GSI
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KGSI TECHNOLOGY INC - GSITFiled: June 11, 2015 (period: March 31, 2015)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549FORM 10-K ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2015 or☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 For the transition period from toCommission File Number 001-33387GSI Technology, Inc.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization) 77-0398779(IRS EmployerIdentification No.) 1213 Elko DriveSunnyvale, 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 Name of Each Exchange on which RegisteredCommon Stock, $0.001 par value The Nasdaq Stock Market LLCSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ☒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 1934during 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 filingrequirements 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 requiredto 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 tosubmit and post such files). Yes ☒ No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. Seethe definitions of "large accelerated filer," accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Act. (Check one):Large accelerated filer Accelerated filer ☒ Non-accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common stockon September 30, 2014, as reported on the Nasdaq Global Market, was approximately $103.2 million. Shares of the registrant's common stock held by eachofficer and director and each person who owns 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may bedeemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of May 31, 2015, there were22,913,122 shares of the registrant's common stock issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant's definitive proxy statement for its 2015 annual meeting of stockholders are incorporated by reference into Part III hereof. Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGSI TECHNOLOGY, INC.2015 FORM 10-K ANNUAL REPORTTABLE OF CONTENTSPART I PageItem 1. Business3 Item 1A. Risk Factors19 Item 1B. Unresolved Staff Comments34 Item 2. Properties34 Item 3. Legal Proceedings34 Item 4. Mine Safety Disclosures35 PART II 36 Item 5. Market for Registrant's Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities36 Item 6. Selected Financial Data37 Item 7. Management's Discussion and Analysis of Financial Condition and Results ofOperations38 Item 7A. Quantitative and Qualitative Disclosures About Market Risk49 Item 8. Financial Statements and Supplementary Data50 Item 9. Changes in and Disagreements with Accountants on Accounting and FinancialDisclosure79 Item 9A. Controls and Procedures80 Item 9B. Other Information80 PART III 81 Item 10. Directors, Executive Officers and Corporate Governance81 Item 11. Executive Compensation81 Item 12. Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters81 Item 13. Certain Relationships and Related Transactions, and Director Independence81 Item 14. Principal Accountant Fees and Services81 PART IV 82 Item 15. Exhibits and Financial Statement Schedules82 SIGNATURES 85 2 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsForward-looking StatementsIn addition to historical information, this Annual Report on Form 10-K includes forward-looking statements withinthe meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of1934, 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 othersimilar expressions. In addition, any statements which refer to expectations, projections, or other characterizations offuture events or circumstances, are forward-looking statements. Actual results could differ materially from thoseprojected in the forward-looking statements as a result of a number of factors, including those set forth in this reportunder "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors,"those described elsewhere in this report, and those described in our other reports filed with the Securities and ExchangeCommission ("SEC"). We caution you not to place undue reliance on these forward-looking statements, which speak onlyas of the date of this report, and we undertake no obligation to update these forward-looking statements after the filingof this report. You are urged to review carefully and consider our various disclosures in this report and in our otherreports publicly disclosed or filed with the SEC that attempt to advise you of the risks and factors that may affect ourbusiness. PART I Item 1. BusinessOverviewWe develop and market high performance memory products, including "Very Fast" static random access memory, orSRAM, and low latency dynamic random access memory, or LLDRAM, that are incorporated primarily in high-performance networking and telecommunications equipment, such as routers, switches, wide area network infrastructureequipment, wireless base stations and network access equipment. In addition, we serve the ongoing needs of the military,industrial, test and measurement equipment, automotive and medical markets for high-performance SRAMs. Based on theperformance characteristics of our products and the breadth of our product portfolio, we consider ourselves to be a leadingprovider of Very Fast SRAMs.We sell our products to leading original equipment manufacturer, or OEM, customers including Alcatel-Lucent,Cisco Systems and Huawei Technologies. We utilize a fabless business model, which allows us both to focus ourresources on research and development, product design and marketing, and to gain access to advanced processtechnologies with only modest capital investment and fixed costs.We were incorporated in California in 1995 under the name Giga Semiconductor, Inc. We changed our name to GSITechnology in December 2003 and reincorporated in Delaware in June 2004 under the name GSI Technology, Inc. Ourprincipal executive offices are located at 1213 Elko Drive, Sunnyvale, California, 94089, and our telephone number is(408) 331-8800.Recent Developments“Dutch Auction” Self-tender Offer; Stock Repurchase ProgramIn August 2014, we completed a modified “Dutch auction” self-tender offer pursuant to which we repurchasedfrom our shareholders an aggregate of 3,846,153 shares of our common stock at a purchase price of $6.50 per share, for anaggregate cost of approximately $25 million, excluding fees and expense related to the tender offer. 