UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

⌧

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

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

For the quarterly period ended December 31, ~~2017~~2020

◻

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

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

For the transition period from to

Commission File Number 001-33387

GSI Technology, Inc.

(Exact name of registrant as specified in its charter)


Delaware		77-0398779
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

1213 Elko Drive

Sunnyvale, California 94089

(Address of principal executive offices, zip code)

(408) 331-8800

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, $0.001 par value	GSIT	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒⌧ No ☐◻

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


Large accelerated filer ☐◻		Accelerated filer ☒◻
Non-accelerated filer ☐⌧		Smaller reporting company ☐⌧
		Emerging growth company ☐◻

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

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

The number of shares of the registrant’s common stock outstanding as of January 31, ~~2018: 21,294,248~~2021: 23,797,963.

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GSI TECHNOLOGY, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, ~~2017~~2020

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PART I — FINANCIAL ~~INFORMATION~~INFORMATION

Item 1.Financial Statements

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE ~~SHEETS~~SHEETS

(Unaudited)


					December 31,		March 31,
					2020		2020

	December 31,		March 31,
	2017		2017
	(In thousands, except share and per share amounts)
					(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	39,740	$	33,736	$	43,064	$	51,506
Short-term investments		17,030		16,199		9,196		15,061
Accounts receivable, net		5,545		6,349		4,012		6,330
Inventories		6,795		9,211		4,523		4,282
Prepaid expenses and other current assets		2,073		2,777		1,979		1,934
Total current assets		71,183		68,272		62,774		79,113
Property and equipment, net		7,667		7,689		7,444		8,119
Operating lease right-of-use assets						817		617
Long-term investments		8,199		12,898		10,126		4,117
Goodwill		7,978		7,978		7,978		7,978
Intangible assets, net		3,067		3,302		2,314		2,489
Other assets		1,229		2,456		139		128
Total assets	$	99,323	$	102,595	$	91,592	$	102,561
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	1,764	$	1,627	$	2,422	$	1,184
Lease liabilities, current						457		498
Accrued expenses and other liabilities		5,250		7,051		5,525		6,578
Deferred revenue		506		1,796
Total current liabilities		7,520		10,474		8,404		8,260
Income taxes payable		885		244		334		620
Deferred income taxes		—		15
Other accrued expenses		5,454		5,418
Lease liabilities, non-current						403		142
Contingent consideration, non-current						3,972		3,898
Total liabilities		13,859		16,151		13,113		12,920
Commitments and contingencies (Note 7)
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value authorized: 5,000,000 shares; issued and outstanding: none		—		—		—		—
Common Stock: $0.001 par value authorized: 150,000,000 shares; issued and outstanding: 21,252,123 and 20,612,757 shares, respectively		21		21
Common Stock: $0.001 par value authorized: 150,000,000 shares; issued and outstanding: 23,795,963 and 23,229,286 shares, respectively						24		23
Additional paid-in capital		26,272		21,830		45,602		40,176
Accumulated other comprehensive loss		(109)		(62)
Accumulated other comprehensive income						5		71
Retained earnings		59,280		64,655		32,848		49,371
Total stockholders’ equity		85,464		86,444		78,479		89,641
Total liabilities and stockholders’ equity	$	99,323	$	102,595	$	91,592	$	102,561

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

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GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~OPERATIONS

(Unaudited)


									Three Months Ended December 31,				Nine Months Ended December 31,
									2020		2019		2020		2019

	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
	(In thousands, except per share amounts)
									(In thousands, except per share amounts)
Net revenues	$	11,118	$	11,484	$	31,452	$	37,788	$	6,763	$	10,049	$	20,043	$	34,808
Cost of revenues		5,443		4,989		15,315		17,228		3,566		4,000		10,684		13,948
Gross profit		5,675		6,495		16,137		20,560		3,197		6,049		9,359		20,860
Operating expenses:
Research and development		4,231		3,813		12,726		11,594		5,736		8,208		17,220		19,636
Selling, general and administrative		2,481		2,448		7,771		7,963		2,612		2,584		8,138		8,119
Total operating expenses		6,712		6,261		20,497		19,557		8,348		10,792		25,358		27,755
Income (loss) from operations		(1,037)		234		(4,360)		1,003
Loss from operations										(5,151)		(4,743)		(15,999)		(6,895)
Interest income, net		113		81		309		227		50		190		244		610
Other income (expense), net		(14)		(20)		(9)		68		(25)		17		(129)		(46)
Income (loss) before income taxes		(938)		295		(4,060)		1,298
Provision for (benefit from) income taxes		590		(53)		720		64
Net income (loss)	$	(1,528)	$	348	$	(4,780)	$	1,234
Net income (loss) per share:
Loss before income taxes										(5,126)		(4,536)		(15,884)		(6,331)
Provision for income taxes										90		84		639		182
Net loss									$	(5,216)	$	(4,620)	$	(16,523)	$	(6,513)
Net loss per share:
Basic	$	(0.07)	$	0.02	$	(0.23)	$	0.06	$	(0.22)	$	(0.20)	$	(0.70)	$	(0.28)
Diluted	$	(0.07)	$	0.02	$	(0.23)	$	0.06	$	(0.22)	$	(0.20)	$	(0.70)	$	(0.28)
Weighted average shares used in per share calculations:
Basic		21,165		20,300		21,003		20,707		23,716		23,096		23,592		22,894
Diluted		21,165		21,097		21,003		21,239		23,716		23,096		23,592		22,894

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

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GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~INCOME (LOSS)~~ LOSS

(Unaudited)

Three Months Ended December 31,

Nine Months Ended December 31,

2017

2016

2017

2016


(In thousands)

Net income (loss)

$
(1,528)

$
348

$
(4,780)

$
1,234

Net unrealized gain (loss) on available-for-sale investments

(48)

(65)

(48)

(76)

Total comprehensive income (loss)

$
(1,576)

$
283

$
(4,828)

$
1,158


	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019

	(In thousands)
Net loss	$	(5,216)	$	(4,620)	$	(16,523)	$	(6,513)
Net unrealized gain (loss) on available-for-sale investments		(38)		(11)		(66)		54
Total comprehensive loss	$	(5,254)	$	(4,631)	$	(16,589)	$	(6,459)

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

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GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

(Unaudited)

~~(Unaudited)~~


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity

Three months ended December 31, 2020	(In thousands, except share amounts)
Balance, September 30, 2020	23,641,426	$	24	$	44,092	$	43	$	38,064	$	82,223
Issuance of common stock under employee stock option plans	154,537		—		817		—		—		817
Stock-based compensation expense	—		—		693		—		—		693
Net loss	—		—		—		—		(5,216)		(5,216)
Net unrealized loss on available-for-sale investments	—		—		—		(38)		—		(38)
Balance, December 31, 2020	23,795,963	$	24	$	45,602	$	5	$	32,848	$	78,479


Three months ended December 31, 2019
Balance, September 30, 2019	23,052,473	$	23	$	37,903	$	28	$	57,815	$	95,769
Issuance of common stock under employee stock option plans	80,525		—		480		—		—		480
Stock-based compensation expense	—		—		629		—		—		629
Net loss	—		—		—		—		(4,620)		(4,620)
Net unrealized loss on available-for-sale investments	—		—		—		(11)		—		(11)
Balance, December 31, 2019	23,132,998	$	23	$	39,012	$	17	$	53,195	$	92,247

Nine Months Ended December 31,

2017

2016


(In thousands)

Cash flows from operating activities:

Net income (loss)

$
(4,780)

$
1,234

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Allowance for sales returns, doubtful accounts and other

(22)

3

Provision for excess and obsolete inventories

1,166

491

Depreciation and amortization

948

1,189

Stock-based compensation

1,521

1,359

Amortization of premium on investments

69

52

Changes in assets and liabilities:

Accounts receivable

826

416

Inventory

1,250

(2,560)

Prepaid expenses and other assets

115

(286)

Accounts payable

(119)

(387)

Accrued expenses and other liabilities

(289)

(60)

Deferred revenue

(1,290)

(119)

Net cash (used in) provided by operating activities

(605)

1,332

Cash flows from investing activities:

Purchase of investments

(6,748)

(14,062)

Maturities of short-term investments

10,500

17,600

Reduction in escrow deposit

1,222

—

Purchases of property and equipment

(436)

(194)

Net cash provided by investing activities

4,538

3,344

Cash flows from financing activities:

Repurchase of common stock

—

(7,112)

Payment of MikaMonu escrow deposit

(850)

—

Proceeds from issuance of common stock under employee stock plans

2,921

968

Net cash provided by (used in) financing activities

2,071

(6,144)

Net increase (decrease) in cash and cash equivalents

6,004

(1,468)

Cash and cash equivalents at beginning of the period

33,736

31,963

Cash and cash equivalents at end of the period

$
39,740

$
30,495

Non-cash financing activities:

Purchases of property and equipment through accounts payable and
accruals

256

—

Supplemental cash flow information:

Net cash paid for income taxes

$
42

$
1,341


						Accumulated
				Additional		Other				Total
	Common Stock			Paid-in		Comprehensive		Retained		Stockholders'
	Shares	Amount		Capital		Income (Loss)		Earnings		Equity

Nine months ended December 31, 2020	(In thousands, except share amounts)
Balance, March 31, 2020	23,229,286	$	23	$	40,176	$	71	$	49,371	$	89,641
Issuance of common stock under employee stock option plans	566,677		1		3,325		—		—		3,326
Stock-based compensation expense	—		—		2,101		—		—		2,101
Net loss	—		—		—		—		(16,523)		(16,523)
Net unrealized loss on available-for-sale investments	—		—		—		(66)		—		(66)
Balance, December 31, 2020	23,795,963	$	24	$	45,602	$	5	$	32,848	$	78,479


Nine months ended December 31, 2019
Balance, March 31, 2019	22,320,156	$	22	$	33,462	$	(37)	$	59,708	$	93,155
Issuance of common stock under employee stock option plans	812,842		1		3,628		—		—		3,629
Stock-based compensation expense	—		—		1,922		—		—		1,922
Net loss	—		—		—		—		(6,513)		(6,513)
Net unrealized gain on available-for-sale investments	—		—		—		54		—		54
Balance, December 31, 2019	23,132,998	$	23	$	39,012	$	17	$	53,195	$	92,247

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

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GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended December 31,
	2020		2019

	(In thousands)
Cash flows from operating activities:
Net loss	$	(16,523)	$	(6,513)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for doubtful accounts and other		(25)		(32)
Provision for excess and obsolete inventories		327		260
Non-cash lease expense		458		462
Depreciation and amortization		962		1,079
Stock-based compensation		2,101		1,922
Amortization of premium (discount) on investments		49		(14)
Changes in assets and liabilities:
Accounts receivable		2,343		1,973
Inventory		(568)		904
Prepaid expenses and other assets		(56)		(1,064)
Accounts payable		1,238		(728)
Accrued expenses and other liabilities		(1,693)		531
Net cash used in operating activities		(11,387)		(1,220)
Cash flows from investing activities:
Purchase of investments		(17,509)		(15,866)
Maturities of short-term investments		17,250		18,626
Decrease in MikaMonu escrow deposit		—		1,000
Purchases of property and equipment		(122)		(265)
Net cash provided by (used in) investing activities		(381)		3,495
Cash flows from financing activities:
Payment of MikaMonu escrow deposit		—		(428)
Proceeds from issuance of common stock under employee stock plans		3,326		3,629
Net cash provided by financing activities		3,326		3,201
Net increase (decrease) in cash and cash equivalents		(8,442)		5,476
Cash and cash equivalents at beginning of the period		51,506		42,495
Cash and cash equivalents at end of the period	$	43,064	$	47,971
Non-cash investing and financing activities:
Purchases of property and equipment through accounts payable and accruals	$	9	$	24
Operating lease right-of-use assets exchanged for lease obligations	$	658	$	1,228
Supplemental cash flow information:
Net cash paid for income taxes	$	857	$	310

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

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GSI TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of GSI Technology, Inc. and its subsidiaries (“GSI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the interim financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These interim financial statements contain all adjustments (which consist of only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the interim financial information included therein. The Company believes that the disclosures are adequate to make the information not misleading. However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020.

The consolidated results of operations for the nine months ended December 31, ~~2017~~2020 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

~~The Company’s~~Except for the changes in disclosure requirements for recurring and nonrecurring fair value measurements and changes in goodwill impairment testing, which were updated as a result of adopting new accounting standards, there have been no material changes to our significant accounting policies ~~are~~that were disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020.

~~Recent accounting~~Risk and uncertainties

On March 11, 2020, the World Health Organization announced that COVID-19, a respiratory illness caused by a novel coronavirus, is a pandemic. COVID-19 has spread to many of the countries in which the Company, its customers, suppliers and other business partners conduct business. 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 its employees, are taking additional steps to avoid or reduce infection, including limiting travel and working from home. These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

The Company continues to monitor its operations and government recommendations and has made modifications to its normal operations because of the COVID-19 global pandemic. The Company has instituted many preventative measures and is regularly evaluating those measures and others as it continues to better understand its current and future operating environment. Except for the Company’s employees located in Taiwan, the majority of its employees are working from home around the world. The Company has maintained a substantial portion of its manufacturing operational capacity at its primary manufacturing support facility located in Hsin Chu, Taiwan where the Company’s suppliers are located and where all of the Company’s products are manufactured. Since the outbreak of COVID-19, aside from the lengthening of lead times for wafers and assembly services, the Company has experienced minimal impact on its manufacturing operations in Taiwan. Final testing of the Company’s products is conducted in house. Shipping and receiving operations are being maintained by a skeleton crew with minimal impact. The Company’s revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to shelter in place restrictions that

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require a significant number of its customer contacts to work from home. The Company’s results for the three month and nine month periods ended December 31, 2020 demonstrate the challenges that the Company is facing during the COVID-19 global pandemic, which has restricted the activities of the Company’s sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors. These challenges are also impacting the Company as it enters new markets and engages with target customers. Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, are unavailable due to COVID-19 related restrictions. The Company has adapted its sales strategies for the COVID-19 environment, where it cannot do face-to-face meetings and conduct secure meetings with government and defense customers, but the Company is still not operating at an optimal level.

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

The Company believes that during the next 12 months the COVID-19 pandemic could impact general economic activity and demand in its end markets. Although the Company cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it is expected to have an adverse effect on the Company’s results of operations, financial position, and liquidity during fiscal year 2021 and into fiscal year 2022. This includes results from new information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. The Company has made estimates of the impact of COVID-19 within its financial statements and there may be changes to those estimates in future periods.

Accounting pronouncements recently adopted

In ~~May 2017,~~August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. ~~2017-09,~~ 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The standard ~~Scope of Modification Accounting”. ASU 2017-09~~ amends the ~~scope~~disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures. The Company adopted ASU No. 2018-13 in the quarter ended June 30, 2020. Implementation of ~~modification accounting for share-based payment arrangements and provides~~this guidance did not have a material impact on the ~~types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718.~~ This guidance clarifies that an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the fair value of the award, (ii) the vesting conditions of the award, and (iii) the classification of the award as an equity~~instrument or liability instrument.~~ The standard is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017, including adoption in any interim period. The Company is currently evaluating the impact of this standard on itsCompany’s consolidated financial ~~statements.~~statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill ~~Impairment".~~Impairment." The standard eliminates the second step in the goodwill impairment test which requires an entity to determine the implied fair value of the reporting unit’s goodwill. Instead, an entity should recognize an impairment loss if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, with the impairment loss not to exceed the amount of goodwill allocated to the reporting unit. The Company adopted ASU No. 2017-04 in the quarter ended June 30, 2020. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures.

Accounting pronouncements not yet effective for fiscal 2021

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards.The standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The standard also clarifies and simplifies other aspects of the accounting for income taxes. The standard is effective for ~~annual~~fiscal years, and interim ~~goodwill impairment tests conducted in~~periods within those fiscal years, beginning after December 15, ~~2019, with early~~2020. Early adoption is permitted. The Company ~~does not anticipate~~is currently evaluating the ~~adoption of~~impact that this guidance towill have ~~a material impact on~~upon its ~~consolidated~~ financial ~~statements~~position and ~~related disclosures.~~results of operations, if any.

