0024553753truetrue0001126741--03-312023Q1falseGSI TECHNOLOGY INC244862390001126741us-gaap:CommonStockMember2022-04-012022-06-300001126741us-gaap:CommonStockMember2021-04-012021-06-300001126741us-gaap:RetainedEarningsMember2022-06-300001126741us-gaap:AdditionalPaidInCapitalMember2022-06-300001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001126741us-gaap:RetainedEarningsMember2022-03-310001126741us-gaap:AdditionalPaidInCapitalMember2022-03-310001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001126741us-gaap:RetainedEarningsMember2021-06-300001126741us-gaap:AdditionalPaidInCapitalMember2021-06-300001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001126741us-gaap:RetainedEarningsMember2021-03-310001126741us-gaap:AdditionalPaidInCapitalMember2021-03-310001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001126741us-gaap:CommonStockMember2022-06-300001126741us-gaap:CommonStockMember2022-03-310001126741us-gaap:CommonStockMember2021-06-300001126741us-gaap:CommonStockMember2021-03-310001126741gsit:ShareBasedCompensationRangeTenMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeNineMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeEightMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeTwoMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeThreeMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeSixMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeSevenMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeOneMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeFourMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeFiveMember2022-04-012022-06-300001126741gsit:ShareBasedCompensationRangeTwoMember2022-06-300001126741gsit:ShareBasedCompensationRangeThreeMember2022-06-300001126741gsit:ShareBasedCompensationRangeSixMember2022-06-300001126741gsit:ShareBasedCompensationRangeSevenMember2022-06-300001126741gsit:ShareBasedCompensationRangeOneMember2022-06-300001126741gsit:ShareBasedCompensationRangeFourMember2022-06-300001126741gsit:ShareBasedCompensationRangeFiveMember2022-06-300001126741gsit:ShareBasedCompensationRangeTenMember2022-06-300001126741gsit:ShareBasedCompensationRangeNineMember2022-06-300001126741gsit:ShareBasedCompensationRangeEightMember2022-06-300001126741us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001126741gsit:EmployeeStockPurchasePlanMember2022-04-012022-06-300001126741us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001126741gsit:EmployeeStockPurchasePlanMember2021-04-012021-06-300001126741gsit:RestOfWorldMember2022-04-012022-06-300001126741gsit:OriginalEquipmentManufacturerMember2022-04-012022-06-300001126741gsit:DistributionMember2022-04-012022-06-300001126741gsit:ContractManufacturersMember2022-04-012022-06-300001126741country:US2022-04-012022-06-300001126741country:SG2022-04-012022-06-300001126741country:NL2022-04-012022-06-300001126741country:DE2022-04-012022-06-300001126741country:CN2022-04-012022-06-300001126741gsit:RestOfWorldMember2021-04-012021-06-300001126741gsit:OriginalEquipmentManufacturerMember2021-04-012021-06-300001126741gsit:DistributionMember2021-04-012021-06-300001126741gsit:ContractManufacturersMember2021-04-012021-06-300001126741country:US2021-04-012021-06-300001126741country:SG2021-04-012021-06-300001126741country:NL2021-04-012021-06-300001126741country:DE2021-04-012021-06-300001126741country:CN2021-04-012021-06-300001126741gsit:NonRecurringEngineeringServicesMembergsit:WistronNewebCorpMember2022-04-012022-06-300001126741gsit:NonRecurringEngineeringServicesMembergsit:WistronNewebCorpMember2021-04-012021-06-300001126741us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-06-300001126741us-gaap:LeaseholdImprovementsMember2022-06-300001126741us-gaap:LandMember2022-06-300001126741us-gaap:FurnitureAndFixturesMember2022-06-300001126741us-gaap:BuildingAndBuildingImprovementsMember2022-06-300001126741gsit:ComputerAndOtherEquipmentMember2022-06-300001126741us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2022-03-310001126741us-gaap:LeaseholdImprovementsMember2022-03-310001126741us-gaap:LandMember2022-03-310001126741us-gaap:FurnitureAndFixturesMember2022-03-310001126741us-gaap:BuildingAndBuildingImprovementsMember2022-03-310001126741gsit:ComputerAndOtherEquipmentMember2022-03-310001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001126741us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001126741us-gaap:RetainedEarningsMember2022-04-012022-06-300001126741us-gaap:RetainedEarningsMember2021-04-012021-06-300001126741us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:AvailableforsaleSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:AvailableforsaleSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:AvailableforsaleSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:AvailableforsaleSecuritiesMemberus-gaap:FairValueMeasurementsRecurringMember2022-03-3100011267412015-11-230001126741us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-3100011267412022-01-012022-03-310001126741us-gaap:PatentsMember2022-06-300001126741us-gaap:ComputerSoftwareIntangibleAssetMember2022-06-300001126741gsit:ProductDesignsMember2022-06-300001126741us-gaap:PatentsMember2022-03-310001126741us-gaap:ComputerSoftwareIntangibleAssetMember2022-03-310001126741gsit:ProductDesignsMember2022-03-310001126741us-gaap:BondsMember2022-06-300001126741gsit:SupranationalObligationsMember2022-06-300001126741us-gaap:BondsMember2022-03-310001126741gsit:SupranationalObligationsMember2022-03-310001126741us-gaap:CertificatesOfDepositMember2022-06-300001126741us-gaap:CertificatesOfDepositMember2022-03-3100011267412021-06-3000011267412021-03-310001126741us-gaap:OtherLiabilitiesMember2022-06-300001126741us-gaap:OtherLiabilitiesMember2022-03-310001126741us-gaap:AvailableforsaleSecuritiesMemberus-gaap:FairValueInputsLevel2Member2022-06-300001126741us-gaap:ShortTermInvestmentsMember2022-06-300001126741gsit:ShortTermInvestmentsSupranationalObligationsMember2022-06-300001126741gsit:ShortTermInvestmentsCertificatesOfDepositMember2022-06-300001126741gsit:ShortTermInvestmentsAgencyBondsMember2022-06-300001126741gsit:LongTermInvestmentsSupranationalObligationsMember2022-06-300001126741gsit:LongTermInvestmentsMember2022-06-300001126741gsit:LongTermInvestmentsCertificatesOfDepositMember2022-06-300001126741us-gaap:ShortTermInvestmentsMember2022-03-310001126741gsit:ShortTermInvestmentsSupranationalObligationsMember2022-03-310001126741gsit:ShortTermInvestmentsCertificatesOfDepositMember2022-03-310001126741gsit:ShortTermInvestmentsAgencyBondsMember2022-03-310001126741gsit:LongTermInvestmentsSupranationalObligationsMember2022-03-310001126741gsit:LongTermInvestmentsMember2022-03-310001126741gsit:LongTermInvestmentsCertificatesOfDepositMember2022-03-310001126741gsit:LongTermInvestmentsAgencyBondsMember2022-03-310001126741us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:FairValueMeasurementsRecurringMember2022-06-300001126741us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:FairValueMeasurementsRecurringMember2022-03-310001126741us-gaap:SellingGeneralAndAdministrativeExpensesMember2022-04-012022-06-300001126741us-gaap:ResearchAndDevelopmentExpenseMember2022-04-012022-06-300001126741us-gaap:CostOfSalesMember2022-04-012022-06-300001126741us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-04-012021-06-300001126741us-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001126741us-gaap:CostOfSalesMember2021-04-012021-06-300001126741us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001126741us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001126741srt:MinimumMember2022-06-300001126741srt:MaximumMember2022-06-300001126741gsit:Covid19Member2022-04-012022-06-300001126741srt:MinimumMember2022-04-012022-06-300001126741srt:MaximumMember2022-04-012022-06-3000011267412022-03-3100011267412021-04-012021-06-300001126741gsit:SRMProductsMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001126741us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2022-04-012022-06-300001126741gsit:SRMProductsMemberus-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-300001126741us-gaap:SalesRevenueNetMemberus-gaap:CustomerConcentrationRiskMember2021-04-012021-06-3000011267412022-06-3000011267412022-07-3100011267412022-04-012022-06-30xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesgsit:segment