3 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur board of directors has also authorized the repurchase, at management’s discretion, of shares of our commonstock from time to time on the open market or in private transactions. The specific timing and amounts of the repurchasesare dependent on market conditions, securities law limitations and other factors. During the fiscal year ended March 31,2015, we repurchased a total of 815,622 shares under the repurchase program at an average cost of $5.53 per share, for anaggregate cost of approximately $4.5 million. At March 31, 2015, management was authorized to repurchase additionalshares with a value of up to $8.5 million under the repurchase program. Appointment of New Independent DirectorsIn March 2015, our board of directors appointed E. Thomas Hart and Jack A. Bradley as new independentdirectors to fill two newly-created positions on the board. Mr. Hart currently serves as non-executive Chairman of the Board of QuickLogic Corporation, a Nasdaq-listedfabless semiconductor company that designs, markets and supports semiconductor and software algorithm solutionsprimarily for manufacturers of mobile, consumer and enterprise communication products. Mr. Hart previously served asQuickLogic's President and Chief Executive Officer from June 1994 to March 2009, its Chairman and Chief ExecutiveOfficer from March 2009 to January 2011 and its Executive Chairman from January 2011 to January 2014. Prior tojoining QuickLogic, Mr. Hart held senior management positions in operations, engineering, sales and marketing withseveral semiconductor companies, including National Semiconductor Corporation and Motorola, Inc. Mr. Hart alsocurrently serves as Chairman of the Board of the Silicon Valley Chapter of the Association for Corporate Growth and is aBoard Leadership Fellow of the National Association of Corporate Directors. Mr. Hart holds a B.S. degree in ElectricalEngineering from the University of Washington.Mr. Bradley has over 30 years' experience in executive management positions with public and private companiesengaged in the software, systems and semiconductor industries. Mr. Bradley is currently a partner at David PowellFinancial Services, providing financial consulting and advisory services. From February 2006 through March 2013,Mr. Bradley served as Chief Executive Officer of Packet Design, Inc., a venture capital-funded company that developedand marketed analytic management systems for data communications and that was sold to private equity investors in2013. Prior to joining Packet Design, Mr. Bradley held senior operational and financial management positions withseveral networking and communications companies, including Cisco Systems, Inc. (General Manager of Video InternetServices Business Unit), 3Com Corporation (Vice President and General Manager, International Division), and BridgeCommunications, Inc. (Chief Financial Officer). Mr. Bradley holds a B.S. degree in Accounting from the University ofSan Francisco. Messrs. Hart and Bradley will stand for re-election at our 2015 annual meeting of stockholders. Settlement of Protracted Litigation with Cypress Semiconductor CorporationOn May 6, 2015, we entered into a settlement agreement with Cypress Semiconductor Corporation to resolve alawsuit filed by Cypress in the United States District Court for the Northern District of California alleging that certain ofour products infringe patents held by Cypress and a separate lawsuit pending in the same court in which we had allegedthat Cypress violated federal and state antitrust laws. Reference is made to “Item 3. Legal Proceedings” for informationregarding this protracted litigation that began in 2011. Under the settlement agreement:·Each of the parties agreed to dismiss its lawsuit in consideration of the dismissal of the lawsuit brought by theother party; and·Each party will release all claims against the other with respect to issues raised in the two lawsuits. 4 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe parties agreed that the settlement agreement was entered into to resolve disputed claims, and that each partydenies any liability to the other party.Industry BackgroundSRAM, LLDRAM and Bandwidth Engine Market OverviewVirtually all types of high-performance electronic systems incorporate some form of volatile memory. An SRAMis a memory device that retains data as long as power is supplied, without requiring any further user intervention. Incontrast, dynamic random access memory, or DRAM, is a memory device that requires user intervention in the form ofrefresh operations to retain data while power is supplied, due to the capacitive nature of its memory cell. However, aDRAM memory cell is much smaller than an SRAM memory cell, so several times more DRAM bits than SRAM bits canbe implemented in any given unit area of silicon. The fundamentally different characteristics of SRAM and DRAMmemory cells have resulted in the emergence of markedly different architectures for SRAM-based and DRAM-basedmemory products, and the two types of memory serve different applications. Classically, SRAM-based products haveserved high performance requirements while DRAM-based products have been used in cost-optimizedapplications. Today, SRAM- and DRAM-based