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What changed in GSI TECHNOLOGY INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GSI TECHNOLOGY INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+328 added−321 removedSource: 10-K (2023-06-28) vs 10-K (2022-06-29)

Top changes in GSI TECHNOLOGY INC's 2023 10-K

328 paragraphs added · 321 removed · 247 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

85 edited+24 added−13 removed63 unchanged
Biggest changeAs the environmental impacts of data processing are becoming increasingly important, and complex workloads are causing the migration from enterprise computing to edge computing for real-time applications, it is becoming increasingly difficult to achieve market demands for low power usage, smaller footprints and higher speeds. 4 Table of Contents The GSI APU has the potential to outperform CPU’s and GPU’s in the market for AI processing of large data collections by providing lower latency and increased capacity in a smaller form-factor and achieve such results with lower power consumption.
Biggest changeAs the environmental impacts of data processing are becoming increasingly important, and complex workloads are migrating to edge computing for real-time applications, it is becoming increasingly difficult to achieve market demands for low power, smaller footprints and faster results.
Even as we expand our offering of in-place associative computing solutions, we continue to be committed to the synchronous SRAM market, by making available exceedingly high density performance memory products for incorporation into in high-performance networking and telecommunications equipment, such as routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment.
Even as we expand our offering of in-place associative computing solutions, we continue to be committed to the synchronous SRAM market, by making available exceedingly high density performance memory products for incorporation into high-performance networking and telecommunications equipment, such as routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment.
In December 2021, we were among the leaders in the Billion-Scale Approximate Nearest Neighbor Search (ANNS) Challenge held at the NeurIPS 2021 Conference performing on par with NVIDIA and Intel. Our results in the ANNS Challenge proved that our technology could perform on par with the category leaders in AI.
In December 2021, we were among the leaders in the Billion-Scale Approximate Nearest Neighbor Search Challenge held at the NeurIPS 2021 Conference performing on par with NVIDIA and Intel. Our results in the ANNS Challenge proved that our technology could perform on par with the category leaders in AI.
We believe that our relationship with our U.S. distributors, Avnet, Mouser and Digi-Key, put us in a strong position to address the Very Fast SRAM memory market in the United States. We currently have regional sales offices located in Canada, China, Hong Kong, Israel and the United States.
We believe that our relationship with our U.S. distributors, Avnet, Mouser and Digi-Key, put us in a strong position to address the Very Fast SRAM memory market in the United States. We currently have regional sales offices located in China, Hong Kong, Israel and the United States.
Once we receive orders for a particular product, we perform the second phase, consisting of final wafer processing, assembly, burn-in and test, which takes approximately ten to twenty-eight weeks to complete. Substrates are required in the second phase before assembly process can begin for many of our products.
Once we receive orders for a particular product, we perform the second phase, consisting of final wafer processing, assembly, burn-in and test, which takes approximately eight to ten weeks to complete. Substrates are required in the second phase before the assembly process can begin for many of our products.
To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in any of these periods. 9 Table of Contents Sales, Marketing and Technical Support We sell our products primarily through our worldwide network of independent sales representatives and distributors.
To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in any of these periods. 10 Table of Contents Sales, Marketing and Technical Support We sell our products primarily through our worldwide network of independent sales representatives and distributors.
If we fail to commercialize our APU products, we may not generate sufficient revenues to offset our development costs and other expenses, which will have an adverse impact on our business including a potential impairment of intangible assets and a negative impact on our market capitalization. ​ 6 Table of Contents High-Speed Synchronous SRAM Market Overview High-speed synchronous SRAMs are incorporated into networking and telecom equipment, military/defense and aerospace applications, audio/video processing, test and measurement equipment, medical and automotive applications, and other miscellaneous applications.
If we fail to commercialize our APU products, we may not generate sufficient revenues to offset our development costs and other expenses, which will have an adverse impact on our business including a potential impairment of intangible assets and a negative impact on our market capitalization. 7 Table of Contents High-Speed Synchronous SRAM Market Overview High-speed synchronous SRAMs are incorporated into networking and telecom equipment, military/defense and aerospace applications, audio/video processing, test and measurement equipment, medical and automotive applications, and other miscellaneous applications.
Through the use of advanced architectures and design methodologies, we have developed high-performance SRAM products offering superior high speed performance capabilities and low power consumption, while our advanced silicon process technologies allow us to optimize yields, lower manufacturing costs and improve quality. ​ 7 Table of Contents ● Product Innovation .
Through the use of advanced architectures and design methodologies, we have developed high-performance SRAM products offering superior high speed performance capabilities and low power consumption, while our advanced silicon process technologies allow us to optimize yields, lower manufacturing costs and improve quality. ​ 8 Table of Contents ● Product Innovation .
Akerib is the inventor of more than 50 patents related to parallel and In Memory Associative Computing. Didier Lasserre has served as our Vice President, Sales since July 2002. From November 1997 to July 2002, Mr. Lasserre served as our Director of Sales for the Western United States and Europe. From July 1996 to October 1997, Mr.
Akerib is the inventor of more than 50 patents related to parallel and In Memory Associative Computing. Didier Lasserre has served as our Vice President, Sales since July 2002. From November 1997 to July 2002, Mr. Lasserre served as our Director of Sales for the Western United States and Europe.
Accordingly, a significant percentage of our net revenues has been derived from sales to these contract manufacturers and to consignment warehouses who purchase products from us for use by contract manufacturers. In addition, we sell our products to OEM customers indirectly through domestic and international distributors.
Accordingly, a significant percentage of our net revenues has been derived from sales to these contract manufacturers, and less frequently, to consignment warehouses who purchase products from us for use by contract manufacturers. In addition, we sell our products to OEM customers indirectly through domestic and international distributors.
We also serve the ongoing needs of the military/defense and aerospace markets by offering robust high-quality radiation-tolerant and radiation-hardened space grade SRAMs in addition to new in-place associative computing solutions including synthetic aperture radar (SAR) image processing.
We also serve the ongoing needs of the military/defense and aerospace markets by offering robust high-quality radiation-tolerant and radiation-hardened space grade SRAMs in addition to new in-place associative computing solutions including synthetic aperture radar (“SAR”) image processing.
Operations Robert Yau ​ 69 ​ ​ Vice President, Engineering, Secretary and Director Lee-Lean Shu co-founded our company in March 1995 and has served as our President and Chief Executive Officer and as a member of our Board of Directors since inception. Since October 2000, Mr. Shu has also served as Chairman of our Board.
Operations Robert Yau ​ 70 ​ ​ Vice President, Engineering, Secretary and Director Lee-Lean Shu co-founded our company in March 1995 and has served as our President and Chief Executive Officer and as a member of our Board of Directors since inception. Since October 2000, Mr. Shu has also served as Chairman of our Board.
Our engineers work closely with our outsource partners to increase yields, reduce manufacturing costs, and help assure the quality of our products. 10 Table of Contents Currently, all of our SRAM and APU wafers are manufactured by TSMC under individually negotiated purchase orders.
Our engineers work closely with our outsource partners to increase yields, reduce manufacturing costs, and help assure the quality of our products. 11 Table of Contents Currently, all of our SRAM and APU wafers are manufactured by TSMC under individually negotiated purchase orders.
The networking and telecom market demand for high-speed synchronous SRAMs has been, and is expected to continue, declining due to the industry trend of embedding greater amounts of SRAM into each generation of ASICs/controllers products, thereby reducing the need for external SRAMs.
The networking and telecom market demand for high-speed synchronous SRAMs has been, and is expected to continue to decline due to the industry trend of embedding greater amounts of SRAM into each generation of ASICs/controllers products, thereby reducing the need for external SRAMs.
Our principal operations objective is the completion of productization efforts for our initial in-place associative computing product, including the second release of our compiler stack in the second half of calendar 2022. ​ ● Identifying and developing new long tail markets where the APU is differentiated .
Our principal operations objective is the completion of productization efforts for our initial in-place associative computing product, including the second release of our compiler stack in the second half of calendar 2023. ​ ● Identifying and developing new long tail markets where the APU is differentiated .
The charters of our Audit Committee, our Compensation Committee, and our Nominating and Governance Committee, our code of conduct (including code of ethics provisions that apply to our principal executive officer, principal financial officer, controller, and senior financial officers) and our corporate governance guidelines are also available at our website under “Corporate Governance.” These items are also available to any stockholder who 14 Table of Contents requests them by calling (408) 331-8800.
The charters of our Audit Committee, our Compensation Committee, and our Nominating and Governance Committee, our code of conduct (including code of ethics provisions that apply to our principal executive officer, principal financial officer, controller, and senior financial officers) and our corporate governance guidelines are also available at our website under “Corporate Governance.” These items are also available to any stockholder who requests them by calling (408) 331-8800.
The future growth and success of our company largely depends on our ability to attract, train and retain qualified professionals. As part of our effort to do so, we offer competitive compensation and benefit programs including a 401(k) Plan, stock options for all employees, flexible spending 13 Table of Contents accounts and paid time off.
The future growth and success of our company largely depends on our ability to attract, train and retain qualified professionals. As part of our effort to do so, we offer competitive compensation and benefit programs including a 401(k) Plan, stock options for all employees, flexible spending accounts and paid time off.
This two-step manufacturing process enables us to significantly shorten our product lead times, providing flexibility for customization and to increase the availability of our products. All of our manufactured wafers, including wafers for our APU product, are tested for electrical compliance and most are packaged at Advanced Semiconductor Engineering, or ASE, which is located in Taiwan.
This two-step manufacturing process enables us to significantly shorten our product lead times, providing flexibility for customization and to increase the availability of our products. All of our manufactured wafers, including wafers for our APU product, are tested for electrical compliance and most are packaged at Advanced Semiconductor Engineering (“ASE”) which is located in Taiwan.
The E1.L form factor enables the use of market standard rack enclosures to build a dense APU compute appliance, such as a 16 card LEDA-S 1U form factor enclosure. We envision that this dense appliance would be of high interest for in-plane real-time SAR applications for instance.
The E1.L form factor enables the use of market standard SSD rack enclosures to build a dense APU compute appliance, such as a 16 card LEDA-S 1U form factor server. We envision that this dense appliance would be of high interest for in-plane real-time SAR applications, for instance.
We expect additional competitors to enter the associative computing market as well. While some of our competitors offer a broader array of products and offer some of their products at lower prices than we do, we believe that our focus on performance leadership provides us with key competitive advantages.
We expect additional competitors to enter the associative computing market as well. While some of our competitors 12 Table of Contents offer a broader array of products and offer some of their products at lower prices than we do, we believe that our focus on performance leadership provides us with key competitive advantages.
Similarity search uses a technique called distance metric learning, in which learning algorithms measure how similar or related objects are. The APU is well suited for very fast similarity search because its design enables distance metric learning at fast computation speeds with high degrees of accuracy.
Similarity search uses a technique called distance metric learning, in which learning algorithms measure how similar related objects are. The APU is well suited for very fast similarity search because its design determines distance metric at fast computation speeds with high degrees of accuracy.
Unlike us, some of our principal competitors maintain their own semiconductor fabs, which may, at times, provide them with capacity, cost and technical advantages. 11 Table of Contents Our principal competitors include NVIDIA Corporation and Intel Corporation for our in-place associative computing solutions and Cypress Semiconductor ( Infineon Technologies AG) , Integrated Silicon Solution and REC for our SRAM products.
Unlike us, some of our principal competitors maintain their own semiconductor fabs, which may, at times, provide them with capacity, cost and technical advantages. Our principal competitors include NVIDIA Corporation and Intel Corporation for our in-place associative computing solutions and Infineon Technologies AG , Integrated Silicon Solution and REC for our SRAM products.
The growth in demand for associative processing computing solutions is being driven by the increasing market adoption and usage of graphics processing unit (GPU) and CPU farms for AI processing of large data collections, including scientific research.
The growth in demand for associative processing computing solutions is being driven by the increasing market adoption and usage of graphics processing unit (“GPU”) and CPU farms for AI processing of large data collections, including parallel computing in scientific research.
As of March 31, 2022, we employed 18 sales and marketing personnel, and were supported by over 200 independent sales representatives, which we believe will enable us to address an expanded customer base with the continuing introduction of our associative computing products in fiscal 2023.
As of March 31, 2023, we employed 16 sales and marketing personnel, and were supported by over 200 independent sales representatives, which we believe will enable us to address an expanded customer base with the continuing introduction of our associative computing products in fiscal 2024.
The manufacturing process consists of two phases, the first of which takes approximately sixteen to seventeen weeks and results in wafers that have the potential to yield multiple products within a given product family. After the completion of this phase, the wafers are stored pending customer orders.
The manufacturing process consists of two phases, the first of which takes approximately thirteen to fifteen weeks and results in wafers that have the potential to yield multiple products within a given product family. After the completion of this phase, the wafers are stored pending customer orders.
Our expectations of demand for the APU have been supported by comparisons of the power usage for processing a large area SAR image for one second at high resolution. In one comparison, the APU used on average 93% less power than CPU or GPU systems.
Our expectations of demand for the APU have been supported by comparisons of the power usage for processing large area SAR image in real-time at high resolution. In one comparison, the APU used on average 93% less power than CPU or GPU systems.
Because we have limited experience developing IC products other than Very Fast SRAMs, any efforts by us to introduce new products based on new technology, including our new in-place associative computing products, may not be successful and, as a result, our business may suffer. 12 Table of Contents Intellectual Property Our ability to compete successfully depends, in part, upon our ability to protect our proprietary technology and information.