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to            

Commission File Number 001-33387

GSI Technology, Inc.

(Exact name of registrant as specified in its charter)

Delaware

77-0398779

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

1213 Elko Drive

Sunnyvale, California 94089

(Address of principal executive offices, zip code)

(408331-8800

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on which Registered

Common Stock, $0.001 par value

GSIT

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  

Accelerated filer  

Non-accelerated filer  

Smaller reporting company  

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No  

The number of shares of the registrant’s common stock outstanding as of July 31, 2022: 24,553,753.

Table of Contents

GSI TECHNOLOGY, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022

Page

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

2

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Operations

3

Condensed Consolidated Statements of Comprehensive Loss

4

Condensed Consolidated Statements of Stockholders’ Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II — OTHER INFORMATION

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 6.

Exhibits

47

Signatures

48

1

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30, 

March 31, 

2022

  

2022

    

(In thousands, except share
and per share amounts)

ASSETS

Cash and cash equivalents

   

$

33,533

    

$

36,971

Short-term investments

 

7,928

 

6,992

Accounts receivable, net

 

4,309

 

4,518

Inventories

 

4,780

 

4,655

Prepaid expenses and other current assets

 

1,809

 

1,555

Total current assets

 

52,359

 

54,691

Property and equipment, net

 

7,234

 

7,359

Operating lease right-of-use assets

1,129

889

Long-term investments

 

875

 

3,345

Goodwill

7,978

7,978

Intangible assets, net

1,964

2,023

Deposits

 

130

 

137

Total assets

 

$

71,669

 

$

76,422

LIABILITIES AND STOCKHOLDERS’ EQUITY

Accounts payable ($30 and $32 to a related party)

 

$

1,403

 

$

1,474

Lease liabilities, current

580

537

Accrued expenses and other liabilities

 

5,586

 

6,850

Total current liabilities

 

7,569

 

8,861

Deferred tax liability

 

11

 

11

Lease liabilities, non-current

503

361

Contingent consideration, non-current

2,321

2,738

Total liabilities

 

10,404

 

11,971

Commitments and contingencies (Note 9)

Stockholders’ equity:

Preferred stock: $0.001 par value authorized: 5,000,000 shares; issued and outstanding: none

 

 

Common Stock: $0.001 par value authorized: 150,000,000 shares; issued and outstanding: 24,553,753 and 24,486,239 shares, respectively

 

25

 

24

Additional paid-in capital

 

53,899

 

53,083

Accumulated other comprehensive loss

 

(181)

 

(154)

Retained earnings

 

7,522

 

11,498

Total stockholders’ equity

 

61,265

 

64,451

Total liabilities and stockholders’ equity

 

$

71,669

 

$

76,422

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

2

Table of Contents

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30, 

2022

2021

    

(In thousands, except per share amounts)

Net revenues

    

$

8,909

    

$

8,791

Cost of revenues ($57 and $13 to a related party)

 

3,544

 

4,009

Gross profit

 

5,365

 

4,782

Operating expenses:

Research and development

6,619

6,103

Selling, general and administrative

2,688

3,040

Total operating expenses

 

9,307

 

9,143

Loss from operations

 

(3,942)

 

(4,361)

Interest income, net

22

23

Other income (expense), net

4

(43)

Loss before income taxes

 

(3,916)

 

(4,381)

Provision (benefit) for income taxes

60

(172)

Net loss

 

$

(3,976)

 

$

(4,209)

Net loss per share:

Basic

 

$

(0.16)

 

