GSIT 10-K & 10-Q changes, risk factors and insider trading

Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future. 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. We may 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.

Higher interest rates, worldwideWorldwide inflationary pressures, tariffsincreased or new tariffs, export controls and other trade disputes,barriers, trade disputes and increasing geopolitical tensions, the evolvingmilitary conflictconflicts in Israel, the military conflict in Ukraine,Ukraine and the declineMiddle inEast, and the challenging global economic environment have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future. We expect such impact will in particular affect our SRAM sales and has also impacted the launch of our APU productproducts to some degree and the adoption of RadHard and RadTolerant SRAM products by aerospace and military customers. However, the magnitude of such impact on our business and its duration is highly uncertain.

KYECKYEC, Nokia and NokiaCadence Design Systems account for a significant percentage of our net revenues. If these customers, or any of our other major customers, reducesreduce the amount they purchase or stop purchasing our products, our operating results will suffer.

KYEC purchases products through contract manufacturers and distributors. Based on information provided to us by KYEC’s contract manufacturers and distributors, purchases by KYEC represented approximately 23%,14%, 3%23% and 2%3% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Nokia purchases our products directly from us and through contract manufacturers and distributors. Based on information provided to us by Nokia’s contract manufacturers and distributors, purchases by Nokia represented approximately 12%,6%, 21%12% and 17%21% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. The significant decline in Nokia’s purchases is due in part to Nokia’s decision to incorporate alternative solutions to the use of SRAMs into certain of its next-generation products in place of our SRAM products that were included in prior versions of such products. If Nokia continues to expand its use of these alternative solutions across additional product lines, our sales to Nokia could decline further or be eliminated entirely. Cadence Design Systems purchases products through contract manufacturers and distributors. Based on information provided to us by Cadence Design Systems contract manufacturers and distributors, purchases by Cadence Design Systems represented approximately 12%, 8% and 8% of our net revenues in fiscal 2026, 2025 and 2024, respectively. We expect that our operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly KYECKYEC, Nokia and Nokia,Cadence Design Systems, and our future success is dependent to a large degree on the business success of these customers over which we have no control. We do not have long-term contracts with KYECKYEC, Nokia and NokiaCadence Design Systems or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products. In addition, our customer concentration risk is compounded by the fact that our key customers operate in distinct end markets with differing demand dynamics. For example, KYEC is a leading provider in the test and measurement market, which is subject to capital expenditure cycles and technology upgrade patterns that differ from those of the networking and telecommunications market served by Nokia. A downturn in a single end market, such as the test and measurement market, could disproportionately affect our revenues if we are significantly concentrated in that market through a single customer relationship. Our increasing dependence on the test and measurement market through KYEC, combined with the ongoing decline in the networking and telecommunications market, may reduce the diversification of our revenue base and amplify the impact of adverse conditions in any one application vertical on our overall operating results. We expect that future direct and indirect sales to KYECKYEC, Nokia and NokiaCadence Design Systems and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods. If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed. Additionally, a small number of customers have historically accounted for a substantial portion of our accounts receivable at period end, and delays or non-payment by any such customer could materially affect our cash flows and liquidity.

Our future success is substantially dependent on the successful introduction of new in-place associative computing productsproducts, including Gemini-II and Plato, which entails significant risks.

Since 2015, our principal strategic objective has been the development of our in-place associative computing products. We have devoted, and will continue to devote, substantial efforts and resources to the development of our new family of in-place associative computing products.products, including Gemini-II and Plato. This ongoing project involvesincludes achieving the commercialization of Gemini-II and development of new, cutting-edge technology,technology for Plato, and will require a continuing substantial effort during fiscal 2026 and beyond2027 and will be subject to significant risks. In addition to the typical risks associated with the development of technologically advanced products, thisthe projectachievement of the commercialization of Gemini-II and development of Plato will be subject to enhanced risks of technological problems related to the development of this entirely new category of products, substantial risks of delays or unanticipated costs that may be encountered, and risks associated with the establishment of entirely new markets and customer and partner relationships. The establishment of new customer and partner relationships and selling our in-place associative computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations. Our inability to successfully establish a market for the product that we have developed will have a material adverse effect on our future financial and business success, including our prospects for increased revenues. To date, sales of our APU products have been limited primarily to research and academic institutions and government-funded proof-of-concept engagements, and there can be no assurance that these engagements will result in broader commercial adoption or production-volume orders. The extended duration of our proof-of-concept sales cycles, combined with the nascent stage of market acceptance for our associative computing architecture, creates a risk that our APU products may not progress beyond limited evaluation-stage deployments, which would prevent us from recovering the substantial research and development investment we have made in this technology. If our APU products fail to achieve meaningful commercial traction within a reasonable period, we may be required to reassess the scope and pace of our investment in associative computing, which could result in impairment charges, reduced market confidence in our technology, and a material adverse effect on our business and the price of our common stock. Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major product introduction effort, then the price of our common stock could fall.

HigherIncreased interestor rates,new tariffstariffs, export controls and other trade disputes,barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures, increasing geopolitical tensions, the evolving conflict in Israel, the military conflictconflicts in Ukraine,Ukraine and the Middle East, and the resulting decline in thechallenging global economic environment are expected to adversely affect our revenues, results of operations and financial condition.

Our business is expected to be materially adversely affected by higherincreased interestor rates,new tariffstariffs, export controls and other trade disputes,barriers, worldwidetrade inflationarydisputes pressures,and increasing geopolitical tensions, theworldwide evolvinginflationary conflict in Israelpressures and the military conflictconflicts in Ukraine,Ukraine and the Middle East, all of which are contributing to a decline in thechallenging global economic environment.

Our quarterly revenues have been flat and other than the quarters ended December 31, 2024 and March 31, 2025, have trended downward due to the decline in the global economic environment that has resulted in less demand for our products. We expect that aan continued riseincrease in interest rates, tariffsincreased or new tariffs, export controls and other trade disputes,barriers, continuedtrade inflationarydisputes pressures,and increasing geopolitical tensions, theworldwide evolvinginflationary conflict in Israel,pressures, continued uncertainties in the business climate caused by the military conflictconflicts in Ukraine and the Middle East will adversely impact demand for new and existing products, and to impact the mindset of potential commercial partners to launch new products using our technology. The resulting decline in thechallenging global economic environment is expected to have an adverse impact on our business and financial condition.