Because we have limited experience developing integrated circuit (“IC”) products other than Very Fast SRAMs, any efforts by us to introduce new products based on new technology, including our new in-place associative computing products, may not be successful and, as a result, our business may suffer. 13 Table of Contents Intellectual Property Our ability to compete successfully depends, in part, upon our ability to protect our proprietary technology and information.
The following is a representative list of our OEM customers that directly or indirectly purchased more than $500,000 of our SRAM products in the fiscal year ended March 31, 2022: ​ ​ ​ ​ ​ BAE Systems Ciena Honeywell Nokia Raytheon Rockwell ​ Many of our OEM customers use contract manufacturers to assemble their equipment.
The following is a representative list of our OEM customers that directly or indirectly purchased more than $600,000 of our SRAM products in the fiscal year ended March 31, 2023: ​ ​ ​ ​ ​ BAE Systems Ciena Honeywell Lockheed Nokia Raytheon ​ ​ Rockwell ​ ​ ​ Many of our OEM customers use contract manufacturers to assemble their equipment.
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 29%, 39% and 38% of our net revenues in fiscal 2022, 2021 and 2020, 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 17%, 29% and 39% of our net revenues in fiscal 2023, 2022 and 2021, respectively.
Item 1. Business Overview GSI provides in-place associative computing solutions for applications in high growth markets such as artificial intelligence (AI) and high-performance computing (HPC), including natural language processing and computer vision. Our initial associative processing unit (“APU”) products are focused on applications using similarity search.
Item 1. Business Overview GSI provides in-place associative computing solutions for applications in high growth markets such as artificial intelligence (“AI”) and high-performance computing (“HPC”), including natural language processing and computer vision. Our associative processing unit (“APU”) products are focused on applications using similarity search.
The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ March 31, ​ ​ 2022 2021 2020 Contract manufacturers and consignment warehouses: ​ ​ ​ ​ ​ ​ ​ Flextronics Technology ​ 16.0 % 21.1 % 14.8 % Sanmina ​ 11.2 ​ 21.5 ​ 17.4 ​ Distributors: ​ ​ ​ ​ ​ ​ ​ Avnet Logistics ​ 38.0 ​ 29.8 ​ 34.3 ​ Nexcomm ​ 17.2 ​ 14.7 ​ 15.1 ​ ​ Nokia was our largest customer in fiscal 2022, 2021 and 2020.
The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ March 31, ​ ​ 2023 2022 2021 Contract manufacturers and consignment warehouses: ​ ​ ​ ​ ​ ​ ​ Flextronics Technology ​ 10.4 % 16.0 % 21.1 % Sanmina ​ 8.8 ​ 11.2 ​ 21.5 ​ Distributors: ​ ​ ​ ​ ​ ​ ​ Avnet Logistics ​ 48.1 ​ 38.0 ​ 29.8 ​ Nexcomm ​ 16.6 ​ 17.2 ​ 14.7 ​ ​ Nokia was our largest customer in fiscal 2023, 2022 and 2021.
This increased competition may result in price reductions, reduced profit margins and loss of market share. In addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures as well as new forms of DRAM and other new memory technologies.
This increased competition may result in price reductions, reduced profit margins and loss of market share. In addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures as well as new forms of Dynamic Random Access Memory (“DRAM”) and other new memory technologies.
Information About Our Executive Officers The following table sets forth certain information concerning our executive officers as of June 1, 2022: ​ ​ ​ ​ ​ ​ Name Age Title Lee-Lean Shu ​ 67 ​ ​ President, Chief Executive Officer and Chairman Avidan Akerib ​ 66 ​ ​ Vice President, Associative Computing Didier Lasserre ​ 57 ​ ​ Vice President, Sales Douglas Schirle ​ 67 ​ ​ Chief Financial Officer Bor-Tay Wu ​ 70 ​ ​ Vice President, Taiwan Operations Ping Wu ​ 65 ​ ​ Vice President, U.S.
Information About Our Executive Officers The following table sets forth certain information concerning our executive officers as of June 1, 2023: ​ ​ ​ ​ ​ ​ Name Age Title Lee-Lean Shu ​ 68 ​ ​ President, Chief Executive Officer and Chairman Avidan Akerib ​ 67 ​ ​ Vice President, Associative Computing Didier Lasserre ​ 58 ​ ​ Vice President, Sales Douglas Schirle ​ 68 ​ ​ Chief Financial Officer Bor-Tay Wu ​ 71 ​ ​ Vice President, Taiwan Operations Ping Wu ​ 66 ​ ​ Vice President, U.S.
Of these employees, 62 are based in our Sunnyvale facility, 58 are based in our Taiwan facility and 46 are based in our Israel facility. We believe that our future success will depend in large part on our ability to attract and retain highly-skilled, engineering, managerial, sales and marketing personnel.
Of these employees, 51 are based in our Sunnyvale facility, 55 are based in our Taiwan facility and 35 are based in our Israel facility. We believe that our future success will depend in large part on our ability to attract and retain highly-skilled, engineering, managerial, sales and marketing personnel.
We currently hold 120 United States patents, including 62 memory patents and 58 associative computing patents, and have in excess of a dozen patent applications pending. We cannot assure you that any patents will be issued as a result of our pending applications.
We currently hold 123 United States patents, including 63 memory patents and 60 associative computing patents, and have in excess of a dozen patent applications pending. We cannot assure you that any patents will be issued as a result of our pending applications.
Wu served as Vice President of Operations at Scan Vision, a semiconductor manufacturer. Robert Yau co-founded our company in March 1995 and has served as our Vice President, Engineering and as a member of our Board of Directors since inception. From December 1993 to February 1995, Mr. Yau was design manager for specialty memory devices at Sony Microelectronics Corporation.
Robert Yau co-founded our company in March 1995 and has served as our Vice President, Engineering and as a member of our Board of Directors since inception. From December 1993 to February 1995, Mr. Yau was design manager for specialty memory devices at Sony Microelectronics Corporation. From 1990 to 1993, Mr. Yau was design manager at MOSEL/VITELIC, a semiconductor company.
This service offering runs on servers in a datacenter that has a direct connection to Amazon Web Services (AWS). Customers can access the APU via the AWS Cognito user identity and data synchronization service for GSI-packaged Software-as-a-Service (SAAS) applications, or a customer’s own custom APU-accelerated applications.
APU SaaS Product We are also commercializing the APU as a service. This service offering runs on servers in a datacenter that have a direct connection to Amazon Web Services. Customers can access the APU via the AWS Cognito user identity and data synchronization service for GSI-packaged SaaS applications, or a customer’s own custom APU-accelerated applications.
Lasserre was an account manager at Solectron Corporation, a provider of electronics manufacturing services. From June 1988 to July 1996, Mr. Lasserre was a field sales engineer at Cypress Semiconductor Corporation, a semiconductor company. Douglas Schirle has served as our Chief Financial Officer since August 2000. From June 1999 to August 2000, Mr. Schirle served as our Corporate Controller.
From July 1996 to October 16 Table of Contents 1997, Mr. Lasserre was an account manager at Solectron Corporation, a provider of electronics manufacturing services. From June 1988 to July 1996, Mr. Lasserre was a field sales engineer at Cypress Semiconductor Corporation, a semiconductor company. Douglas Schirle has served as our Chief Financial Officer since August 2000.
Our associative computing technology utilizes in-memory associative processor structures to address the bottlenecks that limit performance and increase power consumption in CPUs, GPUs, and FPGAs when processing large datasets.
Our associative computing technology utilizes in-memory associative processor structures to address the bottlenecks that limit performance and increase power consumption in CPUs, GPUs, and Field Programable Gate Arrays (“FPGAs”) when processing large datasets.
This flexibility is a tremendous advantage for non-linear processing like trigonometry. The APU is also an associative machine, which means that data that is resident in the device can be applied to a function only if it is deemed associated (for example, with a meta-tag) to the processing.
The APU is also an associative machine, which means that data that is resident in the device can be applied to a function only if it is deemed associated (for example, with a meta-tag) to the processing.
As a result, we see demand for the APU in artificial intelligence applications, including approximate nearest neighbor searches, natural language processing, cryptography, and synthetic aperture radar as well as other fields where the APU’s smaller footprint, superior speed, and low system power consumption is needed.
As a result, we see demand for the APU in artificial intelligence applications, including approximate nearest neighbor searches, natural language processing, cryptography, and synthetic aperture radar as well as other fields whose processing in the datacenter can benefit from the APU’s smaller footprint, superior productivity, and low system power consumption.
In addition, GSI’s compute-in-place technology has wide application. The APU has several benefits that are particularly useful to overcoming the data processing challenges noted above. First, the APU does not have the word size limitation of traditional CPU and GPU processors.
The APU has several benefits that are particularly useful to overcoming the data processing challenges noted above. First, the APU does not have the word size limitation of traditional CPU and GPU processors.
GSI’s gross margin also improved 3 Table of Contents by 7.8% compared to the prior fiscal year, reflecting increased sales of higher-margin products and our ability to manage supply chain challenges and increased costs brought on by the pandemic.
GSI’s gross margin improved by 4.0% compared to the prior fiscal year, reflecting increased sales of higher-margin products and our ability to manage supply chain challenges and increased costs brought on by the pandemic.
Direct sales to contract manufacturers and consignment warehouses accounted for 31.0%, 43.7% and 33.7% of our net revenues for fiscal 2022, 2021 and 2020, respectively. Sales to foreign and domestic distributors accounted for 66.8%, 54.7% and 61.3% of our net revenues for fiscal 2022, 2021 and 2020, respectively.
Direct sales to contract manufacturers and consignment warehouses accounted for 19.8%, 31.0% and 43.7% of our net revenues for fiscal 2023, 2022 and 2021, respectively. Sales to foreign and domestic distributors accounted for 77.5%, 66.8% and 54.7% of our net revenues for fiscal 2023, 2022 and 2021, respectively.
Department of Defense (DoD), Irregular Warfare Technical Support Directorate (IWTSD), and the Israel Ministry of Defense (IMOD), Directorate of Defense Research and Engineering (DDR&D), along with the Merage Institute.
Department of Defense (“DoD”), Irregular Warfare Technical Support Directorate (“IWTSD”), and the Israel Ministry of Defense (“IMOD”), Directorate of Defense Research and Engineering (DDR&D), along with the Merage Institute.
Our marketing group also provides technical, strategic and tactical sales support to our direct sales personnel, sales representatives and distributors. This support includes in-depth product presentations, datasheets, application notes, simulation models, sales tools, marketing communications, marketing research, trademark administration and other support functions. We also engage in various marketing activities to increase brand awareness.
This support includes in-depth product presentations, datasheets, application notes, simulation models, sales tools, marketing communications, marketing research, trademark administration and other support functions. We also engage in various marketing activities to increase brand awareness.
Wistron Neweb Corporation in Taiwan manufactures the boards for our APU product line. Our test procedures require that all of our products be subjected to accelerated burn-in and extensive functional electrical testing which is performed at our Taiwan and U.S. test facilities. Our radiation-hardened products are assembled and tested at STS, located near our Sunnyvale, California headquarters facility.
Wistron Neweb Corporation in Taiwan manufactures the boards for our APU product line. Our test procedures require that all of our products be subjected to accelerated burn-in and extensive functional electrical testing which is performed at our Taiwan and U.S. test facilities.
Our first-place wins in the MAFAT challenge and the MoSAIC challenge have given GSI high-profile exposure to the leading agencies in the Israeli and American military and defense organizations allowing us to pursue opportunities such as our proof of concept order from Elta System Ltd, a subsidiary of Israeli Aerospace Industries, which is funding a SAR image processing acceleration system based on the APU technology.
Despite the difficult financial climate in fiscal 2023, our first-place wins in the MAFAT challenge and the Mobile Standoff Autonomous Indoor Capabilities (“MoSAIC”) challenge have given GSI high-profile exposure to the leading agencies in the Israeli and American military and defense organizations allowing us to pursue opportunities such as our proof of concept order from Elta Systems Ltd, a subsidiary of Israeli Aerospace Industries, which funded a SAR image processing acceleration system based on our APU technology.
Research and Development We have devoted substantial resources in the last six years on the development of our APU products. Our research and development staff includes engineering professionals with extensive experience in the areas of high-speed circuit design, including APU design, as well as SRAM design and systems level networking and telecommunications equipment design.
Our research and development staff includes engineering professionals with extensive experience in the areas of high-speed circuit design, including APU design, as well as SRAM design and systems level networking and telecommunications equipment design.
Our initial focus will be in the markets for artificial intelligence and high-performance computing, including natural language processing, computer vision and cyber security with our initial focus in this area being for similarity search applications including facial recognition, drug discovery and drug toxicity, signal and object detection and cryptography.
Our initial focus is in the markets for artificial intelligence and high-performance computing, including natural language processing, computer vision and cyber security with a focus in this area being for similarity search applications including facial recognition, drug discovery and drug toxicity, signal and object detection and cryptography. ​ ● Identify opportunities and rapidly increase sales of RadHard and RadTolerant SRAMs .
Furthermore, GSI’s expertise in developing radiation-tolerant components creates new opportunities in the growing market for AI products that can be used in low earth orbit and space applications, where other AI products are not able to survive the harsh environment.
Furthermore, GSI’s expertise in developing radiation-tolerant components creates new opportunities in the growing market for AI products that can be used in low earth orbit and space applications, where other AI products are not able to survive the harsh environment. 6 Table of Contents Recent excitement relating to ChatGPT has brought the market for AI search to the forefront of consumer awareness.
The APU has demonstrated its ability to increase the rate of computation for visual search by orders of magnitude with greater accuracy and reduced power consumption. The APU also adds multi-modal search capability to this computational performance.