$

(0.17)

Diluted

 

$

(0.16)

 

$

(0.17)

Weighted average shares used in per share calculations:

Basic

24,523

24,095

Diluted

24,523

24,095

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

3

Table of Contents

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three Months Ended June 30, 

2022

2021

    

(In thousands)

Net loss

    

$

(3,976)

    

$

(4,209)

Net unrealized loss on available-for-sale investments

 

(27)

 

(15)

Total comprehensive loss

 

$

(4,003)

 

$

(4,224)

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

4

Table of Contents

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Retained

Stockholders'

    

Shares

    

Amount

    

Capital

    

Loss

    

Earnings

    

Equity

Three months ended June 30, 2022

(In thousands, except share amounts)

Balance, March 31, 2022

24,486,239

$

24

$

53,083

$

(154)

$

11,498

$

64,451

Issuance of common stock under employee stock option plans

67,514

1

178

179

Stock-based compensation expense

638

638

Net loss

(3,976)

(3,976)

Net unrealized loss on available-for-sale investments

(27)

(27)

Balance, June 30, 2022

24,553,753

$

25

$

53,899

$

(181)

$

7,522

$

61,265

Three months ended June 30, 2021

Balance, March 31, 2021

24,020,276

$

24

$

47,722

$

(20)

$

27,866

$

75,592

Issuance of common stock under employee stock option plans

145,786

783

783

Stock-based compensation expense

823

823

Net loss

(4,209)

(4,209)

Net unrealized loss on available-for-sale investments

(15)

(15)

Balance, June 30, 2021

24,166,062

$

24

$

49,328

$

(35)

$

23,657

$

72,974

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

5

Table of Contents

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Three Months Ended June 30, 

2022

2021

    

(In thousands)

Cash flows from operating activities:

Net loss

   

$

(3,976)

    

$

(4,209)

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

Allowance for doubtful accounts and other

 

(26)

 

(69)

Provision for excess and obsolete inventories

 

43

 

160

Non-cash lease expense

136

113

Depreciation and amortization

 

256

 

246

Stock-based compensation

 

638

 

823

Amortization of premium on investments

 

7

 

32

Changes in assets and liabilities:

Accounts receivable

 

235

 

(885)

Inventories

 

(168)

 

252

Prepaid expenses and other assets

 

(247)

 

(315)

Accounts payable

 

(37)

 

44

Accrued expenses and other liabilities

 

(1,872)

 

(813)

Net cash used in operating activities

 

(5,011)

 

(4,621)

Cash flows from investing activities:

Maturities of short-term investments

 

1,500

4,133

Purchases of property and equipment

 

(106)

(39)

Net cash provided by investing activities

 

1,394

 

4,094

Cash flows from financing activities:

Proceeds from issuance of common stock under employee stock plans

 

179

783

Net cash provided by financing activities

 

179

 

783

Net increase (decrease) in cash and cash equivalents

 

(3,438)

 

256

Cash and cash equivalents at beginning of the period

 

36,971

44,234

Cash and cash equivalents at end of the period

 

$

33,533

 

$

44,490

Non-cash investing and financing activities:

Purchases of property and equipment through accounts payable and
accruals

$

$

314

Operating lease right-of-use assets exchanged for lease obligations

376

Supplemental cash flow information:

Net cash paid for income taxes

 

$

30

 

$

38

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

6

Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of GSI Technology, Inc. and its subsidiaries (“GSI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.  Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for annual financial statements.  These interim financial statements contain all adjustments (which consist of only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the interim financial information included therein.  The Company believes that the disclosures are adequate to make the information not misleading.  However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

The consolidated results of operations for the three months ended June 30, 2022 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

There have been no material changes to our significant accounting policies that were disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

Risk and uncertainties

The COVID-19 pandemic has affected the business activities of the Company, its customers, suppliers and other business partners. Governments in affected regions have implemented, and may continue to implement, safety precautions including quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary. Many organizations and individuals, including the Company and its employees, are taking additional steps to avoid or reduce infection, including limiting travel and working from home. These measures are disrupting normal business operations and have had significant negative impacts on businesses and financial markets worldwide.