products serve both performance and cost-based applications. As thevolatile memory market fragments into a variety of specialized products, more meaningful distinctions betweenvolatile memory products can be made.There is an increasingly broad variety of volatile memory products on the market, characterized by a number ofattributes, such as speed, memory capacity, or density, I/O interface and power consumption. There are several differentindustry measures of speed:·latency, which is the delay between the request for data and the delivery of such data for use and ismeasured in nanoseconds, or ns, or when used to describe performance of synchronous memory productsmay be described in terms of numbers of clock cycles required between the load of an address and thedelivery of valid data;·random access time, which is the minimum amount of time required between accesses to random locationswithin the memory array, typically measured in nanoseconds, or ns;·bandwidth, which is the rate at which data can be streamed to or from a device and is often measured inmegabits or gigabits per second (Mb/s or Gb/s); ·clock frequency, which is the cycle rate of a clock within a synchronous device and is often measured inmegahertz or gigahertz (MHz or GHz); and·transaction rate, which is the rate at which new commands can be executed by the memory device, and isoften measured in millions or billions of transactions per second (MT/s or BT/s).Historically, SRAMs have been utilized wherever other lower price-per-bit memory technologies have beeninadequate. SRAMs demonstrate lower latency and faster random access times relative to DRAMs and other types ofmemory technologies, but at a higher price-per-bit. Historically, the volatile memory market has had three price-performance points, DRAM at the low end, Fast SRAM at the high end, and slow SRAM in the middle. Over the past twodecades, alternative memory technologies have been introduced to address certain applications that formerly used slowSRAMs. For example, new types of DRAM have displaced slow SRAM in applications such as cell phones. However, inthe networking memory market a technology vacuum formed between Fast SRAMs on5 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsone end and commodity DRAMs at the other, with no high bandwidth, high transaction rate, moderate capacity, moderatelatency, and moderate cost volatile memory product to fill the void. In the past decade, Low latency DRAMs, orLLDRAMs, have been developed to fill that void. Like the slow SRAMs that came before them, LLDRAMs have a muchhigher price-per-bit than commodity DRAMs (in order to deliver higher transaction rates) but demonstrate slower randomaccess times and longer latencies than Fast SRAMs.All of these SRAM and DRAM technologies utilize traditional parallel I/O interfaces that require a significantnumber of pins. Recently we have partnered with another company to provide a new serial I/O (SerDes) memory devicecalled “Bandwidth Engine” which is fabricated using embedded DRAM technology. The Bandwidth Engine has capacitycomparable to LLDRAMs but offers far greater transaction rate and data bandwidth capability (greater even than FastSRAMs) through its serial interface. It can also execute a variety of read-modify-write operations heretofore unavailablein any other memory device. The networking market is just beginning to take advantage of the unique and powerfulcapabilities of Bandwidth Engine technology.The need for increasingly greater capacity, data bandwidth, and transaction rates from the various memorytechnologies continues unabated as the networking market begins to make preparations for Terabit networking in thelatter half of the current decade. We believe that Fast SRAM, Low Latency DRAM and Bandwidth Engine products,optimized for networking applications, will play an increasingly essential role in enabling continued improvements innetwork performance.As a result of the displacement of low performance SRAMs, the total market size for SRAMs is diminishing.However, due to their inherent higher latency characteristics, DRAMs cannot match the random access speed of high-performance SRAMs. Gartner Dataquest divides the SRAM market into segments based on speed. The highestperformance segment is comprised of SRAMs that operate at speeds of less than 10 nanoseconds, which we refer to as"Very Fast SRAMs." Very Fast SRAMs are predominantly utilized in high-performance networking andtelecommunications equipment.Increasing Need for Networking Memory ProductsGrowth in data, voice and video traffic has driven the need for both greater networking bandwidth and morecomplex routing and switching equipment, resulting in the continued expansion of the networking andtelecommunications infrastructure. The continued growth in the level of Internet usage has led to the proliferation of awide variety of equipment throughout the networking and telecommunications infrastructure, including routers, switches,wireless local area network infrastructure equipment, wireless base stations and network access equipment, and acontinuing demand for new equipment with faster and higher performance. Moving data in and out of high performancevolatile memory is the core task of every piece of networking equipment. The access patterns or workload of mostmemory arrays used in networking equipment are significantly different from those of memory devices typically used inthe computer market, such as the DRAMs used for main storage in PCs. As a result, distinct classes of memory productsoptimized for the demands of the networking market have been emerging over the last fifteen years. The sharply risingdemand for increasing worldwide network performance is expected to drive a continuing need for ever more specializedmemory