Disruptions in the capital and financial markets as a result of higherincreased interestor rates,new tariffstariffs, export controls and other trade disputes,barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures, increasing geopolitical tensions, the evolving conflict in Israel, the military conflictconflicts in Ukraine,Ukraine and the declineMiddle inEast, and the challenging global economic environment may also adversely affect our ability to obtain additional liquidity should the impacts of a decline in thechallenging global economic environment continue for a prolonged period.

We identified a material weakness in our internal control over financial reporting in the past. If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.

In the course of preparing our financial statements for the fiscal year ended March 31, 2022, we identifiedIf a material weakness in our internal control over financial reporting whichis remained un-remediated at March 31, 2023. During fiscal 2024, we identified and implemented remedial measures to address the control deficiencies that led to the material weakness and determined that the material weakness was remediated as of March 31, 2024. However,identified, there can be no assurance that remedial measures will continue to operateremedy such material weakness would be successful or that theysuch willremedial measures would prevent other control deficiencies or material weaknesses in our control over financial reporting in the future.

Goodwill represents the difference between the purchase price and the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination, such as our acquisition of MikaMonu Group Ltd. in fiscal 2016. We test for goodwill impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired. If the carrying value of a material asset is determined to be impaired, it will be written down to fair value by a charge to operating earnings. As of March 31, 20242026 and 2025, we had a goodwill balance of $8.0 million and intangible assets of $1.6$1.1 million and $1.3 million at March 31, 20242026 and March 31, 2025, respectively, from the MikaMonu acquisition. An adverse change in market conditions, including a sustained decline in our stock price, loss of significant customers, or a weakened demand for our products could be considered to be an impairment triggering event. If such change has the effect of changing one of our critical assumptions or estimates, a change to the estimation of fair value could result in an impairment charge to our goodwill or intangible assets, which would negatively impact our operating results and harm our business. There were no impairment indicators at March 31, 20242026 or 2025.

We currently purchase several key components used in the manufacture of our products from single sources and are dependent upon supply from these sources to meet our needs. 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. 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. If we are unable to obtain an adequate supply of wafers from TSMC or find alternative sources in a timely manner, we will be unable to fulfill our customer orders and our operating results will be harmed. We do not have supply agreements with TSMC, ASE or any of our other independent assembly and test suppliers, and instead obtain manufacturing services and products from these suppliers on a purchase-order basis. Our suppliers, including TSMC, have no obligation to supply products or services to us for any specific product, in any specific quantity, at any specific price or for any specific time period. As a result, the loss or failure to perform by any of these supplierssuppliers, including decisions to allocate capacity to larger, higher volume, or better capitalized customers, could extend lead times, increase prices, or otherwise adversely affect our business and operating results.

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.

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. 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 technologies that could enable the development of products that feature higher performance or lower cost. In addition, the trend toward incorporating SRAM into other chips in the networking and telecommunications markets has the potential to reduce future demand for Very Fast SRAM products. We may experience development, marketing and other technological difficulties that may delay or limit our ability to respond to technological changes, evolving industry standards, competitive developments or end-user requirements. 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. Other challenges that we face include:

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. 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. Additionally, increased demand for semiconductor manufacturing capacity driven by AI applications may result in longer lead times, allocation constraints, and increased costs for wafer fabrication and assembly services, which could adversely affect our ability to fulfill customer orders in time. Inflationary pressures may also cause our wafer fabrication costs to increase. If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline.

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 additionalprice increases in our wafer fabrication costs, which may require us to further increase 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. 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.

Historically, the average unit selling prices of our products have declined substantially over the lives of the products. A reduction in overall average selling prices of our products could result in reduced revenues and lower gross margins. 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. If we fail to accomplish any of these objectives, our business will suffer. To reduce our costs, we may be required to implement design changes that lower our manufacturing costs, negotiate reduced purchase prices from our independent foundries and our independent assembly and test vendors, and successfully manage our manufacturing and subcontractor relationships. Because we do not operate our own wafer foundry or assembly facilities, we may not be able to reduce our costs as rapidly as companies that operate their own foundries or facilities. Additionally, our inventories face the risk of obsolescence. If demand falls below our forecasts, if average selling prices decline, or if customer orders are cancelled or deferred due to product obsolescence or otherwise, we may be required to record additional inventory write-downs, which could be material and adversely affect our gross margins and results of operations

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 theglobal geopolitical conditions and military conflict in Ukraine.conflicts. Experienced computer programmers and hackers may be able to penetrate our network security or the network security of our business partners, and misappropriate or compromise our confidential and proprietary information, create system disruptions or cause shutdowns. The costs to us to eliminate or alleviate cyber or other security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities could be significant, and our efforts to address these problems may not be successful and could result in interruptions and delays that may impede our sales, manufacturing, distribution or other critical functions.

We must continue to identify, recruit, hire, train, retain and motivate highly skilled technical, managerial, sales and marketing and administrative personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retain sufficiently qualified personnel. We may encounter difficulties in recruiting and retaining a sufficient number of qualified engineers, whichincluding those needed for the development and commercialization of our Gemini-II and Plato products. Any difficulties recruiting and retaining engineers could harm our ability to develop new products such as Gemini-II and Plato and adversely impact our relationships with existing and future end-users at a critical stage of development. The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new customers and develop new products.

We typically sell products pursuant to purchase orders that customers can generally cancel or defer on short notice without incurring a significant penalty. Any significant cancellations or deferrals in the future could materially and adversely affect our business, financial condition and results of operations. Cancellations or deferrals could cause us to hold excess inventory, which could reduce our profit margins, increase product obsolescence and restrict our ability to fund our operations. We generally recognize revenue upon shipment of products to a customer. If a customer refuses to accept shipped products or does not pay for these products, we could miss future revenue projections or incur significant charges against our income, which could materially and adversely affect our operating results.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ substantially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Forward Looking Statements”, “Risk Factors” and elsewhere in this report. The following discussion should be read together with our consolidated financial statements and the related notes included elsewhere in this report.

