost of Revenues. Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test and burn-in expenses, the amortized cost of production mask sets, stock-based compensation and the cost of materials and overhead from operations. All of our wafer manufacturing and assembly operations, and a significant portion of our wafer sort testing operations, are outsourced. Accordingly, most of our cost of revenues consists of payments to TSMC and independent assembly and test houses. Because we do not have long-term, fixed-price supply contracts, our wafer fabrication, assembly and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors. In recent years we have experienced increased costs as a result of supply chain constraints for wafers and outsourced assembly, burn-in and test operations. We review our manufacturing costs on a regular basis and pass on any cost increases to our customers when it makes sense to do so. Cost of revenues also includes expenses related to supply chain management, quality assurance, and final product testing and documentation control activities conducted at our headquarters in Sunnyvale, California and our branch operations in Taiwan.

Previous wording

Research and Development Expenses. Research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-based compensation and fees paid to consultants. We charge all research and development expenses to operations as incurred. We charge mask costs used in production to cost of revenues over a 12-month period. However, we charge costs related to pre-production mask sets, which are not used in production, to research and development expenses at the time they are incurred. These charges often arise as we transition to new process technologies and, accordingly,

Current wording

Research and Development Expenses. Research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-based compensation and fees paid to consultants. We charge all research and development expenses to operations as incurred. We charge mask costs used in production to cost of revenues over a 12-month period. However, we charge

Previous wording

can cause research and development expenses to fluctuate on a quarterly basis. We incurred charges of $2.4 million for a pre-production mask set for our APU2 during the quarter ended December 31, 2023. We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote significant resources to product development activities. In particular, we are devoting substantial resources to the development of our in-place associative computing products. Accordingly, we expect that our research and development expenses will continue to be substantial in future periods and may lead to operating losses in some periods. Such expenses as a percentage of net revenues may fluctuate from period to period.

Current wording

costs related to pre-production mask sets, which are not used in production, to research and development expenses at the time they are incurred. These charges often arise as we transition to new process technologies and, accordingly, can cause research and development expenses to fluctuate on a quarterly basis. We incurred charges of $2.4 million for a pre-production mask set for our APU2 during the quarter ended December 31, 2023. We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote significant resources to product development activities. In particular, we are devoting substantial resources to the development of our in-place associative computing products. Accordingly, we expect that our research and development expenses will continue to be substantial in future periods and may lead to operating losses in some periods. Such expenses as a percentage of net revenues may fluctuate from period to period.

Previous wording

The maximum amount of the remaining potential earnout payments totals approximately $30.0 million at March 31, 2024. We determined that the fair value of this contingent consideration liability was $5.8 million at the acquisition date. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at March 31, 2023 and 2024 in the amount of $1.1 million and $160,000, respectively

Current wording

The maximum amount of the remaining potential earnout payments totals approximately $30.0 million at March 31, 2025. We determined that the fair value of this contingent consideration liability was $5.8 million at the acquisition date. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheets at March 31, 2024 and 2025 in the amount of $160,000 and $0, respectively.

Previous wording

At each reporting period, the contingent consideration liability is re-measured at then current fair value with changes recorded in the Consolidated Statements of Operations. Changes in any of the inputs may result in significant adjustments to the recorded fair value. Re-measurement of the contingent consideration liability during the fiscal year ended March 31, 2024 resulted in a decrease of the contingent consideration liability of $0.9 million.

Current wording

At each reporting period, the contingent consideration liability is re-measured at then current fair value with changes recorded in the Consolidated Statements of Operations. Changes in any of the inputs may result in

Previous wording

Net Revenues. Net revenues decreased by 26.7% from $29.7 million in fiscal 2023 to $21.8 million in fiscal 2024.** **The overall average selling price of all units shipped in fiscal 2024 increased by 20.8% in fiscal 2024 compared to the prior fiscal year. The decrease in net revenues is related to the current economic environment which has led to cautionary spending by our customers and purchases made as a result of supply chain constraints in the previous periods. Units shipped decreased by 39.3% in fiscal 2024 compared to fiscal 2023. The networking and telecommunications markets represented 34% and 32% of shipments in fiscal 2024 and in fiscal 2023, respectively. Direct and indirect sales to Nokia, currently our largest customer, decreased by $500,000 from $5.0 million in fiscal 2023 to $4.5 million fiscal 2024. Shipments to Nokia will continue to fluctuate on a quarterly basis as a result of demand and shipments to its end customers. While recent customer order patterns have been particularly variable, these fluctuations are related to economic and external factors, which include worldwide inflationary pressures, higher interest rates and the decline in the global economic environment. Shipments of our SigmaQuad product line accounted for 51.2% of total shipments in fiscal 2024 compared to 49.1% of total shipments in fiscal 2023