Our APU is further differentiated from other solutions in the market by its scalability for very large datasets. The APU has demonstrated its ability to increase the rate of computation for visual search by orders of magnitude with greater accuracy and reduced power consumption. The APU also adds multi-modal search capability to this computational performance.
The total addressable market (TAM) for APU search applications, which is the market where GSI is focusing its commercialization efforts, has been determined by GSI to be approximately $164 billion in 2022, and growing at a compound annual growth rate (CAGR) of 19% to $287 billion by 2025.
The total addressable market (“TAM”) for APU search applications, which is the market where GSI is focusing its commercialization efforts, has been determined by GSI to be approximately $232 billion in 2023, and growing at a compound annual growth rate (“CAGR”) of 13% to $380 billion by 2027.
This combination of sensor processing, image processing, and computer vision at high performance has the potential to bring application processing that normally requires several resources in a data center to real-time edge applications. Possible examples are aircraft reconnaissance, satellite processing, and advanced driver assistance systems (ADAS) support.
Examples of real-time causal processing are SAR, image re-registration, and mathematical structural similarity index measure (“SSIM”). This combination of sensor processing, image processing, and computer vision at high performance has the potential to bring application processing that normally requires several resources in a data center to real-time edge applications. Possible examples are in-asset aircraft reconnaissance and satellite image processing.
We intend to supplement our internal development activities by seeking additional opportunities to acquire other businesses, product lines or technologies, or enter into strategic partnerships, that would complement our current product lines, expand the breadth of our markets, enhance our technical capabilities, or otherwise provide growth opportunities. ​ 8 Table of Contents Customers For our new in-place associative computing solutions, we are focusing sales and marketing efforts in the markets for artificial intelligence and high-performance computing, including natural language processing, computer vision and cyber security with our initial focus in this area being for similarity search applications including facial recognition, drug discovery and drug toxicity, signal and object detection and cryptography.
We intend to supplement our internal development activities by seeking additional opportunities to acquire other businesses, product lines or technologies, or enter into strategic partnerships, that would complement our current product lines, expand the breadth of our markets, enhance our technical capabilities, or otherwise provide growth opportunities. ​ 9 Table of Contents Customers For our compute-in-memory associative computing solutions, we are focusing sales and marketing efforts in the markets for artificial intelligence and high-performance computing, with leading applications in natural language processing, computer vision and synthetic aperture radar.
APU Board Level Product The APU is currently available as a full-size PCIe card, which is our LEDA-E product, and is used in enterprise, datacenter, and edge server installations.
APU Board Level Product The APU is currently available as a full-size PCIe card, which is our LEDA-E product, and is used in enterprise, datacenter, and edge server installations. We are now productizing a 1U SSD-type E1.L form factor card, that is our LEDA-S board level product.
The Billion-Scale ANNS Challenge was created to provide a comparative understanding of algorithmic ideas and their application at scale, promote the development of new techniques for the problem and demonstrate their value, and introduce a standard benchmarking approach.
The Billion-Scale ANNS Challenge was created to provide a comparative understanding of algorithmic ideas and their application at scale, promote the development of new techniques for the problem and demonstrate their value, and introduce a standard benchmarking approach. In April 2022, we announced that our submission to the MoSAIC Challenge won first place in the Human/Object Tagging category.
In April 2022, we announced that our submission to the Mobile Standoff Autonomous Indoor Capabilities (MoSAIC) Challenge won first place in the Human/Object Tagging category. The MoSAIC Challenge was designed to identify best-in-class, cutting-edge hardware and software solutions to address challenging and longstanding technological gaps concerning remote autonomous indoor maneuvers. The MoSAIC Challenge was led by the U.S.
The MoSAIC Challenge was designed to identify best-in-class, cutting-edge hardware and software solutions to address challenging and longstanding technological gaps concerning remote autonomous indoor maneuvers. The MoSAIC Challenge was led by the U.S.
We plan to continue expansion into the military/defense and aerospace markets with our APU platform that has shown design robustness for those applications and anticipate renewed sales efforts now that COVID-19 restrictions are subsiding. ​ ● Exploit opportunities to expand the market for our SRAM products .
We continue to aggressively target the military/defense and aerospace markets with our RadHard and RadTolerant devices. We plan to continue expansion into the military/defense and aerospace markets with our APU platform that has shown design robustness. ​ ● Exploit opportunities to expand the market for our SRAM products .
From March 1997 to June 1999, Mr. Schirle was the Corporate Controller at Pericom Semiconductor Corporation, a provider of digital and mixed signal integrated circuits. From November 1996 to February 1997, Mr. Schirle was Vice President, Finance for Paradigm Technology, a manufacturer of SRAMs, and from December 1993 to October 1996, he was the Controller for Paradigm Technology. Mr.
From June 1999 to August 2000, Mr. Schirle served as our Corporate Controller. From March 1997 to June 1999, Mr. Schirle was the Corporate Controller at Pericom Semiconductor Corporation, a provider of digital and mixed signal integrated circuits. From November 1996 to February 1997, Mr.
By changing the computational framework to parallel processing and having search functions conducted directly in a processing memory array, the APU can greatly expedite computation and response times in many “big data” applications. We are creating a new category of computing products that are expected to have substantial target markets and a large new customer base in those markets.
By changing the computational framework to parallel processing and having search functions conducted directly in a processing memory array, the APU can greatly expedite computation and response times in many “big data” applications.
We will continue to utilize CMOS fabrication process technologies from TSMC to design our products. ​ ● Seek new market opportunities .
We will continue to utilize complementary metal-oxide semiconductor fabrication process technologies from Taiwan Semiconductor Manufacturing Company (“TSMC”) to design our products. ​ ● Seek new market opportunities .
The search market segments included in GSI’s TAM and SAM analysis include computer vision, synthetic aperture radar, drug discovery, cybersecurity, and service markets such as NoSQL, Elasticsearch, and OpenSearch.
Some market applications in these segments are computer vision, synthetic aperture radar, drug discovery, and cybersecurity; and service markets such as NoSQL, Elasticsearch, and OpenSearch.
He served in the same capacity from February 2004 to April 2006. From April 2006 to August 2006, Mr. Wu was Vice President of Operations at QPixel Technology, a semiconductor company. From July 1999 to January 2004, Mr. Wu served as our Director of Operations. From July 1997 to June 1999, Mr.
Wu was a design manager at Atalent, an IC design company in Taiwan. Ping Wu has served as our Vice President, U.S. Operations since September 2006. He served in the same capacity from February 2004 to April 2006. From April 2006 to August 2006, Mr. Wu was Vice President of Operations at QPixel Technology, a semiconductor company.
In fiscal 2022, we shipped prototypes of our radiation-hardened SRAM products to three customers, and in the first quarter of fiscal 2023, we started a program with a major prime contractor for a radiation-hardened SRAM prototype that is anticipated to ship in the first half of fiscal 2023 and has prospects for increasing GSI’s net revenue in fiscal 2023 and beyond.
In the first quarter of fiscal 2023, we started a program with a major prime contractor for a radiation-hardened SRAM prototype that shipped in the first half of fiscal 2023 and has prospects for increasing GSI’s net revenue in fiscal 2024 and beyond. We were incorporated in California in 1995 under the name Giga Semiconductor, Inc.
With the SRAM market, we are focusing our sales on network/telecom OEMs and military/defense and aerospace with our radiation hardened and radiation tolerant product offerings.
Our focus in this area being for similarity search acceleration in fast vector search applications and real-time mobile applications in aerospace and defense. With the SRAM market, we are focusing our sales on network/telecom OEMs and military/defense and aerospace with our radiation hardened and radiation tolerant product offerings.
The APU board level products are also integrated and sold as server appliances that include software for turn-key applications in various markets such as medical molecular search and edge SAR image processing. APU SaaS Product We are also commercializing the APU as a service.
These small appliances would allow functions such as location recognition, object recognition, and GPS-denied alternate routing useful for drone product delivery or reconnaissance applications. The APU board level products are also integrated and sold as server appliances that include software for turn-key applications in various markets such as medical molecular search and edge SAR image processing.
New Markets for the APU The APU is capable of processing large data arrays in a very cost competitive solution for large database similarity search, but the mathematical capabilities of the APU also create new opportunities for using real-time causal processing. Examples of this are SAR, image re-registration, and mathematical structural similarity index measure (SSIM).
For these reasons, the APU is drawing interest from prospective customers in the pharmaceutical and genomics industries. New Markets for the APU The APU is capable of processing large data arrays in a cost competitive solution for large database similarity search, but the mathematical capabilities of the APU also create new opportunities for using real-time causal processing.
For instance, the ability to search on a picture of a product on an ecommerce website, with pricing and specific filters, does not impede the performance of the in-memory search.
For instance, the ability to search on a picture of a product on an ecommerce website, with pricing and specific filters, does not impede the performance of the in-memory search versus a traditional text only search. This kind of performance has the potential to transform online retailers’ capabilities to run search queries and improve customers’ online shopping experience.
Liability for a stated warranty period is usually limited to replacement of defective products. Our marketing efforts are, first and foremost, focused on ensuring that the products we develop meet or exceed our customers’ needs. Our marketing efforts are currently focused on marketing the newly developed in-place associative computing solutions and our radiation-tolerant and radiation-hardened space grade SRAMs.
We have responded with increased pricing to our customers. We typically provide a warranty of up to 36 months on our products. Liability for a stated warranty period is usually limited to replacement of defective products. Our marketing efforts are, first and foremost, focused on ensuring that the products we develop meet or exceed our customers’ needs.
GSI is currently in development and field testing with potential customers in the computer vision, synthetic aperture radar, drug discovery and cybersecurity market segments and is rolling out a SaaS solution for Elasticsearch and OpenSearch.
GSI is currently in development and field testing with potential customers in the computer vision, synthetic aperture radar, and cybersecurity market segments. We have a solution to accelerate multimodal vector search as an on-prem or SaaS solution for OpenSearch and Fast Vector Search (“FVS”).
Previously, those efforts were focused on defining our high-performance SRAM product roadmap. We work closely with key customers to understand their roadmaps and to ensure that the products we develop meet their requirements (primary aspects of which include functionality, performance, electrical interfaces, power, and schedule).
We work closely with key customers to understand their roadmaps and to ensure that the products we develop meet their requirements (primary aspects of which include functionality, performance, electrical interfaces, power, and schedule). Our marketing group also provides technical, strategic and tactical sales support to our direct sales personnel, sales representatives and distributors.
GSI has similarly determined that the Serviceable Available Market (SAM) for APU search applications is approximately $5.4 billion in 2022, and anticipated to grow at a CAGR of 21% to $10 billion by 2025.
GSI has similarly determined that the Serviceable Available Market (“SAM”) for APU search applications is approximately $7.1 billion in 2023, and anticipated to grow at a CAGR of 16% to $12.8 billion by 2027. The search market segments included in GSI’s TAM and SAM analyses include vector search HPC.
Realization of this goal will require additional development and marketing efforts in calendar 2022. In many instances, customer evaluations can proceed with the current product.
Realization of this goal will require additional development and marketing efforts in calendar 2023.
Our commercialization efforts for the APU product are focused on markets where the APU shows factors of improvement against CPU or GPU-only systems. The APU differentiates itself most for similarity search, multi-modal search, real-time very large database search, and several scientific high-performance computing workloads processing sensor data.
The APU differentiates itself most for similarity search, multi-modal vector search, real-time very large database search, and several scientific high-performance computing workloads processing sensor data. The APU’s improved performance over CPU or GPU systems provides a paradigm-shifting ability to process data in real-time.
Schirle was formerly a certified public accountant. 15 Table of Contents Bor-Tay Wu has served as our Vice President, Taiwan Operations since January 1997. From January 1995 to December 1996, Mr. Wu was a design manager at Atalent, an IC design company in Taiwan. Ping Wu has served as our Vice President, U.S. Operations since September 2006.
Schirle was Vice President, Finance for Paradigm Technology, a manufacturer of SRAMs, and from December 1993 to October 1996, he was the Controller for Paradigm Technology. Mr. Schirle was formerly a certified public accountant. Bor-Tay Wu has served as our Vice President, Taiwan Operations since January 1997. From January 1995 to December 1996, Mr.
The APU is based on a memory line structure, which means the APU can operate on an instruction at 16-bits, and then the next instruction at say 768-bits or 2048-bits. The APU can operate on any word width that makes sense for the problem and also for what makes sense at the current processing step.
The APU can operate on any word width that makes sense for the problem and also for what makes sense at the current processing step. This dynamic flexibility is a tremendous advantage for non-linear processing like trigonometry.
The cloud connected cards in this datacenter are also connected via the same ultra-low latency system to provide approximate nearest neighbor (ANN) and multi-modal extension capability to OpenSearch. APU Commercialization Risk Sales of APU products have not been material to date.
The cloud connected cards in this datacenter are also connected via the same ultra-low latency system to provide approximate nearest neighbor (“ANN”) and multi-modal extension capability to OpenSearch. We envision customers who use OpenSearch for their database storage would use our SaaS product to accelerate searches run on OpenSearch.
This kind of performance has the potential to transform online retailers’ capabilities to run search queries and improve customers’ online shopping experience. 5 Table of Contents The APU’s higher speeds and increased accuracy in similarity search has been shown to speed drug discovery, which can potentially lower drug discovery costs, an important consideration for research organizations dependent on funding.
The APU’s higher speeds and increased accuracy in similarity search has been shown to speed drug discovery, which can potentially lower drug discovery costs, an important consideration for research organizations dependent on funding. The APU is well suited for enhancing drug discovery work because it can perform similarity searches using very descriptive molecular representations in a virtual environment.
Since fiscal 2021, in response to the COVID-19 pandemic, we have implemented safety protocols and new procedures to protect our employees. These protocols include complying with social distancing and other health and safety standards as required by state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities.