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

Historically, a small number of OEM customers have accounted for a substantial portion of our net revenues, and we expect that significant customer concentration will continue for the foreseeable future. Many of our OEMs use contract manufacturers to manufacture their equipment. Accordingly, a significant percentage of our net revenues is derived from sales to these contract manufacturers. In addition, a significant portion of our sales are made to foreign and domestic distributors who resell our products to OEMs, as well as their contract manufacturers. Direct sales to contract manufacturers accounted for 4.9%, 7.9% and 20.5% of our net revenues for fiscal 2026, 2025 and 2024, respectively. Sales to foreign and domestic distributors accounted for 93.3%, 91.7% and 76.4% of our net revenues for fiscal 2026, 2025 and 2024, respectively. The following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:

KYEC was our largest end user customer in fiscal 2026 and 2025. Nokia was our largest end user customer in fiscal 2024 and 2023.2024. KYEC purchases product through contract manufacturers and distributors. Based on information provided to us by KYEC’s contract manufacturers and distributors, purchases by KYEC represented approximately 23%,14%, 3%23% and 2%3% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Nokia purchases products directly from us and through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 12%,6%, 21%12% and 17%21% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Cadence Design Systems purchases products through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Cadence Design Systems represented approximately 12%, 8% and 8% of our net revenues in fiscal 2026, 2025 and 2024, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to NokiaNokia, KYEC and KYEC,Cadence Design Systems, and we expect that future direct and indirect sales to NokiaNokia, KYEC and KYECCadence Design Systems will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2025,2026, 20242025 or 2023.2024.

Research and Development Expenses. Research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-based compensation and fees paid to consultants. We charge all research and development expenses to operations as incurred. We charge mask costs used in production to cost of revenues over a 12-month period. However, we charge costs related to pre-production mask sets, which are not used in production, to research and development expenses at the time they are incurred. These charges often arise as we transition to new process technologies and, accordingly, can cause research and development expenses to fluctuate on a quarterly basis. We incurred charges of $2.4 million for a pre-production mask set for our APU2 during the quarter ended December 31, 2023. We incurred charges of $3.2 million for intellectual property rights that we purchased for our Plato project during the quarter ended December 31, 2025. We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote significant resources to product development activities. In particular, we are devoting substantial resources to the development of our in-place associative computing products. Accordingly, we expect that our research and development expenses will continue to be substantial in future periods and may lead to operating losses in some periods. Such expenses as a percentage of net revenues may fluctuate from period to period.

Net Revenues. Net revenues decreasedincreased by 5.7%22.4% from $21.8 million in fiscal 2024 to $20.5 million in fiscal 2025.2025 to $25.1 million in fiscal 2026. The overall average selling price of all units shipped in fiscal 20252026 increased by 0.7%16.3% in fiscal 20252026 compared to the prior fiscal year. Units shipped decreasedincreased by 6.4%5.7% in fiscal 20252026 compared to fiscal 2024.2025. KYEC, which is a leading provider in the test and measurement market, was our largest end user customer in fiscal 2026 and 2025. Direct and indirect sales to KYEC increaseddecreased by $4.1$1.0 million from $544,000 in fiscal 2024 to $4.6 million fiscal 2025. The networking and telecommunications markets represented 19% and 34% of shipments in fiscal 2025 andto in$3.6 million fiscal 2024, respectively.2026. Direct and indirect sales to Nokia decreased by $2.0$1.0 million from $4.5$2.5 million in fiscal 20242025 to $2.5$1.5 million fiscal 2025.2026. Direct and indirect sales to Cadence Design Systems increased by $1.5 million from $1.6 million in fiscal 2025 to $3.1 million in fiscal 2026. The decrease in Nokia’s purchases in the past several fiscal years is due in part to Nokia’s decision to replace SRAM with alternative memory solutions. The test and measurement markets represented 38% and 32% of shipments in fiscal 2026 and in fiscal 2025, respectively. The networking and telecommunications markets represented 16% and 19% of shipments in fiscal 2026 and in fiscal 2025, respectively. Shipments to KYEC, Nokia and Cadence Design Systems will continue to fluctuate on a quarterly basis as a result of demand and shipments to itstheir end customers. While recent customer order patterns have been particularly variable, these fluctuations are related to economic and external factors, which include worldwide inflationary pressures, higherincreased interestor rates,new tariffstariffs, export controls and other trade barriers and trade disputes, increasing geopolitical tensions and the decline in thechallenging global economic environment. In addition, during the second half of fiscal 2025, we have seen early indications of an improvement in our SRAM business. Existing customers are depleting their channel inventory, and we anticipate they will resume ordering in the upcoming quarters.

Cost of Revenues. Cost of revenues increased by 4.8%10.1% from $9.9 million in fiscal 2024 to $10.4 million in fiscal 2025.2025 to $11.4 million in fiscal 2026. The increase in cost of revenues was primarily related to the increase in net revenues in fiscal 2026 compared to fiscal 2025 and changes in the mix of products and customers. Cost of revenues included a provision for excess and obsolete inventories of $301,000 and $305,000 in fiscal 20252026 compared to $180,000and in fiscal 2024.2025, respectively. Cost of revenues included stock-based compensation expense of $199,000$231,000 and $228,000,$199,000, respectively, in fiscal 20252026 and fiscal 2024.2025. Cost of revenues in fiscal 2025 includes $204,000 in severance related payments related to our August 2024 cost reduction initiative.

Gross Profit. Gross profit decreasedincreased by 14.2%35.1% from $11.8 million in fiscal 2024 to $10.1 million in fiscal 2025.2025 to $13.7 million in fiscal 2026. Gross margin decreasedincreased from 54.3% in fiscal 2024 to 49.4% in fiscal 2025.2025 to 54.5% in fiscal 2026. The change in gross profit is primarily related to the change in net revenues discussed above. The decreaseincrease in gross margin was primarily related to change in the mix of products and customers and also reflects the impact of fixed overhead on lowerhigher shipment levels compared to the prior year. Gross margin in fiscal 2025 was also impacted by the severance related payments related to our August 2024 cost reduction initiative discussed above.

Research and Development Expenses. Research and development expenses decreasedincreased 26.2%24.6% from $21.7 million in fiscal 2024 to $16.0 million in fiscal 2025.2025 to $19.9 million in fiscal 2026. The decreaseincrease in research and development spending was primarily related to acharges decreaseof $3.2 million for intellectual property rights that we purchased for our Plato project during the quarter ended December 31, 2025, increases in pre-productionoutside maskconsulting costsexpenses, of $2.4 millionalso related to our APU2Plato productproject and alesser decrease of $2.2 millionincreases in payroll related expenses, partially offset by a lesser increase in outside consulting expenses. The decrease in payrollsoftware relatedmaintenance expenses was related to the cost reduction measures implemented in August 2024.expenses. Research and development expenses in fiscal 20252026 and fiscal 20242025 were also offset by $1.2$1.0 million and $435,000,$1.2 million, respectively, of funding received under the government contracts discussed above.contracts. Research and development expenses included stock-based compensation expense of $1.0 million and $1.4 million$945,000 in fiscal 20252026 and fiscal 2024,2025, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 1.9%4.3% from $10.6 million in fiscal 2024 to $10.8 million in fiscal 2025.2025 to $11.2 million in fiscal 2026. Increases of $574,000 stock-based compensation expense and $573,000 in facility related expenses were partially offset by a decrease of $465,000 in professional fees and a lesser decrease in payroll related expenses. In fiscal 2025, the value of contingent consideration liability resulting from our prior acquisition of the MikaMonu acquisitionGroup Ltd. decreased by $160,000 compared to a decrease of $892,000 million in fiscal 2024 as a result of re-measurement of contingent consideration liability in each year. Decreases of $267,000 in outside sales representative commissions and $187,000 in payroll related expense were partially offset by an increase of $133,000 in professional fees.$160,000. Selling, general and administrative expenses included stock-based compensation expense of $1.1$1.6 million and $1.2$1.1 million in fiscal 20252026 and fiscal 2024,2025, respectively.

