{"url_path":"/sec/gsit/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-06-05","source_url":"https://www.sec.gov/Archives/edgar/data/1126741/0001104659-26-070962-index.html","accession_number":"0001104659-26-070962","cik":"0001126741","ticker":"GSIT","issuer_name":"GSI TECHNOLOGY INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1126741/0001104659-26-070962-index.html","primary_entity_key":"0001126741","primary_entity_name":"GSI TECHNOLOGY INC"},"word_count":5505,"has_tables":true,"body_markdown":"Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\n*The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ substantially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Forward Looking Statements”, “Risk Factors” and elsewhere in this report. The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this report.*\n\n*This discussion and analysis generally covers our financial condition and results of operations for the fiscal year ended March 31, 2026, including year-over-year comparisons versus the fiscal year ended March 31, 2025. Our*[*Annual Report on Form 10-K*](https://www.sec.gov/ix?doc=/Archives/edgar/data/1126741/000155837023011516/gsit-20230331x10k.htm)*for the fiscal year ended March 31, 2025 includes year-over-year comparisons versus the fiscal year ended March 31, 2024 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”*\n\n​\n\n**Overview**\n\nWe 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 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 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, KYEC and Cadence Design Systems. We expect that future direct and indirect sales to Nokia, KYEC and Cadence Design Systems 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.\n\nAs of March 31, 2026, we had cash and cash equivalents of $67.2 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. In addition, between May and August 2025, we sold 4,508,350 shares of common stock pursuant to an At-the-Market offering, at an average price of $3.29 for net proceeds of $14.3 million. On October 21, 2025, we entered into a securities purchase agreement with an institutional investor pursuant to which we agreed to issue and sell, in a registered direct offering (the “Registered Direct Offering”) an aggregate of (i) 1,508,462 shares of our common stock, $0.001 par value per share, at a price of $10.00 per share and (ii) Pre-Funded Warrants to purchase 3,491,538 shares of Common Stock. Each of the Pre-Funded Warrants is exercisable for one share of Common Stock at the exercise price of $0.01 per Pre-Funded Warrant, immediately exercisable, and may be exercised at any time. The Purchaser’s ability to exercise its Pre-Funded Warrants in exchange for shares of Common Stock is subject to certain beneficial ownership limitations set\n\n44\n\n[Table of Contents](#TOC)\n\nforth therein. The gross proceeds to the Company from the Registered Direct Offering were $50.0 million, before deducting the placement agents’ fees and other offering expenses payable by the Company of $3.1 million. The Registered Direct Offering closed on October 22, 2025. All of the Pre-Funded Warrants were exercised in October 2025.\n\n*Revenues.* Substantially all of our revenues are derived from sales of our Very Fast SRAM products. Sales to networking and telecommunications OEMs accounted for 16% 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**.**\n\nThe 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.\n\nWe may experience fluctuations in quarterly net revenues for a number of reasons. Historically, orders on hand at the beginning of each quarter are insufficient to meet our revenue objectives for that quarter and are generally cancelable up to 30 days prior to scheduled delivery. Accordingly, we depend on obtaining and shipping orders in the same quarter to achieve our revenue objectives. In addition, the timing of product releases, purchase orders and product availability could result in significant product shipments at the end of a quarter. Failure to ship these products by the end of the quarter may adversely affect our operating results. Furthermore, our customers may delay scheduled delivery dates and/or cancel orders within specified timeframes without significant penalty.\n\nWe 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.\n\nHistorically, 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. Direct sales to contract manufacturers accounted for 4.9%, 7.9% and 20.5% of our net revenues for fiscal 2026, 2025 and 2024, respectively. Sales to foreign and domestic distributors accounted for 93.3%, 91.7% and 76.4%****of\n\n45\n\n[Table of Contents](#TOC)\n\nour net revenues for fiscal 2026, 2025 and 2024, respectively. The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Fiscal Year Ended**\n\n​\n\n​\n\n​\n\n**March 31, **\n\n​\n\n​\n\n  ​ ​ ​\n\n**2026**\n\n**  ​ ​ ​**\n\n**2025**\n\n**  ​ ​ ​**\n\n**2024**\n\n \n\nContract manufacturer:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nFlextronics Technology\n\n​\n\n2.3\n\n%  \n\n2.7\n\n%  \n\n13.5\n\n%\n\nDistributors:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nAvnet Logistics\n\n​\n\n63.7\n\n​\n\n49.6\n\n​\n\n50.6\n\n​\n\nHolystone\n\n​\n\n14.2\n\n​\n\n22.6\n\n​\n\n2.5\n\n​\n\nNexcomm\n\n​\n\n8.9\n\n​\n\n9.8\n\n​\n\n9.3\n\n​\n\nKYEC was our largest end user customer in fiscal 2026 and 2025. Nokia was our largest end user customer in fiscal 2024. 