~~Table of Contents~~

In ~~November~~June 2016, the FASB issued ASU No. ~~2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”~~. ASU 2016-18 requires entities to include in their cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. As a result, companies will no longer present transfers between cash and cash equivalents, and restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this new guidance will have on its consolidated statement of cash flows.

~~In October 2016, the FASB~~ ~~issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~.” ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company adopted ASU 2016-16 in the quarter ended June 30, 2017. ASU 2016-16 is applied on a modified retrospective basis in the period of adoption. The adoption of this guidance resulted in a derecognition of a prepaid tax asset of $595,000 related to a prior period intra-entity asset transfer, with an offsetting reduction to retained earnings. Because of the Company’s valuation allowance in the United States, there was no change to the Company’s net deferred tax assets. The derecognition of the prepaid tax asset as of April 1, 2017 decreased the Company’s income tax expense by $11,000 in each of the quarters ended June 30, 2017, September 30, 2017 and December 31, 2017 and is projected to decrease the Company’s fiscal 2018 tax expense by $43,000.

~~In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”.~~ ASU 2016-15 adds or clarifies guidance on the classification of certain cash receipts and cash payments in the statement of cash flows. The amendments in the update provide guidance on eight specific cash flow issues, and are effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The amendments to the guidance should be applied using a retrospective transition method for each period presented and, if it is impracticable to apply all of the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company is currently evaluating the impact this new guidance will have on its consolidated statement of cash flows.

~~In June 2016, the FASB issued~~ ~~ASU~~ 2016-13,, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial ~~Instruments,~~Instruments.” ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other

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receivables, loans, and other financial instruments, the Company will be required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. ASU 2016-13 is effective for fiscal years beginning after December 15, ~~2019,~~2022, including interim periods within those fiscal years, with early adoption permitted beginning April 1, 2019. Application of the amendments is through a cumulative-effect adjustment to retained earnings as of the effective date. The Company is currently evaluating the impact of this standard on its consolidated financial statements.

~~In March 2016,~~ NOTE 2—REVENUE RECOGNITION

The Company determines revenue recognition through the ~~FASB~~ ~~issued~~ ~~ASU 2016-09,~~ ~~“Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.”~~ ~~ASU 2016-09 simplifies several aspects~~following steps: (1) identification of the ~~accounting for share-based payment transactions, including~~contract with a customer; (2) identification of the ~~income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The Company adopted ASU 2016-09~~performance obligations in the ~~quarter ended June 30, 2017.~~ contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.

The majority of the Company’s customer contracts, which may be in the form of purchase orders, contracts or purchase agreements, contain performance obligations for delivery of agreed upon products. Delivery of all performance obligations contained within a contract with a customer typically occurs at the same time (or within the same accounting period). Transfer of control typically occurs at the 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 the Company has a right to payment. Thus, the Company will generally recognize revenue upon shipment of the product.

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

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

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

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

The Company warrants its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of ~~equity awards. ASU 2016-09~~revenues. Warranty costs and the accrued warranty liability were not material as of December 31, 2020.

The majority of the Company’s revenue is ~~applied prospectively to all excess tax benefits~~derived from sales of SRAM products which represent approximately 98% of total revenues in the nine months ended December 31, 2020.

Nokia, the Company’s largest customer, purchases products directly from the Company and ~~tax deficiencies resulting from settlements after the date of adoption. The adoption of ASU 2016-09 resulted in an increase~~through contract manufacturers and distributors. Based on information provided to the ~~net operating loss carryforward deferred tax asset~~Company by its contract manufacturers and ~~a corresponding increase in the valuation allowance of $654,000 attributable to excess tax benefits not previously recognized as they did not reduce income taxes payable.~~

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~~In February 2016, the FASB issued ASU 2016-02,~~ ~~“Leases (Topic 842)~~.” The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. All leases create an asset and a liability for the lessee in accordance with FASB Concepts Statement No. 6, “~~Elements of Financial Statements~~,” and, therefore, recognition of those lease assets and lease liabilities represents a change of previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. This ASU is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The recognition, measurement, and presentation of expenses and cash flows arising from a leasedistributors, purchases by a lessee have not significantly changed from previous GAAP. Although the Company is currently evaluating the impact the pronouncement will have on its consolidated financial statements and related disclosures, the Company expects that most of its operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption.

~~In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.”~~ ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income and simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. The accounting standard update also updates certain presentation and disclosure requirements. This accounting standard update will be effective ~~for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years,and early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its consolidated financial statements.~~

~~In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.”~~ This standard update intends to simplify the subsequent measurement of inventory, excluding inventory accounted for under the last-in, first-out or the retail inventory methods. The update replaces the current lower of cost or market test with a lower of cost and net realizable value test. Under the current guidance, market could be replacement cost, net realizable value or net realizable value less anNokia represented approximately normal profit margin. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company adopted ASU 2015-11 in the quarter ended June 30, 2017. Implementation of this guidance did not have a material impact on the Company’s consolidated financial statements.

~~In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606~~)" and has subsequently issued several supplemental and/or clarifying ASUs (collectively, "ASC 606"). The new accounting standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2017. The Company plans to adopt ASC 606 on April 1, 2018 using the modified retrospective transition method with the cumulative effect of initial adoption, if any, recognized in opening retained earnings on the adoption date. Almost all40% of the Company’s purchase orders, contracts or purchase agreements do not contain performance obligations other than delivery of the agreed upon product, with title transfer occurring at the time of shipment subject to estimated allowance for distributor price adjustments and rights of return. Thus, the Company generally recognizes revenue upon shipment of the product. The Company has historically deferred recognition of revenue on shipments to its distributors that have ship from stock and debit and price protection rights due to a lack of a fixed and determinable price that could be reasonably estimated. The Company has been revising certain of its distribution agreements to eliminate ship from stock and debits and price protection in order to eliminate any uncertainty in regards to a final selling price and to establish a selling price that is fixed and determinable at the time of shipment to the distributor. Assuming all other revenue recognition criteria have been met, it is likely that the new guidance would require the Company to recognize revenue and cost relating to distributor sales upon shipment to the distributor, subject to estimated allowance for distributor price adjustments and rights of return. The Company is currentlynet revenues in the ~~process of assessing the impact this guidance is expected to have upon adoption, which includes determining the impact of the new guidance on~~nine months ended December 31, 2020 and 2019.

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

The following table presents the Company’s revenue ~~recognition practices, business processes, internal controls and the additional disclosures which may be required upon the adoption of ASC 606.~~disaggregated by customer type.


	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019

	(In thousands)
Contract manufacturers	$	3,154	$	3,022	$	9,007	$	11,745
Distribution		3,586		6,603		10,692		21,346
OEMs		23		424		344		1,717
	$	6,763	$	10,049	$	20,043	$	34,808

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NOTE 2—3—NET ~~INCOME (LOSS)~~LOSS PER COMMON SHARE

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


									Three Months Ended December 31,				Nine Months Ended December 31,
									2020		2019		2020		2019

	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
	(In thousands, except per share amounts)
Net income (loss)	$	(1,528)	$	348	$	(4,780)	$	1,234

									(In thousands, except per share amounts)
Net loss									$	(5,216)	$	(4,620)	$	(16,523)	$	(6,513)

Denominators:
Weighted average shares—Basic		21,165		20,300		21,003		20,707		23,716		23,096		23,592		22,894
Dilutive effect of employee stock options		—		795		—		530		—		—		—		—
Dilutive effect of employee stock purchase plan options		—		2		—		2		—		—		—		—
Weighted average shares—Dilutive		21,165		21,097		21,003		21,239		23,716		23,096		23,592		22,894
Net income (loss) per common share—Basic	$	(0.07)	$	0.02	$	(0.23)	$	0.06
Net income (loss) per common share—Diluted	$	(0.07)	$	0.02	$	(0.23)	$	0.06
Net loss per common share—Basic									$	(0.22)	$	(0.20)	$	(0.70)	$	(0.28)
Net loss per common share—Diluted									$	(0.22)	$	(0.20)	$	(0.70)	$	(0.28)

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

Three Months Ended December 31,

Nine Months Ended December 31,

2017

2016

2017

2016

(In thousands)

Shares underlying options and ESPP shares

2,969

4,621

2,785

5,247


	Three Months Ended December 31,		Nine Months Ended December 31,
	2020	2019	2020	2019

	(In thousands)
Shares underlying options and ESPP shares	5,181	4,048	4,856	3,762

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NOTE 3—4—BALANCE SHEET DETAIL



					December 31, 2020		March 31, 2020


	December 31, 2017		March 31, 2017
	(In thousands)
					(In thousands)
Inventories:
Work-in-progress	$	2,683	$	2,112	$	1,924	$	1,650
Finished goods		4,046		6,803		2,572		2,612
Inventory at distributors		66		296		27		20
	$	6,795	$	9,211
					$	4,523	$	4,282



					December 31, 2020		March 31, 2020


	December 31, 2017		March 31, 2017
	(In thousands)
					(In thousands)
Accounts receivable, net:
Accounts receivable	$	5,627	$	6,453	$	4,072	$	6,415
Less: Allowances for sales returns, doubtful accounts and other		(82)		(104)
	$	5,545	$	6,349
Less: Allowances for doubtful accounts and other						(60)		(85)
					$	4,012	$	6,330



					December 31, 2020		March 31, 2020


	December 31, 2017		March 31, 2017
	(In thousands)
					(In thousands)
Prepaid expenses and other current assets:
Prepaid tooling and masks	$	419	$	836	$	783	$	707
Prepaid income taxes		—		43		45		79
Escrow deposit		762		1,234
Other receivables		207		216		234		211
Other prepaid expenses and other current assets		685		448		917		937
	$	2,073	$	2,777
					$	1,979	$	1,934



						December 31, 2020		March 31, 2020


	December 31, 2017		March 31, 2017
	(In thousands)
						(In thousands)
Property and equipment, net:
Computer and other equipment	$	18,491	$	18,585		$	18,289	$	18,191
Software		4,902		4,793			4,097		4,086
Land		3,900		3,900	��		3,900		3,900
Building and building improvements		2,310		2,256			3,735		3,735
Furniture and fixtures		107		111			102		102
Leasehold improvements		725		715			877		874
Construction in progress		302		—
		30,737		30,360
							31,000		30,888
Less: Accumulated depreciation		(23,070)		(22,671)			(23,556)		(22,769)
	$	7,667	$	7,689
						$	7,444	$	8,119

Depreciation expense was ~~$245,000~~$197,000 and ~~$289,000~~$293,000 for the three months ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~$714,000~~$787,000 and ~~$919,000~~$904,000 for the nine months ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

The Company expects expenditures of approximately $1,000,000 to be incurred in the next twelve months for construction on our headquarters building in Sunnyvale, CA in addition to the $302,000 spent as of December 31, 2017. The Company expects to occupy the upgraded portion of its headquarters building in the first half of fiscal 2019.

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December 31, 2017

March 31, 2017

(In thousands)

Other assets:

Escrow deposit

$
1,000

$
1,750

Non-current deferred income taxes

98

22

Prepaid income taxes

—

552

Deposits

131

132

$
1,229

$
2,456



	December 31, 2020		March 31, 2020

	(In thousands)
Other assets:
Deposits	$	139	$	128
	$	139	$	128

The escrow deposit at December 31, 2017 and March 31, 2017 includes approximately $1.0 million and $1.8 million, respectively, placed in escrow in connection with the Company’s acquisition of MikaMonu Group Ltd. (“MikaMonu”) on November 23, 2015. During the quarter ended December 31, 2017 $750,000 was reclassified to current assets.

The following tables summarize the components of intangible assets and related accumulated amortization balances at December 31, ~~2017~~2020 and March 31, ~~2017~~2020 (in thousands):


	As of December 31, 2017
	Gross Carrying Amount		Accumulated amortization		Net Carrying Amount

							As of December 31, 2020
							Gross Carrying Amount		Accumulated amortization		Net Carrying Amount
Intangible assets:
Product designs	$	590	$	(590)	$	—	$	590	$	(590)	$	—
Patents		4,220		(1,153)		3,067		4,220		(1,906)		2,314
Software		80		(80)		—		80		(80)		—
Total	$	4,890	$	(1,823)	$	3,067	$	4,890	$	(2,576)	$	2,314


	As of March 31, 2017
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount

							As of March 31, 2020
							Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets:
Product designs	$	590	$	(590)	$	—	$	590	$	(590)	$	—
Patents		4,220		(918)		3,302		4,220		(1,731)		2,489
Software		80		(80)		—		80		(80)		—
Total	$	4,890	$	(1,588)	$	3,302	$	4,890	$	(2,401)	$	2,489

Amortization of intangible assets included in cost of revenues was ~~$78,000~~$58,000 and ~~$78,000~~$58,000 for the three months ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~$235,000~~$175,000 and ~~$270,000~~$175,000 for the nine months ended December 31, ~~2017~~2020 and ~~2016,~~2019, respectively.

As of December 31, ~~2017,~~2020, the estimated future amortization expense of intangible assets in the table above is as follows (in thousands):



Fiscal year ending March 31,	Fiscal year ending March 31,			Fiscal year ending March 31,
2018 (remaining three months)		$	78
2019			267
2020			233
2021			233
2021 (Remaining three months)					$	58
2022			233			233
2023						233
2024						233
2025						233
Thereafter			2,023			1,324
Total		$	3,067		$	2,314

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	December 31, 2020		March 31, 2020

	(In thousands)
Accrued expenses and other liabilities:
Accrued compensation	$	3,959	$	3,673
Purchased intellectual property		—		1,621
Accrued commissions		223		270
Income taxes payable		211		143
Miscellaneous accrued expenses		1,132		871
	$	5,525	$	6,578

December 31, 2017

March 31, 2017

(In thousands)

Accrued expenses and other liabilities:

Accrued compensation

$
3,122

$
3,990

Escrow indemnity accrual

5

484

Accrued professional fees

27

66

Accrued commissions

256

238

Contingent consideration

757

1,117

Accrued retention payment

260

251

Miscellaneous accrued expenses

823

905

$
5,250

$
7,051

December 31, 2017

March 31, 2017

(In thousands)

Other accrued expenses:

Contingent consideration

$
5,194

$
5,083

Other long-term accrued liabilities

260

335

$
5,454

$
5,418

NOTE 5—GOODWILL

~~NOTE 4—GOODWILL~~

Goodwill represents the difference between the purchase price and the estimated fair value of the identifiable assets acquired and liabilities assumed in a business combination. The Company tests for goodwill impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset is more likely than not impaired. The Company has one reporting unit. The Company assesses goodwill for impairment on an annual basis on the last day of February in the fourth quarter of its fiscal year.

The Company had a goodwill balance of $8.0 million as of both March 31, ~~2017~~2020 and December 31, ~~2017.~~2020. The goodwill resulted from the acquisition of MikaMonu Group Ltd. in fiscal 2016.

The Company utilized a two-step quantitative analysis to complete its annual impairment test during the fourth quarter of fiscal ~~2017~~2020 and concluded that there was no impairment, as the fair value of its sole reporting unit exceeded its carrying value. The Company determined that the second step of the impairment test was not necessary. No triggering event took place subsequent to the fiscal ~~2017~~2020 annual assessment that necessitated a quantitative impairment analysis for the Company’s one reporting unit.