products. High-performance networking and telecommunications equipment requires a variety of memory types;both SRAM-based and DRAM-based. Some of the required memory arrays are embedded in specialized processors orASICs but many tasks require more bits than can be accommodated on a processor or ASIC, and must be provided in someform of external volatile memory. SRAM-based and DRAM-based networking memory products address thisrequirement. For example, in a typical router or switch, multiple networking-optimized memory devices are required totemporarily store, or buffer, data traffic and to provide rapid lookup of information in data tables. As networkingequipment must increasingly support advanced traffic content such as Voice over Internet Protocol, or VoIP, videostreaming and bi-directional video, demand for even higher performance networking memory is expected to continue toincrease.6 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsDemanding Requirements for Success in the Networking Memory MarketThe pressure on networking and telecommunications OEMs to bring higher performance equipment to marketrapidly to support not only more traffic but also more advanced traffic content is compounded by the requirement thatthis new equipment occupy no more space than the equipment it replaces, which results in increased circuit densityrequirements and the need for lower power operations. In response to these pressures, OEMs have increasingly relied onproviders that are capable of rapidly developing and introducing advanced, higher density, low power networkingmemory. The variety of memory applications within the networking and telecommunications markets has also driven aneed for more specialized products available in relatively low volumes. These specialized products include high-speedsynchronous memory products implemented in both SRAM and DRAM memory technologies with a range of density,latency and bandwidth capabilities. In general, OEMs prefer to work with a supplier who can address the full range oftheir high-performance networking memory product requirements and, just as importantly, can offer the technical andlogistic support necessary to sustain and accelerate their efforts.We believe the key success factors for a networking memory vendor are the ability to offer a broad catalog of high-performance, high-quality and high-reliability networking memory products, to continuously introduce new productswith higher speeds, lower power and greater densities, to maintain timely availability of prior generations of products forseveral years after their introductions, and to provide effective logistic and technical support throughout their OEMcustomers' product development and manufacturing life cycles.The GSI SolutionWe endeavor to address the overall needs of our OEM customers, not only satisfying their immediate requirementsfor our latest generation, highest performance networking memory, but also providing them with the ongoing long-termsupport necessary during the entire lives of the systems in which our products are utilized. Accordingly, the key elementsof our solution include:Innovative Product Performance LeadershipHigh Speed. Through the use of advanced architectures, design methodologies and silicon process technologies,we have developed a wide variety of high-performance networking memory products. Until recently, all of our productshave been SRAM-based, but with increased investment in high performance DRAM-based networking memory productswe expect to increase our market share in the overall networking memory market. Our SRAM product line has evolvedfrom BurstRAMs with an average transaction rate of about 0.125 BT/s to our SigmaQuad™-IVe SRAMs (currentlyscheduled to be available later in 2015) with expected transaction rates up to 2.66 BT/s and data bandwidths up to 192Gb/s, greater than any other SRAM commercially available today. Our current Low Latency DRAMs deliver transactionrates up to 0.533 BT/s and data bandwidths up to 38 Gb/s, with faster versions expected to be available later this year.Our new Bandwidth Engine products provide transactions rates exceeding 4 BT/s and data bandwidths up to 400 Gb/s.Our SRAM products can produce data at latencies of 4 to 5 ns while LLDRAM and Bandwidth Engine latenciesare approximately 15 ns. By providing higher performance networking memory, we enable our networking andtelecommunications customers to continually design and develop higher performance products that support increasinglycomplex traffic content.Low Power Consumption. Many of our products require significantly less power than comparable products offeredby our principal competitors. Because these products utilize less power and generate less heat, the reliability of thenetworking or telecommunications equipment in which they are employed increases. Furthermore, the low powerutilization of our products helps enable OEMs to add capabilities to their systems, which otherwise might not have beenpossible due to overall system power constraints.7 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsProcess Technology Leadership. We maintain our own process engineering capability and resources, which arelocated in close physical proximity to our SRAM wafer manufacturing partner, Taiwan Semiconductor ManufacturingCompany, or TSMC. This enhances our ability to work closely with TSMC to develop modifications of the advancedprocess technologies used in the manufacturing of our Fast SRAMs in order to maximize product performance, optimizeyields, lower manufacturing costs and improve quality. Our most advanced 144 and 288 Mb synchronous Very FastSRAMs are manufactured using 40 nanometer process technology. Our new LLDRAMs are being produced using 63nanometer DRAM process technology at Powerchip Technology