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 14%, 23% and 3% of our net revenues in fiscal 2026, 2025 and 2024, 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 6%, 12% and 21% of our net revenues in fiscal 2026, 2025 and 2024, respectively. Cadence Design Systems purchases products through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Cadence Design Systems represented approximately 12%, 8% and 8% of our net revenues in fiscal 2026, 2025 and 2024, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to Nokia, KYEC and Cadence Design Systems, and we expect that future direct and indirect sales to Nokia, KYEC and Cadence Design Systems 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 2026, 2025 or 2024.\n\n*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.\n\n*Gross Profit.*    Our gross profit margins vary among our products and are generally greater on our radiation hardened and radiation tolerant SRAMs, on our higher density products and, within a particular density, greater on our higher speed and industrial temperature products. We expect that our overall gross margins will fluctuate from period to period as a result of shifts in product mix, changes in average selling prices and our ability to control our cost of revenues, including costs associated with outsourced wafer fabrication and product assembly and testing.\n\n*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\n\n46\n\n[Table of Contents](#TOC)\n\ncosts 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 incurred charges of $3.2 million for intellectual property rights that we purchased for our Plato project during the quarter ended December 31, 2025. 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.\n\n*Selling, General and Administrative Expenses.*     Selling, general and administrative expenses consist primarily of commissions paid to independent sales representatives, salaries, stock-based compensation and related expenses for personnel engaged in sales, marketing, administrative, finance and human resources activities, professional fees, costs associated with the promotion of our products and other corporate expenses. We expect that our sales and marketing expenses will increase in absolute dollars in future periods if we are able to grow and expand our sales force but that, to the extent our revenues increase in future periods, these expenses will generally decline as a percentage of net revenues. We also expect that, in support of any future growth that we are able to achieve, general and administrative expenses will generally increase in absolute dollars.\n\n**Acquisition**\n\nOn November 23, 2015, we acquired all of the outstanding capital stock of privately held MikaMonu Group Ltd. (“MikaMonu”), a development-stage, Israel-based company that specialized in in-place associative computing for markets including big data, computer vision and cyber security. MikaMonu, located in Tel Aviv, held 12 United States patents and had a number of pending patent applications.\n\nThe allocation of the purchase price to acquired identifiable intangible assets and goodwill was based on their estimated fair values at the date of acquisition. The fair value allocated to patents was $3.5 million and the residual value allocated to goodwill was $8.0 million.\n\nThe acquisition agreement provided for potential “earnout” payments to the former MikaMonu shareholders in cash or shares of GSI Technology’s common stock, at our discretion, during a period of up to ten years following the closing of the acquisition if certain revenue targets for products based on MikaMonu technology were achieved. December 31, 2025 was the final date during which revenues from the sale of qualifying products were measured for purposes of calculating earnout consideration under the acquisition agreement. None of the revenue targets have been achieved, the amount of revenues recognized during the measurement period was not sufficient to create an earnout payment obligation, and no revenue-based earnout payments have been paid.