NOTE 5—6—INCOME TAXES

The current portion of the Company’s unrecognized tax benefits was $0 at both December 31, ~~2017~~2020 and March 31, ~~2017.~~2020. The long-term portion at December 31, ~~2017~~2020 and March 31, ~~2017~~2020 was ~~$823,000~~$326,000 and ~~$244,000,~~$613,000, respectively, of which the timing of the resolution is uncertain. As of December 31, ~~2017, $1.3~~2020, $3.0 million of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets. As of December 31,~~2017 and March 31, 2017,~~ 2020, the Company’s net deferred tax assets of ~~$5.6~~$12.4 million ~~and $8.9 million, respectively,~~ were subject to a ~~full~~ valuation ~~allowance.~~

~~On December 22, 2017,~~allowance of $12.4 million.As of March 31, 2020, the “Tax Cuts and Jobs Act” ("H.R. 1") was signed into law, significantly impacting several sections of the Internal Revenue Code. This new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21%, limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. The Company remeasured allCompany’s net deferred tax assets ~~and liabilities as~~ of December 22, 2017, based on the provisions of H.R. 1. This new legislation resulted in a estimated tax provision of $639,000 in the quarter ended December 31, 2017 related to the transition tax associated with deemed repatriation of foreign earnings. In addition, as a result of provisions in the new

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~~legislation related to indefinite lived net operating loss carryovers and the refundability of minimum tax credit carryovers, the Company recorded a deferred tax benefit related~~$9.4 million were subject to a valuation allowance ~~release~~ of ~~$99,000~~$9.4 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted. The CARES Act is an approximate $2 trillion emergency economic stimulus package passed in response to the ~~quarter ended December 31, 2017. Finally,~~COVID-19 global pandemic. The CARES Act contains numerous income tax provisions including changes to the net operating loss rules that the Company ~~recorded~~believes will not have a ~~liability for taxes payable of $68,000 at December 31, 2017 that will be paid over a period of up to eight years.~~

This original estimate may be materially impacted by a number of additional considerations, including but not limited to the issuance of the final regulations, the Company’s ongoing analysis of the new law and the Company’s actual earnings for the fiscal year ending March 31, 2018.

significant impact.

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

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

The Company is subject to taxation in the United States and various state and foreign jurisdictions. Fiscal years 2013 through ~~2017~~2020 remain open to examination by federal tax authorities, and fiscal years ~~2011~~2012 through ~~2017~~2020 remain open to examination by California tax authorities. During the quarter ended June 30, 2020, the Company

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settled an income tax audit in Israel for fiscal years 2016 through 2019 that resulted in a discrete tax provision of $479,000 and a tax liability of $713,000 as of June 30, 2020 that was paid in the quarter ended September 30, 2020.

The Company’s estimated annual effective income tax rate, including discrete items, was approximately ~~(13.7%~~(3.4%) and ~~7.4%~~(2.2%) as of December 31, ~~2017~~2020 and ~~2016,~~2019, respectively. The annual effective tax rates as of December 31, ~~2017~~2020 and ~~2016~~2019 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and expenses and the foreign tax ~~differential, and the impact of new tax reform.~~differential.

NOTE 6—7—FINANCIAL INSTRUMENTS

Fair value measurements

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

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities. The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market. As of December 31, ~~2017,~~2020, the Level 1 category included money market funds of$~~9.5~~23.2 million, which were included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers. As of December 31, ~~2017,~~2020, the Level 2 category included short-term investments of ~~$17.0~~$9.2 million and long-term investments of ~~$8.2~~$10.1 million, which were comprised of certificates of deposit, ~~corporate debt securities and~~ government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing. As of December 31, ~~2017,~~2020, the Company’s Level 3 financial instruments measured at fair value on the Condensed Consolidated Balance Sheets consisted of the contingent consideration liability related to the acquisition of MikaMonu. The fair value of the contingent consideration liability was initially determined as of the acquisition date using unobservable inputs. These inputs ~~include~~included the estimated amount and timing of future cash flows, the probability of success (achievement

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of the various contingent events) and a risk-adjusted discount rate of approximately 14.8% used to adjust the probability-weighted cash flows to their present value. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, changes used in the assumptions for future cash flows and probability of success would be accompanied by a directionally similar change in the fair value measurement and expense. Conversely, changes in the risk-adjusted discount rate would be accompanied by a directionally opposite change in the related fair value measurement and expense. Subsequent to the acquisition date, at each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations. ~~The change in fair~~During the most recent re-measurement of the contingent consideration liability as of March 31, 2020, the Company used a risk-adjusted discount rate of approximately 14.5% to adjust the probability-weighted cash flows to their present value using probabilities ranging from 0% to 10% for the ~~three month and nine month periods ended~~remaining contingent events. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at December 31, ~~2017 were $41,000~~2020 and ~~$121,000,~~March 31, 2020 in the amount of $4.0 million and $3.9 million, respectively.

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


			Fair Value Measurements at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilities		Inputs		Inputs
	December 31, 2017		(Level 1)		(Level 2)		(Level 3)

											Fair Value Measurements at Reporting Date Using
											Quoted Prices
											in Active		Significant
											Markets for		Other		Significant
											Identical Assets		Observable		Unobservable
											and Liabilities		Inputs		Inputs
									December 31, 2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	9,520	$	9,520	$	—	$	—	$	23,160	$	23,160	$	—	$	—
Marketable securities		25,229		—		25,229		—		19,322		—		19,322		—
Total	$	34,749	$	9,520	$	25,229	$	—	$	42,482	$	23,160	$	19,322	$	—

Liabilities:
Contingent consideration									$	3,972	$	—	$	—	$	3,972


			Fair Value Measurements at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilities		Inputs		Inputs
	March 31, 2017		(Level 1)		(Level 2)		(Level 3)

											Fair Value Measurements at Reporting Date Using
											Quoted Prices
											in Active		Significant
											Markets for		Other		Significant
											Identical Assets		Observable		Unobservable
											and Liabilities		Inputs		Inputs
									March 31, 2020		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	6,293	$	6,293	$	—	$	—	$	14,117	$	14,117	$	—	$	—
Marketable securities		29,097		—		29,097		—		19,178		—		19,178		—
Total	$	35,390	$	6,293	$	29,097	$	—	$	33,295	$	14,117	$	19,178	$	—

Liabilities:
Contingent consideration									$	3,898	$	—	$	—	$	3,898

The following table sets forth the changes in fair value of contingent consideration for the nine months ended December 31, 2020 and December 31, 2019:


	Nine Months Ended December 31,
	2020		2019

	(In thousands)
Contingent consideration, beginning of period	$	3,898	$	4,206
Change due to accretion		74		87
Payment of contingent consideration		—		(500)
Contingent consideration, end of period	$	3,972	$	3,793

Short-term and long-term investments

All of the Company’s short-term and long-term investments are classified as available-for-sale. Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations. Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive ~~income (loss)~~loss in the Condensed Consolidated Balance Sheets. The Company had money market funds of ~~$9.5~~$23.2 million and ~~$6.3~~$14.1 million at December 31, ~~2017~~2020 and March 31, ~~2017,~~2020, respectively, included in cash and cash equivalents on the Condensed Consolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

1415

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


									December 31, 2020
											Gross		Gross
											Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value

	December 31, 2017
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
									(In thousands)
Short-term investments:
Corporate notes	$	555	$	—	$	—	$	555
Certificates of deposit		7,500		1		(16)		7,485	$	2,495	$	14	$	—	$	2,509
Foreign government obligations		5,431		—		(26)		5,405
State and municipal obligations		1,585		—		—		1,585
Supranational obligations										2,765		5		—		2,770
Agency bonds		2,002		—		(2)		2,000		3,918		—		(1)		3,917
Total short-term investments	$	17,073	$	1	$	(44)	$	17,030	$	9,178	$	19	$	(1)	$	9,196
Long-term investments:
Certificates of deposit	$	8,250	$	—	$	(51)	$	8,199	$	4,000	$	31	$	—	$	4,031
Supranational obligations										2,047		—		(1)		2,046
Agency bonds										4,018		31		—		4,049
Total long-term investments	$	8,250	$	—	$	(51)	$	8,199	$	10,065	$	62	$	(1)	$	10,126


									March 31, 2020
											Gross		Gross
											Unrealized		Unrealized		Fair
									Cost		Gains		Losses		Value

	March 31, 2017
			Gross		Gross
			Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
	(In thousands)
									(In thousands)
Short-term investments:
State and municipal obligations	$	1,632	$	1	$	—	$	1,633
Corporate notes		557		—		(2)		555
Certificates of deposit									$	12,000	$	52	$	(1)	$	12,051
Agency bonds		3,012		—		(7)		3,005		2,989		21		—		3,010
Foreign government obligations		1,001		—		(1)		1,000
Certificates of deposit		10,000		9		(3)		10,006
Total short-term investments	$	16,202	$	10	$	(13)	$	16,199	$	14,989	$	73	$	(1)	$	15,061
Long-term investments:
Certificates of deposit	$	7,500	$	3	$	(39)	$	7,464	$	745	$	18	$	—	$	763
Foreign government obligations		5,442		—		(8)		5,434
Agency bonds										2,029		42		—		2,071
Supranational obligations										1,270		13		—		1,283
Total long-term investments	$	12,942	$	3	$	(47)	$	12,898	$	4,044	$	73	$	—	$	4,117

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position as of December 31, 2020 and March 31, 2020, respectively.


	December 31, 2020
	Less Than 12 Months				12 Months or Greater				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Loss		Value		Loss

	(In thousands)
Agency bonds	$	4,918	$	(1)	$	—	$	—	$	4,918	$	(1)
Certificates of deposit		250		(1)		—		—		250		(1)
Supranational obligations		2,523		(1)		—		—		2,523		(1)
	$	7,691	$	(3)	$	—	$	—	$	7,691	$	(3)


	March 31, 2020
	Less Than 12 Months				12 Months or Greater				Total
		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
		Value		Loss		Value		Loss		Value		Loss

	(In thousands)
Certificates of deposit	$	2,498	$	(2)	$	-	$	-	$	2,498	$	(2)
	$	2,498	$	(2)	$	-	$	-	$	2,498	$	(2)

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The Company’s investment portfolio consists of both corporate and governmental securities that have a maximum maturity of three years. All unrealized gains and losses are due to changes in interest rates and bond yields. Subject to normal credit risks, the Company has the ability to realize the full value of all these investments upon maturity.

The deferred tax ~~asset~~liability related to unrecognized gains and losses on short-term and long-term investments was ~~$21,000~~$(22,000) and ~~$17,000~~$(30,000) at December 31, ~~2017~~2020 and March 31, ~~2017,~~2020, respectively.

As of December 31, ~~2017,~~2020, contractual maturities of the Company’s available-for-sale investments were as follows:


							Fair
					Cost		Value

			Fair
	Cost		Value
	(In thousands)
					(In thousands)
Maturing within one year	$	17,073	$	17,030	$	9,178	$	9,196
Maturing in one to three years		8,250		8,199		10,065		10,126
	$	25,323	$	25,229
					$	19,243	$	19,322

The Company classifies its short-term investments as “available-for-sale” as they are intended to be available for use in current operations.

NOTE 8—LEASES

The Company has operating leases for corporate offices, research and development facilities, certain equipment and software. The Company’s leases have remaining lease terms of 2 months to 32 months, some of which include options to extend for up to 5 years.

Supplemental balance sheet information related to leases was as follows:


	As of		As of
	December 31, 2020		March 31, 2020

	(In thousands)
Operating Leases
Operating lease right-of-use assets	$	817	$	617

Lease liabilities-current	$	457	$	498
Lease liabilities-non-current		403		142
Total operating lease liabilities	$	860	$	640

The following table provides the details of lease costs:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019

	(In thousands)				(In thousands)
Operating lease cost	$	172	$	164	$	504	$	483
Short-term lease cost		8		7		23		21
	$	180	$	171	$	527	$	504

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The following table provides other information related to leases:


	Nine Months Ended December 31,
	2020		2019

	(In thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	175	$	488

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	658	$	1,228

Weighted-average remaining lease term (years):
Operating leases		2.2		1.5

Weighted-average discount rate:
Operating leases		4.86%		6.46%

The following table provides the maturities of the Company’s operating lease liabilities as of December 31, 2020:


	Operating Lease
	Liabilities
Fiscal Year	(In thousands)
2021 (Remaining three months)	$	154
2022		395
2023		251
2024		102
Total undiscounted future cash flows		902
Less: Imputed interest		(42)
Present value of undiscounted future cash flows	$	860

Presentation on statement of financial position
Current	$	457
Non-current	$	403

NOTE 7—9—COMMITMENTS AND CONTINGENCIES

Indemnification obligations

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the Company, under which the Company agrees to hold the other party harmless against losses arising from a breach of representations and covenants related to such matters as title to assets sold and certain intellectual property rights. In each of these circumstances, payment by the Company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount, and in some instances, the Company may have recourse against third parties for certain payments made by it under these agreements.

It is not possible to predict the maximum potential amount of future payments that may be required under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material effect on its business, financial condition, cash flows or results of operations.

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Product warranties

The Company warrants its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues. Warranty costs and the accrued warranty liability were not material as of December 31, ~~2017~~2020 and March 31, ~~2017~~2020 and for the three months ~~and nine months~~ ended December 31, ~~2017~~2020 or ~~2016.~~2019.

NOTE 8—10—STOCK-BASED COMPENSATION

As of December 31, ~~2017, 4,575,111~~2020, 1,576,722 shares of common stock were available for grant under the Company’s 2016 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the nine months ended December 31, ~~2017:~~2020:


			Weighted
		Number of Shares	Average	Weighted
	Shares	Underlying	Remaining	Average
	Available for	Options	Contractual	Exercise		Intrinsic
	Grant	Outstanding	Life (Years)	Price		Value
Balance at March 31, 2017	5,464,185	7,622,830		$	5.09

										Weighted
									Number of Shares	Average	Weighted
								Shares	Underlying	Remaining	Average
								Available for	Options	Contractual	Exercise		Intrinsic
								Grant	Outstanding	Life (Years)	Price		Value
Balance at March 31, 2020								2,522,314	8,135,791		$	6.17
Granted	(898,874)	898,874		$	7.17			(989,842)	989,842		$	6.14
Exercised	—	(523,773)		$	4.39	$	1,787,814	—	(443,190)		$	5.94	$	583,645
Forfeited	9,800	(97,200)		$	5.10			44,250	(161,833)		$	7.01
Balance at December 31, 2017	4,575,111	7,900,731	5.68	$	5.37
Balance at December 31, 2020								1,576,722	8,520,610	5.57	$	6.17
Options vested and exercisable		4,884,592	3.96	$	5.20	$	13,630,614		5,497,662	4.02	$	5.70	$	9,735,923
Options vested and expected to vest		7,829,674	5.65	$	5.36	$	20,474,445		8,440,795	5.54	$	6.16	$	11,522,386

The weighted average fair value per underlying share of options granted during the three months ended December 31, ~~2017~~2020 and ~~2016~~2019 was ~~$2.35~~$2.51 and ~~$1.75,~~$2.66, respectively, and $2.39 and $2.84 for the nine months ended December 31, ~~2017~~2020 and ~~2016 was $2.49 and $1.56,~~2019, respectively.