These protocols, which were no longer being enforced, included complying with social distancing and other health and safety standards as required by state and local government agencies, taking into consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities. 15 Table of Contents Investor Information You can access financial and other information in the Investor Relations section of our website at www.gsitechnology.com .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny significant order cancellations or order deferrals could adversely affect our operating results. ● The military conflict in Ukraine, the rapid rise in energy prices and the ongoing COVID-19 global pandemic may continue to adversely affect our financial condition. ● We have incurred significant losses and may incur losses in the future. ● We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, our ability to produce timely and accurate financial statements could be impaired. ● We depend upon the sale of our Very Fast SRAMs for most of our revenues and the market for Very Fast SRAMs is highly competitive. ● We are dependent on a number of single source suppliers. ● If we do not successfully develop and introduce new products, which entails certain significant risks, our business will be harmed. 16 Table of Contents ● If we are unable to offset increased wafer fabrication and assembly costs, our gross margins will suffer. ● We are subject to the highly cyclical nature of the networking and telecommunications markets. ● We rely heavily on distributors and our business will be negatively impacted if we are unable to develop and manage distribution channels and accurately predict future sales through our distributors. ● The average selling prices of our products are expected to decline. ● We are substantially dependent on the continued services and performance of our senior management and other key personnel.
Biggest changeIf this customer, or any of our other major customers, reduces the amount they purchase, stops purchasing our products or fails to pay us, our financial position and operating results will suffer. ● Rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment may continue to adversely affect our financial condition. ● We have incurred significant losses and may incur losses in the future. 17 Table of Contents ● We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, our ability to produce timely and accurate financial statements could be impaired. ● Goodwill impairment and related charges, as well as other accounting charges or adjustments could negatively impact our operating results. ● We depend upon the sale of our Very Fast SRAMs for most of our revenues and the market for Very Fast SRAMs is highly competitive. ● If we do not successfully implement certain cost reduction initiatives, we may suffer adverse impacts on our business and operations. ● We are dependent on a number of single source suppliers. ● If we do not successfully develop and introduce the new in-place associative computing products, which entails certain significant risks, our business will be harmed. ● If we are unable to offset increased wafer fabrication and assembly costs, our gross margins will suffer. ● We are subject to the highly cyclical nature of the networking and telecommunications markets. ● We rely heavily on distributors and our business will be negatively impacted if we are unable to develop and manage distribution channels and accurately forecast future sales through our distributors. ● The average selling prices of our products are expected to decline. ● We are substantially dependent on the continued services of our senior management and other key personnel.
Other challenges that we face include: ● our products may become obsolete upon the introduction of alternative technologies; ● we may incur substantial costs if we need to modify our products to respond to these alternative technologies; ● we may not have sufficient resources to develop or acquire new technologies or to introduce new products capable of competing with future technologies; ● new products that we develop may not successfully integrate with our end-users’ products into which they are incorporated; ● we may be unable to develop new products that incorporate emerging industry standards; ● we may be unable to develop or acquire the rights to use the intellectual property necessary to implement new technologies; and ● when introducing new or enhanced products, we may be unable to manage effectively the transition from older products.
Other challenges that we face include: · our products may become obsolete upon the introduction of alternative technologies; · we may incur substantial costs if we need to modify our products to respond to these alternative technologies; · we may not have sufficient resources to develop or acquire new technologies or to introduce new products capable of competing with future technologies; · new products that we develop may not successfully integrate with our end-users’ products into which they are incorporated; · we may be unable to develop new products that incorporate emerging industry standards; · we may be unable to develop or acquire the rights to use the intellectual property necessary to implement new technologies; and · when introducing new or enhanced products, we may be unable to effectively manage the transition from older products.
Although our Board has determined that these repurchases are in the best interests of our stockholders, they expose us to certain risks including: ● the risks resulting from a reduction in the size of our “public float,” which is the number of shares of our common stock that are owned by non-affiliated stockholders and available for trading in the securities markets, which may reduce the volume of trading in our shares and result in reduced liquidity and, potentially, lower trading prices; ● the risk that our stock price could decline and that we would be able to repurchase shares of our common stock in the future at a lower price per share than the prices we have paid in our tender offer and repurchase program; and ● the risk that the use of a portion of our cash reserves for this purpose has reduced, or may reduce, the amount of cash that would otherwise be available to pursue potential cash acquisitions or other strategic business opportunities. ​ Item 1B.
Although our Board has determined that these repurchases are in the best interests of our stockholders, they expose us to certain risks including: · the risks resulting from a reduction in the size of our “public float,” which is the number of shares of our common stock that are owned by non-affiliated stockholders and available for trading in the securities markets, which may reduce the volume of trading in our shares and result in reduced liquidity and, potentially, lower trading prices; · the risk that our stock price could decline and that we would be able to repurchase shares of our common stock in the future at a lower price per share than the prices we have paid in our tender offer and repurchase program; and · the risk that the use of a portion of our cash reserves for this purpose has reduced, or may reduce, the amount of cash that would otherwise be available to pursue potential cash acquisitions or other strategic business opportunities.
The COVID-19 global pandemic, along with the previous outbreaks of SARS, H1N1 and the Avian Flu, has curtailed travel between and within countries, including in the Asia-Pacific region. Outbreaks of new contagious diseases or the resurgence of existing diseases that significantly affect the Asia-Pacific region could disrupt the operations of our key suppliers and manufacturing partners.
The recent COVID-19 global pandemic, along with the previous outbreaks of SARS, H1N1 and the Avian Flu, curtailed travel between and within countries, including in the Asia-Pacific region. Outbreaks of new contagious diseases or the resurgence of existing diseases that significantly affect the Asia-Pacific region could disrupt the operations of our key suppliers and manufacturing partners.
In addition, we may not have sufficient administrative staff to support our operations. For example, we currently have only five employees in our finance department in the United States, including our Chief Financial Officer. Furthermore, our officers have limited experience in managing large or rapidly growing businesses.
In addition, we may not have sufficient administrative staff to support our operations. For example, we currently have only four employees in our finance department in the United States, including our Chief Financial Officer. Furthermore, our officers have limited experience in managing large or rapidly growing businesses.
Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated in recent years and may increase in the future due to a number of our employees working from home and the potential for retaliatory cyber-attacks as a result of the military conflict in Ukraine.
Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated and may increase in the future due to a number of our employees working from home and the potential for retaliatory cyber-attacks as a result of the military conflict in Ukraine.
These provisions could also have the effect of discouraging others from making tender offers for our common stock. As a result, these provisions might prevent the market price of our common stock from increasing substantially in response to actual or rumored takeover attempts. These provisions might also prevent changes in our management.
These provisions could also have the effect of discouraging others from making tender offers for our common stock. As a result, these provisions might prevent the market price of our common stock from increasing substantially in response to actual or rumored takeover attempts.
Claims that we infringe third party intellectual property rights could seriously harm our business and require us to incur significant costs. In recent years, there has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.
Claims that we infringe third party intellectual property rights could seriously harm our business and require us to incur significant costs. There has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.
Any action to materially modify international trade agreements, change corporate tax policy related to international commerce or mandate domestic production of goods, could adversely affect our business, financial condition and results of operations. 32 Table of Contents Some of our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business.
Any action to materially modify international trade agreements, change corporate tax policy related to international commerce or mandate domestic production of goods, could adversely affect our business, financial condition and results of operations. Some of our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business.
For example, because we have limited experience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce new products, including APU products, may not be successful and our business may suffer.
For example, because we have limited experience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce new products may not be successful and our business may suffer.
Securities litigation could result in substantial costs and divert management’s attention and resources. This could harm our business and cause the value of our stock to decline. 33 Table of Contents We may need to raise additional capital in the future, which may not be available on favorable terms or at all, and which may cause dilution to existing stockholders.
Securities litigation could result in substantial costs and divert management’s attention and resources. This could harm our business and cause the value of our stock to decline. We may need to raise additional capital in the future, which may not be available on favorable terms or at all, and which may cause dilution to existing stockholders.
Our Very Fast SRAM products are incorporated into routers, switches, wireless local area network infrastructure equipment, wireless base stations and network access equipment used in the highly cyclical networking and telecommunications markets. We expect that the networking and telecommunications markets will continue to be highly cyclical, characterized by periods of rapid growth and contraction.
Our Very Fast SRAM products are incorporated into routers, switches, wireless local area network infrastructure equipment, wireless base stations and network access equipment used in the highly cyclical 24 Table of Contents networking and telecommunications markets. We expect that the networking and telecommunications markets will continue to be highly cyclical, characterized by periods of rapid growth and contraction.
In addition, the cost and operational consequences of implementing further data protection measures could be significant. 25 Table of Contents Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time.
In addition, the cost and operational consequences of implementing further data protection measures could be significant. Portions of our IT infrastructure also may experience interruptions, delays or cessations of service or produce errors in connection with systems integration or migration work that takes place from time to time.
We are dependent on our relationships with TSMC to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes. If we or TSMC experience significant delays in this transition or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.
We are dependent on our relationships with TSMC to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes. If we or TSMC experience significant delays in this 30 Table of Contents transition or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.
Our ability to increase our net revenues and maintain our gross margins despite a decline in the average selling prices of our products will depend on a variety of factors, including our ability to introduce lower cost versions of our existing products, increase unit sales volumes of these products, and introduce new products with higher prices and greater margins.
Our ability to increase our net revenues and maintain our gross 25 Table of Contents margins despite a decline in the average selling prices of our products will depend on a variety of factors, including our ability to introduce lower cost versions of our existing products, increase unit sales volumes of these products, and introduce new products with higher prices and greater margins.
If a successful claim is made against us or any of our customers and a license is not made available to us on commercially reasonable terms or we are required to pay substantial damages or awards, our business, financial condition and results of operations would be materially adversely affected.
If a successful claim is made against us or any of our customers and a license is not made available to us on 28 Table of Contents commercially reasonable terms or we are required to pay substantial damages or awards, our business, financial condition and results of operations would be materially adversely affected.
As a result, if OEM customers reduce their purchases of our products, our business will suffer. 26 Table of Contents Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results. Our products are generally incorporated in our OEM customers’ products at the design stage.
As a result, if OEM customers reduce their purchases of our products, our business will suffer. Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results. Our products are generally incorporated in our OEM customers’ products at the design stage.
If any claims received in the future were to be upheld, the consequences to us could require us to: ● stop selling our products that incorporate the challenged intellectual property; 27 Table of Contents ● obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms or at all; ● pay damages; or ● redesign those products that use the disputed technology.
If any claims received in the future were to be upheld, the consequences to us could require us to: · stop selling our products that incorporate the challenged intellectual property; · obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms or at all; · pay damages; or · redesign those products that use the disputed technology.
TSMC, as well as our other independent suppliers and many of our OEM customers, have operations in the Pacific Rim, an area subject to significant risk of earthquakes, typhoons and other natural disasters and adverse consequences related to the outbreak of contagious diseases such as COVID-19.
TSMC, as well as our other independent suppliers and many of our OEM customers, have operations in the Pacific Rim, an area subject to significant risk of earthquakes, typhoons and other natural disasters and adverse consequences related to the outbreak of contagious diseases.
In recent years the stock market in general, and the market for technology stocks in particular, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. The market price of our common stock might experience significant fluctuations in the future, including fluctuations unrelated to our performance.
In recent years, the stock market in general, and the market for technology stocks in particular, have experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected 33 Table of Contents companies. The market price of our common stock might experience significant fluctuations in the future, including fluctuations unrelated to our performance.
Moreover, the value of any design win will largely depend on the commercial success of our OEM customers’ products. There can be no assurance that we will continue to achieve design wins or that any design win will result in future revenues.
Moreover, the value of any design win will largely depend on the commercial success of our 27 Table of Contents OEM customers’ products. There can be no assurance that we will continue to achieve design wins or that any design win will result in future revenues.
If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline. 23 Table of Contents We are subject to the highly cyclical nature of the networking and telecommunications markets.
If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline. We are subject to the highly cyclical nature of the networking and telecommunications markets.
As of May 31, 2022 , our executive officers, directors and entities affiliated with them beneficially owned approximately 32% of our outstanding common stock.
As of May 31, 2023 , our executive officers, directors and entities affiliated with them beneficially owned approximately 32% of our outstanding common stock.
Moreover, a substantial portion of our products is manufactured and tested in Taiwan, and the software development for our associative computing products occurs in Israel. We intend to continue expanding our international business in the future.
Moreover, a substantial portion of our products is manufactured and tested in Taiwan, and the software development for our associative computing products occurs in 31 Table of Contents Israel. We intend to continue expanding our international business in the future.
As a result, we could be required to obtain additional manufacturing and assembly capacity in order to meet increased demand. Securing additional manufacturing and assembly capacity may cause our wafer fabrication and assembly costs to increase.
As a result, we could be required to obtain additional manufacturing and assembly capacity in order to meet increased demand. Securing additional manufacturing and assembly capacity may cause our wafer fabrication and assembly costs to increase. Inflationary pressures may also cause our wafer fabrication costs to increase.
Factors that may affect periodic operating results in the future include: ● commercial acceptance of our associative computing products; ● commercial acceptance of our RadHard and RadTolerant products; ● changes in our customers' inventory management practices; ● unpredictability of the timing and size of customer orders, since most of our customers purchase our products on a purchase order basis rather than pursuant to a long-term contract; ● changes in our product pricing policies, including those made in response to new product announcements, pricing changes of our competitors and price increases by our foundry and suppliers; ● our ability to anticipate and conform to new industry standards; ● fluctuations in availability and costs associated with materials and manufacturing services needed to satisfy customer requirements caused by supply constraints; 18 Table of Contents ● manufacturing defects, which could cause us to incur significant warranty, support and repair costs, lose potential sales, harm our relationships with customers and result in write-downs; and ● our ability to address technology issues as they arise, improve our products' functionality and expand our product offerings.