The Company continues to monitor its operations and government recommendations and has made modifications to its normal operations because of the COVID-19 global pandemic. The Company has instituted many preventative measures and is regularly evaluating those measures and others as it continues to better understand its current and future operating environment. From March 2020 through April 2022, except for the Company’s employees located in Taiwan, the majority of its employees worked from home around the world. In May 2021, due to a surge in COVID-19 infections in Taiwan, the Company’s Taiwan employees worked from home under alternating schedules, and returned to their offices in July 2021. The Company maintained a substantial portion of its manufacturing operational capacity at its primary manufacturing support facility located in Hsin Chu, Taiwan where the Company’s suppliers are located and where all of the Company’s products are manufactured. Since the outbreak of COVID-19, aside from supply chain shortages from the lengthening of lead times for wafers and assembly services and the impact of ongoing and expected price increases, including a 20% increase in the cost of wafers received in early calendar 2022, the Company has experienced minimal impact, and continues to experience minimal impact, on its manufacturing operations in Taiwan. Final testing of the Company’s products is conducted in house in both the US and Taiwan. Shipping and receiving operations were maintained by a skeleton crew with minimal impact. The Company’s revenues were impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that required a significant number of its customer

7

Table of Contents

contacts to work from home. The Company’s results for the fiscal years ended March 31, 2022 and 2021 demonstrate the challenges that the Company has faced during the COVID-19 global pandemic, which has restricted the activities of the Company’s sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors. These challenges have also impacted the Company as it entered new markets and engaged with target customers to sell its new APU product. Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, were limited, and continue to be limited due to COVID-19 related restrictions. The Company adapted its sales strategies for the COVID-19 environment, where it could not do face-to-face meetings and conduct secure meetings with government and defense customers. In addition to the continuing COVID-19 global pandemic, the recent military conflict in Ukraine, the rapid rise in energy prices, worldwide inflationary pressures and rising interest rates may have an adverse impact on the Company’s business and financial condition.

The disruption to the marketplace resulting from the COVID-19 global pandemic that the Company continues to experience is unlike anything the Company has ever had to deal with. While the Company continues to monitor the business metrics that it has historically used to predict its financial performance, the Company is uncertain as to whether these metrics will operate consistently with its historical experience.

The Company believes that during the next 12 months the COVID-19 pandemic could impact general economic activity and demand in its end markets. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak, if the pandemic continues, it will have an adverse effect on the Company’s results of operations, financial position, including potential impairments, and liquidity in fiscal year 2023. This expectation includes results from new information that may emerge concerning COVID-19, the effectiveness of vaccines and any actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of COVID-19 within its condensed consolidated financial statements and there may be changes to those estimates in future periods that could be material.

Accounting pronouncements not yet effective for fiscal 2023

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted beginning April 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.

NOTE 2—REVENUE RECOGNITION

The Company determines revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.

The majority of the Company’s customer contracts, which may be in the form of purchase orders, contracts or purchase agreements, contain performance obligations for delivery of agreed upon products. Delivery of all performance obligations contained within a contract with a customer typically occurs at the same time (or within the same accounting period). Transfer of control typically occurs at the point at which delivery has occurred, title and the risks and rewards of ownership have passed to the customer, and the Company has a right to payment. For all transactions apart from consignment sales, the Company will generally recognize revenue upon shipment of the

8

Table of Contents

product. For consignment sales, revenue is recognized at the time that the product is pulled from consignment warehouses.

Because all of the Company’s performance obligations relate to contracts with a duration of less than one year, the Company has elected to apply the optional exemption practical expedient provided in ASC 606 and, therefore, is not required to disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period.