~~Table of Contents~~

Options outstanding by exercise price at December 31, ~~2017~~2020 were as follows:


				Number of	Options Outstanding			Options Exercisable
				Shares	Weighted		Weighted Average		Weighted
				Underlying	Average		Remaining	Number	Average
				Options	Exercise		Contractual	Vested and	Exercise

														Number of	Options Outstanding			Options Exercisable
														Shares	Weighted		Weighted Average		Weighted
														Underlying	Average		Remaining	Number	Average
														Options	Exercise		Contractual	Vested and	Exercise
Exercise Price	Exercise Price			Outstanding	Price		Life (Years)	Exercisable	Price		Exercise Price			Outstanding	Price		Life (Years)	Exercisable	Price
$	2.43	-	3.43	884,945	$	3.29	3.50	733,789	$	3.27	3.40	-	4.81	888,007	$	4.06	3.32	888,007	$	4.06
$	3.60	-	4.17	1,037,183	$	3.98	2.94	942,089	$	4.02	4.90	-	4.99	1,255,826	$	4.97	4.48	1,255,826	$	4.97
$	4.30	-	4.98	1,201,191	$	4.82	5.79	713,709	$	4.74	5.13	-	5.59	910,509	$	5.32	3.68	910,509	$	5.32
$	4.99	-	5.23	1,158,816	$	5.10	7.70	175,239	$	5.12	5.69	-	5.83	854,567	$	5.81	7.36	270,874	$	5.76
$	5.28	-	6.00	990,966	$	5.64	5.61	815,243	$	5.71	5.91	-	6.45	933,860	$	6.17	6.18	568,329	$	6.20
$	6.16	-	6.54	857,658	$	6.35	5.57	630,425	$	6.41	6.54	-	6.70	1,100,140	$	6.65	5.15	555,193	$	6.60
$	6.61	-	6.86	843,896	$	6.80	6.48	604,005	$	6.78	6.86	-	7.26	1,042,797	$	7.08	5.55	563,773	$	6.95
$	7.00	-	7.26	733,506	$	7.20	8.04	161,513	$	7.00	7.40	-	8.09	812,431	$	7.79	8.27	330,598	$	7.79
$	7.40			83,990	$	7.40	9.35	-	$	-	8.30			613,893	$	8.30	8.58	45,973	$	8.30
$	9.20			108,580	$	9.20	3.08	108,580	$	9.20	9.20			108,580	$	9.20	0.08	108,580	$	9.20
				7,900,731	$	5.37	5.68	4,884,592	$	5.20
														8,520,610	$	6.17	5.57	5,497,662	$	5.70

Table of Contents

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to employee stock plans:


									Three Months Ended December 31,				Nine Months Ended December 31,
									2020		2019		2020		2019

	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
	(In thousands)
												(In Thousands)
Cost of revenues	$	73	$	78	$	186	$	209	$	88	$	77	$	260	$	184
Research and development		292		251		843		712		343		347		1,109		1,143
Selling, general and administrative		170		100		492		438		262		205		732		595
Total	$	535	$	429	$	1,521	$	1,359	$	693	$	629	$	2,101	$	1,922

As stock-based compensation expense recognized in the Condensed Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures in accordance with authoritative guidance. The Company estimates forfeitures at the time of grant and revises the original estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

No tax benefit related to stock-based compensation was recognized in the ~~three months or~~ nine months ended December 31, ~~2017 or December 31, 2016~~2020 due to a full valuation allowance. There were no windfall tax benefits realized from exercised stock options in either of these periods. Compensation cost capitalized within inventory at December 31, ~~2017~~2020 was immaterial. As of December 31, ~~2017,~~2020, the Company’s total unrecognized compensation cost was ~~$4.2~~$5.2 million, which will be recognized over a weighted average period of ~~2.18~~2.09 years. The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:


	Three Months Ended December 31,						Nine Months Ended December 31,
	2020			2019					2020				2019


Stock Option Plans:
Risk-free interest rate		0.38	%		1.66	%	0.22	-	0.38	%	1.66	-	2.30	%
Expected life (in years)		5.00			5.00				5.00				5.00
Volatility		47.1	%		36.5	%	41.9	-	47.1	%	36.5	-	37.3	%
Dividend yield		—	%		—	%			—	%			—	%
Employee Stock Purchase Plan:
Risk-free interest rate		0.12	%		1.58	%	0.12	-	0.15	%	1.58	-	2.43	%
Expected life (in years)		0.50			0.50				0.50				0.50
Volatility		68.6	%		33.5	%	67.1	-	68.6	%	33.5	-	43.1	%
Dividend yield		—	%		—	%			—	%			—	%

~~Table~~NOTE 11—RELATED PARTY TRANSACTION

The Company incurred non-recurring engineering service expense of ~~Contents~~

approximately $326,000 during the nine months ended December 31, 2020 from Wistron Neweb Corp (“WNC”) in connection with the manufacturing of single-APU PCIe boards, to be used in the Company’s in-place associative computing product. Haydn Hsieh, a member of the Company’s board of directors, is the Chairman and Chief Strategy Officer of WNC. The amount owed to WNC, of $243,000 at December 31, 2020, is included in accounts payable in the Condensed Consolidated Balance Sheets.

Three Months Ended December 31,

Nine Months Ended December 31,

2017

2016

2017

2016

(In thousands)

(In thousands)

Stock Option Plans:

Risk-free interest rate

2.00
%

1.62
%

1.84
-
2.00
%

1.12
-
1.62
%

Expected life (in years)

5.00

5.00

5.00

5.00

Volatility

35.5
%

33.3
%

35.5
-
36.5
%

33.3
-
34.8
%

Dividend yield

—
%

—
%

—
%

—
%

Employee Stock Purchase Plan:

Risk-free interest rate

1.42
%

0.45
%

1.04
-
1.42
%

0.38
-
0.45
%

Expected life (in years)

0.50

0.50

0.50

0.50

Volatility

38.8
%

30.8
%

38.8
-
51.1
%

30.8
-
39.6
%

Dividend yield

—
%

—
%

—
%

—
%

NOTE 9—12—SEGMENT AND GEOGRAPHIC INFORMATION

Based on its operating management and financial reporting structure, the Company has determined that it has one reportable business segment: the design, development and sale of integrated circuits.

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The following is a summary of net revenues by geographic area based on the location to which product is shipped:


									Three Months Ended December 31,				Nine Months Ended December 31,
									2020		2019		2020		2019

	Three Months Ended December 31,				Nine Months Ended December 31,
	2017		2016		2017		2016
	(In thousands)
									(In thousands)
United States	$	6,404	$	3,838	$	15,820	$	14,094	$	3,550	$	4,408	$	9,363	$	12,794
China		1,372		2,024		4,319		8,121		760		1,221		1,762		4,590
Singapore		1,068		2,947		4,768		8,502		772		766		2,608		5,538
Netherlands		1,145		1,576		3,128		3,539		951		417		4,083		5,169
Germany										615		2,958		1,653		5,870
Rest of the world		1,129		1,099		3,417		3,532		115		279		574		847
	$	11,118	$	11,484	$	31,452	$	37,788
									$	6,763	$	10,049	$	20,043	$	34,808

All sales are denominated in United States dollars.

~~Table of Contents~~

Item 2.Management’s~~Management’s~~ Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q, and in particular the following Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements involve risks and uncertainties. Forward-looking statements are identified by words such as “anticipates,” “believes,” “expects,” “intends,” “may,” “will,” and other similar expressions. In addition, any statements which refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those set forth in this report under “Risk Factors,” those described elsewhere in this report, and those described in our other reports filed with the Securities and Exchange Commission (“SEC”). We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report, and we undertake no obligation to update these forward-looking statements after the filing of this report. You are urged to review carefully and consider our various disclosures in this report and in our other reports publicly disclosed or filed with the SEC that attempt to advise you of the risks and factors that may affect our business.

Overview

We are a fabless semiconductor company that designs, develops and markets static random access memories, or SRAMs, that operate at speeds of less than 10 nanoseconds, which we refer to as Very Fast SRAMs, ~~and low latency dynamic random access memories, or LLDRAMs,~~ primarily for the networking and telecommunications markets. We are subject to the highly cyclical nature of the semiconductor industry, which has experienced significant fluctuations, often in connection with fluctuations in demand for the products in which semiconductor devices are used. Our revenues have been substantially impacted by significant fluctuations in sales to our largest customer, ~~Nokia (Alcatel-Lucent), and Cisco Systems, which was our largest customer in years past.~~Nokia. We expect that future direct and indirect sales to ~~these two customers~~Nokia will continue to fluctuate significantly on a quarterly basis. The ~~worldwide financial crisis~~networking and telecommunications market has accounted for a significant portion of our net revenues in the ~~resulting economic impact on~~past and has declined during the ~~end markets we serve have adversely impacted our financial results since the second half of fiscal 2009,~~past several years and ~~we expect that the unsettled global economic environment will~~is expected to continue to ~~affect our operating results in future periods.~~decline. However, with no debt, substantial liquidity and a history of positive cash flows from operations, we believe we are in a better financial position than many other companies of our size.

On March 11, 2020, the World Health Organization announced that COVID-19, a respiratory illness caused by a novel coronavirus, is a pandemic. COVID-19 has spread to many of the countries in which we, our customers, our suppliers and our other business partners conduct business. 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. These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

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While expected to be temporary, these disruptions have negatively impacted our revenue, results of operations, financial condition, and liquidity during fiscal year 2021.

We continue to monitor our operations and government recommendations and have made modifications to our normal operations because of the COVID-19 global pandemic. We have instituted many preventative measures and are regularly evaluating those measures and others as we continue to better understand our current and future operating environment. Except for our employees located in Taiwan, the majority of our employees are working from home around the world, and productivity remains high. We have maintained a substantial portion of our manufacturing operational capacity at our primary manufacturing support facility located in Hsin Chu, Taiwan where our suppliers are located and all of our products are manufactured. Since the outbreak of COVID-19, aside from the lengthening of lead times for wafers and assembly services, we have experienced minimal impact on our manufacturing operations in Taiwan. Final testing of our product is conducted in house. Shipping and receiving operations at our United States headquarters are being maintained by a skeleton crew with minimal impact. Our revenues have been and are expected to continue to be impacted by changes in customer buying patterns and communication limitations related to shelter in place restrictions that require a significant number of our customer contacts to work from home. Our results for the quarter and nine month periods ended December 31, 2020 demonstrate the challenges that we are facing during the COVID-19 global pandemic, which has restricted the activities of our sales force and distributors, reduced customer demand and caused the postponement of investment in certain customer sectors. These challenges are also impacting us as we enter new markets and engage with target customers. Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, are unavailable due to COVID-19 related restrictions. We have adapted our sales strategies for the COVID-19 environment, where we cannot do face-to-face meetings and conduct secure meetings with government and defense customers, but we are still not operating at an optimal level.

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

As of December 31, 2020, we had cash, cash equivalents, and short-term and long-term investments of $62.4 million, with no debt. We have a team in-place with tremendous depth and breadth of experience and knowledge, with a legacy business that is providing an ongoing source of funding for the development of new product lines. 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 with no current expectations of additional cash infusions required. Generally, our primary source of liquidity is cash generated from operating activities. Our level of cash and cash flows from operations have historically been sufficient to meet our operating and capital needs. We believe that during the next 12 months the COVID-19 global pandemic could impact general economic activity and demand in our end markets. Although we cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it is expected to have an adverse effect on our results of operations, financial position, and liquidity in fiscal year 2021 and into fiscal year 2022.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted to provide emergency economic stimulus in response to the COVID-19 global pandemic. The CARES Act includes direct financial assistance to Americans in the form of one-time payments to individuals, aid to small businesses in the form of loans and grants, and other efforts to stabilize the U.S. economy and keep Americans employed. We have not filed, and currently do not intend to file, for funding related to the CARES Act due to our strong balance sheet and liquidity position with $62.4 million in cash and cash equivalents, short-term investments and long-term investments and no debt outstanding as of December 31, 2020. Also included in the CARES Act are numerous income tax provisions including changes to the net operating loss rules that we believe will not have a significant impact on us.

Revenues. Our revenues are derived primarily from sales of our Very Fast SRAM products. Sales to networking and telecommunications OEMs accounted for ~~63%~~50% to ~~66%~~55% of our net revenues during our last three fiscal years. We also sell our products to OEMs that manufacture products for ~~defense~~military and aerospace applications such as radar and guidance systems, missiles and satellites, for professional audio applications such as sound mixing systems, for test and measurement applications such as high-speed testers, for automotive applications such as smart

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cruise control and voice recognition systems, and for medical applications such as ultrasound and CAT scan equipment.

As is typical in the semiconductor industry, the selling prices of our products generally decline over the life of the product. Our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products. Although we expect the average selling prices of individual products to decline over time, we believe that, over the next several quarters, our overall average selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price, higher density products. 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 Taiwan Semiconductor Manufacturing Company, or TSMC, ~~and Powerchip,~~ our wafer ~~suppliers,~~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.

We may experience fluctuations in quarterly net revenues for a number of reasons. Historically, orders on hand at the beginning of each quarter are insufficient to meet our revenue objectives for that quarter and are generally cancelable up to 30 days prior to scheduled delivery. Accordingly, we depend on obtaining and shipping

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orders in the same quarter to achieve our revenue objectives. In addition, the timing of product releases, purchase orders and product availability could result in significant product shipments at the end of a quarter. Failure to ship these products by the end of the quarter may adversely affect our operating results. Furthermore, our customers may delay scheduled delivery dates and/or cancel orders within specified timeframes without significant penalty.

We sell our products through our direct sales force, international and domestic sales representatives and distributors. ~~Historically,~~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 shelter in place restrictions that require a significant number of our customer contacts to work from home. 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). Transfer of control typically occurs at the time of shipment or at the time the product ~~sales, except for sales~~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 ~~distributors that~~the customer, and we have ~~price protection and ship from stock and debit rights, are~~a right to payment. Thus, we will generally ~~recognized~~recognize revenue upon shipment ~~net~~ of ~~sales returns and allowances.~~the product. Sales to consignment warehouses, who purchase products from us for use by contract manufacturers, are recorded upon delivery to the contract manufacturer. Sales to distributors that have price protection and ship from stock and debit rights are recorded as deferred revenues for financial reporting purposes and recognized as revenues when the products are resold by the distributors to the OEM. Sales to certain distributors are made under agreements allowing for returns or credits under certain circumstances. We therefore defer recognition of revenue on sales to those distributors under these terms until products are resold by the distributor. We have been revising certain distribution agreements to eliminate ship from stock and debits and price protection. Under these revised distribution agreements, we recognized additional revenue of $848,000 for the three months ended December 31, 2017 upon shipment of the product as the price was fixed and determinable.

Nokia ~~(Alcatel-Lucent)~~ was our largest customer in fiscal ~~2017, 2016~~2020, 2019 and ~~2015.~~2018. Nokia ~~(Alcatel-Lucent)~~ purchases products directly from us and through contract manufacturers and distributors. ~~Purchases~~Based on information provided to us by its contract manufacturers and our distributors, purchases by Nokia ~~(Alcatel-Lucent)~~ represented approximately ~~36%~~40%, ~~41%~~38%, ~~32%~~45% and ~~25%~~36% of our net revenues in the nine months ended December 31, ~~2017~~2020 and in fiscal ~~2017~~, ~~2016~~2020, 2019 and ~~2015~~, respectively. Cisco Systems, our largest OEM customer prior to fiscal 2014, purchases our products primarily through its consignment warehouse, Wintec Industries Inc., and also purchases some products through its contract manufacturers and directly from us. Based on information provided to us by Cisco Systems' consignment warehouses and contract manufacturers, purchases by Cisco Systems represented approximately 6%,~~9%, 9% and 13% of our net revenues in the nine months ended December 31, 2017 and in fiscal~~ ~~2017~~, ~~2016~~ ~~and~~ ~~2015~~,2018, respectively. Our revenues have been substantially impacted by significant fluctuations in sales to Nokia, ~~(Alcatel-Lucent) and Cisco Systems,~~ and we expect that future direct and indirect sales to ~~these two customers~~Nokia will continue to fluctuate substantially on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in the nine months ended December 31, ~~2017 or~~2020 and in fiscal ~~2017~~, ~~2016~~2020, 2019 or ~~2015~~.2018.

Cost of Revenues. Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test and burn-in expenses, the amortized cost of production mask sets, stock-based compensation and the cost of materials and overhead from operations. All of our wafer manufacturing and assembly operations, and a significant portion of our wafer sort testing operations, are outsourced. Accordingly, most of our cost of revenues consists of payments to TSMC ~~Powerchip~~ and independent assembly and test houses. Because we do not have long-term, fixed-price supply contracts, our wafer fabrication and other outsourced manufacturing costs are subject to the cyclical fluctuations in demand for semiconductors. Cost of revenues also includes expenses related to supply chain management, quality assurance, and final product testing and documentation control activities conducted at our headquarters in Sunnyvale, California and our branch operations in Taiwan.

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Gross Profit. Our gross profit margins vary among our products and are generally greater on our higher density products and, within a particular density, greater on our higher speed and industrial temperature products. We expect that our overall gross margins will fluctuate from period to period as a result of shifts in product mix, changes in average selling prices and our ability to control our cost of revenues, including costs associated with outsourced wafer fabrication and product assembly and testing.

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 believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote

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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 based on patented technology obtained in our acquisition of MikaMonu in November 2015.~~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.

Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily of commissions paid to independent sales representatives, salaries, stock-based compensation and related expenses for personnel engaged in sales, marketing, administrative, finance and human resources activities, professional fees, costs associated with the promotion of our products and other corporate expenses. We expect that our sales and marketing expenses will increase in absolute dollars in future periods if we are able to grow and expand our sales force but that, to the extent our revenues increase in future periods, these expenses will generally decline as a percentage of net revenues. We also expect that, in support of any future growth that we are able to achieve, general and administrative expenses will generally increase in absolute dollars.