Current wording

Net Revenues. Net revenues decreased by 5.7% from $21.8 million in fiscal 2024 to $20.5 million in fiscal 2025.** **The overall average selling price of all units shipped in fiscal 2025 increased by 0.7% in fiscal 2025 compared to the prior fiscal year. Units shipped decreased by 6.4% in fiscal 2025 compared to fiscal 2024. KYEC, which is a leading provider in the test and measurement market, was our largest end user customer in fiscal 2025. Direct and indirect sales to KYEC increased by $4.1 million from $544,000 in fiscal 2024 to $4.6 million fiscal 2025. The networking and telecommunications markets represented 19% and 34% of shipments in fiscal 2025 and in fiscal 2024, respectively. Direct and indirect sales to Nokia decreased by $2.0 million from $4.5 million in fiscal 2024 to $2.5 million fiscal 2025. Shipments to Nokia will continue to fluctuate on a quarterly basis as a result of demand and shipments to its end customers. While recent customer order patterns have been particularly variable, these fluctuations are related to economic and external factors, which include worldwide inflationary pressures, higher interest rates, tariffs and trade disputes, increasing geopolitical tensions and the decline in the global economic environment. In addition, during the second half of fiscal 2025, we have seen early indications of an improvement in our SRAM business. Existing customers are depleting their channel inventory, and we anticipate they will resume ordering in the upcoming quarters.

Previous wording

Cost of Revenues. Cost of revenues decreased by 17.2% from $12.0 million in fiscal 2023 to $9.9 million in fiscal 2024. Cost of revenues decreased as a result of the lower volume of units shipped in fiscal 2024 compared to fiscal 2023 as discussed above. Cost of revenues included a provision for excess and obsolete inventories of $180,000 in fiscal 2024 compared to $226,000 in fiscal 2023. Cost of revenues included stock-based compensation expense of $228,000 and $202,000, respectively, in fiscal 2024 and fiscal 2023.

Current wording

Cost of Revenues. Cost of revenues increased by 4.8% from $9.9 million in fiscal 2024 to $10.4 million in fiscal 2025. The increase in cost of revenues was primarily related to changes in the mix of products and customers. Cost of revenues included a provision for excess and obsolete inventories of $305,000 in fiscal 2025 compared to $180,000 in fiscal 2024. Cost of revenues included stock-based compensation expense of $199,000 and $228,000,

Previous wording

Gross Profit. Gross profit decreased by 33.1% from $17.7 million in fiscal 2023 to $11.8 million in fiscal 2024. Gross margin decreased from 59.6% in fiscal 2023 to 54.3% in fiscal 2024. The change in gross profit is primarily related to the change in net revenues discussed above. The decrease in gross margin was primarily related to change in the mix of products and customers and also reflects the impact of fixed overhead on lower shipment levels compared to the prior year.

Current wording

Gross Profit. Gross profit decreased by 14.2% from $11.8 million in fiscal 2024 to $10.1 million in fiscal 2025. Gross margin decreased from 54.3% in fiscal 2024 to 49.4% in fiscal 2025. The change in gross profit is primarily related to the change in net revenues discussed above. The decrease in gross margin was primarily related to change in the mix of products and customers and also reflects the impact of fixed overhead on lower shipment levels compared to the prior year. Gross margin in fiscal 2025 was also impacted by the severance related payments related to our August 2024 cost reduction initiative discussed above.

Previous wording

Research and Development Expenses. Research and development expenses decreased 7.9% from $23.6 million in fiscal 2023 to $21.7 million in fiscal 2024. The reduction in research and development spending in fiscal 2024 reflects the impact of cost reduction measures implemented in the quarter ended December 31, 2022. The decrease in research and development spending was primarily related to decreases of $2.2 million in payroll related expenses and $1.4 million in outside consulting expenses for the development of our APU-2 product. The decrease in research and development spending was partially offset by an increase in pre-production mask costs of $2.4 million related to our APU-2 product. Research and development expenses in fiscal 2024 were also offset by $435,000 of funding received under the Direct to Phase II award for the development of a Next-Generation Associative Processing Unit-2 for Enhanced Space-Based Capabilities. Research and development expenses included stock-based compensation expense of $1.4 million and $1.3 million in fiscal 2024 and fiscal 2023, respectively.