The Company adjusts the transaction price for variable consideration. Variable consideration is not typically significant and primarily results from stock rotation rights and quick pay discounts provided to certain distributors. As a practical expedient, the Company is recognizing the incremental costs of obtaining a contract, specifically commission expenses that have a period of benefit of less than twelve months, as an expense when incurred. Additionally, the Company has adopted an accounting policy to recognize shipping costs that occur after control transfers to the customer as a fulfillment activity.

The Company’s contracts with customers do not typically include extended payment terms. Payment terms vary by contract type and type of customer and generally range from 30 to 60 days from shipment. Additionally, the Company has right to payment upon shipment.

The Company records revenue net of sales tax, value added tax, excise tax and other taxes collected concurrent with product sales. The impact of such taxes on products sales is immaterial. The Company has also elected to recognize the cost for freight and shipping when control over the products sold passes to customers and revenue is recognized.

The Company warrants its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues. Warranty costs and the accrued warranty liability were not material as of June 30, 2022.

The majority of the Company’s revenue is derived from sales of SRAM products which represent approximately 97% and 99% of total revenues in the three months ended June 30, 2022 and 2021, respectively.

Nokia, the Company’s largest customer, purchases products directly from the Company and through contract manufacturers and distributors. Based on information provided to the Company by its contract manufacturers and distributors, purchases by Nokia represented approximately 15% and 43% of the Company’s net revenues in the three months ended June 30, 2022 and 2021, respectively.

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

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

Three Months Ended June 30, 

2022

2021

(In thousands)

Contract manufacturers

   

$

1,535

   

$

3,863

Distribution

7,305

4,710

OEMs

69

218

$

8,909

$

8,791

NOTE 3—NET LOSS PER COMMON SHARE

The Company uses the treasury stock method to calculate the weighted average shares used in computing diluted net loss per share. The following table sets forth the computation of basic and diluted net loss per share:

9

Table of Contents

Three Months Ended June 30, 

2022

2021

(In thousands, except per share amounts)

Net loss

    

$

(3,976)

    

$

(4,209)

Denominators:

Weighted average shares—Basic

24,523

24,095

Dilutive effect of employee stock options

Dilutive effect of employee stock purchase plan options

Weighted average shares—Dilutive

 

24,523

 

24,095

Net loss per common share—Basic

 

$

(0.16)

$

(0.17)

Net loss per common share—Diluted

 

$

(0.16)

$

(0.17)

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

Three Months Ended June 30, 

2022

2021

(In thousands)

Shares underlying options and ESPP shares

8,113

5,648

NOTE 4—BALANCE SHEET DETAIL

June 30, 2022

March 31, 2022

    

(In thousands)

Inventories:

Work-in-progress

   

$

3,134

    

$

3,085

Finished goods

 

1,637

 

1,555

Inventory at distributors

 

9

 

15

 

$

4,780

 

$

4,655

June 30, 2022

March 31, 2022

    

(In thousands)

Accounts receivable, net:

Accounts receivable

   

$

4,364

    

$

4,599

Less: Allowances for doubtful accounts and other

 

(55)

 

(81)

 

$

4,309

 

$

4,518

June 30, 2022

March 31, 2022

    

(In thousands)

Prepaid expenses and other current assets:

Prepaid tooling and masks

$

537

$

68

Other receivables

182

226

Other prepaid expenses and other current assets

1,090

1,261

$

1,809

$

1,555

10

Table of Contents

June 30, 2022

March 31, 2022

    

(In thousands)

Property and equipment, net:

Computer and other equipment

$

18,484

$

18,415

Software

4,428

4,425

Land

3,900

3,900

Building and building improvements

3,735

3,735

Furniture and fixtures

102

102

Leasehold improvements

878

878

31,527

31,455

Less: Accumulated depreciation

(24,293)

(24,096)

$

7,234

$

7,359

Depreciation expense was $197,000 and $187,000 for the three months ended June 30, 2022 and 2021, respectively.