Interest Income and Other (Expense), Net. Interest income and other (expense), net decreasedincreased from income of $414,000 in fiscal 2024 to income of $326,000 in fiscal 2025.2025 to income of $4.1 million in fiscal 2026. Interest income decreasedincreased by $96,000$481,000 primarily due to lowerhigher cash balances invested in money market funds. The foreign currency exchange loss decreasedincreased from ($127,000) in fiscal 2024 to ($119,000) in fiscal 2025.2025 to ($206,000) in fiscal 2026. The exchange loss in each period was primarily related to our Taiwan branch operations and operations in Israel. Other income in fiscal 2026 included a gain on the change in the fair value of warrants of $6.2 million and costs associated with the Registered Direct Offering of $2.8 million.

Provision (benefit) for Income Taxes. The provision (benefit) for income taxes increased from $70,000 in fiscal 2024 towas $130,000 in fiscal 2025.2025 Theto provision for income taxes($132,000) in fiscal 2024 included a benefit of ($117,000) related to the approval by the Israel tax authorities of a “Preferred Company” tax rate that was retroactively applied to fiscal 2023.2026. Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March 31, 20252026 and the realization of our deferred tax assets is questionable, we recorded a tax provision reflecting a valuation allowance of $22.8$25.4 million in net deferred tax assets in fiscal 2025.2026. Reductions in uncertain tax benefits due to lapses in the statute of limitations were $767,000 in fiscal 2025 and were not significant in fiscal 2024.2026.

Net Loss. Net loss was ($20.1)$10.6 million in fiscal 20242025 compared to a net loss of ($10.6)$13.2 million in fiscal 2025.2026. This decreaseincrease in net loss was primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Net cash used in operating activities was $13.0$15.9 million and $17.4$13.0 million for fiscal 20252026 and fiscal 2024,2025, respectively. Cash from operations in fiscal 2026 was adjusted for the non-cash gain on the change in fair value of warrants in the amount of $6.2 million. The primary uses of cash in fiscal 20252026 were the net loss of $10.6$13.2 million and an increaseincreases of $1.1$1.5 million in accrued expenses and other liabilities, $1.2 million in accounts receivable and $1.0 million in prepaid expenses and other assets. The increase in prepaid expenses and other assets was primarily related to a production mask set for our APU2. The primary source of cash in fiscal 20252026 was aan reductionincrease in inventoriesaccounts payable of $781,000. Cash from operations in fiscal 2025 was adjusted for the non-cash gain on the sale of assets in the amount of $5.8$2.6 million. The uses of cash in fiscal 20252026 were offset by non-cash items including stock-based compensation of $2.3$2.8 million and depreciation and amortization expenses of $665,000.$628,000.

The primary uses of cash in fiscal 20242025 were the net loss of $20.1$10.6 million and aan decreaseincrease of $1.6$1.1 million in accruedprepaid expenses and other liabilities.assets. The reductionincrease in accruedprepaid expenses and other liabilitiesassets was primarily related to decreasesa production mask set for our APU2. The primary source of cash in compensationfiscal related2025 accruals,was incomea taxesreduction payablein andinventories deferredof revenue.$781,000. Cash from operations in fiscal 2025 was adjusted for the non-cash gain on the sale of assets in the amount of $5.8 million. The uses of cash in fiscal 20242025 were lessoffset than the net loss due toby non-cash items including stock-based compensation of $2.8$2.3 million and depreciation and amortization expenses of $927,000. The primary source of cash in fiscal 2024 was a decrease in inventories of $1.3 million.$665,000.

Net cash used by investing activities was $486,000 in fiscal 2026 and net cash provided by investing activities was $11.4 million and $2.8$11.3 million in fiscal 20252025. Investment activities in fiscal 2026 consisted of the purchase of property and 2024,equipment respectively.of $486,000. Investment activities in fiscal 2025 primarily consisted of the net proceeds of $11.2$11.4 million from thea sale and leaseback transaction discussed above,transaction, partially offset by the purchase of property and equipment of $45,000. Investment activities in fiscal 2024 primarily consisted of the maturity of certificates of deposit and agency bonds of $3.4 million partially offset by the purchase of property and equipment of $645,000.

While higher interest rates, worldwide inflationary pressures, tariffs and trade disputes, increasing geopolitical tensions and the decline in the global economic environment have created significant uncertainty as to general economic and capital market conditions for thefiscal remainder of calendar 20252027 and beyond, we believe that our existing balances of cash and cash equivalents, and cash flow expected to be generated from our future operations will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints and the continuation of the impact of higher interest rates and inflation may have on our business, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts as well as potentially additional funding to complete the commercialization and development of Gemini-II and Plato, and the expansion of our sales and marketing team. Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake. On June 28, 2023, we filed a registration statement on Form S-3, which was declared effective by the SEC on July 19, 2023. On August 1, 2023, we commenced a registered securities offering pursuant to a Sales Agreement (the “Sales Agreement”) with Needham & Company, LLC (“Needham”). The Sales Agreement provides that we may offer and sell our common stock having an aggregate offering price of up to $25.0 million from time to time (the “Offering”) through Needham, acting as our sales agent. We sold 133,000 shares pursuant to the Offering at an average price of $4.20 for proceeds of $542,000, less offering costs of $389,000 during the quarter ended September 30, 2023. In May and June 2025, we sold 3,380,773 shares pursuant to the Offering at an average price of $3.32 for proceeds of $11.2 million, less offering costs of $411,000. We cannot assure that additional equity or debt financing, if required, will be available on terms that are acceptable or at all.

As of March 31, 2025,2026, we had $15.1$18.5 million in purchase obligations for facility leases, waferswafers, software maintenance and softwarechip anddesign testservice purchase obligations that are binding commitments, of which $2.9$9.1 million are payable in the next twelve months and $12.2$9.4 million are committed in the long term.