Corporation, or Powerchip, in Taiwan.Product Innovation. We believe that we have established a position as a technology leader in the design anddevelopment of Very Fast SRAMs. We were the first supplier to introduce 72-bit-wide SRAMs as single monolithic ICs. In2010, we were the first supplier to introduce a Fast Synchronous SRAM capable of one billion transactions per second –SigmaQuad-IIIe – whose 1.45 BT/s capability was more than double any other SRAM commercially available at thetime. In early 2015, we further solidified our position as a technology leader by being the first vendor to introduce andship 288 megabit monolithic SRAMs. In addition, we are the only vendor to offer a full line of Very Fast SynchronousSRAMs that operate and interface at 1.8 to 3.3 volts, giving our OEM customers the ability to use the same product insystems that operate at any voltage within that range. Moreover, we are the only vendor to offer a Very Fast SynchronousSRAM product that operates at 1.8 volts and uses approximately one-half to two-thirds the power of our competitors' 2.5volt products. We intend to apply the same approaches we used to take the lead in SRAM-based networking memory tothe continued development of our line of DRAM-based networking memory products.Broad and Readily Available Product PortfolioExtensive Product Catalog. The Very Fast SRAM market is highly fragmented in terms of product features andspecifications. This is especially true of the networking segment of the fast SRAM market and is becoming true of theLLDRAM segment as well. To meet our OEM customers' diverse needs, we have what we believe is the broadest catalogof Very Fast SRAM products currently available, and our LLDRAM and Bandwidth Engine product lines further expandour position in the networking market. Our product line includes a wide range of devices with varying densities, features,clock speeds, and voltages, as well as several operating temperature ranges and numerous package options in both 5/6RoHS (leaded) and 6/6 RoHS (lead-free) versions, which are compliant with the European Union's Restriction on the Useof Hazardous Substances Directive 2002/95/EC.Advanced Feature Sets. Our products offer features that address a broad range of our networking andtelecommunications OEMs' system requirements. Among these features is a JTAG test port, named for the IEEE Joint TestAction Group, which enables post-assembly verification of the connection between our product and an OEM customer'ssystem board, thereby allowing an OEM customer of ours to develop, test and ship their products more rapidly.Additionally, we offer our FLXDrive™ feature, which allows system designers to optimize the signal integrity for anygiven requirement. We also provide OEMs the ability to employ certain of our products in various modes of operation byusing our products' mode control pins, thus increasing the flexibility of those products and their ready availability fromour inventory.Superior Lifetime Availability of Products. Unlike the market for consumer electronics, the markets in which wecompete, particularly the networking and telecommunications markets, generally are characterized by system designs thatremain in production for extended periods of time, and maintenance of those systems in the field for even longer periodsis critical to their success. Our foundry-based manufacturing strategy, our process technology selections, our master-diedesign strategy and the design of our packaging, burn-in and test work-flows all contribute to allow us to meet and exceedour guarantee of providing a product life of at least seven years for any new product family we bring to market. Thesetechniques also allow us to keep our delivery lead-times relatively short even for8 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsspecialized, infrequently ordered members of those product families. We believe our approach is better suited to addressthe needs of our target markets than attempts to apply mass market manufacturing strategies to networking memoryproducts.Multiple Temperature Grades. We offer both commercial and industrial temperature grades for all of ourproducts. This ability to perform at specification throughout the industrial temperature range of -40°C to +85°C is criticalfor memory products used in a broad variety of networking and telecommunications applications, where the operatingenvironments may be harsh. We now also offer a portfolio of off-the-shelf military temperature SRAM products and canalso offer military customers additional and extended temperature grades upon request.Master Die MethodologyOur master die methodology enables multiple product families, and variations thereof, to be manufactured from asingle mask set. As a result, based upon the way available die from a wafer are metalized, wire bonded, packaged andtested, from 25 mask sets we have created over 15,000 different products. Using these mask sets, we produce wafers thatcan be further processed upon customer orders into the final specified product thereby significantly shortening the overallmanufacturing time. For example, from a 72 megabit mask set, we can produce three families of 72 megabit SRAMproducts. Our unique methodology results in the following benefits:Rapid Order Fulfillment. We maintain a common pool of wafers that incorporate all available master die. Becausewe can typically create several different products from a single master die, we can respond to unforecasted customer ordersmore quickly than our competitors.Reduced Cost. Our master die methodology allows us to reduce our costs through the purchase of fewer mask setsby allowing faster and less expensive internal product qualifications, by enabling more cost-efficient use of engineeringresources and by reducing the incidence