Current wording

Research and Development Expenses. Research and development expenses decreased 26.2% from $21.7 million in fiscal 2024 to $16.0 million in fiscal 2025. The decrease in research and development spending was primarily related to a decrease in pre-production mask costs of $2.4 million related to our APU2 product and a decrease of $2.2 million in payroll related expenses, partially offset by a lesser increase in outside consulting expenses. The decrease in payroll related expenses was related to the cost reduction measures implemented in August 2024. Research and development expenses in fiscal 2025 and fiscal 2024 were also offset by $1.2 million and $435,000, respectively, of funding received under the government contracts discussed above. Research and development expenses included stock-based compensation expense of $1.0 million and $1.4 million in fiscal 2025 and fiscal 2024, respectively.

Previous wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 6.3% from $9.9 million in fiscal 2023 to $10.6 million in fiscal 2024. In fiscal 2024, the value of contingent consideration liability resulting from the MikaMonu acquisition decreased by $892,000 compared to a decrease of $1.7 million in fiscal 2023 as a result of re-measurement of contingent consideration liability in each year. Decreases of $554,000 in payroll related expenses and $196,000 in outside sales representative commissions were partially offset by increases of $284,000 in outside consultants and $234,000 in professional fees. Selling, general and administrative expenses included stock-based compensation expense of $1.2 million and $951,000 in fiscal 2024 and fiscal 2023, respectively.

Current wording

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 1.9% from $10.6 million in fiscal 2024 to $10.8 million in fiscal 2025. In fiscal 2025, the value of contingent consideration liability resulting from the MikaMonu acquisition decreased by $160,000 compared to a decrease of $892,000 million in fiscal 2024 as a result of re-measurement of contingent consideration liability in each year. Decreases of $267,000 in outside sales representative commissions and $187,000 in payroll related expense were partially offset by an increase of $133,000 in professional fees. Selling, general and administrative expenses included stock-based compensation expense of $1.1 million and $1.2 million in fiscal 2025 and fiscal 2024, respectively.

Previous wording

Interest Income and Other (Expense), Net. Interest income and other (expense), net increased from income of $202,000 in fiscal 2023 to income of $414,000 in fiscal 2024. Interest income increased by $232,000 due to higher interest rates received on cash and short-term investments. The foreign currency exchange loss increased from ($121,000) in fiscal 2023 to ($127,000) in fiscal 2024. The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel.

Current wording

Interest Income and Other (Expense), Net. Interest income and other (expense), net decreased from income of $414,000 in fiscal 2024 to income of $326,000 in fiscal 2025. Interest income decreased by $96,000 primarily due to lower cash balances invested in money market funds. The foreign currency exchange loss decreased from ($127,000) in fiscal 2024 to ($119,000) in fiscal 2025. The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel.

Previous wording

Provision (benefit) for Income Taxes. The provision for income taxes decreased from $372,000 in fiscal 2023 to $70,000 in fiscal 2024. The provision for income taxes in fiscal 2024 included a benefit of ($117,000) related to the approval by the Israel tax authorities of a “Preferred Company” tax rate that was retroactively applied to fiscal 2023. Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2024 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $20.2 million in net deferred tax assets in fiscal 2024. Reductions in uncertain tax benefits due to lapses in the statute of limitations were not significant in the years ended March 31, 2024 and 2023.

Current wording

Provision (benefit) for Income Taxes. The provision for income taxes increased from $70,000 in fiscal 2024 to $130,000 in fiscal 2025. The provision for income taxes in fiscal 2024 included a benefit of ($117,000) related to the approval by the Israel tax authorities of a “Preferred Company” tax rate that was retroactively applied to fiscal 2023. Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2025 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $22.8 million in net deferred tax assets in fiscal 2025. Reductions in uncertain tax benefits due to lapses in the statute of limitations were $767,000 in fiscal 2025 and were not significant in fiscal 2024.