Results of Operations

The following table sets forth statement of operations data as a percentage of net revenues for the periods indicated:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2020		2019		2020		2019
Net revenues	100.0	%	100.0	%	100.0	%	100.0	%
Cost of revenues	52.7		39.8		53.3		40.1
Gross profit	47.3		60.2		46.7		59.9
Operating expenses:
Research and development	84.8		81.7		85.9		56.4
Selling, general and administrative	38.7		25.7		40.6		23.3
Total operating expenses	123.5		107.4		126.5		79.7
Loss from operations	(76.2)		(47.2)		(79.8)		(19.8)
Interest and other income, net	0.4		2.1		0.6		1.6
Loss before income taxes	(75.8)		(45.1)		(79.2)		(18.2)
Provision for income taxes	1.3		0.9		3.2		0.5
Net loss	(77.1)		(46.0)		(82.4)		(18.7)

Three Months Ended December 31,

Nine Months Ended December 31,

2017

2016

2017

2016

Net revenues

100.0
%

100.0
%
100.0
%

100.0
%
Cost of revenues

49.0

43.4

48.7

45.6

Gross profit

51.0

56.6

51.3

54.4

Operating expenses:

Research and development

38.1

33.2

40.5

30.7

Selling, general and administrative

22.3

21.3

24.7

21.1

Total operating expenses

60.4

54.5

65.2

51.8

Income (loss) from operations

(9.4)

2.1

(13.9)

2.6

Interest and other income, net

1.0

0.5

1.0

0.8

Income (loss) before income taxes

(8.4)

2.6

(12.9)

3.4

Provision for (benefit from) income taxes

5.3

(0.5)

2.3

0.2

Net income (loss)

(13.7)

3.1

(15.2)

3.2

Net Revenues. Net revenues decreased by ~~3.2%~~32.7% from ~~$11.5~~$10.0 million in the three months ended December 31, ~~2016~~2019 to ~~$11.1~~$6.8 million in the three months ended December 31, ~~2017~~2020 and by ~~16.8%~~42.4% from ~~$37.8~~$34.8 million in the nine months ended December 31, ~~2016~~2019 to ~~$31.5~~$20.0 million in the nine months ended December 31, ~~2017. The reduction in both periods reflected the continuing weakness~~2020.

Net revenues in the three and nine month periods ended December 31, 2020 were impacted by the COVID-19 global ~~networking~~pandemic. Our net revenues in the current fiscal year demonstrate the challenges that we are facing during

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the COVID-19 global pandemic, which has restricted the activities of our sales force and ~~telecommunications~~distributors, reduced customer demand and caused the postponement of investment in certain customer sectors. These challenges are also impacting us as we enter new markets and engage with target customers. Industry conferences and on-site training workshops, which are typically used for building a sales pipeline, are unavailable due to COVID-19 related restrictions. We have adapted our sales strategies for the COVID-19 environment as there are limitations with both in-person and virtual meetings, particularly, government and defense customers with regards to secure teleconferencing. However, we are still not operating at an optimal level.

The overall average selling price of all units shipped in ~~particular, continued weakness~~the quarter ended December 31, 2020 decreased by 1.0% compared to the quarter ended December 31, 2019 and decreased by 7.3% in ~~Asia.~~the nine months ended December 31, 2020 compared to the nine months ended December 31, 2019. The changes in the average selling price in each fiscal 2021 period were due to changes in product mix, as we sold less higher density, higher average selling price products in the fiscal 2021 periods compared to the prior fiscal year periods. Direct and indirect sales to Nokia, ~~(Alcatel-Lucent),~~ currently our largest customer, ~~decreased~~increased from ~~$4.5~~$2.6 million in the three months ended December 31, ~~2016~~2019 to ~~$3.9~~$2.8 million in the three months ended December 31, ~~2017~~2020 and decreased from ~~$15.7~~$13.9 million in the nine months ended December 31, ~~2016~~2019 to ~~$11.2~~$8.1 million in the nine months ended December 31, ~~2017. The decrease in the each period reflected a continuing inventory correction by Nokia (Alcatel-Lucent) to reduce inventory levels to align them with production requirements.~~Direct and indirect sales to Cisco Systems, our largest customer prior to 2014, decreased from $1.1 million in the three months ended December 31, 2016 to $565,000 in the three months ended December 31, 2017 and from$3.6 million in the nine months ended December 31, 2016 to $1.9 million in the nine months ended December 31, 2017 reflecting softness in the market for its switches and routers that incorporate our products. 2020. Shipments of our SigmaQuad product line accounted for ~~54.5%~~62.0% of total shipments in the three months ended December 31, ~~2017 compared to 54.2% of total shipments~~2019 and in the three months ended December 31, ~~2016~~2020 and ~~48.2%~~64.7% of total shipments in the nine months ended December 31, ~~2017~~2019 compared to ~~55.8%~~58.1% of total shipments in the nine months ended December 31, ~~2016.~~2020. The ~~decline~~changes in SigmaQuad shipments ~~in each period is~~were primarily due to the ~~decline~~changes in sales to Nokia ~~(Alcatel-Lucent)~~ discussed above.

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Cost of Revenues. Cost of revenues ~~increased~~decreased by ~~9.1%~~10.9% from ~~$5.0~~$4.0 million in the three months ended December 31, ~~2016~~2019 to ~~$5.4~~$3.6 million in the three months ended December 31, ~~2017~~2020 and decreased by ~~11.1%~~23.4% from ~~$17.2~~$13.9 million in the nine months ended December 31, ~~2016~~2019 to ~~$15.3~~$10.7 million in the nine months ended December 31, 2020. Cost of revenues included a provision for excess and obsolete inventories of $260,000 in the nine months ended December 31, 2019 compared to $327,000 in the nine months ended December 31, 2020. Cost of revenues included stock-based compensation expense of $77,000 and $88,000 for the three months ended December 31, 2019 and 2020, respectively, and $184,000 and $260,000 for the nine months ended December 31, 2019 and 2020, respectively.

Gross Profit. Gross profit decreased by 47.1% from $6.0 million in the three months ended December 31, ~~2017.The increase in cost of revenues in the current three month period is primarily due~~2019 to changes in amounts charged to cost of revenue for potentially excess inventory and changes in the mix of product shipped during each period. The decrease in cost of revenues in the nine month period was primarily due to the decrease in net revenues discussed above. Cost of revenues included stock-based compensation expense of $73,000 and $78,000 for the three months ended December 31, 2017 and 2016, respectively, and $186,000 and $209,000 for the nine months ended December 31, 2017 and 2016, respectively.

~~Gross Profit.~~ ~~Gross profit decreased by 12.6% from $6.5~~$3.2 million in the three months ended December 31, ~~2016 to $5.7 million in the three months ended December 31, 2017~~2020 and decreased by ~~21.5%~~55.1% from ~~$20.6~~$20.9 million in the nine months ended December 31, ~~2016~~2019 to ~~$16.1~~$9.4 million in the nine months ended December 31, ~~2017.~~2020.

Gross margin decreased from ~~56.6%~~60.2% in the three months ended December 31, ~~2016~~2019 to ~~51.0%~~47.3% in the three months ended December 31, ~~2017~~2020 and decreased from ~~54.4%~~59.9% in the nine months ended December 31, ~~2016~~2019 to ~~51.3%~~46.7% in the nine months ended December 31, ~~2017.~~2020. The ~~decrease~~change in gross profit in ~~the three months and nine months ended December 31, 2017~~each period is primarily related to the ~~decreases~~changes in net revenues discussed above and a provision for excess and obsolete inventories of $427,000 for the three months ended December 31, 2017 compared to $158,000 in the three months ended December 31, 2016 and a provision for excess and obsolete inventories of $1.2 million for the nine months ended December 31, 2017 compared to $491,000 in the nine months December 31, 2016.above. The ~~decreases~~changes in gross margin are primarily related to changes in the mix of products and customers and changes in the ~~provision~~level of charges for ~~excess and obsolete inventories discussed above.~~inventory reserves booked in each period.

Research and Development Expenses.Research and development expenses ~~increased~~decreased by ~~11.0%~~30.1% from ~~$3.8~~$8.2 million in the three months ended December 31, ~~2016~~2019 to ~~$4.2~~$5.7 million in the three months ended December 31, ~~2017. This increase~~2020. The decrease in research and development spending was primarily ~~due~~related to ana decrease of $2.7 million for purchased intellectual property partially offset by a lesser increase ~~of $261,000~~ in payroll related ~~expenses related to our associative processor development activities.~~expenses. Research and development expenses included stock-based compensation expense of ~~$292,000~~$347,000 and ~~$251,000~~$343,000 for the three months ended December 31, ~~2017~~2019 and ~~2016,~~2020, respectively. Research and development expenses ~~increased~~decreased 12.3% from ~~$11.6~~$19.6 million in the nine months ended December 31, ~~2016~~2019 to ~~$12.7~~$17.2 million in the nine months ended December 31, ~~2017.~~2020.The ~~increase~~decrease in research and development spending was primarily ~~due~~related to ~~an increase~~a decrease of ~~$1.3~~$2.7 million for purchased intellectual property and a lesser decrease in consultants expenses partially offset by lesser increases in payroll related expenses, ~~partially offset by a decrease of $564,000 for purchased IP, both primarily~~patent related ~~to our associative processor development activities.~~legal fees and software maintenance expenses. Research and development expenses included stock-based compensation expense of ~~$843,000 and $712,000~~$1.1 million for the nine months ended December 31, ~~2017~~2019 and ~~2016, respectively.~~2020.

Selling, General and Administrative Expenses.Selling, general and administrative expenses were ~~essentially~~ unchanged at ~~$2.4~~$2.6 million in the three months ended December 31, ~~2016 compared to $2.5 million~~2019 and in the three months ended December 31, ~~2017.Increases in stock-based compensation expenses, professional fees and~~2020. A decrease of $179,000 for independent sales ~~representative~~representatives commissions ~~were~~and a lesser decrease in travel

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expenses was primarily offset by a decrease in payroll related expenses. Selling, general and administrative expenses included stock-based compensation expense of $170,000 and $100,000 for the three months ended December 31, 2017 and 2016, respectively. Selling, general and administrative expenses decreased 2.4% from $8.0 million in the nine months ended December 31, 2016 to $7.8 million in the nine months ended December 31, 2017.~~This decrease was primarily related to a decrease in payroll related expenses of $174,000 and a lesser decrease~~an increase in professional fees. Selling, general and administrative expenses included stock-based compensation expense of ~~$492,000~~$205,000 and ~~$438,000~~$262,000 for the three months ended December 31, 2019 and 2020, respectively. Selling, general and administrative expenses were unchanged at $8.1 million in the nine months ended December 31, 2019 and in the nine months ended December 31, 2020. Decreases in independent sales representative commissions of $466,000 and $131,000 in travel expenses were primarily offset by increases in professional fees, payroll related expenses and stock-based compensation expense. Selling, general and administrative expenses included stock-based compensation expense of $595,000 and $732,000 for the nine months ended December 31, ~~2017~~2019 and ~~2016,~~2020, respectively.

Interest Income and Other Income, ~~(Expense),~~ Net. Interest and other income, ~~(expense),~~ net ~~increased 62.3%~~decreased 87.9% from income of ~~$61,000~~$207,000 in the three months ended December 31, ~~2016~~2019 to ~~$99,000~~$25,000 in the three months ended December 31, ~~2017.~~2020. Interest income ~~increased~~decreased by ~~$32,000~~$139,000 primarily due to higher interest rates received on our cash and short-term and long-term investments. Foreign exchange losses were $20,000 for the three months ended December 31, 2016 as compared to $14,000 for the three months ended December 31, 2017.Interest and other income (expense), net increased 1.7% from income of $295,000 in the nine months ended December 31, 2016 to $300,000 in the nine months ended December 31, 2017. Interest income increased by $82,000 due to higherlower interest rates received on our cash and short-term and long-term investments. Foreign exchange gains were ~~$68,000~~$18,000 for the ~~nine months ended~~

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~~December 31, 2016 as compared to a loss $9,000 for the nine~~three months ended December 31, ~~2017.~~ 2019 compared to losses of $25,000 for the three months ended December 31, 2020.The exchange gains and losses in each period were related to our Taiwan branch operations and our operations in Israel. Interest and other income, net decreased 79.6% from income of $564,000 in the nine months ended December 31, 2019 to $115,000 in the nine months ended December 31, 2020. Interest income decreased by $366,000 primarily due to lower interest rates received on our cash and short-term and long-term investments. We had a foreign exchange loss of $46,000 for the nine months ended December 31, 2019 compared to $129,000 for the nine months ended December 31, 2020. The exchange losses in each period were related to our Taiwan branch operations and our operations in Israel.

Provision for ~~(benefit from)~~ Income Taxes. The ~~benefit~~provision for income taxes increased 7.1% from ~~$53,000~~$84,000 in the three months ended December 31, ~~2016~~2019 to ~~a provision of $590,000~~$90,000 in the three months ended December 31, ~~2017~~2020 and ~~the provision~~ increased ~~1,025.0%~~251.1% from ~~$64,000~~$182,000 in the nine months ended December 31, ~~2016~~2019 to ~~$720,000~~$639,000 in the nine months ended December 31, ~~2017. These changes were~~2020. This change for the nine month period was primarily due to the settlement of an income tax audit in Israel during the quarter ended June 30, 2020 for fiscal years 2016 through fiscal 2019 which resulted in a discrete tax provision of ~~$639,000 related~~$479,000, and to the transition tax associated with deemed repatriation of foreign earnings and the re-measurement of deferred tax assets and liabilities based on the provisions of H.R. 1 recorded in the quarter ended December 31, 2017 as well as froma lesser extent due to fluctuations in the relative mix of income among our operating jurisdictions.

Net ~~Income (Loss)~~Loss. Net ~~income~~loss was ~~$348,000 in the three months ended December 31, 2016 compared to a net loss of $1.5~~$4.6 million in the three months ended December 31, ~~2017.Net income~~2019 compared $5.2 million in the three months ended December 31, 2020 and was ~~$1.2~~$6.5 million in the nine months ended December 31, ~~2016~~2019 compared to ~~a net loss of $4.8~~$16.5 million in the nine months ended December 31, ~~2017.~~2020. These fluctuations were primarily due to the changes in net revenues, gross profit and operating expenses discussed above.

Liquidity and Capital Resources

As of December 31, ~~2017,~~2020, our principal sources of liquidity were cash, cash equivalents and short-term investmentsof ~~$56.8~~$52.3 millioncompared to ~~$49.9~~$66.6 million as of March 31, ~~2017.~~2020.

Net cash used in operating activities was ~~$605,000 for the nine months ended December 31, 2017 compared to net cash provided by operating activities was $1.3~~$11.4 million for the nine months ended December 31, ~~2016.~~2020 compared to $1.2 million for the nine months ended December 31, 2019. The primary uses of cash in the ~~current~~ nine ~~month period were a~~months ended December 31, 2020 was the net loss of ~~$4.8 million, a decrease in deferred revenue of $1.3~~$16.5 million and a ~~lesser decrease~~reduction in accrued expenses and other ~~liabilities.~~liabilities of $1.7 million. The ~~decrease~~reduction in ~~deferred revenue is~~accrued expenses and other liabilities was primarily ~~due~~related to the ~~recognition~~payment of $848,000 in additional revenue resulting from revisions to the distribution agreement with our largest distributor in the United States that eliminated ship from stock and debits and price protection rights that the distributor previously had. The primary sources of cash in the current nine month period were stock-based compensation of $1.5 million, a decrease in inventory of $1.3 million and a provisionfiscal 2020 year-end accruals for ~~excess and obsolete inventories of $1.2 million, depreciation and amortization expenses of $948,000 and a reduction in accounts receivable of $826,000.The primary~~purchased intellectual property. Primary sources of cash in the nine months ended December 31, ~~2016~~2020 were ~~net income~~a reduction in accounts receivable of ~~$1.2~~$2.3 million, non-cash items including stock-based compensation of ~~$1.4~~$2.1 million and depreciation and amortization expenses of $962,000 and an increase in accounts payable of $1.2 million. The decrease in accounts receivable was primarily due to the decrease in shipments in the quarter ended December 31, 2020 compared to the quarter ended March 31, 2020.

The primary ~~use~~uses of cash in the nine months ended December 31, ~~2016~~2019 was the net loss of $6.5 million, an increase of $1.1 million in ~~inventory~~prepaid expenses and other assets and a reduction in accounts payable of ~~$2.6 million. Our inventory balance increased~~$728,000.