The preparation of our consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are inherent in the preparation of the consolidated financial statements and include estimates affecting obsolete and excess inventory and contingent consideration.inventory. We believe that we consistently apply these judgments and estimates and that our financial statements and accompanying notes fairly represent our financial results for all periods presented. However, any errors in these judgments and estimates may have a material impact on our balance sheet and statement of operations. Critical accounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our financial condition and results of operations and require our most difficult and subjective judgments and estimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding the valuation of inventories and contingent consideration.inventories.

Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future. For example, in the elevennine fiscal quarters ended DecemberJune 31,30, 2025,2026, we recorded net revenues of as much as $6.4 million and as little as $4.6 million, and in nineeight of those quarters, operating losses from $2.2 million to $6.9 million. We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price. Furthermore, if our operating expenses exceed our expectations, our financial performance could be adversely affected. Factors that may affect periodic operating results in the future include:

Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future. 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. We may 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.

Worldwide inflationary pressures, increased or new tariffs, export controls and other trade barriers, trade disputes and increasing geopolitical tensions, the military conflictconflicts in Ukraine,Ukraine and the Middle East, and the challenging global economic environment have caused increased stock market volatility and uncertainty in customer demand and the worldwide economy in general, and we may continue to experience decreased sales and revenues in the future. We expect such impact will in particular affect our SRAM sales and has also impacted the launch of our APU products to some degree and the adoption of RadHard and RadTolerant SRAM products by aerospace and military customers. However, the magnitude of such impact on our business and its duration is highly uncertain.

KYEC purchases products through contract manufacturers and distributors. Based on information provided to us by KYEC’s contract manufacturers and distributors, purchases by KYEC represented approximately 23%,14%, 3%23% and 2%3% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Nokia purchases our products directly from us and through contract manufacturers and distributors. Based on information provided to us by Nokia’s contract manufacturers and distributors, purchases by Nokia represented approximately 12%,6%, 21%12% and 17%21% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. The significant decline in Nokia’s purchases is due in part to Nokia’s decision to incorporate alternative solutions to the use of SRAMs into certain of its next-generation products in place of our SRAM products that were included in prior versions of such products. If Nokia continues to expand its use of these alternative solutions across additional product lines, our sales to Nokia could decline further or be eliminated entirely. Cadence Design Systems purchases products through contract manufacturers and distributors. Based on information provided to us by Cadence Design SystemsSystems’ contract manufacturers and distributors, purchases by Cadence Design Systems represented approximately 8%,12%, 8% and 0%8% of our net revenues in fiscal 2025,2026, 20242025 and 2023,2024, respectively. We expect that our operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly KYEC, Nokia and Cadence Design Systems, and our future success is dependent to a large degree on the business success of these customers over which we have no control. We do not have long-term contracts with KYEC, Nokia and Cadence Design Systems or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products. In addition, our customer concentration risk is compounded by the fact that our key customers operate in distinct end markets with differing demand dynamics. For example, KYEC is a leading provider in the test and measurement market, which is subject to capital expenditure cycles and technology upgrade patterns that differ from those of the networking and telecommunications market served by Nokia. A downturn in a single end market, such as the test and measurement market, could disproportionately affect our revenues if we are significantly concentrated in that market through a single customer relationship. Our increasing dependence on the test and measurement market through KYEC, combined with the ongoing decline in the networking and telecommunications market, may reduce the diversification of our revenue base and amplify the impact of adverse conditions in any one application vertical on our overall operating results. We expect that future direct and indirect sales to KYEC, Nokia and Cadence Design Systems and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operating results in future periods. If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed. Additionally, a small number of customers have historically accounted for a substantial portion of our accounts receivable at period end, and delays or non-payment by any such customer could materially affect our cash flows and liquidity.

Our future success is substantially dependent on the successful introduction of new in-place associative computing products, including Gemini-I, Gemini-II and Plato, which entails significant risks.

Since 2015, our principal strategic objective has been the development of our in-place associative computing products. We have devoted, and will continue to devote, substantial efforts and resources to the development of our new family of in-place associative computing products, including Gemini-I, Gemini-II and Plato. This ongoing project includes achieving customer acceptance of Gemini-I, the commercialization of Gemini-II and development of new, cutting-edge technology for Plato, and will require a continuing substantial effort during fiscal 2026 and beyond2027 and will be subject to significant risks. In addition to the typical risks associated with the development of technologically advanced products, the achievement of customer acceptance of Gemini-I, the commercialization of Gemini-II and development of Plato will be subject to enhanced risks of technological problems related to the development of this entirely new category of products, substantial risks of delays or unanticipated costs that may be encountered, and risks associated with the establishment of entirely new markets and customer and partner relationships. The establishment of new customer and partner relationships and selling our in-place associative computing products to such new customers is a significant undertaking that requires us to invest heavily in our sales team, enter into new channel partner relationships, expand our marketing activities and change the focus of our business and operations. Our inability to successfully establish a market for the product that we have developed will have a material adverse effect on our future financial and business success, including our prospects for increased revenues. To date, sales of our APU products have been limited primarily to research and academic institutions and government-funded proof-of-concept engagements, and there can be no assurance that these engagements will result in broader commercial adoption or production-volume orders. The extended duration of our proof-of-concept sales cycles, combined with the nascent stage of market acceptance for our associative computing architecture, creates a risk that our APU products may not progress beyond limited evaluation-stage deployments, which would prevent us from recovering the substantial research and development investment we have made in this technology. If our APU products fail to achieve meaningful commercial traction within a reasonable period, we may be required to reassess the scope and pace of our investment in associative computing, which could result in impairment charges, reduced market confidence in our technology, and a material adverse effect on our business and the price of our common stock. Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major product introduction effort, then the price of our common stock could fallfall.

Increased or new tariffs, export controls and other trade barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures, the military conflictconflicts in Ukraine,Ukraine and the Middle East, and the resulting challenging global economic environment are expected to adversely affect our revenues, results of operations and financial condition.

Our business is expected to be materially adversely affected by increased or new tariffs, export controls and other trade barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures and the military conflictconflicts in Ukraine,Ukraine and the Middle East, all of which are contributing to a challenging global economic environment.

We expect that aan continued riseincrease in interest rates, increased or new tariffs, export controls and other trade barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures, continued uncertainties in the business climate caused by the military conflictconflicts in Ukraine and the Middle East will adversely impact demand for new and existing products, and to impact the mindset of potential commercial partners to launch new products using our technology. The resulting challenging global economic environment is expected to have an adverse impact on our business and financial condition.