11

Table of Contents

The following tables summarize the components of intangible assets and related accumulated amortization balances at June 30, 2022 and March 31, 2022 (in thousands):

As of June 30, 2022

    

Gross
Carrying
Amount

    

Accumulated
Amortization

    

Net Carrying
Amount

 

Intangible assets:

    

    

 

Product designs

$

590

$

(590)

$

Patents

4,220

(2,256)

1,964

Software

80

(80)

Total

$

4,890

$

(2,926)

$

1,964

As of March 31, 2022

    

Gross
Carrying
Amount

    

Accumulated
Amortization

    

Net Carrying
Amount

 

Intangible assets:

Product designs

$

590

$

(590)

$

Patents

4,220

(2,197)

2,023

Software

80

(80)

Total

$

4,890

$

(2,867)

$

2,023

Amortization of intangible assets included in cost of revenues was $59,000 and $59,000 for the three months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):

Fiscal year ending March 31,

2023 (remaining nine months)

$

175

2024

233

2025

233

2026

233

2027

233

Thereafter

857

Total

$

1,964

12

Table of Contents

June 30, 2022

March 31, 2022

    

(In thousands)

Accrued expenses and other liabilities:

Accrued compensation

$

3,915

$

5,524

Accrued commissions

247

232

Income taxes payable

149

127

Miscellaneous accrued expenses

1,275

967

$

5,586

$

6,850

NOTE 5—GOODWILL

Goodwill represents the difference between the purchase price and the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. The Company tests 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. The Company has one reporting unit. The Company assesses goodwill for impairment on an annual basis on the last day of February in the fourth quarter of its fiscal year.

The Company had a goodwill balance of $8.0 million as of both March 31, 2022 and June 30, 2022. The goodwill resulted from the acquisition of MikaMonu Group Ltd. in fiscal 2016.

The Company completed its annual impairment test during the fourth quarter of fiscal 2022 and concluded that there was no impairment, as the fair value of its sole reporting unit exceeded its carrying value. The Company believes that no triggering event has taken place subsequent to the fiscal 2022 annual assessment.

NOTE 6—INCOME TAXES

The current portion and long-term portion of the Company’s unrecognized tax benefits was $0 at both June 30, 2022 and March 31, 2022. As of June 30, 2022, $3.6 million of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets. Due to historical losses in the U.S., the Company has a full valuation allowance on its U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance.

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

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

The Company is subject to taxation in the United States and various state and foreign jurisdictions.  Fiscal years 2013 through 2022 remain open to examination by federal tax authorities, and fiscal years 2012 through 2022 remain open to examination by California tax authorities. Fiscal years 2020, 2021 and 2022 are subject to audit by the Israeli tax authorities.

For the three months ended June 30, 2022 and June 30, 2021, the Company incurred income tax expense (benefit) of $60,000 and ($172,000) on net losses before income taxes of ($3.9 million) and ($4.4 million), respectively. The provision (benefit) was calculated using the annualized effective tax rate method. The Company’s estimated annual effective income tax rate, including discrete items, was approximately (1.49%) and 0.05% as of June 30, 2022 and 2021, respectively. The annual effective tax rates as of June 30, 2022 and 2021 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and expenses and the foreign tax differential.

13

Table of Contents

NOTE 7—FINANCIAL INSTRUMENTS

Fair value measurements

Authoritative accounting guidance for fair value measurements provides a framework for measuring fair value and related disclosures. The guidance applies to all financial assets and financial liabilities that are measured on a recurring basis. The guidance requires fair value measurement to be classified and disclosed in one of the following three categories:

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities.  The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market.  As of June 30, 2022, the Level 1 category included money market funds of $13.7 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. As of June 30, 2022, the Level 2 category included short-term investments of $7.9 million and long-term investments of $875,000, which were comprised of certificates of deposit, government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.  As of June 30, 2022, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu. The fair value of the contingent consideration liability was initially determined as of the acquisition date using unobservable inputs. These inputs included the estimated amount and timing of future cash flows, the probability of success (achievement of the various contingent events) and a risk-adjusted discount rate of approximately 14.8% used to adjust the probability-weighted cash flows to their present value. Significant increases (decreases) to the estimated amount and timing of future cash flows or the probability of success would result in a significantly higher (lower) fair value measurement. Conversely, a significant increase or (decrease) in the risk-adjusted discount rate would result in a significantly (lower) higher fair value measurement. Generally, changes used in the assumptions for future cash flows and probability of success would be accompanied by a directionally similar change in the fair value measurement and expense. Conversely, changes in the risk-adjusted discount rate would be accompanied by a directionally opposite change in the related fair value measurement and expense. Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. During the most recent re-measurement of the contingent consideration liability as of June 30, 2022, the Company used a risk-adjusted discount rate of approximately 15.9% to adjust the probability-weighted cash flows to their present value using probabilities ranging from 0% to 15% for the remaining contingent events. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at June 30, 2022 and March 31, 2022 in the amount of $2.3 million and $2.7 million, respectively.

14

Table of Contents

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

Fair Value Measurements at Reporting Date Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical Assets

Observable

Unobservable

and Liabilities

Inputs

Inputs

    

June 30, 2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Assets:

Money market funds

$

13,673

$

13,673

$

$

Marketable securities

8,803

8,803

Total

$

22,476

$

13,673

$

8,803

$

Liabilities:

Contingent consideration

$

2,321

$

$

$

2,321

Fair Value Measurements at Reporting Date Using

Quoted Prices

in Active

Significant

Markets for

Other

Significant

Identical Assets

Observable

Unobservable

and Liabilities

Inputs

Inputs

    

March 31, 2022

    

(Level 1)

    

(Level 2)

    

(Level 3)

 

Assets:

Money market funds

$

16,142

$

16,142

$

$

Marketable securities

10,337

10,337

Total

$

26,479

$

16,142

$

10,337

$

Liabilities:

Contingent consideration

$

2,738

$

$

$

2,738

The following table sets forth the changes in fair value of contingent consideration for the three months ended June 30, 2022 and 2021, respectively:

Three Months Ended June 30, 

    

2022

    

2021

(In thousands)

Contingent consideration, beginning of period

$

2,738

$

4,225

Change due to accretion

33

22

Re-measurement of contingent consideration

(450)

Contingent consideration, end of period

$

2,321

$

4,247

Short-term and long-term investments

All of the Company’s short-term and long-term investments are classified as available-for-sale.  Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations.  Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.  The Company had money market funds of $13.7 million and $16.1 million at June 30, 2022 and March 31, 2022, respectively, included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.  The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

15

Table of Contents

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

June 30, 2022

Gross

Gross

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

 

(In thousands)

Short-term investments:

Certificates of deposit

$

5,000

$

$

(43)

$

4,957

Supranational obligations

1,003

(4)

999

Agency bonds

2,005

(33)

1,972

Total short-term investments

$

8,008

$

$

(80)

$

7,928

Long-term investments:

Certificates of deposit

$

250

$

$

(7)

$

243

Supranational obligations

652

(20)

632

Total long-term investments

$

902

$

$

(27)

$

875

March 31, 2022

Gross

Gross

Unrealized

Unrealized

Fair

    

Cost

    

Gains

    

Losses

    

Value

 

(In thousands)

Short-term investments:

Certificates of deposit

$

4,000

$

$

(11)

$

3,989

Supranational obligations

1,007

(7)

1,000

Agency bonds

2,011

(8)

2,003

Total short-term investments

$

7,018

$

$

(26)

$

6,992

Long-term investments:

Certificates of deposit

$

1,750

$

$

(18)

$

1,732

Supranational obligations

651

(17)

634

Agency bonds

997

(18)

979

Total long