Primary sources of cash in the ~~prior period~~nine months ended December 31, 2019 were non-cash items including stock-based compensation of $1.9 million and depreciation and amortization expenses of $1.1 million and a reduction in accounts receivable of $2.0 million. The decrease in accounts receivable was primarily due to the ~~assembling of our LLDRAM products to support shipments~~decrease in net revenues in the ~~subsequent six~~quarter ended December 31, 2019 compared to the quarter ended March 31, 2019.

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Net cash used in investing activities was $381,000 in the nine months ~~as we qualified a new assembly vendor.~~

~~Net~~ended December 31, 2020 compared to net cash provided by investing activities ~~was $4.5~~of $3.5 million in the nine months ended December 31, ~~2017 compared to $3.3 million in the nine months ended December 31, 2016.~~ 2019.

Investment activities in the nine months ended December 31, ~~2017~~2020 primarily consisted ~~primarily~~ of the purchase of certificates of deposit, agency bonds and supranational obligations of $17.5 million, partially offset by the maturity of certificates of deposit ~~of $10.5 million, partially offset by the purchase of~~and agency bonds ~~and certificates~~ of ~~deposit of $6.7 million and the purchase of property and equipment of $436,000.~~$17.3 million. Investment activities in the nine months ended December 31, ~~2016~~2019 primarily consisted ~~primarily~~ of the maturity of ~~corporate notes, state and municipal obligations and~~ certificates of deposit of ~~$17.6~~$18.6 million, partially offset by the purchase of ~~agency bonds and~~ certificates of deposit and agency bonds of ~~$14.1 million and the purchase of property and equipment for $194,000.~~$15.9 million.

Net cash provided by financing activities in the nine months ended December 31, ~~2017 primarily~~ 2020 consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans of ~~$2.9 million, partially offset the by release of an escrow deposit related to our acquisition of Mika Monu in November 2015 in the amount of $850,000~~.$3.3 million. Net cash ~~used in~~provided by financing activities in the nine months ended December 31, ~~2016~~ 2019 primarily consisted of ~~the repurchase of $7.1 million of our common stock at an average purchase price of $4.33 per share, partially offset by~~ the net proceeds from the sale of common stock pursuant to our employee stock plans. of $3.6 million partially offset by the release of an escrow deposit related to our acquisition of MikaMonu in the amount of $428,000.

~~The Company’s~~Our estimated annual effective income tax rate was approximately ~~(13.7%~~(3.4%) as of December 31, ~~2017. We expect H.R. 1 to impact our net income, diluted earnings per share, and cash flows in future periods, due~~

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primarily to the reduction in the federal corporate tax rate. We currently estimate that our blended consolidated effective income tax rate for full-year fiscal 2018 will approximate (3.0%) before discrete items. The blended statutory Federal tax rates for the year ending March 31, 2018 and 2019 will be 31.5% and 21%. These tax-related estimates may differ from actual results, possibly materially, due to changes in interpretations of H.R. 1 and assumptions made by us, as well as guidance that may be issued and actions we may take as a result of H.R. 1. See Note 5, Income Taxes, for further information.2020.

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.~~months. Our future capital requirements will depend on many factors, including revenue growth, if any, that we experience, 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. Additional capital may also be required for the consummation of any acquisition of businesses, products or technologies that we may undertake. We cannot assure that additional equity or debt financing, if required, will be available on terms that are acceptable or at all.

Contractual Obligations

The following table describes our contractual obligations as of December 31, ~~2017:~~2020:

Payments due by period


2018

2019 and 2020

2021 and 2022

After 2022

Total

Facilities and equipment leases

$
107,000

$
767,000

$
265,000

$
7,000

$
1,146,000

Wafer and test purchase obligations

698,000

779,000

—

—

1,477,000

$
805,000

$
1,546,000

$
265,000

$
7,000

$
2,623,000


	Payments due by period (in thousands)
		Up to 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
Facilities and software leases	$	154	$	646	$	102	$	—	$	902
Wafer, software and test purchase obligations		1,536		345		—		—		1,881
	$	1,690	$	991	$	102	$	—	$	2,783

As of December 31, ~~2017,~~ 2020, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $823,000. We expect to make federal income tax payments in the next twelve months of approximately $5,000. As a result of H.R 1, we recorded a liability for taxes payable of $68,000 at December 31, 2017 that will be paid over a period of up to eight years.$326,000.

~~We expect expenditures of approximately $1,000,000 to be incurred in the next twelve months for construction on our headquarters building in Sunnyvale, CA.~~

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 retention of MikaMonu’s key employee and the achievement of certain product development milestones and~~ revenue targets for products based on the MikaMonu technology. As of December 31, ~~2017,~~2020, the accrual for potential contingent consideration was ~~$5.9 million.~~$4.0 million and is payable at various dates through December 31, 2025.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020.

Please refer to Note 5 to our condensed consolidated financial statements appearing under Part I, Item 1 for a discussion regarding how H.R. 1 may impact the Company’s critical accounting policies and estimates.

Off-Balance Sheet Arrangements

At December 31, ~~2017,~~2020, 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

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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.

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Recent Accounting Pronouncements

Please refer to Note 1 to our condensed consolidated financial statements appearing under Part I, Item 1 for a discussion of recent accounting pronouncements that may impact the Company.

Item 3.Quantitative and Qualitative Disclosure About Market Risk

Foreign Currency Exchange Risk. Our revenues and expenses, except those expenses related to our operations in Taiwan and in Israel, including subcontractor manufacturing expenses, are denominated in U.S. dollars. As a result, we have relatively little exposure for currency exchange risks, and foreign exchange gains and losses have been minimal to date. We do not currently enter into forward exchange contracts to hedge exposure denominated in foreign currencies or any other derivative financial instruments for trading or speculative purposes. In the future, if we feel our foreign currency exposure has increased, we may consider entering into hedging transactions to help mitigate that risk.

Interest Rate Sensitivity. We had cash, cash equivalents, short-term investments and long-term investments totaling ~~$65.0~~$62.4 million at December 31, ~~2017.~~2020. These amounts were invested primarily in money market funds, ~~state and municipal obligations,~~ certificates of deposit, government agency bonds and foreign government obligations. 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. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. We believe a hypothetical 100 basis point increase or decrease in interest rates would not materially affect the fair value of our interest-sensitive financial instruments. Declines in interest rates, however, will reduce future investment income.

Item 4.Controls and~~Controls and~~ Procedures

Management’s Evaluation of Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December 31, ~~2017~~,2020, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report for the purpose of ensuring that the information required to be disclosed by us in this report is made known to them by others on a timely basis, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported by us within the time periods specified in the SEC's rules and instructions for Form 10-Q.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 1A.

Risk Factors

~~Item 1A.Risk Factors~~

Our future performance is subject to a variety of risks. If any of the following risks actually occur, our business, financial condition and results of operations could suffer and the trading price of our common stock could decline. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations. You should also refer to other information contained in this report, including our condensed consolidated financial statements and related notes. The risk factors described below do not contain any

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material changes from those previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017~~2020.

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Risks Related to Our Business and Financial Condition

Unpredictable fluctuations in our operating results could cause our stock price to decline.

Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future. For example, in the eleven fiscal quarters ended December 31, ~~2017~~, 2020,we recorded net revenues of as much as ~~$14.0~~$14.7 million and as little as ~~$9.6~~$6.6 million, including net revenues varying from $6.6 million to $6.8 million in the last three quarters and quarterly operating income of as much as~~$389,000~~ $2.2 million and, in ~~eight~~ten quarters, operating losses, including ~~our~~ operating ~~loss of $1.8~~losses varying from $5.2 million to $5.7 million in the ~~quarter~~last three quarters ended ~~September 30, 2017.~~December 31, 2020. 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. InFor the last three consecutive quarters, our net revenues were adversely impacted by the COVID-19 global pandemic.In future periods, we may not have any revenue growth, or our revenues could ~~decline.~~decline or continue to be further adversely impacted by the COVID-19 global pandemic. 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:

● commercial acceptance of our associative computing products;

~~changes in our customers' inventory management practices;~~

● 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;~~

● 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;

~~our ability to anticipate and conform to new industry standards;~~

● our ability to anticipate and conform to new industry standards;

~~fluctuations in availability and costs associated with materials needed to satisfy customer requirements;~~

● fluctuations in availability and costs associated with materials needed to satisfy customer requirements;

~~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;~~

● 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;

~~changes in our product pricing policies, including those made in response to new product announcements and pricing changes of our competitors; and~~

● changes in our product pricing policies, including those made in response to new product announcements and pricing changes of our competitors; and

●our ability to address technology issues as they arise, improve our products' functionality and expand our product offerings.

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

The COVID-19 global pandemic has 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 may also impact the launch of our APU product to some degree. However, the magnitude of such impact on our business and its duration is highly uncertain.

Our ~~two~~ largest OEM ~~customers account~~customer accounts for a significant percentage of our net revenues. If ~~either of these customers,~~this customer, or any of our other major customers, reduces the amount they purchase or stop purchasing our products, our operating results will suffer.

Nokia, ~~(Alcatel-Lucent), currently~~ our largest customer, purchases our products directly from us and through contract manufacturers and distributors. Purchases by Nokia ~~(Alcatel-Lucent)~~ represented approximately ~~36%~~40%, ~~41%~~38%, ~~32%~~45% and ~~25%~~36% of our net revenues in the nine months ended December 31, ~~2017~~2020 and in fiscal ~~2017, 2016~~2020, 2019 and ~~2015,~~2018, respectively. Cisco Systems, historically our largest OEM customer, purchases our products through its consignment warehouses and contract manufacturers and directly from us. Purchases by Cisco Systems represented approximately 6%,~~9%, 9% and 13% of our net revenues in the nine months ended December 31, 2017 and in fiscal~~ ~~2017~~, ~~2016~~ ~~and~~ ~~2015, respectively.~~We expect that our

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operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly Nokia, ~~(Alcatel-Lucent) and Cisco Systems,~~ and our future success is dependent to a large degree on the business success of ~~these OEMs~~this customer over which we have no control. We do not have long-term contracts with Nokia ~~(Alcatel-Lucent), Cisco Systems~~ or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products. We expect that future direct and indirect sales to Nokia ~~(Alcatel-Lucent), Cisco Systems~~ and our other key OEM customers will continue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our

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operating results in future periods. The decline in economic activity resulting from the COVID-19 global pandemic is expected to cause a continued reduction in orders from Nokia and our other key OEM customers. 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 ongoing COVID-19 global pandemic may continue to adversely affect our revenues, results of operations and financial condition.

Our business is expected to continue to be materially adversely affected by global outbreak of respiratory illness caused by a novel coronavirus known as COVID-19. COVID-19 has been declared by the World Health Organization to be a “pandemic” and has spread to many of the countries in which we, our customers, our suppliers and our other business partners conduct business. National, state and local 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. These measures are disrupting normal business operations both in and outside of affected areas and have had significant negative impacts on businesses and financial markets worldwide.

We have experienced, and expect to continue to experience, a number of adverse impacts as a result of the COVID-19 global pandemic, including reductions in demand for our products, delays and cancellations of orders, difficulties in obtaining raw materials and components, shortages of labor to manufacture products, inefficiencies caused by remote worker’s difficulties in performing their normal work outputs, closures of the facilities of some of our suppliers and customers, delays in shipments and delays in collecting accounts receivable. Although we cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it is expected to have an adverse effect on our results of operations, financial position, and liquidity during fiscal year 2021 and into fiscal year 2022. This includes results from new information that may emerge concerning COVID-19 and any actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. We have made estimates of the impact of COVID-19 within our financial statements and there may be changes to those estimates in future periods.

Disruptions in the capital markets as a result of 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.

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We have incurred significant losses ~~in prior periods~~ and may incur losses in the future.

We have incurred significant ~~losses in prior periods.~~losses. We incurred net losses of ~~$115,000, $2.2~~$10.3 million and ~~$5.0~~$4.5 million during fiscal ~~2017, 2016~~2020 and ~~2015, respectively. Our operating expenses over~~2018, respectively, and a net loss of $16.5 million during the ~~past several years included substantial expenses related to legal proceedings which resulted in operating losses. Although these proceedings are substantially concluded, there~~nine months ended December 31, 2020. There can be no assurance that our Very Fast SRAMs will continue to receive broad market acceptance, that our new product development initiatives will be successful or that we will be able to achieve sustained revenue growth or profitability.

We depend upon the sale of our Very Fast SRAMs for most of our revenues, and a downturn in demand for these products could significantly reduce our revenues and harm our business.

We derive most of our revenues from the sale of Very Fast SRAMs, and we expect that sales of these products will represent the substantial majority of our revenues for the foreseeable future. Our business depends in large part upon continued demand for our products in the markets we currently serve, which could continue to be adversely impacted by the COVID-19 global pandemic, and adoption of our products in new markets. Market adoption will be dependent upon our ability to increase customer awareness of the benefits of our products and to prove their high-performance and cost-effectiveness. We may not be able to sustain or increase our revenues from sales of our products, particularly if the networking and telecommunications markets were to experience another significant downturn in the future. 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 development of new in-place associative computing products which entails significant risks.

Since 2015, our principal strategic objective has been the development of a new category of in-place associative computing products. We have devoted, and are continuing to devote, substantial efforts and resources to this development effort. This ongoing project involves the commercialization of new, cutting-edge technology, will require a substantial effort during fiscal 2021 and beyond and will be subject to significant risks. In addition to the typical risks associated with the development of technologically advanced products (as further detailed in the next paragraph), this project will be subject to enhanced risks of technological problems related to the development of an 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 relationships. The establishment of new customer relationships and selling our in-place associative computing products to such new customers will be a significant undertaking that will require 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 conclude this major development effort and establish a market for the products we hope to develop would have a material adverse effect on our future financial and business success, including our prospects for increased revenues. Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major development effort, then the price of our common stock could fall.

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. 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, ~~and LLDRAMs,~~ our efforts to introduce new products may not be successful and our business may suffer. 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;~~

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● our products may become obsolete upon the introduction of alternative technologies;

~~we may be unable to develop or acquire the rights to use the intellectual property necessary to implement new technologies; and~~

● 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.

~~Our future success is substantially dependent on the successful development of new in-place associative computing products which entails significant risks.~~

Since our acquisition of MikaMonu in November 2015, our principal strategic objective has been the development of a new category of in-place associative computing products based on patented technology that we acquired in the acquisition. We have devoted, and are continuing to devote, substantial efforts and resources to this development effort. This ongoing project involves the commercialization of new, cutting-edge technology, will require a substantial effort over a year or more and will be subject to significant risks. In addition to the typical risks associated with the development of technologically advanced products (as outlined in the previous paragraph), this project will be subject to enhanced risks of technological problems related to the development of an 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 relationships. Our inability to successfully conclude this major development effort and establish a market for the products we hope to develop would have a material adverse effect on our future financial and business success, including our prospects for increased revenues. Additionally, if we are unable to meet the expectations of market analysts and investors with respect to this major development effort, then the price of our common stock could fall.

We are subject to the highly cyclical nature of the networking and telecommunications markets.

Our 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 business and our operating results are likely to fluctuate, perhaps quite severely, as a result of this cyclicality.

The market for Very Fast SRAMs is highly competitive.

The market for Very Fast SRAMs, which are used primarily in networking and telecommunications equipment, is characterized by price erosion, rapid technological change, cyclical market patterns and intense foreign and domestic competition. Several of our competitors offer a broad array of memory products and have greater financial, technical, marketing, distribution and other resources than we have. Some of our competitors maintain their own semiconductor fabrication facilities, which may provide them with capacity, cost and technical advantages over us. We cannot assure you that we will be able to compete successfully against any of these competitors. Our ability to compete successfully in this market depends on factors both within and outside of our control, including:

● real or perceived imbalances in supply and demand of Very Fast SRAMs;

~~real or perceived imbalances in supply and demand of Very Fast SRAMs;~~

● the rate at which OEMs incorporate our products into their systems;

~~the rate at which OEMs incorporate our products into their systems;~~

● the success of our customers’ products;

~~the success of our customers' products;~~

● our ability to develop and market new products; and

~~our ability to develop and market new products; and~~

●the supply and cost of wafers.

In addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures and new forms of DRAM, or the emergence of new memory technologies that could enable the development of products that feature higher performance, lower cost or lower power capabilities. Additionally, the trend toward

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incorporating SRAM into other chips in the networking and telecommunications markets has the potential to reduce future demand for Very Fast SRAM products. There can be no assurance that we will be able to

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compete successfully in the future. Our failure to compete successfully in these or other areas could harm our business.

We are dependent on a number of single source suppliers, and if we fail to obtain adequate supplies, our business will be harmed and our prospects for growth will be curtailed.

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 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. 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 suppliers could adversely affect our business and operating results.

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. In particular, if TSMC is unable to supply us with sufficient quantities of wafers to meet all of our requirements, we would have to allocate our products among our customers, which would constrain our growth and might cause some of them to seek alternative sources of supply. 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.

We rely heavily on distributors and our success depends on our ability to develop and manage our indirect distribution channels.

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 the nine months ended December 31, 2020 and in fiscal 2020, 2019 and 2018, our largest distributor Avnet Logistics accounted for 31.0%, 34.3%, 31.3% and 35.3%, 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.

Because we outsource our wafer manufacturing and independent wafer foundry capacity is limited, we may be required to enter into costly long-term supply arrangements to secure foundry capacity.

We do not have a long-term supply agreement with TSMC, but instead obtain our wafers on a purchase order basis. In order to secure future wafer supply from TSMC or from other independent foundries, we may be required to enter into various arrangements with them, which could include:

● contracts that commit us to purchase specified quantities of wafers over extended periods;

● investments in and joint ventures with the foundries; or

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● non-refundable deposits with or prepayments or loans to foundries in exchange for capacity commitments.

We may not be able to make any of these arrangements in a timely fashion or at all, and these arrangements, if any, may not be on terms favorable to us. Moreover, even if we are able to secure independent foundry capacity, we may be obligated to use all of that capacity or incur penalties. These penalties may be expensive and could harm our financial results.

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 has incurred in recent months as a result of the COVID-19 global pandemic, 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. If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline.

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. 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.

~~Global~~Current unfavorable economic and market conditions, domestically and internationally, may adversely affect our business, financial condition, ~~and~~ results of ~~operations.~~

operations and cash flows.

We ~~sell our products to end customers~~have significant customer sales both in the United States and internationally. We also rely heavily on our suppliers in Asia. We are therefore susceptible to adverse ~~domestic~~U.S. and international economic and market ~~conditions. In recent years, turmoil in~~conditions, including the economic difficulties resulting from the COVID-19 global financial markets and economic conditions has impacted credit availability, consumer spending and capital expenditures, including expenditures for networking and telecommunications equipment. Weakness in global networking and telecommunications markets, particularly in Asia, has continued to adversely impact our revenues in recent quarters. Slowness in economic growth, domestically and in our key markets, uncertainty regarding macroeconomic trends, and volatility in financial markets may continue to adversely affect our business, financial condition and results of operations over coming quarters.

~~We are dependent on a number of single source suppliers, and if we fail to obtain adequate supplies, our business will be harmed and our prospects for growth will be curtailed.~~

Wepandemic that currently ~~purchase several key components used~~exist in the ~~manufacture of our products from single sources~~United States and ~~are dependent upon supply from these sources to meet our needs.~~worldwide. If any of ~~these suppliers cannot provide components on a timely basis, at the same price~~our manufacturing partners, customers, distributors or at all, our ability to manufacture our products will be constrained and our business will suffer. Most significantly, we obtain wafers for our Very Fast SRAM products from a single foundry, TSMC, and most of them are packaged at ASE. Wafers for our LLDRAM products are obtained exclusively from Powerchip. If we are unable to obtain an adequate supply of wafers from TSMC or Powerchip 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, Powerchip, 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 and Powerchip, 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 suppliers could adversely affect our business and operating results.

~~Should any of our single source~~ suppliers experience ~~manufacturing failures~~serious financial difficulties or yield shortfalls, be disrupted by 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. In particular, if TSMC is unable to supply us with sufficient quantities of wafers to meet all ofceases operations, our requirements, we would have to allocate our products among our customers, which would constrain our growth and might cause some of them to seek alternative sources of supply. Since the manufacturing of wafers and other components is extremely

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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.~~

~~Because we outsource our wafer manufacturing and independent wafer foundry capacity is limited, we may be required to enter into costly long-term supply arrangements to secure foundry capacity.~~

We do not have long-term supply agreements with TSMC or Powerchip, but instead obtain our wafers on a purchase order basis. In order to secure future wafer supply from TSMC or Powerchip or from other independent foundries, we may be required to enter into various arrangements with them, which could include:

~~contracts that commit us to purchase specified quantities of wafers over extended periods;~~

~~investments in and joint ventures with the foundries; or~~

~~non-refundable deposits with or prepayments or loans to foundries in exchange for capacity commitments.~~

~~If we are unable to offset increased wafer fabrication costs by increasing the average selling prices of our products, our gross margins will suffer.~~

If there is a significant upturn in the networking and telecommunications markets that results in increased demand for our products and competing products, the available supply of wafers may be limited. As a result, we could be required to obtain additional manufacturing capacity in order to meet increased demand. Securing additional manufacturing capacity may 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.

~~We rely heavily on distributors and our success depends on our ability to develop and manage our indirect distribution channels.~~

~~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 the nine months ended December 31, 2017 and in fiscal~~ ~~2017~~, ~~2016~~ ~~and~~ ~~2015~~, our distributor Avnet Logistics accounted for 34.7%, 25.5%, 28.2% and 35.2%, 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.

~~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. While we attempt to assist our distributors in maintaining targeted stocking levels of our products, we may not consistently be accurate or successful. 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. 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

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~~predict sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.~~

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 ~~December 31, 2017~~, four customers accounted for 38%, 18%, 14% and 14% of our accounts receivable, respectively. If any of these customers do not pay us, our financial position and operating results will be harmed. Generally, we do not require collateral from our customers.

We have previously disclosed a material weakness in our internal control over financial reporting relating to the evaluation and calculation of our inventory reserve which management believes has been fully remediated. Should we have inadequately remediated this material weakness or should we otherwise fail to maintain effective internal control over financial reporting and disclosure controls and processes, our ability to report our financial condition and results of operations accurately and on a timely basis could be adversely affected.

In connection with the completion of the quarter-end closing and review procedures for the quarter ended December 31, 2013, certain errors were identified in the evaluation and calculation of our inventory write-down for the quarter and nine month period then ended that were the result of a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

During these closing and review procedures, our management determined that we had not designed and maintained effective controls over the review of supporting information to confirm the completeness and accuracy of our calculations for the write-down of excess or obsolete inventory, thereby affecting the valuation of our inventory as of December 31, 2013. While this control deficiency did not result in any material misstatement of our historical financial statements, it did result in adjustments identified by our auditors as part of their quarterly review process, and require corrections after our initial estimate of excess and obsolete inventory write-downs for the three month period ended December 31, 2013.

A material weakness in our internal control over financial reporting could adversely impact our ability to provide timely and accurate financial information. Following the identification of the error in our financial statements and the material weakness that gave rise to the error, our management implemented a remediation plan which it believes fully remediated the material weakness. Should our remediation efforts prove to have been inadequate or should we otherwise fail to maintain effective internal control over financial reporting and disclosure controls and procedures, we could be unable to meet our reporting obligations accurately and on a timely basis. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock.

~~Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results.~~

In November 2015, we acquired all of the outstanding capital stock of privately held MikaMonu Group Ltd., a development-stage, Israel-based company that specializes in in-place associative computing for markets including big data, computer vision and cyber security. We also acquired substantially all of the assets related to the SRAM memory device product line of Sony Corporation in 2009. We intend to supplement our internal development activities by seeking opportunities to make additional acquisitions or investments in companies, assets or technologies that we believe are complementary or strategic. Other than the MikaMonu and Sony acquisitions, we have not made any such acquisitions or investments, and therefore our experience as an organization in making such acquisitions and investments is limited. In connection with the MikaMonu acquisition, we are subject to risks related to potential problems, delays or anticipated costs that may be encountered in the development of products based on the MikaMonu technology and the establishment of new markets and customer relationships for the potential new

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~~products. In addition, in connection with the MikaMonu acquisition and any future acquisitions or investments we may make, we face numerous other risks, including:~~

~~difficulties in integrating operations, technologies, products and personnel;~~

~~diversion of financial and managerial resources from existing operations;~~

~~risk of overpaying for or misjudging the strategic fit of an acquired company, asset or technology;~~

~~problems or liabilities stemming from defects of an acquired product or intellectual property litigation that may result from offering the acquired product in our markets;~~

~~challenges in retaining key employees to maximize the value of the acquisition or investment;~~

~~inability to generate sufficient return on investment;~~

~~incurrence of significant one-time write-offs; and~~

~~delays in customer purchases due to uncertainty.~~

If we proceed with additional acquisitions or investments, we may be required to use a considerable amount of our cash, or to finance the transaction through debt or equity securities offerings, which may decrease our financial liquidity or dilute our stockholders and affect the market price of our stock. As a result, if we fail to properly evaluate and execute acquisitions or investments, our business and prospects may be harmed.

~~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. We have recently been involved in protracted patent infringement litigation, and we could become subject to additional claims or litigation in the future as a result of allegations that we infringe others' intellectual property rights or that our use of intellectual property otherwise violates the law. Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturers against the alleged infringement. Any such litigation regarding intellectual property could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical. 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.~~

Although patent disputes in the semiconductor industry have often been settled through cross-licensing arrangements, we may not be able in any or every instance to settle an alleged patent infringement claim through a cross-licensing arrangement in part because we have a more limited patent portfolio than many of our competitors. 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.

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~~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. 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. Monitoring unauthorized use of our intellectual property is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Our attempts to enforce our intellectual property rights could be time consuming and costly. We were recently involved in litigation to enforce our intellectual property rights and to protect our trade secrets. Additional litigation of this type may be necessary in the future. Any such litigation could result in substantial costs and diversion of resources. If competitors are able to use our technology without our approval or compensation, our ability to compete effectively could be harmed.

System security risks, data protection, cyber-attacks and systems integration issues could disrupt our internal operations or the operations of our business partners, and any such disruption could harm our reputation or cause a reduction in our expected revenue, increase our expenses, negatively impact our results of operation or otherwise adversely affect our stock price.

Security breaches, computer malware and cyber-attacks have become more prevalent and sophisticated in recent ~~years.~~years and may increase in the future due to a large number of our employees working from home during the COVID-19 global pandemic. 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.

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We manage and store various proprietary information and sensitive or confidential data relating to our business on the cloud. Breaches of our security measures or the accidental loss, inadvertent disclosure or unapproved dissemination of proprietary information or confidential data about us, including the potential loss or disclosure of such information or data as a result of fraud, trickery or other forms of deception, could expose us to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation or otherwise harm our business. 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 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 fulfill orders and interrupt other processes and could adversely affect our financial results, stock price and reputation.

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.

At December 31, 2020, three customers accounted for 41%, 23% and 19% of our accounts receivable, respectively. If any of these customers do not pay us, our financial position and operating results will be harmed. Generally, we do not require collateral from our customers.

Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products.

Our products are used as components in our OEM customers’ products, including routers, switches and other networking and telecommunications products. Accordingly, demand for our products is subject to factors affecting the ability of our OEM customers to successfully introduce and market their products, including:

● capital spending by telecommunication and network service providers and other end-users who purchase our OEM customers’ products;

● the competition our OEM customers face, particularly in the networking and telecommunications industries;

● the technical, manufacturing, sales and marketing and management capabilities of our OEM customers;

● the financial and other resources of our OEM customers; and

● the inability of our OEM customers to sell their products if they infringe third-party intellectual property rights.

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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. However, their decisions to use our products often require significant expenditures by us without any assurance of success, and often precede volume sales, if any, by a year or more. If an OEM customer decides at the design stage not to incorporate our products into their products, we will not have another opportunity for a design win with respect to that customer’s product for many months or years, if at all. Our sales cycle can take up to 24 months to complete, and because of this lengthy sales cycle, we may experience a delay between increasing expenses for research and development and our sales and marketing efforts and the generation of volume production revenues, if any, from these expenditures. 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.

Any significant order cancellations or order deferrals could adversely affect our operating results.

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.

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. We have recently been involved in protracted patent infringement litigation, and we could become subject to additional claims or litigation in the future as a result of allegations that we infringe others’ intellectual property rights or that our use of intellectual property otherwise violates the law. Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturers against the alleged infringement. Any such litigation regarding intellectual property could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical. 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.

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Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results.

In November 2015, we acquired all of the outstanding capital stock of privately held MikaMonu Group Ltd., a development-stage, Israel-based company that specializes in in-place associative computing for markets including big data, computer vision and cyber security. We also acquired substantially all of the assets related to the SRAM memory device product line of Sony Corporation in 2009. We intend to supplement our internal development activities by seeking opportunities to make additional acquisitions or investments in companies, assets or technologies that we believe are complementary or strategic. Other than the MikaMonu and Sony acquisitions, we have not made any such acquisitions or investments, and therefore our experience as an organization in making such acquisitions and investments is limited. In connection with the MikaMonu acquisition, we are subject to risks related to potential problems, delays or unanticipated costs that may be encountered in the development of products based on the MikaMonu technology and the establishment of new markets and customer relationships for the potential new products. In addition, in connection with any future acquisitions or investments we may make, we face numerous other risks, including:

● difficulties in integrating operations, technologies, products and personnel;

● diversion of financial and managerial resources from existing operations;

● risk of overpaying for or misjudging the strategic fit of an acquired company, asset or technology;

● problems or liabilities stemming from defects of an acquired product or intellectual property litigation that may result from offering the acquired product in our markets;

● challenges in retaining key employees to maximize the value of the acquisition or investment;

● inability to generate sufficient return on investment;

● incurrence of significant one-time write-offs; and

● delays in customer purchases due to uncertainty.

We are substantially dependent on the continued services and performance of our senior management and other key personnel.

Our future success is substantially dependent on the continued services and continuing contributions of our senior management who must work together effectively in order to design our products, expand our business, increase our revenues and improve our operating results. Members of our senior management team have long-standing and important relationships with our key customers and suppliers. The loss of services, whether as a result of illness, retirement or death, of Lee-Lean Shu, our President and Chief Executive Officer, Robert Yau, our Vice President of Engineering, Dr. Avidan Akerib, our Vice President of Associative Computing, any other executive officer or other key employee could significantly delay or prevent the achievement of our development and strategic objectives. We do not have employment contracts with, nor maintain key person insurance on, any of our executive officers or other key employees.

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If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed.

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, which could harm our ability to develop new products 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 OEM customers and develop new products.

Our business will suffer if we are unable to protect our intellectual property.

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. 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. We are dependent on our relationships with TSMC ~~and Powerchip~~ to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes. We cannot assure you that TSMC ~~or Powerchip~~ will be able to effectively manage the transition or that we will be able to maintain our relationship with them. If we or TSMC ~~or Powerchip~~ 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.

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Manufacturing process technologies are subject to rapid change and require significant expenditures for research and development.

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 second quarter of fiscal ~~2014,~~2019, we incurred ~~$809,000 and $648,000, respectively,~~approximately $1.0 million in research and development expense associated with a pre-production mask ~~sets which were~~set that will not ~~later~~be used in production as part of the transition to our new 4028 nanometer SRAM process technology ~~and 63 nanometer DRAM process technology.~~for our APU product. 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.

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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. These defects could result in a delay in recognition or loss of revenues, loss of market share or failure to achieve market acceptance. These defects may also cause us to incur significant warranty, support and repair costs, divert the attention of our engineering personnel from our product development efforts, result in a loss of market acceptance of our products and harm our relationships with our OEM customers. Our OEM customers could also seek and obtain damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.

Defects in wafers and other components used in our products and arising from the manufacturing of these products may not be fully recoverable from TSMC or our other suppliers. For example, in the quarter ended December 31, 2005, we incurred a charge of approximately $900,000 related to the write-off of inventory resulting from an error in the assembly process at one of our suppliers. This write-off adversely affected our operating results for fiscal 2006.