Disruptions in the capital and financial markets as a result of increased or new tariffs, export controls and other trade barriers, trade disputes and increasing geopolitical tensions, worldwide inflationary pressures, the military conflictconflicts in Ukraine,Ukraine and the Middle East, and the challenging global economic environment may also adversely affect our ability to obtain additional liquidity should the impacts of a challenging global economic environment continue for a prolonged period.

We identified a material weakness in our internal control over financial reporting in the past. If we fail to maintain effective internal control over financial reporting in the future, the accuracy and timing of our financial reporting may be adversely affected.

Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404(a) of the Sarbanes-Oxley Act, or any testing by our independent registered public accounting firm, may reveal control deficiencies of varying degrees of severity. While any unremediated deficiencies identified to date have not individually or in the aggregate been determined to constitute a material weakness, we cannot assure you that any such deficiencies, or deficiencies identified in the future, will not be determined to constitute a material weakness, whether individually or in the aggregate with other deficiencies. Any failure to implement required new or improved controls, or difficulties encountered in remediating identified deficiencies or in implementing new or improved controls, could cause us to fail to meet our internal control over financial reporting that are deemed to be material weaknessesobligations or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement.statements. Inferior internal control over financial reportingreporting, including the existence of uncorrected control deficiencies, could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

Goodwill represents the difference between the purchase price and the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination, such as our acquisition of MikaMonu Group Ltd. in fiscal 2016. We test for goodwill impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired. If the carrying value of a material asset is determined to be impaired, it will be written down to fair value by a charge to operating earnings. As of June 30, 2026 and March 31, 2025 and December 31, 2025,2026, we had a goodwill balance of $8.0 million and intangible assets of $1.0 million and $1.1 million,million at June 30, 2026 and March 31, 2026, respectively, from the MikaMonu acquisition. An adverse change in market conditions, including a sustained decline in our stock price, loss of significant customers, or a weakened demand for our products could be considered to be an impairment triggering event. If such change has the effect of changing one of our critical assumptions or estimates, a change to the estimation of fair value could result in an impairment charge to our goodwill or intangible assets, which would negatively impact our operating results and harm our business. There were no impairment indicators at June 30, 2026 or March 31, 2025 or December 31, 2025.2026.

We currently purchase several key components used in the manufacture of our products from single sources and are dependent upon supply from these sources to meet our needs. 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. 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. If we are unable to obtain an adequate supply of wafers from TSMC or find alternative sources in a timely manner, we will be unable to fulfill our customer orders and our operating results will be harmed. We do not have supply agreements with TSMC, ASE or any of our other independent assembly and test suppliers, and instead obtain manufacturing services and products from these suppliers on a purchase-order basis. Our suppliers, including TSMC, have no obligation to supply products or services to us for any specific product, in any specific quantity, at any specific price or for any specific time period. As a result, the loss or failure to perform by any of these supplierssuppliers, including decisions to allocate capacity to larger, higher volume, or better capitalized customers, could extend lead times, increase prices, or otherwise adversely affect our business and operating results.

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. 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. Additionally, increased demand for semiconductor manufacturing capacity driven by AI applications may result in longer lead times, allocation constraints, and increased costs for wafer fabrication and assembly services, which could adversely affect our ability to fulfill customer orders in time. Inflationary pressures may also cause our wafer fabrication costs to increase. If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline.

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 additionalprice increases in our wafer fabrication costs, which may require us to further increase 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. 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.

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 thefiscal nine months ended December 31,2026, 2025 and in fiscal 2025, 2024 and 2023,2024, our largest distributor Avnet Logistics accounted for 64.0%,63.7%, 49.6%, 50.6%49.6% and 48.1%,50.6%, 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. 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. These conflicts may harm our business or reputation.

Historically, the average unit selling prices of our products have declined substantially over the lives of the products. A reduction in overall average selling prices of our products could result in reduced revenues and lower gross margins. 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. If we fail to accomplish any of these objectives, our business will suffer. To reduce our costs, we may be required to implement design changes that lower our manufacturing costs, negotiate reduced purchase prices from our independent foundries and our independent assembly and test vendors, and successfully manage our manufacturing and subcontractor relationships. Because we do not operate our own wafer foundry or assembly facilities, we may not be able to reduce our costs as rapidly as companies that operate their own foundries or facilities. Additionally, our inventories face the risk of obsolescence. If demand falls below our forecasts, if average selling prices decline, or if customer orders are cancelled or deferred due to product obsolescence or otherwise, we may be required to record additional inventory write-downs, which could be material and adversely affect our gross margins and results of operations.

If we are unable to attract and retain the engineering talent required to meet our product milestones, we could experience delays in Gemini-II commercialization, including failure to complete critical features, integrations, performance optimizations, reliability enhancements, and compliance or certification requirements necessary for market launch and adoption. Similarly, insufficient staffing or turnover within our research and development function could slow or derail the Plato product roadmap, cause us to miss our anticipated tape-out date in early calendar 2027, reduce the pace of innovation, and impair our ability to validate core technologies, generate defensible intellectual property, and respond to evolving market and customer requirements. Any material delay or shortfall in engineering capacity could increase development costs, force us to reduce scope or quality, or require greater reliance on third-party contractors or offshore vendors, which may introduce coordination challenges, security risks, IP ownership or confidentiality concerns, and variability in deliverable quality and timelines.

Failure to attract and retain the requisite engineering talent could have a material adverse effect on our business, financial condition, operating results, and prospects. It could lead to missed commercialization windows for Gemini-II, reduced customer satisfaction and adoption, inability to achieve expected performance or compliance standards, slower progress on Plato’s research and development objectives, loss of competitive advantage, and ultimately reduced revenue growth. Persistent talent gaps could also necessitate changes to our product strategy, impair the value of our technology assets, and increase the risk that we will not achieve our planned milestones or that we will need to raise additional capital on unfavorable terms, any of which could adversely affect our business.

At DecemberJune 31,30, 2025,2026, threeone customerscustomer accounted for 41%, 34% and 15%62% of our accounts receivable, respectively.receivable. If anythis ofcustomer these customers dodoes not pay us, our financial position and operating results will be harmed. Generally, we do not require collateral from our customers.

We must continue to identify, recruit, hire, train, retain and motivate highly skilled technical, managerial, sales and marketing and administrative personnel. Competition for these individuals is intense, and we may not be able to successfully recruit, assimilate or retain sufficiently qualified personnel. We may encounter difficulties in recruiting and retaining a sufficient number of qualified engineers, including those needed for the development and commercialization of our Gemini-II product offerings and the development of our Plato products.product offerings. Any difficulties recruiting and retaining engineers could harm our ability to develop new products such as Gemini-II and Plato and adversely impact our relationships with existing and future end-users at a critical stage of development. The failure to recruit and retain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and our ability to obtain new customers and develop new products.