of obsolete inventory.Customer ResponsivenessCustomer-driven Solutions. We work closely with leading networking and telecommunications OEMs, as well astheir chip-set suppliers, to better anticipate their requirements and to rapidly develop and implement solutions that allowthem to meet their specific product performance objectives. Customer demand drives our business. For example, toaddress near term needs, we offer critical specification variations, such as special operating ranges or wire bond options oncurrently available products, while we also design new families of products to meet their emerging long term needs. As aconsequence, our portfolio not only includes the widest selection of catalog parts available, it also includes an extensivelist of custom, customer-specific products. This degree of responsiveness enables us to provide our OEM customers withthe exact products required for their applications.Preemptive Service. Our extensive open libraries of design support tools as well as our ability to deliver thespecific device required for system prototyping with very short notice enables networking and telecommunicationOEMs to design and introduce differentiated products quickly as well as to reduce their development costs. Our openmodel libraries give designers access 24 hours a day, seven days a week to electrical and behavioral simulation models.Behavioral models are offered in both Verilog and very high speed integrated circuits hardware description language("VHDL") format to better fit different customers' simulation environments, further streamlining the customers'development process. We currently offer our FPGA controller IP free of charge for use with our Type II+ and Type IIIeSigmaQuad and SigmaDDR Fast SRAM devices, to help enable our customers to design FPGA-based systems quickly andefficiently, and reach the market with their products faster, and are also developing new FPGA controller IP for use withour next generation Type IVe SigmaQuad and SigmaDDR SRAMs, as well as for our next9 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsgeneration LLDRAMs. Controller IP is also available for our Bandwidth Engine products. Our open model libraries andsupport tools, coupled with the FPGA controller IP, can save our customers months of design effort and leverage theextensive evaluation and timing already performed by our engineers to enhance their products’ performance, reducedevelopment costs and shorten time-to-market. We refer to this customer support as “Preemptive Service.”Quality and Reliability. Networking and telecommunications equipment typically have long product lives, andthe cost to repair or replace this equipment due to product failure at any time is prohibitively expensive. The high-qualityand reliability of memory products incorporated in our OEM customers' products is, thus, critical. Every product familywe offer is subjected to extensive long term reliability testing before receiving qualification certification, and everydevice shipped is first subjected to burn-in and then to final tests in which the device is operated beyond its specifiedoperating voltage and temperature ranges.The GSI StrategyOur objective is to profitably increase our market share in the high performance memory market. Our strategyincludes the following key elements:Continue to Focus on the Networking and Telecommunications Markets. We intend to continue to focus ondesigning and developing high transaction rate, low latency, high bandwidth and feature-rich memory products targetedprimarily at the networking and telecommunications markets. Increasing network complexity due to higher traffic volumeand more advanced traffic content continues to drive OEMs' demand for high-performance networking memory. Webelieve our active high-performance memory product development and manufacturing expertise coupled with establishedstrategic partnerships will continue to enable us to provide networking and telecommunications OEMs with the earlyaccess to next generation Very Fast SRAMs, Low Latency DRAMS, and Bandwidth Engine products that offer superiorperformance, advanced feature sets and continued high reliability, which they need to design and develop new productsthat support increasingly complex traffic content and to bring networking and telecommunications equipment to marketquickly.Strengthen and Expand Customer Relationships. We are focused on maintaining close relationships with industryleaders to facilitate rapid adoption of our products and to enhance our position as a leading provider of high-performancememory. We work with both our customers and with their non-memory IC suppliers that require high-performancememory support. We will continue to work with both groups at the pre-design and design stage of their projects in orderto anticipate their future high-performance memory needs and to identify and respond to their immediate requests forcurrently available products and variants on currently available products. We plan to enhance our relationships with theseleading OEMs and IC vendors and to develop similar relationships with additional OEMs and IC vendors.Continue to Invest in Research and Development to Extend Our Technology Leadership. We believe we haveestablished a position as a technology leader in the design and development of Very Fast SRAMs. Our Very Fast SRAMproducts most often provide the highest speed available at a given density for a given device configuration. We intend tomaintain and advance our technology leadership through continual enhancement of our existing Very Fast SRAMproducts, particularly our SigmaQuad/SigmaDDR family of low latency, high-bandwidth synchronous SRAMs, while wecontinue to broaden our product line with the introduction of other new high performance memory