Factors that may affect periodic operating results in the future include: ● commercial acceptance of our associative computing products; ● commercial acceptance of our RadHard and RadTolerant products; ● changes in our customers' inventory management practices; ● unpredictability of the timing and size of customer orders, since most of our customers purchase our products on a purchase order basis rather than pursuant to a long-term contract; ● changes in our product pricing policies, including those made in response to new product announcements, pricing changes of our competitors and price increases by our foundry and suppliers; ● our ability to anticipate and conform to new industry standards; ● fluctuations in availability and costs associated with materials and manufacturing services needed to satisfy customer requirements caused by supply constraints; 19 Table of Contents ● restructuring, asset and goodwill impairment and related charges, as well as other accounting changes or adjustments; ● manufacturing defects, which could cause us to incur significant warranty, support and repair costs, lose potential sales, harm our relationships with customers and result in write-downs; and ● our ability to address technology issues as they arise, improve our products' functionality and expand our product offerings.
If any of these changes were to occur, our business could be harmed and our stock price could decline. Our international business exposes us to additional risks. Products shipped to destinations outside of the United States accounted for 53.5%, 55.4% and 59.6% of our net revenues in fiscal 2022, 2021 and 2020, respectively.
If any of these changes were to occur, our business could be harmed and our stock price could decline. Our international business exposes us to additional risks. Products shipped to destinations outside of the United States accounted for 51.4%, 53.5% and 55.4% of our net revenues in fiscal 2023, 2022 and 2021, respectively.
If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed. ● Cyber-attacks could disrupt our operations or the operations of our partners, and result in reduced revenue, increased costs, liability claims and harm our reputation or competitive position. ● Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products. ● Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results. ● Our business could be negatively affected as a result of actions of activist stockholders or others. ● Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results. ● Our business will suffer if we are unable to protect our intellectual property or if there are claims that we infringe third party intellectual property rights. ● If our business grows, such growth may place a significant strain on our management and operations.
If we are unable to recruit or retain qualified personnel, our business could be harmed. ● Cyber-attacks could disrupt our operations or the operations of our partners, and result in reduced revenue, increased costs, liability claims and harm our reputation or competitive position. ● Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products. ● Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results. ● Our business could be negatively affected as a result of actions of activist stockholders or others. ● Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results. ● Our business will suffer if we are unable to protect our intellectual property or if there are claims that we infringe third party intellectual property rights. ● Current unfavorable economic and market conditions may adversely affect our business, financial condition, results of operations and cash flows. ● If our business grows, such growth may place a significant strain on our management and operations.
From November 2008 through December 2021 we repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional shares repurchased in the open market pursuant to our stock repurchase program.
Since November 2008, we have repurchased and retired an aggregate of 12,004,779 shares of our common stock at a total cost of $60.7 million, including 3,846,153 shares repurchased at a total cost of $25 million pursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional shares repurchased in the open market pursuant to our stock repurchase program.
Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by the COVID-19 global pandemic, natural disaster or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminate deliveries to us for any other reason, we likely will not be able to enforce fulfillment of any delivery commitments and we would have to identify and qualify acceptable replacements from alternative sources of supply.
Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by natural disaster, military action or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminate deliveries to us for any other reason, we likely will not be able to enforce fulfillment of any delivery commitments and we would have to identify and qualify acceptable replacements from alternative sources of supply.
As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be harmed. 28 Table of Contents If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed.
As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be harmed. If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed.
A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our financial position and operating results will suffer. At March 31, 2022, three customers accounted for 34%, 28% and 19% of our accounts receivable, respectively.
A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our financial position and operating results will suffer. At March 31, 2023, three customers accounted for 36%, 25% and 19% of our accounts receivable, respectively.
Our management is taking steps to remediate our material weakness, including re-evaluating the methodology and procedures involved in developing forecasts used to calculate the contingent consideration liability as well as the review and oversight of the forecasting process.
Our management is taking steps to remediate our material weakness, including re-evaluating the methodology and procedures involved in developing forecasts as well as the review and oversight of the forecasting process.
At March 31, 2022, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our 34 Table of Contents common stock from time to time under our repurchase program.
At March 31, 2023, we had outstanding authorization from our Board of Directors to purchase up to an additional $4.3 million of our common stock from time to time under our repurchase program.
Any decrease in revenues from sales of our products could harm our business more than it would if we offered a more diversified line of products. 21 Table of Contents Our future success is substantially dependent on the successful introduction of our new APU products which entails significant risks.
Any decrease in revenues from sales of our products could harm our business more than it would if we offered a more diversified line of products. Our future success is substantially dependent on the successful introduction of new in-place associative computing products which entails significant risks.
This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2023 and will be subject to significant risks.
This ongoing project involves the commercialization of new, cutting-edge technology, will require a continuing substantial effort during fiscal 2024 22 Table of Contents and will be subject to significant risks.
Our business depends in large part upon continued demand for our products in the markets we currently serve, which will continue to be adversely impacted by the COVID-19 global pandemic, and adoption of our products in new markets.
Our business depends in large part upon continued demand for our products in the markets we currently serve, which will continue to be adversely impacted by the decline in the global economic environment, and adoption of our products in new markets.
We have incurred significant losses and may incur losses in the future. We have incurred significant losses. We incurred net losses of $16.4 million, $21.5 million and $10.3 million during fiscal 2022, 2021 and 2020, respectively.
We have incurred significant losses and may incur losses in the future. We have incurred significant losses. We incurred net losses of $16.0 million, $16.4 million and $21.5 million during fiscal 2023, 2022 and 2021, respectively.
Purchases by Nokia represented approximately 29%, 39% and 38% of our net revenues in fiscal 2022, 2021 and 2020, respectively.
Purchases by Nokia represented approximately 17%, 29% and 39% of our net revenues in fiscal 2023, 2022 and 2021, respectively.
Taiwanese policies toward economic liberalization, and laws and policies affecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change, resulting in greater restrictions on our ability and our suppliers’ ability to do business and operate facilities in Taiwan.
Moreover, the role of the Taiwanese government in the Taiwanese economy is significant. Taiwanese policies toward economic liberalization, and laws and policies affecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change, resulting in greater restrictions on our ability and our suppliers’ ability to do business and operate facilities in Taiwan.
In the course of preparing our financial statements for the fiscal year ended March 31, 2022, we identified a material weakness in our internal control over financial reporting.
In the course of preparing our financial statements for the fiscal year ended March 31, 2022, we identified a material weakness in our internal control over financial reporting which remained un-remediated at March 31, 2023.
This transition will require us to migrate to new manufacturing processes for our products and redesign certain products. The manufacture and design of our products is complex, and we may experience difficulty in transitioning to smaller geometry process technologies or new manufacturing processes. These difficulties could result in reduced manufacturing yields, delays in product deliveries and increased expenses.
The manufacture and design of our products is complex, and we may experience difficulty in transitioning to smaller geometry process technologies or new manufacturing processes. These difficulties could result in reduced manufacturing yields, delays in product deliveries and increased expenses.
We rely on a combination of patent, trade secret, copyright and trademark laws and non-disclosure and other contractual agreements to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement.
Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws and non-disclosure and other contractual agreements to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement.
Conducting business outside of the United States subjects us to additional risks and challenges, including: ● potential political and economic instability in, or foreign conflicts that involve or affect, the countries in which we, our customers and our suppliers are located; ● local authorities’ decisions regarding travel restrictions, stay-at-home orders, testing requirements and other policies to address public health crises such as the COVID-19 global pandemic which have an adverse impact on the economy and demand for our products; ● uncertainties regarding taxes, tariffs, quotas, export controls and license requirements, trade wars, policies that favor domestic companies over nondomestic companies, including government efforts to provide for the development and growth of local competitors, and other trade barriers; ● heightened price sensitivity from customers in emerging markets; ● compliance with a wide variety of foreign laws and regulations and unexpected changes in these laws and regulations; ● fluctuations in freight rates and transportation disruptions; 31 Table of Contents ● difficulties and costs of staffing and managing personnel, distributors and representatives across different geographic areas and cultures, including assuring compliance with the U.
Conducting business outside of the United States subjects us to additional risks and challenges, including: · potential political and economic instability in, or armed conflicts that involve or affect, the countries in which we, our customers and our suppliers are located; · uncertainties regarding taxes, tariffs, quotas, export controls and license requirements, trade wars, policies that favor domestic companies over nondomestic companies, including government efforts to provide for the development and growth of local competitors, and other trade barriers; · heightened price sensitivity from customers in emerging markets; · compliance with a wide variety of foreign laws and regulations and unexpected changes in these laws and regulations; · fluctuations in freight rates and transportation disruptions; · difficulties and costs of staffing and managing personnel, distributors and representatives across different geographic areas and cultures, including assuring compliance with the U.
We are vulnerable to advances in technology by competitors, including new SRAM architectures, new forms of DRAM and the emergence of new memory technologies that could enable the development of products that feature higher performance or lower cost.
In particular, the networking and telecommunications markets are rapidly evolving and new standards are emerging. We are vulnerable to advances in technology by competitors, including new SRAM architectures, new forms of DRAM and the emergence of new memory 23 Table of Contents technologies that could enable the development of products that feature higher performance or lower cost.
Risks Related to Our International Business and Operations ● The international political, social and economic environment, particularly as it relates to Taiwan, may affect our business performance. ● Certain of our independent suppliers and OEM customers have operations in the Pacific Rim, an area subject to significant risk of natural disasters and outbreak of contagious diseases such as COVID-19. ● The United States could materially modify certain international trade agreements, or change tax provisions related to the global manufacturing and sales of our products. 17 Table of Contents ● Some of our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business.
Risks Related to Manufacturing and Product Development ● We may experience difficulties in transitioning our manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. ● Manufacturing process technologies are subject to rapid change and require significant expenditures. ● Our products may contain defects, which could reduce revenues or result in claims against us. 18 Table of Contents Risks Related to Our International Business and Operations ● The international political, social and economic environment, particularly as it relates to Taiwan, may affect our business performance. ● Certain of our independent suppliers and OEM customers have operations in the Pacific Rim, an area subject to significant risk of natural disasters and outbreak of contagious diseases such as COVID-19. ● The United States could materially modify certain international trade agreements, or change tax provisions related to the global manufacturing and sales of our products. ● Some of our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business.
For example, these conflicts may result from the different discount levels offered by multiple channel distributors to their customers or, potentially, from our direct sales force targeting the same equipment manufacturer accounts as our indirect channel distributors.
Since we sell through multiple channels and distribution networks, we may have to resolve potential conflicts between these channels. For example, these conflicts may result from the different discount levels offered by multiple channel distributors to their customers or, potentially, from our direct sales force targeting the same equipment manufacturer accounts as our indirect channel distributors.
For example, in the twelve fiscal quarters ended March 31, 2022, we recorded net revenues of as much as $13.0 million and as little as $6.6 million, including net revenues varying from $6.6 million to $8.8 million in the last eight quarters, and operating losses from $229,000 to $5.7 million, and varying from $2.9 million and $5.7 million in the last eight quarters ended March 31, 2022.
For example, in the twelve fiscal quarters ended March 31, 2023, we recorded net revenues of as much as $9.0 million and as little as $5.4 million, and operating losses from $2.9 million to $5.7 million.
Our business benefits from free trade agreements, and we also rely on various U.S. corporate tax provisions related to international commerce as we develop, manufacture, market and sell our products globally.
A portion of our business activities are conducted in foreign countries, including Taiwan and Israel. Our business benefits from free trade agreements, and we also rely on various U.S. corporate tax provisions related to international commerce as we develop, manufacture, market and sell our products globally.
The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new OEM customers and develop new products. Our business will suffer if we are unable to protect our intellectual property. Our success and ability to compete depends in large part upon protecting our proprietary technology.
The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new OEM customers and develop new products. 29 Table of Contents Our business will suffer if we are unable to protect our intellectual property.
In fiscal years 2021 and 2022, we experienced, and we expect to continue to experience price increases for raw materials, including a 20% increase in the price of wafers received in early calendar 2022, and manufacturing services due to the supply chain constraints in the semiconductor market.
In fiscal years 2022 and 2023, we experienced price increases for raw materials, including a 20% increase in the price of wafers that was implemented in early calendar 2022 and a 6% increase that was implemented in early calendar 2023, as well as varying pricing increases for manufacturing services due to the supply chain constraints in the semiconductor market .
The material weakness identified pertains to the design of the control over the review of the forecasts used to calculate the contingent consideration liability and used in the recoverability test for intangible assets.
The material weakness identified pertains to the design and maintenance of control over the review of the forecasts used to calculate the contingent consideration liability, used in the goodwill impairment test and used in the recoverability test for intangible assets. This material weakness has not been remediated as of March 31, 2023.
These conflicts may harm our business or reputation. 24 Table of Contents The average selling prices of our products are expected to decline, and if we are unable to offset these declines, our operating results will suffer.
These conflicts may harm our business or reputation. The average selling prices of our products are expected to decline, and if we are unable to offset these declines, our operating results will suffer. Historically, the average unit selling prices of our products have declined substantially over the lives of the products, and we expect this trend to continue.
Use of a portion of our cash reserves to repurchase shares of our common stock presents potential risks and disadvantages to us and our continuing stockholders.
These provisions might also prevent changes in our management. 34 Table of Contents Use of a portion of our cash reserves to repurchase shares of our common stock presents potential risks and disadvantages to us and our continuing stockholders.