\n\n47\n\n[Table of Contents](#TOC)\n\n**Results of Operations**\n\nThe following table sets forth statement of operations data as a percentage of net revenues for the periods indicated:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Year Ended March 31, **\n\n​\n\n​\n\n​\n\n**2026**\n\n​\n\n​\n\n**2025**\n\n​\n\nNet revenues\n\n​\n\n100.0\n\n%  \n\n​\n\n100.0\n\n%  \n\nCost of revenues\n\n​\n\n45.5\n\n​\n\n​\n\n50.6\n\n​\n\nGross profit\n\n​\n\n54.5\n\n​\n\n​\n\n49.4\n\n​\n\nOperating expenses:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\nResearch and development\n\n​\n\n79.4\n\n​\n\n​\n\n78.0\n\n​\n\nSelling, general and administrative\n\n​\n\n44.7\n\n​\n\n​\n\n52.5\n\n​\n\nGain from sale of assets\n\n​\n\n—\n\n​\n\n​\n\n(28.2)\n\n​\n\nTotal operating expenses\n\n​\n\n124.1\n\n​\n\n​\n\n102.3\n\n​\n\nLoss from operations\n\n​\n\n(69.6)\n\n​\n\n​\n\n(52.9)\n\n​\n\nInterest and other income, net\n\n​\n\n16.3\n\n​\n\n​\n\n1.6\n\n​\n\nLoss before income taxes\n\n​\n\n(53.3)\n\n​\n\n​\n\n(51.3)\n\n​\n\nProvision (benefit) for income taxes\n\n​\n\n(0.6)\n\n​\n\n​\n\n0.6\n\n​\n\nNet loss\n\n​\n\n(52.7)\n\n​\n\n​\n\n(51.9)\n\n​\n\n​\n\nFiscal Year Ended March 31, 2026 Compared to Fiscal Year Ended March 31, 2025\n\n*Net Revenues.*    Net revenues increased by 22.4% from $20.5 million in fiscal 2025 to $25.1 million in fiscal 2026.****The overall average selling price of all units shipped in fiscal 2026 increased by 16.3% in fiscal 2026 compared to the prior fiscal year. Units shipped increased by 5.7% in fiscal 2026 compared to fiscal 2025. KYEC, which is a leading provider in the test and measurement market, was our largest end user customer in fiscal 2026 and 2025. Direct and indirect sales to KYEC decreased by $1.0 million from $4.6 million in fiscal 2025 to $3.6 million fiscal 2026. Direct and indirect sales to Nokia decreased by $1.0 million from $2.5 million in fiscal 2025 to $1.5 million fiscal 2026. Direct and indirect sales to Cadence Design Systems increased by $1.5 million from $1.6 million in fiscal 2025 to $3.1 million in fiscal 2026. The decrease in Nokia’s purchases in the past several fiscal years is due in part to Nokia’s decision to replace SRAM with alternative memory solutions. The test and measurement markets represented 38% and 32% of shipments in fiscal 2026 and in fiscal 2025, respectively. The networking and telecommunications markets represented 16% and 19% of shipments in fiscal 2026 and in fiscal 2025, respectively. Shipments to KYEC, Nokia and Cadence Design Systems will continue to fluctuate on a quarterly basis as a result of demand and shipments to their 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, increased or new tariffs, export controls and other trade barriers and trade disputes, increasing geopolitical tensions and the challenging global economic environment.\n\n*Cost of Revenues.*    Cost of revenues increased by 10.1% from $10.4 million in fiscal 2025 to $11.4 million in fiscal 2026. The increase in cost of revenues was primarily related to the increase in net revenues in fiscal 2026 compared to fiscal 2025 and changes in the mix of products and customers. Cost of revenues included a provision for excess and obsolete inventories of $301,000 and $305,000 in fiscal 2026 and in fiscal 2025, respectively. Cost of revenues included stock-based compensation expense of $231,000 and $199,000, respectively, in fiscal 2026 and fiscal 2025. Cost of revenues in fiscal 2025 includes $204,000 in severance related payments related to our August 2024 cost reduction initiative.\n\n48\n\n[Table of Contents](#TOC)\n\n*Gross Profit.*    Gross profit increased by 35.1% from $10.1 million in fiscal 2025 to $13.7 million in fiscal 2026. Gross margin increased from 49.4% in fiscal 2025 to 54.5% in fiscal 2026. The change in gross profit is primarily related to the change in net revenues discussed above. The increase in gross margin was primarily related to change in the mix of products and customers and also reflects the impact of fixed overhead on higher 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.\n\n*Research and Development Expenses.*    Research and development expenses increased 24.6% from $16.0 million in fiscal 2025 to $19.9 million in fiscal 2026. The increase in research and development spending was primarily related to charges of $3.2 million for intellectual property rights that we purchased for our Plato project during the quarter ended December 31, 2025, increases in outside consulting expenses, also related to our Plato project and lesser increases in payroll related expenses, partially offset by a lesser decrease in software maintenance expenses. Research and development expenses in fiscal 2026 and fiscal 2025 were also offset by $1.0 million and $1.2 million, respectively, of funding received under the government contracts. Research and development expenses included stock-based compensation expense of $1.0 million and $945,000 in fiscal 2026 and fiscal 2025, respectively.\n\n*Selling, General and Administrative Expenses.*    Selling, general and administrative expenses increased 4.3% from $10.8 million in fiscal 2025 to $11.2 million in fiscal 2026. Increases of $574,000 stock-based compensation expense and $573,000 in facility related expenses were partially offset by a decrease of $465,000 in professional fees and a lesser decrease in payroll related expenses. In fiscal 2025, the value of contingent consideration liability resulting from our prior acquisition of the MikaMonu Group Ltd. decreased by $160,000. Selling, general and administrative expenses included stock-based compensation expense of $1.6 million and $1.1 million in fiscal 2026 and fiscal 2025, respectively.