We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs. Historically, these migrations to new manufacturing processes have resulted in significant initial design and development costs associated with pre-production mask sets for the manufacture of new products with smaller geometry process technologies. For example, in the third quarter of fiscal 2024, we incurred approximately $2.4 million in research and development expense associated with a pre-production mask set that will not be used in production as part of the transition to our new 16 nanometer SRAM process technology for our APU2 product. We incurred charges of $3.2 million for intellectual property rights that we purchased for our Plato project duringin the third quarter endedof Decemberfiscal 31, 2025.2026. 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.

Products shipped to destinations outside of the United States accounted for 45.0%,51.1%, 60.3%, 47.3%60.3% and 51.4%47.3% of our net revenues in thefiscal nine months ended December 31,2026, 2025 and in fiscal 2025, 2024 and 2023,2024, respectively. Moreover, a substantial portion of our products are manufactured and tested in Taiwan and the software development for our associative computing products occurs in Israel where there is an evolving military conflict. We intend to continue expanding our international business in the future. Conducting business outside of the United States subjects us to additional risks and challenges, including:

WhileAlthough we recently raised approximately $50 million in gross proceeds in October 2025 through a registered direct offering and raised approximately $9.6 million in gross proceeds in May 2026 pursuant to an At-the-Market offering, we may need to seek additional funding in the future. We do not know if we will be able to obtain additional financing on favorable terms, if at all. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, and we may be required to reduce operating costs, which could seriously harm our business. In addition, if we issue equity securities, our stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of our common stock.

As of JanuaryJuly 31, 2026, our executive officers, directors and entities affiliated with them beneficially owned approximately 21%17% of our outstanding common stock. As a result, these stockholders will be able to exercise substantial influence over, and may be able to effectively control, matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over or merging with us.

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

In January 2026, we announced a new proof-of-concept (“POC”) engagement with two government agencies. GSI is partnering with G2 Tech, an Israeli deep-tech AI company, on Sentinel, a program to develop an autonomous perimeter security system that manages drones and cameras in real time for advanced monitoring, detection, and response. The project is jointly backed by the U.S. Department of War (Department of Defense), and a foreign government agency. Under the POC, G2 Tech is leading the system-level platform development, focusing on real-time data processing, monitoring, and autonomous response workflows for high-load and mission-critical environments across unmanned systems. The platform supports autonomous operation while maintaining human oversight and decision-support capabilities. Gemini-II leverages the APU’s compute-in-memory architecture to process sensor data in place, enabling on-device AI inference and real-time responsiveness.. Total governmental funding for the POC is expected to be in the millions of dollars. GSI expects to receive roughly $1 million dollars to support software optimization and integration of the Gemini-II platform into the Sentinel system.

Generally, our primary source of liquidity is cash equivalents. Our level of cash equivalents has historically been sufficient to meet our current and longer termlonger-term operating and capital needs. We believe that during the next 12 months, continued inflationary pressures, increased or new tariffs, export controls and other trade barriers, trade disputes, and increasing geopolitical tensions will continue to negatively impact general economic activity and demand in our end markets. Although it is difficult to estimate the length or gravityseverity of thethese continuedconditions, inflationarywe pressures,expect increased or new tariffs, export controls and other trade barriers, trade disputes, increasing geopolitical tensions and the challenging global economic environment, are expectedthem to have an adverse effect on our results of operations, financial position, including potential impairments, and liquidity through the remainder of fiscal 2026 and into fiscal 2027.

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

KYEC was our largest end user customer in fiscal 2026 and 2025. Nokia was our largest end user customer in fiscal 2024 and 2023.2024. KYEC purchases product through contract manufacturers and distributors. Based on information provided to us by KYEC’s contract manufacturers and distributors, purchases by KYEC represented approximately 11%,16%, 23%,14%, 3%23% and 2%3% of our net revenues in the ninethree months ended DecemberJune 31,30, 2025,2026, and in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Nokia purchases products directly from us and through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia represented approximately 8%,5%, 12%,6%, 21%12% and 17%21% of our net revenues in the ninethree months ended DecemberJune 31,30, 2025,2026, and in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Cadence Design Systems purchases products through contract manufacturers and distributors. Based on information provided to us by its contract manufacturers and our distributors, purchases by Cadence Design Systems represented approximately 17%,7%, 8%,12%, 8% and 0%8% of our net revenues in the ninethree months ended DecemberJune 31,30, 2025,2026, and in fiscal 2025,2026, 20242025 and 2023,2024, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to Nokia, KYEC and Cadence Design Systems, and we expect that future direct and indirect sales to Nokia, KYEC and Cadence Design Systems will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in the ninethree months ended DecemberJune 31,30, 20252026 or in fiscal 2025,2026, 20242025 or 2023.2024.

Research and Development Expenses. Research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-based compensation and fees paid to consultants. We charge all research and development expenses to operations as incurred. We charge mask costs used in production to cost of revenues over a 12-month period. However, we charge costs related to pre-production mask sets, which are not used in production, to research and development expenses at the time they are incurred. These charges often arise as we transition to new process technologies and, accordingly, can cause research and development expenses to fluctuate on a quarterly basis. We incurred charges of $2.4 million for a pre-production mask set for our APU2 during the quarter ended December 31, 2023. We incurred charges of $3.2 million for intellectual property rights that we purchased for our Plato project during the quarter ended December 31, 2025. We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote significant resources to product development activities. In particular, we are devoting substantial resources to the development of our in-place associative computing products. Accordingly, we expect that our research and development expenses will increase in future periods as we expand our hardware and software development teams to complete development ofcommercialize our Gemini-II product offerings and develop Plato product offerings. Research and development expenses will be substantial in future periods and may lead to operating losses in some periods. Such expenses as a percentage of net revenues may fluctuate from period to period.

Goodwill. We had a goodwill balance of $8.0 million as of both DecemberJune 31,30, 20252026 and March 31, 2025.2026. The goodwill resulted from the acquisition of MikaMonu Group Ltd. in fiscal 2016. We completed our annual impairment test during the fourth quarter of fiscal 20252026 and concluded that there was no impairment, as it was more likely than not that the fair value of our sole reporting unit exceeded its carrying value and the performance of a quantitative impairment test was not required.