The military conflict in Ukraine, the rapid rise in energy prices and the COVID-19 global pandemic have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future.
Rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future.
In addition, our business could be harmed if such an outbreak resulted in travel being restricted, the implementation of stay-at-home or shelter-in-place orders or if it adversely affected the operations of our OEM customers or the demand for our products or our OEM customers’ products.
In addition, our business could be harmed if such an outbreak resulted in travel being restricted, the implementation of stay-at-home or shelter-in-place orders or if it adversely affected the operations of our OEM customers or the demand for our products or our OEM customers’ products. 32 Table of Contents We do not maintain sufficient business interruption and other insurance policies to compensate us for all losses that may occur.
If we fail to offer technologically advanced products, including APU products, and respond to technological advances and emerging standards, we may not generate sufficient revenues to offset our development costs and other expenses, which will hurt our business.
If we fail to offer technologically advanced products and respond to technological advances and emerging standards, we may not generate sufficient revenues to offset our development costs and other expenses, which will hurt our business. The development of new or enhanced products is a complex and uncertain process that requires the accurate anticipation of technological and market trends.
Risks Related to Manufacturing and Product Development We may experience difficulties in transitioning to smaller geometry process technologies and other more advanced manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses. In order to remain competitive, we expect to continue to transition the manufacture of our products to smaller geometry process technologies.
If our management fails to respond effectively to changes in our business, our business may suffer. Risks Related to Manufacturing and Product Development We may experience difficulties in transitioning to smaller geometry process technologies and other more advanced manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.
Since the manufacturing of wafers and other components is extremely complex, the process of qualifying new foundries and suppliers is a lengthy process and there is no assurance that we would be able to find and qualify another supplier without materially adversely affecting our business, financial condition and results of operations. 22 Table of Contents If we do not successfully develop new products to respond to rapid market changes due to changing technology and evolving industry standards, particularly in the networking and telecommunications markets, our business will be harmed.
Since the manufacturing of wafers and other components is extremely complex, the process of qualifying new foundries and suppliers is a lengthy process and there is no assurance that we would be able to find and qualify another supplier without materially adversely affecting our business, financial condition and results of operations.
If any of these suppliers cannot provide components on a timely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business will suffer.
If any of these suppliers cannot provide components on a timely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business will suffer. For example, due to worldwide inflationary pressures, the cost of wafers and assembly services have increased by approximately 25% since the beginning of fiscal 2021.
Disruptions in the capital markets as a result of the military conflict in Ukraine, the rapid rise in energy prices and other inflation and the COVID-19 global pandemic may also adversely affect our ability to obtain additional liquidity should the impacts of the global pandemic continue for a prolonged period.
Disruptions in the capital and financial markets as a result of rising interest rates, worldwide inflationary pressures, bank failures, the military conflict in Ukraine, significant fluctuations in energy prices and the decline in the global economic environment may also adversely affect our ability to obtain additional liquidity should the impacts of a decline in the global economic environment continue for a prolonged period .
If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.
If we are unable to assert that our internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected and we could become subject to litigation or investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources. 21 Table of Contents Furthermore, we cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weakness in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.
We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive than originally anticipated. Such disruptions could adversely impact our ability to attract and retain customers, fulfill orders and interrupt other processes and could adversely affect our business, financial results, stock price and reputation.
We may not be successful in implementing new systems and transitioning data, which could cause business disruptions and be more expensive, time consuming, disruptive and resource-intensive than originally anticipated.
We will incur similar expenses in the future as we continue to transition our products to smaller geometry processes.
We will incur similar expenses in the future as we continue to transition our products to smaller geometry processes. The costs inherent in the transition to new manufacturing process technologies will adversely affect our operating results and our gross margin.
We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price. For the last nine consecutive quarters, our net revenues were adversely impacted by the COVID-19 global pandemic.
We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price. Furthermore, if our operating expenses exceed our expectations, our financial performance could be adversely affected.
If we are not able to accurately predict sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.
This could result in distributors returning unsold inventory to us, or in us not having sufficient inventory to meet the demand for our products. If we are not able to accurately forecast sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.
Historically, the average unit selling prices of our products have declined substantially over the lives of the products, and we expect this trend to continue. A reduction in overall average selling prices of our products could result in reduced revenues and lower gross margins.
A reduction in overall average selling prices of our products could result in reduced revenues and lower gross margins.
For example, any political instability or armed conflict resulting from changes in the relationship among the United States, Taiwan and the People’s Republic of China could damage our business. Moreover, the role of the Taiwanese government in the Taiwanese economy is significant.
For example, political instability or restrictions on transportation logistics for our products resulting from changes in the relationship among the United States, Taiwan and the People’s Republic of China could negatively impact our business. Any significant armed conflict related to this matter would be expected to materially and adversely damage our business.
We will not be able to adjust our spending quickly if our revenues fall short of our expectations. If this were to occur, our operating results would be harmed. If our operating results in future quarters fall below the expectations of market analysts and investors, the price of our common stock could fall.
If our operating results in future quarters fall below the expectations of market analysts and investors, the price of our common stock could fall.
Despite testing by us and our OEM customers, design or manufacturing errors may be found in existing or new products. These defects could result in a delay in recognition or loss of revenues, loss of market share or failure to achieve market acceptance.
Our products are complex to design and manufacture and could contain defects, which could reduce revenues or result in claims against us. We develop complex products. Despite testing by us and our OEM customers, design or manufacturing errors may be found in existing or new products.
If we are unable to offset increased wafer fabrication and assembly costs by increasing the average selling prices of our products, our gross margins will suffer.
If we are unable to offset increased wafer fabrication and assembly costs by increasing the average selling prices of our products, our gross margins will suffer. If there is a significant upturn in the demand for the manufacturing and assembly of semiconductor products as occurred in fiscal 2022, the available supply of wafers and packaging services may be limited.
We do not maintain sufficient business interruption and other insurance policies to compensate us for all losses that may occur. Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss in excess of our insurance policy limits could have a material adverse effect on our business.
Any losses or damages incurred by us as a result of a catastrophic event or any other significant uninsured loss in excess of our insurance policy limits could have a material adverse effect on our business. The United States could materially modify certain international trade agreements, or change tax provisions related to the global manufacturing and sales of our products.
Inventory levels of our products held by our distributors may exceed or fall below the levels we consider desirable on a going-forward basis. This could result in distributors returning unsold inventory to us, or in us not having sufficient inventory to meet the demand for our products.
This process involves the exercise of judgment and use of assumptions as to future uncertainties, including end user demand. Inventory levels of our products held by our distributors may exceed or fall below the levels we consider desirable on a going-forward basis.
We may be unable to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand. Our financial results, quarterly product sales, trends and comparisons are affected by fluctuations in the buying patterns of the OEMs that purchase our products from our distributors.
Our financial results, quarterly product sales, trends and comparisons are affected by fluctuations in the buying patterns of the OEMs that purchase our products from our distributors. While we attempt to assist our distributors in maintaining targeted stocking levels of our products, we may not consistently be accurate or successful.
There can be no assurance that we will be able to compete successfully in the future. Our failure to compete successfully in these or other areas could harm our business. We rely heavily on distributors and our success depends on our ability to develop and manage our indirect distribution channels.
Our customers may decide to purchase products from our competitors rather than accept these price increases and our business may suffer. There can be no assurance that we will be able to compete successfully in the future. Our failure to compete successfully in these or other areas could harm our business.
For example, due to the COVID-19 global pandemic, we could see additional disruptions in our supply chain beyond the longer lead-times for the purchase of wafers and assembly services that we are currently experiencing. Most significantly, we obtain wafers for our Very Fast SRAM and APU products from a single foundry, TSMC, and most of them are packaged at ASE.
Most significantly, we obtain wafers for our Very Fast SRAM and APU products from a single foundry, TSMC, and most of them are packaged at ASE.
We recently experienced a 20% increase in wafer fabrication costs due to supply chain constraints, which resulted in us increasing the cost of our products. Our customers may decide to purchase products from our competitors rather than accept these price increases and our business may suffer.
In fiscal 2022 and 2023 we experienced increases of 20% and 6%, respectively, in wafer fabrication costs due to supply chain constraints, which resulted in us increasing the cost of our products. Inflationary pressures are expected to result in additional increases in our wafer fabrication costs, which may require us to further increase the cost of our products.
If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed. The military conflict in Ukraine, the rapid rise in energy prices and other inflation and the ongoing COVID-19 global pandemic may continue to adversely affect our revenues, results of operations and financial condition.
If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed.
A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate our products into end products for OEMs. For example, in fiscal 2022, 2021 and 2020, our largest distributor Avnet Logistics accounted for 38.0%, 29.8% and 34.3%, respectively, of our net revenues.
For example, in fiscal 2023, 2022 and 2021, our largest distributor Avnet Logistics accounted for 48.1%, 38.0% and 29.8%, respectively, of our net revenues. Avnet Logistics and our other existing distributors may choose to devote greater resources to marketing and supporting the products of other companies.
Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports that are filed with the SEC.
Any failure to implement and maintain effective internal control over financial reporting could adversely affect the results of periodic management evaluations. If we determine that our goodwill and intangible assets have become impaired, we may incur impairment charges, which would negatively impact our operating results.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease space in the United States in the states of Georgia and Texas and in Israel. The aggregate annual gross rent for our leased facilities was approximately $806,000 in fiscal 2022. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosures Not applicable. PART II ​
Biggest changeWe also lease space in the United States in the states of Georgia and Texas and in Israel. The aggregate annual gross rent for our leased facilities was approximately $764,000 in fiscal 2023. Item 3. Legal Proceedings None. Item 4. Mine Safety Disclosures Not applicable. 35 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 35 ​ ​ ​ PART II ​ 35 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 35 Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37
Biggest changeItem 4. Mine Safety Disclosures 35 ​ ​ ​ PART II ​ 36 Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 36 Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe have never declared or paid cash dividends on our common stock, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. 35 Table of Contents Issuer Purchases of Equity Securities Our Board of Directors has authorized us to repurchase, at management’s discretion, shares of our common stock.
Biggest changeWe have never declared or paid cash dividends on our common stock, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. Issuer Purchases of Equity Securities Our Board of Directors has authorized us to repurchase, at management’s discretion, shares of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Common Stock and Dividends Our common stock is traded on the Nasdaq Global Market under the symbol “GSIT”. On May 31, 2022, there were approximately 21 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information, Holders of Common Stock and Dividends Our common stock is traded on the Nasdaq Global Market under the symbol “GSIT”. On May 31, 2023, there were approximately 21 holders of record of our common stock.
During the quarter ended March 31, 2022, we did not repurchase any of our shares under the repurchase program. ​ ​
During the quarter ended March 31, 2023, we did not repurchase any of our shares under the repurchase program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+33 added−29 removed45 unchanged
Biggest changeResults of Operations The following table sets forth statement of operations data as a percentage of net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ ​ 2022 ​ 2021 ​ Net revenues ​ 100.0 % 100.0 % Cost of revenues ​ 44.5 ​ 52.3 ​ Gross profit ​ 55.5 ​ 47.7 ​ Operating expenses: ​ ​ ​ ​ ​ Research and development ​ 73.9 ​ 84.2 ​ Selling, general and administrative ​ 30.6 ​ 40.2 ​ Total operating expenses ​ 104.5 ​ 124.4 ​ Loss from operations ​ (49.0) ​ (76.7) ​ Interest and other income (expense), net ​ (0.2) ​ 0.3 ​ Loss before income taxes ​ (49.2) ​ (76.4) ​ Provision (benefit) for income taxes ​ (0.2) ​ 1.2 ​ Net loss ​ (49.0) ​ (77.6) ​ ​ Fiscal Year Ended March 31, 2022 Compared to Fiscal Year Ended March 31, 2021 Net Revenues.
Biggest changeThe fair value allocated to patents was $3.5 million and the residual value allocated to goodwill was $8.0 million. 41 Table of Contents Results of Operations The following table sets forth statement of operations data as a percentage of net revenues for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended March 31, ​ ​ ​ 2023 ​ ​ 2022 ​ Net revenues ​ 100.0 % ​ 100.0 % Cost of revenues ​ 40.4 ​ ​ 44.5 ​ Gross profit ​ 59.6 ​ ​ 55.5 ​ Operating expenses: ​ ​ ​ ​ ​ ​ Research and development ​ 79.3 ​ ​ 73.9 ​ Selling, general and administrative ​ 33.5 ​ ​ 30.6 ​ Total operating expenses ​ 112.8 ​ ​ 104.5 ​ Loss from operations ​ (53.2) ​ ​ (49.0) ​ Interest and other income (expense), net ​ 0.7 ​ ​ (0.2) ​ Loss before income taxes ​ (52.5) ​ ​ (49.2) ​ Provision (benefit) for income taxes ​ 1.3 ​ ​ (0.2) ​ Net loss ​ (53.8) ​ ​ (49.0) ​ ​ Fiscal Year Ended March 31, 2023 Compared to Fiscal Year Ended March 31, 2022 Net Revenues.
The majority of 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).
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 typically occurs at the time of shipment or at the time the product is pulled from consignment as that is the point at which delivery has occurred, title and the risks and rewards of ownership have passed to the customer, and we have a right to payment.
Transfer of control occurs at the time of shipment or at the time the product is pulled from consignment as that is the point at which delivery has occurred, title and the risks and rewards of ownership have passed to the customer, and we have a right to payment.
The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion and analysis generally covers our financial condition and results of operations for the fiscal year ended March 31, 2022, including year-over-year comparisons versus the fiscal year ended March 31, 2021.