Previous wording

Net Loss. Net loss was ($16.0) million in fiscal 2023 compared to a net loss of ($20.1) million in fiscal 2024. This decrease was primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Current wording

Net Loss. Net loss was ($20.1) million in fiscal 2024 compared to a net loss of ($10.6) million in fiscal 2025. This decrease was primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Previous wording

As of March 31, 2024, our principal sources of liquidity were cash and cash equivalents of $14.4 million** **compared to $30.6 million of cash, cash equivalents and short-term investments as of March 31, 2023. Cash and cash equivalents totaling $9.4 million were held in foreign locations as of March 31, 2024.

Current wording

As of March 31, 2025, our principal sources of liquidity were cash and cash equivalents of $13.4 million** **compared to $14.4 million of cash, cash equivalents and short-term investments as of March 31, 2024. Cash and cash equivalents totaling $8.8 million were held in foreign locations as of March 31, 2025.

Previous wording

The primary uses of cash in fiscal 2023 were the net loss of $16.0 million, a reduction in accrued expenses and other liabilities of $2.3 million and an increase in inventories of $2.0 million. The reduction in accrued expenses and other liabilities was primarily related to the payment of fiscal 2022 year-end accruals for incentive compensation. The uses of cash in fiscal 2023 were less than the net loss due to non-cash items including stock-based compensation of $2.5 million and depreciation and amortization expenses of $1.0 million. The primary source of cash in fiscal 2023 was a decrease in accounts receivable of $1.1 million.

Current wording

Net cash used in operating activities was $13.0 million and $17.4 million for fiscal 2025 and fiscal 2024, respectively. The primary uses of cash in fiscal 2025 were the net loss of $10.6 million and an increase of $1.1 million in prepaid expenses and other assets. The increase in prepaid expenses and other assets was primarily related to a production mask set for our APU2. The primary source of cash in fiscal 2025 was a reduction in inventories of $781,000. Cash from operations in fiscal 2025 was adjusted for the non-cash gain on the sale of assets in the amount of $5.8 million. The uses of cash in fiscal 2025 were offset by non-cash items including stock-based compensation of $2.3 million and depreciation and amortization expenses of $665,000.

Previous wording

Net cash used in operating activities was $17.4 million and $16.8 million for fiscal 2024 and fiscal 2023, respectively. The primary uses of cash in fiscal 2024 were the net loss of $20.1 million and a decrease of $1.6 million in accrued expenses and other liabilities. The reduction in accrued expenses and other liabilities was primarily related to decreases in compensation related accruals, income taxes payable and deferred revenue. The uses of cash in fiscal 2024 were less than the net loss due to non-cash items including stock-based compensation of

Current wording

The primary uses of cash in fiscal 2024 were the net loss of $20.1 million and a decrease of $1.6 million in accrued expenses and other liabilities. The reduction in accrued expenses and other liabilities was primarily related to decreases in compensation related accruals, income taxes payable and deferred revenue. The uses of cash in fiscal 2024 were less than the net loss due to non-cash items including stock-based compensation of $2.8 million and depreciation and amortization expenses of $927,000. The primary source of cash in fiscal 2024 was a decrease in inventories of $1.3 million.

Previous wording

Net cash provided by investing activities was $2.8 million and $6.7 million in fiscal 2024 and 2023, respectively. Investment activities in fiscal 2024 primarily consisted of the maturity of certificates of deposit and agency bonds of $3.4 million partially offset by the purchase of property and equipment of $645,000. Investment activities in fiscal 2023 primarily consisted of the maturity of certificates of deposit and agency bonds of $7.0 million partially offset by the purchase of property and equipment of $316,000.

Current wording

Net cash provided by investing activities was $11.4 million and $2.8 million in fiscal 2025 and 2024, respectively. Investment activities in fiscal 2025 primarily consisted of the net proceeds of $11.2 million from the sale and leaseback transaction discussed above, partially offset by the purchase of property and equipment of $45,000. Investment activities in fiscal 2024 primarily consisted of the maturity of certificates of deposit and agency bonds of $3.4 million partially offset by the purchase of property and equipment of $645,000.

Previous wording

Cash provided by financing activities was $1.8 million and $402,000 in fiscal 2024 and fiscal 2023, respectively and consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans.

Current wording

Cash provided by financing activities was $633,000 million and $1.8 million in fiscal 2025 and fiscal 2024, respectively and primarily consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans. Net cash provided by financing activities in fiscal 2024 also included proceeds from the sale of common stock pursuant to an At-the-Market offering of $153,000.

Previous wording

At March 31, 2024, we had total minimum lease obligations of approximately $1.6 million from April 1, 2023 through April 30, 2027, under non-cancelable operating leases for our facilities.