technologies targetedto address the evolving needs of the high performance memory market.Exploit Opportunities to Expand our Markets. While we develop our high-performance memory productsspecifically for the networking and telecommunications markets, they are often applicable across a wide range ofindustries and applications. We have experienced growth in product sales for military, industrial, test and10 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmeasurement, and medical markets and intend to continue penetrating these and other new markets with similar needs forhigh-performance memory technologies. We intend to supplement our internal development activities by seekingopportunities to acquire other businesses, product lines or technologies, or enter into strategic partnerships, that wouldcomplement our current product lines, expand the breadth of our markets, enhance our technical capabilities, or otherwiseprovide growth opportunities.Collaborate with Wafer Foundries to Leverage Leading-edge Process Technologies. We will continue to relyupon advanced complementary metal oxide semiconductor, or CMOS, technologies, the most commonly used processtechnologies for manufacturing semiconductor devices, from TSMC for SRAM-based products and from Powerchip forDRAM-based products. We provide our technology partners with the sort of in-depth feedback for yield and performanceimprovement that can best come from very large array structures like those found in our products. Our most advancedproducts currently in production were designed using 40 nanometer process technology on 300 millimeter wafers. ProductsWe design, develop and market a broad range of high-performance memory products primarily for the networkingand telecommunications markets. We specialize in high performance memory products featuring very high transactionrates, high density, low latency, high bandwidth, fast clock access times and low power consumption. We commit tooffering our products for longer periods of time than our competitors, typically seven years or more following their initialintroduction. Accordingly, we continue to offer products in a variety of package types that have been discontinued byother suppliers.We currently offer more than 30 families of SRAMs, two families of LLDRAMs, and one family of BandwidthEngine products. These basic product configurations are the basis for over 15,000 individual products that incorporate avariety of performance specifications and optional features. Our products can be found in a wide range of networking andtelecommunications equipment, including core routers, multi-service access routers, universal gateways, enterprise edgerouters, service provider edge routers, optical edge routers, fast Ethernet switches and wireless base stations. We also sellour products to OEMs that manufacture products for military applications such as radar and guidance systems, forprofessional audio applications such as sound mixing systems, for test and measurement applications such as high-speedtesters, for automotive applications such as smart cruise control, and for medical applications such as ultrasound and CATscan equipment.Synchronous SRAM ProductsSynchronous SRAMs are controlled by timing signals, referred to as clocks, which make them easier to use thanolder style asynchronous SRAMs with similar latency characteristics in applications requiring high bandwidth datatransfers. Synchronous SRAMs that employ double data rate interface protocols can transfer data at much higherbandwidth than both single data rate and asynchronous SRAMs. We currently supply synchronous SRAMs that can cycleat operating frequencies as high as 725 MHz, and we expect to introduce products with operating frequencies of up to1,333 MHz later in 2015.BurstRAM™ and NBT™ SRAMs. We currently offer BurstRAMs and No Bus Turnaround, or NBT, SRAMs thatimplement a single data rate bus protocol. BurstRAMs were originally developed for microprocessor cache applicationsand have become the most widely used synchronous SRAMs on the market. They are used in applications where largeamounts of data are read or written in single sessions, or bursts. NBT SRAMs are a variation on the BurstRAM theme andwere developed to address the needs of moderate performance networking11 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsapplications. NBT SRAMs feature a single data rate bus protocol designed to minimize or eliminate wasted data transfertime slots on the bus when BurstRAMs switch from read to write operations. Both families of products can perform burstdata transfers or single cycle transfers at the discretion of the user.Our BurstRAMs and NBT SRAMs are offered in both pipeline and flow-through modes. Flow-throughSRAMs allow the shortest latency. Pipelined SRAMs break the access into discrete clock-controlled steps, allowing newaccess commands to be accepted while an access is already in progress. Therefore, while flow-through SRAMs offer lowerlatency, pipelined SRAMs offer greater data bandwidth. Our BurstRAM and NBT SRAM products incorporate a numberof features that reduce our OEM customers' cost of ownership and increase their design flexibility, including a JTAG testport and our FLXDrive feature, which allows system designers to optimize signal integrity for a given application.We currently offer BurstRAMs and NBT SRAMs with storage densities of up to 144 megabits with clock frequencyof up to 333 MHz and clock access times as fast as 2 nanoseconds that operate at 3.3, 2.5 or 1.8 volts.SigmaQuad and SigmaDDR Products. High-performance double data rate and quad data rate synchronousSRAMs have become the de facto standard for the networking and telecommunications industry. We offer a full line ofquad data rate separate I/O SRAMs, known as our SigmaQuad