The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this report. This discussion and analysis generally covers our financial condition and results of operations for the fiscal year ended March 31, 2023, including year-over-year comparisons versus the fiscal year ended March 31, 2022.
We have experienced increased costs as a result of supply chain constraints for wafers and outsourced assembly, burn-in and test operations. We expect these increased manufacturing costs will continue into fiscal 2023.
We have experienced increased costs as a result of supply chain constraints for wafers and outsourced assembly, burn-in and test operations. We expect these increased manufacturing costs will continue into fiscal 2024.
We make certain estimates and judgments in the calculation of tax liabilities and the determination of deferred tax assets, which arise from temporary differences between tax and financial statement recognition methods. We record a valuation allowance to reduce our deferred tax assets to the amount that management estimates is more likely than not to be realized.
We make certain estimates and judgments in the calculation of tax liabilities and the determination of deferred tax assets, which arise from temporary differences between tax and financial statement recognition methods. We record a valuation allowance to reduce our deferred tax assets to the amount that management estimates is more likely than not 45 Table of Contents to be realized.
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.
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 39 Table of Contents portion of our wafer sort testing operations, are outsourced.
We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote 40 Table of Contents significant resources to product development activities. In particular, we are devoting substantial resources to the development of a new category of in-place associative computing products.
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 a new category of in-place associative computing products.
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, changes in price levels, or other causes.
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.
To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2022, 2021 or 2020. Cost of Revenues.
To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2023, 2022 or 2021. Cost of Revenues.
Future changes to any of the inputs, including forecasted revenues from a new product which are inherently difficult to estimate, may result in material adjustments to the recorded fair value . Valuation of Goodwill and Intangibles.
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 . Valuation of Goodwill and Intangibles.
If the payment ultimately proves to be unnecessary, the reversal of these tax reserves would result in tax benefits being recognized in the period we determine such reserves are no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to provision for income taxes will result. Stock-Based Compensation Expense.
If the payment ultimately proves to be unnecessary, the reversal of these tax reserves would result in tax benefits being recognized in the period we determine such reserves are no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to provision for income taxes will result.
The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at March 31, 2021 and 2022 in the amount of $4.2 million and $2.7 million, respectively. At each reporting period, the contingent consideration liability will be re-measured at then current fair value with changes recorded in the Consolidated Statements of Operations.
The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at March 31, 2022 and 2023 in the amount of $2.7 million and $1.1 million, respectively. At each reporting period, the contingent consideration liability will be re-measured at then current fair value with changes recorded in the Consolidated Statements of Operations.
We are not required to make any further retention payments. We will also make “earnout” payments to the former MikaMonu shareholders in cash or shares of our common stock, at our discretion, during a period of up to ten years following the closing if certain product development milestones and revenue targets for products based on the MikaMonu technology are achieved.
We will also make “earnout” payments to the former MikaMonu shareholders in cash or shares of our common stock, at our discretion, during a period of up to ten years following the closing if certain product development milestones and revenue targets for products based on the MikaMonu technology are achieved.
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2021 includes a discussion and analysis of our financial condition and results of operations for the fiscal year ended March 31, 2020 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ​ Overview We are a leading provider of high-performance semiconductor memory solutions for in-place associative computing applications in high growth markets such as artificial intelligence (AI) and high-performance computing (HPC), including natural language processing and computer vision.
Our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 includes year-over-year comparisons versus the fiscal year ended March 31, 2021 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ​ Overview We are a leading 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.
The Company identified a potential impairment indicator for the finite lived intangible assets and performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows of the asset group to the carrying amount as of March 31, 2022.
We identified a potential impairment indicator for the finite lived intangible assets and performed a recoverability test by comparing the sum of the estimated undiscounted future cash flows of the asset group to the carrying amount as of December 31, 2022 and March 31, 2023.
The portion of the retention payment made to the other former MikaMonu shareholders (approximately $1.3 million) plus the maximum amount of the 41 Table of Contents potential earnout payments totals approximately $30.0 million at March 31, 2022. We determined that the fair value of this contingent consideration liability was $5.8 million at the acquisition date.
The portion of the retention payment made to the other former MikaMonu shareholders (approximately $1.3 million) plus the maximum amount of the potential earnout payments totals approximately $30.0 million at March 31, 2023. We determined that the fair value of this contingent consideration liability was $5.8 million at the acquisition date.
Our future capital requirements will depend on many factors, including the rate of revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints and the continuation of the impact of the COVID-19 pandemic 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 efforts.
Our future capital requirements will depend on many factors, including the rate of revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints, 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 efforts.
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 29%, 39% and 38% of our net revenues in fiscal 2022, 2021 and 2020, 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 17%, 29% and 39% of our net revenues in fiscal 2023, 2022 and 2021, respectively.
The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ March 31, ​ ​ 2022 2021 2020 Contract manufacturers and consignment warehouses: ​ ​ ​ ​ ​ ​ ​ Flextronics Technology ​ 16.0 % 21.1 % 14.8 % Sanmina ​ 11.2 ​ 21.5 ​ 17.4 ​ Distributors: ​ ​ ​ ​ ​ ​ ​ Avnet Logistics ​ 38.0 ​ 29.8 ​ 34.3 ​ Nexcomm ​ 17.2 ​ 14.7 ​ 15.1 ​ Nokia was our largest customer in fiscal 2022, 2021 and 2020.
The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year Ended ​ ​ ​ March 31, ​ ​ 2023 2022 2021 Contract manufacturers and consignment warehouses: ​ ​ ​ ​ ​ ​ ​ Flextronics Technology ​ 10.4 % 16.0 % 21.1 % Sanmina ​ 8.8 ​ 11.2 ​ 21.5 ​ Distributors: ​ ​ ​ ​ ​ ​ ​ Avnet Logistics ​ 48.1 ​ 38.0 ​ 29.8 ​ Nexcomm ​ 16.6 ​ 17.2 ​ 14.7 ​ Nokia was our largest customer in fiscal 2023, 2022 and 2021.
We had cash, cash equivalents, short term investments and long-term investments totaling $47.3 million at March 31, 2022. These amounts were invested primarily in money market funds, certificates of deposit and agency bonds. The cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes.
We had cash, cash equivalents, short term investments and long-term investments totaling $30.6 million at March 31, 2023. These amounts were invested primarily in money market funds, certificates of deposit and agency bonds. The cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes.
The primary uses of cash in fiscal 2022 were the net loss of $16.4 million and increases in accounts receivable, inventory and accrued expenses and other liabilities. The primary sources of cash in fiscal 2022 were non-cash items including stock-based compensation of $3.0 million and depreciation and amortization expenses of $1.0 million.
The primary uses of cash in fiscal 2022 were the net loss of $16.4 million and increases in accounts receivable, inventory and accrued expenses and other liabilities. The uses of cash in fiscal 2022 were less than the net loss due to non-cash items including stock-based compensation of $3.0 million and depreciation and amortization expenses of $1.0 million.
At March 31, 2022, we had total minimum lease obligations of approximately $930,000 from April 1, 2022 through February 29, 2024, under non-cancelable operating leases for our facilities.
At March 31, 2023, we had total minimum lease obligations of approximately $686,000 from April 1, 2023 through February 29, 2024, under non-cancelable operating leases for our facilities.
Stock-based compensation expense recognized in the statement of operations is based on options ultimately expected to vest, reduced by the amount of estimated forfeitures. We chose the straight-line method of allocating compensation cost over the requisite service period of the related award in accordance with the authoritative guidance.
See the policy in Note 6 – Income Taxes. Stock-Based Compensation Expense. Stock-based compensation expense recognized in the statement of operations is based on options ultimately expected to vest, reduced by the amount of estimated forfeitures. We chose the straight-line method of allocating compensation cost over the requisite service period of the related award in accordance with the authoritative guidance.
Declines in interest rates, however, will reduce future investment income. ​ 47 Table of Contents
Declines in interest rates, however, will reduce future investment income. ​ 48 Table of Contents
The increase in gross margin was primarily related to changes in the mix of products and customers and, to a lesser extent, a 20% price increase effective in December 2021 for the majority of our products. Research and Development Expenses. Research and development expenses increased 5.7% from $23.3 million in fiscal 2021 to $24.7 million in fiscal 2022.
The increase in gross margin was primarily related to changes in the mix of products and customers and, to a lesser extent, a 20% price increase effective in December 2021 for the majority of our products. Research and Development Expenses. Research and development expenses decreased 4.5% from $24.7 million in fiscal 2022 to $23.6 million in fiscal 2023.
Reductions in uncertain tax benefits due to lapses in the statute of limitations were not significant in the years ended March 31, 2022 and 2021. Net Loss. Net loss was ($21.5) million in fiscal 2021 compared to a net loss of ($16.4) million in fiscal 2022.
Reductions in uncertain tax benefits due to lapses in the statute of limitations were not significant in the years ended March 31, 2023 and 2022. Net Loss. Net loss was ($16.4) million in fiscal 2022 compared to a net loss of ($16.0) million in fiscal 2023.
Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2022 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $16.2 million in net deferred tax assets in fiscal 2022.
Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2023 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $17.5 million in net deferred tax assets in fiscal 2023.
Thus, we will generally recognize revenue upon shipment of the product. Sales to consignment warehouses, who purchase products from us for use by contract manufacturers, are recorded upon delivery to the contract manufacturer.
Thus, we will recognize revenue upon shipment of the product for direct sales and sales to our distributors. Sales to consignment warehouses, who purchase products from us for use by contract manufacturers, are recorded upon delivery to the contract manufacturer.
Cash provided by financing activities was $2.4 million and $4.7 million in fiscal 2022 and fiscal 2021, respectively and consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans.
Cash provided by financing activities was $402,000 and $2.4 million in fiscal 2023 and fiscal 2022, respectively and consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans.
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 to adjust the probability-weighted cash flows to their present value.
These inputs included the estimated amount and timing of future cash flows, the probability of achievement of the forecast, and a risk-adjusted discount rate to adjust the probability-weighted cash flows to their present value.
This decrease was primarily due to the changes in net revenues, gross profit and operating expenses discussed above. Liquidity and Capital Resources As of March 31, 2022, our principal sources of liquidity were cash, cash equivalents and short-term investments of $44.0 million compared to $54.0 million as of March 31, 2021.
This decrease was primarily due to the changes in net revenues, gross profit and operating expenses discussed above. 43 Table of Contents Liquidity and Capital Resources As of March 31, 2023, our principal sources of liquidity were cash, cash equivalents and short-term investments of $30.6 million compared to $44.0 million as of March 31, 2022.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 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.
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.
Due to revisions to the amount of expected revenue, the timing of revenue to be recognized 46 Table of Contents prior to the end of the earnout period and the probability of achievement of the APU revenue forecast, the contingent consideration liability decreased by $1.5 million from March 31, 2021 to March 31, 2022.
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 $1.7 million from March 31, 2022 to March 31, 2023.
Our initial associative processing unit (“APU”) products are focused on applications using similarity search. Similarity search is used in visual search queries for ecommerce, computer vision, drug discovery, cyber security and service markets such as NoSQL, Elasticsearch, and OpenSearch.
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, cyber security and service markets such as NoSQL, Elasticsearch, and OpenSearch.
Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that require a significant number of our customer contacts to work from home.
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.
A material adverse impact from the COVID-19 global pandemic could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions of businesses, products or technologies.
A material decline in the global economic environment could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions of businesses, products or technologies.
Research and development expenses included stock-based compensation expense of $1.7 million and $1.5 million in fiscal 2022 and fiscal 2021, respectively. Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased 8.3% from $11.1 million in fiscal 2021 to $10.2 million in fiscal 2022.
Research and development expenses included stock-based compensation expense of $1.3 million and $1.7 million in fiscal 2023 and fiscal 2022, respectively. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 1.4% from $10.2 million in fiscal 2022 to $10.4 million in fiscal 2023.
Cash, cash equivalents and short-term investments totaling $26.2 million were held in foreign locations as of March 31, 2022. Net cash used in operating activities was $13.8 million and $15.3 million for fiscal 2022 and fiscal 2021, respectively.
Cash, cash equivalents and short-term investments totaling $21.4 million were held in foreign locations as of March 31, 2023. Net cash used in operating activities was $16.8 million and $13.8 million for fiscal 2023 and fiscal 2022, respectively.
In fiscal 2022, the value of contingent consideration liability resulting from the MikaMonu acquisition was decreased by $1.6 million compared to an increase of $229,000 in fiscal 2021 as a result of re-measurement of contingent consideration liability in each year.
In fiscal 2023, the value of contingent consideration liability resulting from the MikaMonu acquisition decreased by $1.5 million compared to a decrease of $1.6 million in fiscal 2022 as a result of re-measurement of contingent consideration liability in each year.
We calculated the expected term based on the historical average period of time that options were outstanding as adjusted for expected changes in future exercise patterns, which, for options granted in fiscal 2022, 2021 and 2020, resulted in an expected term of approximately five years. We used our historical volatility to estimate expected volatility in fiscal 2022, 2021 and 2020.
We calculated the expected term based on the historical average period of time that options were outstanding as adjusted for expected changes in future exercise patterns, which, for options granted in fiscal 2023, 2022 and 2021, resulted in an expected term of approximately 4.6 to 5.0 years, 5.0 years and 5.0 years, respectively.
Changes in any of the inputs may result in significant adjustments to the recorded fair value. Re-measurement of the contingent consideration liability at March 31, 2022 resulted in a decrease of the contingent consideration liability of $1.6 million.
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, 2023 resulted in a decrease of the contingent consideration liability of $1.9 million.