\n\n*Gain from Sale of Assets*. Gain from sale of assets includes the gain from the sale of our headquarters building located at 1213 Elko Drive in Sunnyvale, California. The sale and leaseback transaction was completed on June 6, 2024. For further discussion of the sale and leaseback transaction, see Note - 8 Leases to the consolidated financial statements contained elsewhere in this report.\n\n*Interest Income and Other (Expense), Net.*  Interest income and other (expense), net increased from income of $326,000 in fiscal 2025 to income of $4.1 million in fiscal 2026. Interest income increased by $481,000 primarily due to higher cash balances invested in money market funds. The foreign currency exchange loss increased from ($119,000) in fiscal 2025 to ($206,000) in fiscal 2026. The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel. Other income in fiscal 2026 included a gain on the change in the fair value of warrants of $6.2 million and costs associated with the Registered Direct Offering of $2.8 million.\n\n*Provision (benefit) for Income Taxes.*    The provision (benefit) for income taxes was $130,000 in fiscal 2025 to ($132,000) in fiscal 2026. Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2026 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $25.4 million in net deferred tax assets in fiscal 2026. 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 2026.\n\n*Net Loss.*    Net loss was $10.6 million in fiscal 2025 compared to a net loss of $13.2 million in fiscal 2026. This increase in net loss was primarily due to the changes in net revenues, gross profit and operating expenses discussed above.\n\n49\n\n[Table of Contents](#TOC)\n\n**Liquidity and Capital Resources**\n\nAs of March 31, 2026, our principal sources of liquidity were cash and cash equivalents of $67.2 million****compared to $13.4 million of cash, cash equivalents and short-term investments as of March 31, 2025. Cash and cash equivalents totaling $16.0 million were held in foreign locations as of March 31, 2026.\n\nNet cash used in operating activities was $15.9 million and $13.0 million for fiscal 2026 and fiscal 2025, respectively. Cash from operations in fiscal 2026 was adjusted for the non-cash gain on the change in fair value of warrants in the amount of $6.2 million. The primary uses of cash in fiscal 2026 were the net loss of $13.2 million and increases of $1.5 million in accrued expenses and other liabilities, $1.2 million in accounts receivable and $1.0 million in prepaid expenses and other assets. The primary source of cash in fiscal 2026 was an increase in accounts payable of $2.6 million. The uses of cash in fiscal 2026 were offset by non-cash items including stock-based compensation of $2.8 million and depreciation and amortization expenses of $628,000.\n\nThe 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.\n\nNet cash used by investing activities was $486,000 in fiscal 2026 and net cash provided by investing activities was $11.3 million in fiscal 2025. Investment activities in fiscal 2026 consisted of the purchase of property and equipment of $486,000. Investment activities in fiscal 2025 primarily consisted of the net proceeds of $11.4 million from a sale and leaseback transaction, partially offset by the purchase of property and equipment of $45,000.\n\nCash provided by financing activities was $70.2 million and $633,000 in fiscal 2026 and fiscal 2025, respectively. Cash provided by financing activities in fiscal 2026 primarily consisted of the proceeds from the issuance of common stock and warrants of $49.7 million, proceeds from the sale of common stock pursuant to an At-the-Market offering of $14.3 million and the proceeds from the sale of common stock pursuant to our employee stock plans of $6.2 million. Net cash provided by financing activities in fiscal 2025 consisted of the proceeds from the sale of common stock pursuant to our employee stock plans of $633,000.\n\nAt March 31, 2026, we had total minimum lease obligations of approximately $10.9 million from April 1, 2025 through May 30, 2034, under non-cancelable operating leases for our facilities.\n\nWhile 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 fiscal 2027 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 as well as potentially additional funding to complete the commercialization and development of Gemini-II and Plato, 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\n\n50\n\n[Table of Contents](#TOC)\n\nAgreement”) 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. In May and June 2025, we sold 3,380,773 shares pursuant to the Offering at an average price of $3.32 for proceeds of $11.2 million, less offering costs of $411,000. We cannot assure that additional equity or debt financing, if required, will be available on terms that are acceptable or at all.