~~Demand for our products may decrease if our OEM customers experience difficulty manufacturing, marketing or selling their products.~~

Our products are used as components in our OEM customers' products, including routers, switches and other networking and telecommunications products. Accordingly, demand for our products is subject to factors affecting the ability of our OEM customers to successfully introduce and market their products, including:

~~capital spending by telecommunication and network service providers and other end-users who purchase our OEM customers' products;~~

~~the competition our OEM customers face, particularly in the networking and telecommunications industries;~~

~~the technical, manufacturing, sales and marketing and management capabilities of our OEM customers;~~

~~the financial and other resources of our OEM customers; and~~

~~the inability of our OEM customers to sell their products if they infringe third-party intellectual property rights.~~

~~As a result, if OEM customers reduce their purchases of our products, our business will suffer.~~

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~~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. However, their decisions to use our products often require significant expenditures by us without any assurance of success, and often precede volume sales, if any, by a year or more. If an OEM customer decides at the design stage not to incorporate our products into their products, we will not have another opportunity for a design win with respect to that customer's product for many months or years, if at all. Our sales cycle can take up to 24 months to complete, and because of this lengthy sales cycle, we may experience a delay between increasing expenses for research and development and our sales and marketing efforts and the generation of volume production revenues, if any, from these expenditures. 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.

~~Any significant order cancellations or order deferrals could adversely affect our operating results.~~

If our business grows, such growth may place a significant strain on our management and operations and, as a result, our business may suffer.

We are endeavoring to expand our business, and any growth that we are successful in achieving could place a significant strain on our management systems, infrastructure and other resources. To manage ~~such~~the potential growth of our operations and resulting increases in the number of our personnel, we will need to invest the necessary capital to continue to improve our operational, financial and management controls and our reporting systems and procedures. Our controls, systems and procedures may prove to be inadequate should we experience significant growth. 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. If our management fails to respond effectively to changes in our business, our business may suffer.

~~We are substantially dependent on the continued services and performance of our senior management and other key personnel.~~

Our future success is substantially dependent on the continued services and continuing contributions of our senior management who must work together effectively in order to design our products, expand our business, increase our revenues and improve our operating results. Members of our senior management team have long-standing and important relationships with our key customers and suppliers. The loss of services of Lee-Lean Shu, our President and Chief Executive Officer, Robert Yau, our Vice President of Engineering, Dr. Avidan Akerib our Vice President of Associative Computing, any other executive officer or other key employee could significantly delay or prevent the achievement of our development and strategic objectives. We do not have employment contracts with, nor maintain key person insurance on, any of our executive officers or other key employees.

~~If we are unable to recruit or retain qualified personnel, our business and product development efforts could be harmed.~~

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products 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 OEM customers and develop new products.

Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for ~~49.7%~~53.3%, ~~59.1%~~59.6%, ~~60.3%~~62.5% and ~~66.2%~~51.5% of our net revenues in the nine months ended December 31, ~~2017~~2020 and in fiscal ~~2017~~, ~~2016~~2020, 2019 and ~~2015~~,2018, respectively. Moreover, a substantial portion of our products is manufactured and tested in Taiwan, and ~~we are now conducting business operations~~the software development for our associative computing products occurs in ~~Israel as a result of our acquisition of MikaMonu.~~Israel. 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:

● 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;

● 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;

● 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;

~~heightened price sensitivity from customers in emerging markets;~~

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~~compliance with a wide variety of foreign laws and regulations and unexpected changes in these laws and regulations;~~

● difficulties in collecting accounts receivable and longer accounts receivable payment cycles;

~~legal uncertainties regarding taxes, tariffs, quotas, export controls, competition, export licenses and other trade barriers;~~

● difficulties and costs of staffing and managing personnel, distributors and representatives across different geographic areas and cultures, including assuring compliance with the U. S. Foreign Corrupt Practices Act and other U. S. and foreign anti-corruption laws;

~~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;~~

● limited protection for intellectual property rights in some countries; and

~~difficulties in collecting accounts receivable and longer accounts receivable payment cycles;~~

difficulties and costs of staffing and managing personnel, distributors and representatives across different geographic areas and cultures, including assuring compliance with the U. S. Foreign Corrupt Practices Act and other U. S. and foreign anti-corruption laws;

~~limited protection for intellectual property rights in some countries; and~~

●fluctuations in freight rates and transportation disruptions.

Moreover, our reporting currency is the U.S. dollar. However, a portion of our cost of revenues and our operating expenses is denominated in currencies other than the U.S. dollar, primarily the New Taiwanese dollar. As a result, appreciation or depreciation of other currencies in relation to the U.S. dollar could result in transaction gains or losses that could impact our operating results. We do not currently engage in currency hedging activities to reduce the risk of financial exposure from fluctuations in foreign exchange rates.

~~U.S. federal income tax reform could adversely~~Changes in Taiwan’s political, social and economic environment may affect ~~us.~~our business performance.

~~On December 22, 2017, the “Tax Cuts and Jobs Act” (“H.R. 1”) was signed into law, significantly impacting several sections~~Because much of the ~~Internal Revenue Code. This new law includes significant~~manufacturing and testing of our products is conducted in Taiwan, our business performance may be affected by changes toin Taiwan’s political, social and economic environment. For example, any political instability resulting from the ~~U.S. corporate income tax system, including a permanent reduction~~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 ~~corporate income tax rate from 35% to 21%, limitations on the deductibility of interest expense~~Taiwanese economy is significant. Taiwanese policies toward economic liberalization, and ~~executive compensation~~laws and ~~the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. We are continuing to examine the impact that H.R. 1 may have~~policies affecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change, resulting in greater restrictions on our ~~business. We have remeasured all deferred tax assets~~ability and ~~liabilities as~~our suppliers’ ability to do business and operate facilities in Taiwan. If any of ~~December 22, 2017, based on the provisions of H.R. 1. This new legislation resulted in an estimated tax provision of $639,000 in the quarter ended December 31, 2017 related~~these changes were to the transition tax associated with deemed repatriation of foreign earnings. In addition, as a result of provisions in the new legislation related to indefinite lived net operating loss carryovers and the refundability of minimum tax credit carryovers, we recorded a deferred tax benefit related to a valuation allowance release of $99,000 in the quarter ended December 31, 2017. Finally, we recorded a liability for taxes payable of $68,000 at December 31, 2017 that will be paid over a period of up to eight years.

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~~This estimated tax provision and the impact of H.R. 1 is based on~~occur, our ~~management’s current knowledge and assumptions and recognized impacts~~business could be ~~materially different from estimated provisions based upon a number of additional considerations, including but not limited to the issuance of the final regulations, our ongoing analysis of the new law~~harmed and our ~~actual earnings for the fiscal year ending March 31, 2018.~~

stock price could decline.

TSMC, ~~and Powerchip,~~ as well as our other independent suppliers and many of our OEM customers, have operations in the Pacific Rim, an area subject to significant ~~earthquake~~ risk of earthquakes, typhoons and other natural disasters and adverse consequences related to the ~~potential~~ outbreak of contagious diseases such as ~~the H1N1 Flu.~~COVID-19.

The ~~foundries~~foundry that ~~manufacture~~manufactures our Fast SRAM, ~~and LLDRAM products,~~ TSMC, ~~and Powerchip,~~ and all of the principal independent suppliers that assemble and test our products are located in Taiwan. Many of our customers are also located in the Pacific Rim. The risk of an earthquake in these Pacific Rim locations is significant. The occurrence of an earthquake, typhoon or other natural disaster near the fabrication facilities of TSMC or our other independent suppliers could result in damage, power outages and other disruptions that impair their production and assembly capacity. Any disruption resulting from such events could cause significant delays in the production or shipment of our products until we are able to shift our manufacturing, assembling, packaging or production testing from the affected contractor to another third-party vendor. In such an event, we may not be able to obtain alternate foundry capacity on favorable terms, or at all.

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The ~~outbreak~~COVID-19 global pandemic, along with the previous outbreaks of SARS, ~~in 2003~~H1N1 and the Avian Flu, has curtailed travel tobetween and ~~from certain~~within countries, ~~primarily~~including in the Asia-Pacific ~~region, and limited travel within those countries. If there were to be another outbreak~~region. Outbreaks of anew contagious ~~disease, such as SARS~~diseases or the ~~H1N1 Flu,~~resurgence of existing diseases that significantly ~~affected~~affect the Asia-Pacific region could disrupt the operations of our key suppliers ~~could be disrupted.~~and manufacturing partners. In addition, our business could be harmed if such an outbreak resulted in travel being restricted, ~~as it was during parts~~the implementation of ~~2003,~~stay-at-home or shelter-in-place orders or if it adversely affected the operations of ~~our suppliers or~~ our OEM customers or the demand for our products or our OEM ~~customers'~~customers’ products.

~~Changes~~The United States could materially modify certain international trade agreements, or change tax provisions related to the global manufacturing and sales of our products.

A portion of our business activities are conducted in ~~Taiwan's political, social~~foreign countries, including Taiwan and ~~economic environment may~~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. 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, ~~performance.~~

~~Because much~~financial condition and results of the manufacturing and testing of our products is conducted in Taiwan, our business performance may be affected by changes in Taiwan's political, social and economic environment. For example, any political instability resulting from 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. 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. If any of these changes were to occur, our business could be harmed and our stock price could decline.operations.

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.

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.

Some of our products are incorporated into advanced military electronics, and changes in international geopolitical circumstances and domestic budget considerations may hurt our business.

Some of our products are incorporated into advanced military electronics such as radar and guidance systems. Military expenditures and appropriations for such purchases rose significantly in recent years. However, asif current U.S. military operations around the ~~current conflict in Afghanistan winds down,~~world are scaled back, demand for our products for use in military applications may decrease, and our operating results could suffer. Domestic budget considerations may also adversely affect our

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operating results. For example, if governmental appropriations for military purchases of electronic devices that include our products are reduced, our revenues will likely decline.

Our operations involve the use of hazardous and toxic materials, and we must comply with environmental laws and regulations, which can be expensive, and may affect our business and operating results.

We are subject to federal, state and local regulations relating to the use, handling, storage, disposal and human exposure to hazardous and toxic materials. If we were to violate or become liable under environmental laws in the future as a result of our inability to obtain permits, human error, accident, equipment failure or other causes, we could be subject to fines, costs, or civil or criminal sanctions, face property damage or personal injury claims or be required to incur substantial investigation or remediation costs, which could be material, or experience disruptions in our operations, any of which could have a material adverse effect on our business. In addition, environmental laws could become more stringent over time imposing greater compliance costs and increasing risks and penalties associated with violations, which could harm our business.

We face increasing complexity in our product design as we adjust to new and future requirements relating to the material composition of our products, including the restrictions on lead and other hazardous substances that apply to specified electronic products put on the market in the European Union, China and California. Other countries, including at the federal and state levels in the United States, are also considering similar laws and regulations. Certain electronic products that we maintain in inventory may be rendered obsolete if they are not in compliance with such laws and regulations, which could negatively impact our ability to generate revenue from

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those products. Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, or in the worst case decreased revenue, and could even require that we redesign or change how we manufacture our products. Such redesigns result in additional costs and possible delayed or lost revenue.

Risks Relating to Our Common Stock and the Securities Market

The trading price of our common stock is subject to fluctuation and is likely to be volatile.

The trading price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including:

● the establishment of a market for our new associative computing products;

~~actual or anticipated declines in operating results;~~

● actual or anticipated declines in operating results;

~~changes in financial estimates or recommendations by securities analysts;~~

● changes in financial estimates or recommendations by securities analysts;

~~the institution of legal proceedings against us or significant developments in such proceedings;~~

● the institution of legal proceedings against us or significant developments in such proceedings;

announcements by us or our competitors of financial results, new products, significant technological innovations, contracts, acquisitions, strategic relationships, joint ventures, capital commitments or other events;

● announcements by us or our competitors of financial results, new products, significant technological innovations, contracts, acquisitions, strategic relationships, joint ventures, capital commitments or other events;

~~changes in industry estimates of demand for Very Fast SRAM products;~~

● changes in industry estimates of demand for Very Fast SRAM products;

~~the gain or loss of significant orders or customers;~~

● the gain or loss of significant orders or customers;

~~recruitment or departure of key personnel; and~~

● recruitment or departure of key personnel; and

~~market conditions in our industry, the industries of our customers and the economy as a whole~~.

● market conditions in our industry, the industries of our customers and the economy as a whole.

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. These fluctuations could materially adversely affect our business relationships, our ability to obtain future financing on favorable terms or otherwise harm our business. In addition, in the past, securities class action litigation has often been brought against a company following periods of volatility

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in the market price of its securities. This risk is especially acute for us because the extreme volatility of market prices of technology companies has resulted in a larger number of securities class action claims against them. Due to the potential volatility of our stock price, we may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert ~~management's~~management’s attention and resources. This could harm our business and cause the value of our stock to decline.

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.

From November 2008 through December ~~2017,~~2019 we repurchased and retired an aggregate of ~~11,983,942~~12,004,779 shares of our common stock at a total cost of ~~$60.6~~$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. At December 31, ~~2017,~~2020, we had outstanding authorization from our Board of Directors to purchase up to an additional ~~$4.4~~$4.3 million of our common stock from time to time under our repurchase program.Although our Board has determined that these repurchases are in the best interests of our stockholders, they expose us to certain risks including:

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●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 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.

Our executive officers, directors and entities affiliated with them hold a substantial percentage of our common stock.

As of January 31, ~~2018,~~ 2021, our executive officers, directors and entities affiliated with them beneficially owned approximately ~~34%~~35% 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.

The provisions of our charter documents might inhibit potential acquisition bids that a stockholder might believe are desirable, and the market price of our common stock could be lower as a result.

Our Board of Directors has the authority to issue up to 5,000,000 shares of preferred stock. Our Board of Directors can fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action by our stockholders. The issuance of shares of preferred stock might delay or prevent a change in control transaction. As a result, the market price of our common stock and the voting and other rights of our stockholders might be adversely affected. The issuance of preferred stock might result in the loss of voting control to other stockholders. We have no current plans to issue any shares of preferred stock. Our charter documents also contain other provisions, which might discourage, delay or prevent a merger or acquisition, including:

~~our stockholders have no right to remove directors without cause;~~

● our stockholders have no right to remove directors without cause;

~~our stockholders have no right to act by written consent;~~

● our stockholders have no right to act by written consent;

●our stockholders have no right to call a special meeting ~~of stockholders; and~~

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stockholders; and

~~stockholders must comply with advance notice requirements to nominate directors or submit proposals for consideration at stockholder meetings.~~

● our stockholders must comply with advance notice requirements to nominate directors or submit proposals for consideration at stockholder meetings.

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.

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Item 2.Unregistered Sales~~Unregistered Sales~~ of Equity Securities and Use of Proceeds

Stock Repurchase Program

Our Board of Directors has authorized us to repurchase, at management’s discretion, shares of our common stock. Under the repurchase program, we may repurchase shares from time to time on the open market or in private transactions. The specific timing and amount of the repurchases will be dependent on market conditions, securities law limitations and other factors. The repurchase program may be suspended or terminated at any time without prior notice. During the quarter ended December 31, ~~2017,~~2020, we did not repurchase any of our shares under the repurchase program.

~~(1)~~

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Item 6.Exhibits


Exhibit Number		Name of Document
31.1		Certification of Lee-Lean Shu, President, Chief Executive Officer and Chairman, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Douglas M. Schirle, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Lee-Lean Shu, President, Chief Executive Officer and Chairman, and Douglas M. Schirle, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES~~SIGNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: February ~~2, 2018~~5, 2021

	GSI Technology, Inc.

	By:	/s/ LEE-LEAN SHU
		Lee-Lean Shu
		President, Chief Executive Officer and Chairman

	By:	/s/ DOUGLAS M. SCHIRLE
		Douglas M. Schirle
		Chief Financial Officer

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PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	5 6
	Notes to Condensed Consolidated Financial Statements	6 7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19 21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25 28
Item 4.	Controls and Procedures	25
		28

	PART II — OTHER INFORMATION

Item 1A.	Risk Factors	25 28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41 44
Item 6.	Exhibits	42 45
Signatures		43 46


	Payments due by period
	2018		2019 and 2020		2021 and 2022		After 2022		Total
Facilities and equipment leases	$	107,000	$	767,000	$	265,000	$	7,000	$	1,146,000
Wafer and test purchase obligations		698,000		779,000		—		—		1,477,000
	$	805,000	$	1,546,000	$	265,000	$	7,000	$	2,623,000