Direct sales to contract manufacturers and consignment warehouses accounted 39 Table of Contents for 31.0%, 43.7% and 33.7% of our net revenues for fiscal 2022, 2021 and 2020, respectively. Sales to foreign and domestic distributors accounted for 66.8%, 54.7% and 61.3% of our net revenues for fiscal 2022, 2021 and 2020, respectively.
Direct sales to contract manufacturers and consignment warehouses accounted for 19.8%, 31.0% and 43.7% of our net revenues for fiscal 2023, 2022 and 2021, respectively. Sales to foreign and domestic distributors accounted for 77.5%, 66.8% and 54.7% of our net revenues for fiscal 2023, 2022 and 2021, respectively.
The 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.
The allocation of the purchase price to acquired identifiable intangible assets and goodwill was based on their estimated fair values at the date of acquisition.
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.
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 38 Table of Contents orders and product availability could result in significant product shipments at the end of a quarter.
Subsequent to the acquisition date, at each reporting period, the contingent consideration liability will be re-measured at its then current fair value with changes recorded in the Consolidated Statements of Operations.
Since the acquisition date, at each reporting period, the contingent consideration liability is re-measured at its then current fair value with changes recorded selling, general and administrative expenses in the Consolidated Statements of Operations.
Furthermore, our customers may delay scheduled delivery dates and/or cancel orders within specified timeframes without significant penalty. We sell our products through our direct sales force, international and domestic sales representatives and distributors.
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. We sell our products through our direct sales force, international and domestic sales representatives and distributors.
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.
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. We have a strong balance sheet and liquidity position that we anticipate will provide financial flexibility and security in the current environment of economic uncertainty.
The increase in research and development spending was primarily related to an increase of $1.4 million in payroll related expenses and lesser increases in software maintenance expense, stock-based compensation expense and facilities related expenses partially offset by decreases in outside consulting expenses and other fees and patent related legal fees.
The decrease in research and development spending was primarily related to decreases of $1.7 million in payroll related expenses and $360,000 in stock-based compensation expense, partially offset by increases of $436,000 in outside consulting expenses and $253,000 in software maintenance expense.
The foreign currency exchange loss decreased from ($201,000) in fiscal 2021 to ($131,000) in fiscal 2022. The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel. 43 Table of Contents Provision (benefit) for Income Taxes.
The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel. Provision (benefit) for Income Taxes. The provision for income taxes increased from a benefit from income taxes of ($45,000) in fiscal 2022 to a provision of $372,000 in fiscal 2023.
While the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic and capital market conditions for the remainder of 2022 and beyond, we believe that our existing balances of cash, cash equivalents and short-term investments, 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, although we could be required, or could elect, to seek 44 Table of Contents additional funding prior to that time.
While the disruptions in the capital markets as a result of rising interest rates, worldwide inflationary pressures, significant fluctuations in energy prices and the decline in the global economic environment have created significant uncertainty as to general economic and capital market conditions for the remainder of 2023 and beyond, we believe that our existing balances of cash, cash equivalents and short-term investments, 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, although we could be required, or could elect, to seek additional funding prior to that time.
Cost of revenues increased by 2.3% from $14.5 million in fiscal 2021 to $14.8 million in fiscal 2022. Cost of revenues included a provision for excess and obsolete inventories of $466,000 in fiscal 2021 compared to $402,000 in fiscal 2022. Cost of revenues included stock-based compensation expense of $248,000 and $346,000, respectively, in fiscal 2022 and fiscal 2021. Gross Profit.
Cost of revenues included a provision for excess and obsolete inventories of $226,000 in fiscal 2023 compared to $402,000 in fiscal 2022. Cost of revenues included stock-based compensation expense of $202,000 and $248,000, respectively, in fiscal 2023 and fiscal 2022. Gross Profit. Gross profit decreased by 4.6% from $18.5 million in fiscal 2022 to $17.7 million in fiscal 2023.
Gross profit increased by 40.3% from $13.2 million in fiscal 2021 to $18.5 million in fiscal 2022. Gross margin increased from 47.7% in fiscal 2021 to 55.5% in fiscal 2022. The change in gross profit is primarily related to the change in net revenues discussed above.
Gross margin increased from 55.5% in fiscal 2022 to 59.6% in fiscal 2023. The change in gross profit is primarily related to the change in net revenues discussed above.
The purchase price of the acquisition was allocated to the intangible assets acquired, with the excess of the purchase price over the fair value of assets acquired recorded as goodwill. We perform a goodwill impairment test near the end of each fiscal year.
The purchase price of the acquisition was allocated to the intangible assets acquired, with the excess 40 Table of Contents of the purchase price over the fair value of assets acquired recorded as goodwill.
Net revenues increased by 20.4% from $27.7 million in fiscal 2021 to $33.4 million in fiscal 2022. The overall average selling price of all units shipped in fiscal 2022 increased by 12.3% in fiscal 2022 compared to the prior fiscal year. Net revenues in fiscal 2021 and 2022 were impacted by the COVID-19 global pandemic.
Net revenues decreased by 11.1% from $33.4 million in fiscal 2022 to $29.7 million in fiscal 2023. The overall average selling price of all units shipped in fiscal 2023 increased by 2.1% in fiscal 2023 compared to the prior fiscal year.
Although it is difficult to estimate the length or gravity of the continued impact of the COVID-19 outbreak, it is expected to have an adverse effect on our results of operations, financial position, including potential impairments, and liquidity in fiscal year 2023.
Although it is difficult to estimate the length or gravity of the continued inflationary pressures and rising interest rates, the impact of recent bank failures, significant fluctuations in energy prices 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 in fiscal 2024.
The primary use of cash in fiscal 2021 was the net loss of $21.5 million. The primary sources of cash in fiscal 2021 were non-cash items including stock-based compensation of $2.9 million and depreciation and amortization expenses of $1.2 million and a provision for excess and obsolete inventories of $466,000 and a decrease in accounts receivable of $2.6 million.
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.
We also made cash retention payments totaling $2.5 million to the three former MikaMonu shareholders, conditioned on the continued employment of Dr. Avidan Akerib, MikaMonu’s co-founder and chief technologist. Retention payments of $743,000, $750,000 and $1.0 million were paid to the former MikaMonu shareholders during the quarters ended December 31, 2017, 2018 and 2019, respectively.
Under the terms of the acquisition agreement, we paid the former MikaMonu shareholders initial cash consideration of approximately $4.9 million, and cash retention payments totaling $2.5 million in 2017, 2018 and 2019 to the former MikaMonu shareholders, that were conditioned on the continued employment of Dr. Avidan Akerib, MikaMonu’s co-founder and chief technologist.
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.
However, any errors in these judgments and estimates may have a material impact on our balance sheet and statement of operations.
The risk-free interest rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding to the expected life of the options. The dividend yield is 0% based on the fact that we have never paid dividends and have no present intention to pay dividends.
We used our historical volatility to estimate expected volatility in fiscal 2023, 2022 and 2021. The risk-free interest rate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding to the expected life of the options.
We consider the need to establish the allowance for excess inventory generally based on inventory levels in excess of 12 months of forecasted demand for each specific product. At any point in time, some portion of our inventory is subject to the risk of being materially in excess of our projected demand.
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.
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.
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.
Determining some of these assumptions requires significant judgment and changes to these assumptions could result in a significant change to the calculation of stock-based compensation in future periods. 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.
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.
We adapted our sales strategies for the COVID-19 environment, where we could not have 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 and the rapid rise in energy prices may have an adverse impact on our business and financial condition.
We adapted our sales strategies for the COVID-19 environment, where we could not have face-to-face meetings and conduct secure meetings with government and defense customers.
As of March 31, 2022, we had $4.1 million in purchase obligations for facility leases and software and test purchase obligations that are binding commitments, of which $3.2 million are payable in the next twelve months and $832,000 are committed in the long term. ​ As of March 31, 2022, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $0.
As of March 31, 2023, we had $1.7 million in purchase obligations for facility leases and software and test purchase obligations that are binding commitments, of which $1.3 million are payable in the next twelve months and $416,000 are committed in the long term. ​ As of March 31, 2023, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $0. 44 Table of Contents 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.
Interest and other income (expense), net decreased from income of $94,000 in fiscal 2021 to an expense of $60,000 in fiscal 2022. Interest income decreased by $224,000 due to lower interest rates received on cash and short-term and long-term investments and lower levels of short-term and long-term investments.
Interest income increased by $252,000 due to higher interest rates received on cash and short-term and long-term investments, partially offset by lower levels of short-term and long-term investments. The foreign currency exchange loss decreased from ($131,000) in fiscal 2022 to ($121,000) in fiscal 2023.
Revenue is recognized upon transfer of control which 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 product.
Our critical accounting estimates include those regarding the valuation of inventories, contingent consideration and the valuation of intangibles and goodwill. Revenue Recognition. Revenue is recognized upon transfer of control which 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.
Investment activities in fiscal 2021 primarily consisted of the maturity of certificates of deposit, supranational obligations and agency bonds of $21.0 million partially offset by the purchase of certificates of deposit, supranational obligations and agency bonds of $17.5 million.
Net cash provided by investing activities was $6.7 million and $4.2 million in fiscal 2023 and 2022, respectively. 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.
Shipments of our SigmaQuad product line accounted for 51.2% of total shipments in fiscal 2022 compared to 56.7% of total shipments in fiscal 2021.
Shipments to Nokia will continue to fluctuate as a result of demand and shipments to its end customers. Shipments of our SigmaQuad product line accounted for 49.1% of total shipments in fiscal 2023 compared to 51.2% of total shipments in fiscal 2022.
The reduction in contingent consideration in fiscal 2022 was partially offset by increases in payroll related expenses, independent sales representative commissions and stock-based compensation expense. Selling, general and administrative expenses included stock-based compensation expense of $1.1 million and $999,000, respectively, in fiscal 2022 and fiscal 2021. Interest and Other Income (Expense), Net.
Selling, general and administrative expenses included stock-based compensation expense of $951,000 and $1.1 million, respectively, in fiscal 2023 and fiscal 2022. Interest and Other Income (Expense), Net. Interest and other income (expense), net increased from an expense of $60,000 in fiscal 2022 to income of $202,000 in fiscal 2023.
The result of the recoverability test indicated that the sum of the expected future cash flows was greater than the carrying amount of the finite lived intangible assets. Recent Accounting Pronouncements Please 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.
Recent Accounting Pronouncements Please 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. 47 Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Exchange Risk.
We assess goodwill for impairment on an annual basis on the last day of February in the fourth quarter of our fiscal year. Intangible assets with finite useful lives are amortized over their estimated useful lives, generally on a straight-line basis over five to fifteen years.
We believe our procedures for determining fair value are reasonable and consistent with current market conditions as of December 31, 2022 and March 31, 2023. Intangible assets with finite useful lives are amortized over their estimated useful lives, generally on a straight-line basis over five to fifteen years.
Significant estimates are inherent in the preparation of the consolidated financial statements and include estimates affecting revenue recognition, obsolete and excess inventory, the valuation allowance on deferred tax assets, stock-based compensation expense, contingent consideration and the valuation of intangibles and goodwill.
Significant estimates are inherent in the preparation of the consolidated financial statements and include estimates affecting obsolete and excess inventory, contingent consideration and the valuation of intangibles and goodwill. 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.
Our level of cash equivalents and short-term investments has historically been sufficient to meet our current and longer term operating and capital needs. We believe that during the next 12 months the COVID-19 global pandemic will continue to impact general economic activity and demand in our end markets.
We believe that during the next 12 months, continued inflationary pressures and rising interest rates will continue to negatively impact general economic activity and demand in our end markets.
Final testing of our product is conducted in house. Shipping and receiving operations at our United States headquarters were maintained by a skeleton crew with minimal impact. Our revenues were impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that required a significant number of our customer contacts to work from home.
However, with no debt and substantial liquidity, we believe we are in a better financial position than many other companies of our size. Our revenues in recent years have been impacted by changes in customer buying patterns and communication limitations related to COVID-19 restrictions that required a significant number of our customer contacts to work from home.
We have not filed for funding related to the CARES Act, CAA and ARPA due to our strong balance sheet and liquidity position. Revenues. Our revenues are derived primarily from sales of our Very Fast SRAM products. Sales to networking and telecommunications OEMs accounted for 49% to 53% of our net revenues during our last three fiscal years.
Sales to networking and telecommunications OEMs accounted for 32% to 53% of our net revenues during our last three fiscal years.
Units shipped increased by 5.7% in fiscal 2022 compared to fiscal 2021. The networking and telecommunications markets represented 49% and 53% of shipments in fiscal 2022 and in fiscal 2021, respectively. Direct and indirect sales to Nokia, currently our largest customer, decreased by $1.3 million from $10.9 million in fiscal 2021 to $9.6 million fiscal 2022.
The decrease in net revenues in fiscal 2023 compared to fiscal 2022 is related to the decline in the global economic environment during the period. Units shipped decreased by 13.7% in fiscal 2023 compared to fiscal 2022. The networking and telecommunications markets represented 32% and 49% of shipments in fiscal 2023 and in fiscal 2022, respectively.
Removed
However, with no debt and substantial liquidity, we believe we are in a better financial position than many other companies of our size. Since 2020, the COVID-19 pandemic has affected many of the countries in which we, our customers, our suppliers and our other business partners conduct business.
Added
While the COVID-19 pandemic has ended, the significant fluctuations in energy prices, worldwide inflationary pressures, rising interest rates and decline in the global economic environment have had, and may continue to have, an adverse impact on our business and financial condition.
Removed
Governments in affected regions have implemented, and may continue to implement, safety precautions which include quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures as they deem necessary. Many organizations and individuals, including the Company and our employees, are taking additional steps to avoid or reduce infection, including limiting travel and working from home.

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