Current wording

At March 31, 2025, we had total minimum lease obligations of approximately $12.6 million from April 1, 2025 through May 30, 2034, under non-cancelable operating leases for our facilities.

Previous wording

While higher interest rates, worldwide inflationary pressures and the decline in the global economic environment have created significant uncertainty as to general economic and capital market conditions for the remainder of calendar 2024 and beyond, we believe that our existing balances of cash and cash equivalents, and cash flow expected to be generated from our future operations and the net proceeds of approximately $11.2 million from the sale of our headquarters building in Sunnyvale, CA which closed on June 6, 2024 will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints and the continuation of the impact of higher interest rates and inflation may have on our business, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing team. Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake. On June 28, 2023, we filed a registration statement on Form S-3, which was declared effective by the SEC on July 19, 2023. On August 1, 2023, we commenced a registered securities offering pursuant to a Sales Agreement (the “Sales Agreement”) with Needham & Company, LLC (“Needham”). The Sales Agreement provides that we may offer and sell our common stock having an aggregate offering price of up to $25.0 million from time to time (the “Offering”) through Needham, acting as our sales agent. We sold 133,000 shares pursuant to the offering at an average price of $4.20 for proceeds of $542,000, less offering costs of $389,000 during the quarter ended September 30, 2023. We cannot assure that additional equity or debt financing, if required, will be available on terms that are acceptable or at all.

Current wording

While higher interest rates, worldwide inflationary pressures, tariffs and trade disputes, increasing geopolitical tensions and the decline in the global economic environment have created significant uncertainty as to general economic and capital market conditions for the remainder of calendar 2025 and beyond, we believe that our existing balances of cash and cash equivalents, and cash flow expected to be generated from our future operations will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints and the continuation of the impact of higher interest rates and inflation may have on our business, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing team. Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake. On June 28,

Previous wording

As of March 31, 2024, we had $2.2 million in purchase obligations for facility leases, wafers and software and test purchase obligations that are binding commitments, of which $1.2 million are payable in the next twelve months and $1.0 million are committed in the long term.

Current wording

As of March 31, 2025, we had $15.1 million in purchase obligations for facility leases, wafers and software and test purchase obligations that are binding commitments, of which $2.9 million are payable in the next twelve months and $12.2 million are committed in the long term.

Previous wording

In connection with the acquisition of MikaMonu on November 23, 2015, we are required to make contingent consideration payments to the former MikaMonu shareholders conditioned upon the achievement of certain revenue

Current wording

In connection with the acquisition of MikaMonu on November 23, 2015, we are required to make contingent consideration payments to the former MikaMonu shareholders conditioned upon the achievement of certain revenue targets for products based on the MikaMonu technology. As of March 31, 2025, the accrual for potential payment of contingent consideration was $0.

Previous wording

*Contingent Consideration.*The fair value of the contingent consideration liability potentially payable in connection with our acquisition of MikaMonu was initially determined as of the acquisition date using unobservable inputs. These inputs included the estimated amount and timing of future revenue, the probability of achievement of the revenue forecast, and a risk-adjusted discount rate to adjust the probability-weighted cash flow payments to their present value. Since the acquisition date, at each reporting period, the contingent consideration liability is re-measured at its then current fair value with changes recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Due to revisions to the amount of expected revenue, the timing of revenue to be recognized prior to the end of the earnout period and the probability of achievement of the APU revenue forecast, the contingent consideration liability decreased by $892,000 from March 31, 2023 to March 31, 2024. Future changes to any of the inputs, including forecasted revenues from a new product, which are inherently difficult to estimate, or the valuation model selected, may result in material adjustments to the recorded fair value.

Current wording

inputs. These inputs included the estimated amount and timing of future revenue, the probability of achievement of the revenue forecast, and a risk-adjusted discount rate to adjust the probability-weighted cash flow payments to their present value. Since the acquisition date, at each reporting period, the contingent consideration liability is re-measured at its then current fair value with changes recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Due to revisions to the amount of expected revenue, the timing of revenue to be recognized prior to the end of the earnout period and the probability of achievement of the APU revenue forecast, the contingent consideration liability decreased by $160,000 from March 31, 2024 to March 31, 2025. Future changes to any of the inputs, including forecasted revenues from a new product, which are inherently difficult to estimate, or the valuation model selected, may result in material adjustments to the recorded fair value.