Intangible Assets. We review identifiable amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. There were no impairment indicators noted as of DecemberJune 31,30, 20252026 and March 31, 2025.2026. Based on the uncertainty of forecasts inherent with a new product, events such as the failure to generate forecasted revenue from the APU productproduct, could result in a non-cash impairment charge in future periods.

Cost of Revenues. Cost of revenues increased by 15.5%11.8% from $2.5$2.6 million in the three months ended DecemberJune 31,30, 20242025 to $2.9 million in the three months ended DecemberJune 31,30, 20252026. andThe increasedincrease byin 8.0%cost fromof $7.8revenues millionwas primarily related to changes in the ninemix monthsof endedproducts Decemberand 31, 2024 to $8.4 million in the nine months ended December 31, 2025.customers. Cost of revenues included a provision for excess and obsolete inventories of $245,000$124,000 in the ninethree months ended DecemberJune 31,30, 20242026 compared to $232,000$70,000 in the ninethree months ended DecemberJune 31,30, 2025. Cost of revenues includes $203,000 in severance related payments in the nine months ended December 31, 2024 related to our August 2024 cost reduction initiative. Cost of revenues included stock-based compensation expense of $50,000$70,000 and $61,000$44,000 forin the three months ended DecemberJune 31,30, 2024 and 2025, respectively, and $175,000 and $163,000 for the nine months ended December 31, 20242026 and 2025, respectively.

Gross Profit. Gross profit increaseddecreased by 9.5%7.7% from $2.9$3.7 million in the three months ended DecemberJune 31,30, 20242025 to $3.2$3.4 million in the three months ended DecemberJune 31,30, 2025 and by 51.8% from $6.8 million in the nine months ended December 31, 2024 to $10.4 million in the nine months ended December 31, 2025.2026. Gross margin decreased from 54.0%58.1% in the three months ended DecemberJune 31,30, 20242025 to 52.7%53.4% in the three months ended DecemberJune 31,30, 2025 and increased from 46.7% in the nine months ended December 31, 2024 to 55.2% in the nine months ended December 31, 2025.2026. The changes in gross profit are primarily related to the increases in net revenues discussed above. The changeschange in gross margin werewas primarily related to changes in the mix of products and customers. Gross margin in the nine months ended December 31, 2024 was also impacted by the severance related payments related to our August 2024 cost reduction initiative discussed above.

Provision (benefit) for Income Taxes. The provision (benefit) for income taxes wasdecreased $44,000from $54,000 in the three months ended DecemberJune 31,30, 2024 compared2025 to a benefit of ($251,000$76,000) in the three months ended DecemberJune 31,30, 2025 and was $124,000 in the nine months ended December 31, 2024 compared to ($156,000) in the nine months ended December 31, 2025.2026. This change was primarily due to fluctuations in the relative mix of income among our operating jurisdictions and changes in deferred tax assets.

Net Loss. Net loss wasincreased $4.0from $2.2 million in the three months ended DecemberJune 31,30, 2024 compared2025 to $3.0$4.8 million in the three months ended DecemberJune 31,30, 20252026. andThis fluctuation was $8.4 million in the nine months ended December 31, 2024 compared to $8.4 million in the nine months ended December 31, 2025. These fluctuations were primarily due to the changes in net revenues, gross profit,profit and operating expenses, the gain from sale of assets, the gain on the change in fair value of warrants and the issuance costs for the warrantsexpenses discussed above.

As of DecemberJune 31,30, 2025,2026, our principal sources of liquidity were cash and cash equivalents of $70.7$77.0 million compared to cash and cash equivalents $13.4of $67.2 million as of March 31, 2025.2026.

The primary uses of cash in the ninethree months ended DecemberJune 31,30, 20242025 were the net loss of $8.4$2.2 million and a decrease of $1.2$1.7 million in accrued expenses and other liabilities. The decrease in accrued expenses and other liabilities was primarily related to payment made for a production mask set for our APU2 that was accrued at March 31, 2025. The primary sourcessource of cash in the ninethree months ended DecemberJune 31,30, 20242025 werewas reductionsa reduction in inventoriesaccounts and prepaid expenses and other current assets. Cash from operations in the nine months ended December 31, 2024 was adjusted for the non-cash gain on the salereceivable of assets in the amount of $5.8$1.6 million.

Net cash provided by (used in) investing activities was ($336,000)$358,000 in the ninethree months ended DecemberJune 31,30, 20252026 compared to $11.4 million$21,000 in the ninethree months ended DecemberJune 31,30, 2024.2025. Investment activities in the ninethree months ended DecemberJune 31,30, 2026 and 2025 primarily consisted of the purchase of property and equipment of $336,000. Investment activities in the nine months ended December 31, 2024 primarily consisted of the net proceeds of $11.3 million from the sale and leaseback transaction discussed above, partially offset by the purchase of property and equipment of $41,000.equipment.

Net cash provided by financing activities in the ninethree months ended DecemberJune 31,30, 20252026 primarily consisted of the proceeds from issuance of common stock and warrants of $49.7 million,net proceeds from the sale of common stock pursuant to an At-the-Market offering of $14.3$9.3 million and the proceeds from the sale of common stock pursuant to our employee stock plans of $4.1$4.8 million. Net cash provided by financing activities in the ninethree months ended DecemberJune 31,30, 20242025 primarily consisted of the net proceeds from the sale of common stock pursuant to an At-the-Market offering of $10.8 million and the proceeds from the sale of common stock pursuant to our employee stock plans of $622,000.$226,000.

We believe that our existing balances of cash and cash equivalents will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months. Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, any additional manufacturing cost increases resulting from supply constraints and the continuation of the impact of inflation may have on our business, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing team. Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake. On June 28, 2023, we filed a registration statement on Form S-3, which was declared effective by the SEC on July 19, 2023. On August 1, 2023, we commenced a registered securities offering pursuant to a Sales Agreement (the “Sales Agreement”) with Needham & Company, LLC (“Needham”). The Sales Agreement provides that we may offer and sell our common stock having an aggregate offering price of up to $25.0 million from time to time (the “Offering”) through Needham, acting as our sales agent. Between May and August 2025, we sold 4,508,350 shares pursuant to the Offering at an average price of $3.29 for proceeds of $14.8 million, less offering costs of $573,000.

As of DecemberJune 31,30, 2025,2026, we had $20.5$16.8 million in purchase obligations for facility leases, wafer, software and design services obligations that are binding commitments of which $2.9$7.4 million are payable in the next twelve months and $17.6$9.4 million are committed in the long term.

At DecemberJune 31,30, 2025,2026, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not exposed to the type of financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.