\n\nOn October 21, 2025, we entered into the Purchase Agreement with the Purchaser pursuant to which we agreed to issue and sell, in the Registered Direct Offering an aggregate of (i) 1,508,462 Shares of our Common Stock at a price of $10.00 per Share and (ii) the Pre-Funded Warrants to purchase 3,491,538 shares of Common Stock. Each of the Pre-Funded Warrants is exercisable for one share of Common Stock at the exercise price of $0.01 per Pre-Funded Warrant, immediately exercisable, and may be exercised at any time. The Purchaser’s ability to exercise its Pre-Funded Warrants in exchange for shares of Common Stock is subject to certain beneficial ownership limitations set forth therein. The gross proceeds to us from the Registered Direct Offering were approximately $50 million, before deducting offering expenses payable of approximately $3.1 million. The Registered Direct Offering closed on October 22, 2025. All of the Pre-Funded Warrants were exercised in October 2025.\n\nAs of March 31, 2026, we had $18.5 million in purchase obligations for facility leases, wafers, software maintenance and chip design service purchase obligations that are binding commitments, of which $9.1 million are payable in the next twelve months and $9.4 million are committed in the long term.\n\n​\n\n**Critical Accounting Estimates**\n\nThe preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are inherent in the preparation of the consolidated financial statements and include estimates affecting obsolete and excess inventory. We believe that we consistently apply these judgments and estimates and that our financial statements and accompanying notes fairly represent our financial results for all periods presented. However, any errors in these judgments and estimates may have a material impact on our balance sheet and statement of operations. Critical accounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments and estimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding the valuation of inventories.\n\n*Valuation of Inventories.*    Inventories are stated at the lower of cost or net realizable value, cost being determined on a weighted average basis. Our inventory write-down allowance is established when conditions indicate that the selling price of our products could be less than cost due to physical deterioration, obsolescence based on changes in technology and demand, changes in price levels, or other causes. We consider the need to establish the allowance for excess inventory generally based on inventory levels in excess of 12 months of forecasted customer demand for each specific product, which is based on historical sales and expected future orders. At any point in time, some portion of our inventory is subject to the risk of being materially in excess of our projected demand. Additionally, our average selling prices could decline due to market or other conditions, which creates a risk that costs of manufacturing our inventory may not be recovered. These factors contribute to the risk that we may be required to record additional inventory write-downs in the future, which could be material. In addition, if actual market conditions are more favorable than expected, inventory previously written down may be sold to customers resulting in lower cost of sales and higher income from operations than expected in that period.\n\n51\n\n[Table of Contents](#TOC)\n\n​\n\n**Recent Accounting Pronouncements**\n\nPlease refer to Note 1 to our consolidated financial statements appearing under Part II, Item 8 for a discussion of recent accounting pronouncements that may impact the Company.\n\nItem **7A.**Quantitative and Qualitative Disclosures About Market Risk\n\n*Foreign Currency Exchange Risk.*    Our revenues and expenses, except those expenses related to our operations in Israel and Taiwan, including subcontractor manufacturing expenses in Taiwan, are denominated in U.S. dollars. As a result, we have relatively little exposure for currency exchange risks, and foreign exchange losses have been minimal to date. We do not currently enter into forward exchange contracts to hedge exposure denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. In the future, if we believe our foreign currency exposure has increased, we may consider entering into hedging transactions to help mitigate that risk.\n\n*Interest Rate Sensitivity.***    **We had cash and cash equivalents totaling $67.2 million at March 31, 2026. These amounts were invested primarily in money market funds. The cash and cash equivalents are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. We believe a hypothetical 100 basis point increase in interest rates would not materially affect the fair value of our interest-sensitive financial instruments. Declines in interest rates, however, will reduce future investment income.\n\n​\n\n​\n\n52\n\n[Table of Contents](#TOC)\n\n​"}