family, as well as a companion line of double data ratecommon I/O SRAMs, known as our SigmaDDR family. SigmaQuad SRAMs feature two uni-directional (one input andone output) double data rate data ports (two data ports times double data rate transfers equals quad data rate),controlled via a single address and control port. SigmaDDR SRAMs feature a single bi-directional double data rate dataport. We currently offer our SigmaQuad and SigmaDDR devices in multiple bus protocol versions and data burstlengths, and with various power supply and interface voltages, all under the names SigmaQuad, SigmaQuad-II andSigmaQuad-IIIe, and (coming soon) SigmaQuad-IVe, and their SigmaDDR equivalents. We expect to introduce ourSigmaQuad-IVe product line later in 2015. An additional variant in this family of SRAMs is the SigmaSIO DDR, which isdesigned to address some segments of the market currently served by dual-port SRAMs.We currently offer SigmaQuad/SigmaDDR products in five storage densities, 18 megabits, 36 megabits, 72megabits, 144 megabits and 288 megabits. These SRAMs are capable of speeds up to 725 MHz (and ,with theintroduction of SigmaQuad-IVe, up to 1,333 MHz), and operate on main power supply voltages that range from 2.5 voltsto 1.2 volts and interface voltages that range from 1.8 volts to 1.2 volts.SigmaRAM™ Products. We offer a family of high-performance, low voltage, synchronous SigmaRAM™ SRAMproducts designed for use in networking and telecommunications systems. Our SigmaRAM products include the fullrange of common I/O SRAM functionality, including late write and double late write protocols, pipelined read cycles,burst data transfers and double data rate read and write data transfers. We currently offer SigmaRAM products withstorage density of 18 megabits, speeds of up to 350 MHz and clock access times as fast as 1.7 nanoseconds that operate at1.8 volts.Asynchronous SRAM ProductsUnlike synchronous SRAMs, asynchronous SRAMs employ a clock-free control interface. They are widely used insupport of high-end digital signal processors, or DSPs. We believe we have one of the broadest portfolios of 3.3 volt,high-speed asynchronous SRAMs. These products are designed to meet the stringent power and performance requirementsof networking and telecommunications applications, such as VoIP, cellular base stations, DSL line cards and modems.12 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe currently offer asynchronous SRAM products with a variety of storage densities between 1 megabit and 8megabits and random access times ranging from 7 nanoseconds to 15 nanoseconds. All of our asynchronousSRAMs operate at 3.3 volts.Low Latency DRAM ProductsOur low latency DRAM family fills an under-served market segment between commodity DRAMs and FastSRAMs. Offering moderate density, moderate speed and moderate cost, LLDRAM technology gives system designers amiddle choice when commodity DRAM performance is insufficient but Fast SRAM performance is unnecessary.LLDRAMs offer one-third the latency of commodity DRAMs and four times the density of Fast SRAMs, givingnetworking equipment designers another tool for solving difficult data management problems.Our current LLDRAM portfolio includes both 288 megabit and 576 megabit devices that are capable of speeds ofup to 533 MHz, and that operate on a 1.8 volt power supply and support both 1.8 volt and 1.5 volt interfaces. They areavailable in five distinct configurations including common I/O and separate I/O types and data bus widths of x36, x18and x9. These devices serve as an alternate source for users of a popular, functionally equivalent device from acompeting vendor. We plan to expand our LLDRAM portfolio later in 2015 with the introduction of 1.25 Gigabit devicescapable of speeds of up to 800 MHz, that operate on a 1.5 volt power supply and support 1.2 volt and 1.0 volt interfaces,and that will be available in common I/O configurations with data bus widths of x36 and x18.Bandwidth Engine ProductsThe serial I/O interface and high transaction rate and data bandwidth capability of our Bandwidth Engine products,along with their ability to perform atomic read-modify-write operations, provide a level of performance well-suited for thenext generation of high-speed networking systems.The Bandwidth Engine products are 576 megabit devices that support SerDes speeds of up to 15 Gb/s pertransceiver. They are capable of performing in excess of 4 billion transactions per second, and can achieve sustained databandwidth of up to 400 Gb/s (200 Gb/s input, 200 Gb/s output) and can support four different SerDes lane configurations.CustomersOur primary sales and marketing strategy is to achieve design wins with leading OEM’s in the networking andtelecommunications markets and the other markets we serve. The following is a representative list of our OEM customersthat directly or indirectly purchased more than $600,000 of our products in the fiscal year ended March 31, 2015:Alcatel-Lucent BAE Systems Cisco SystemsGeneral Dynamics Honeywell Huawei TechnologiesIBM Rockwell ZTE Many of our OEM customers use contract manufacturers to assemble their equipment. Accordingly, a significantpercentage of our net revenues is derived from sales to these contract manufacturers and to consignment warehouses whopurchase products from us for use by contract manufacturers. In addition, we sell our products to OEM customersindirectly through domestic and international distributors.13 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn the case of sales of our products to distributors and consignment warehouses, the decision to purchase ourproducts is typically made by the OEM customers. In the case of contract manufacturers, OEM customers typicallyprovide a list of approved products to the contract manufacturer, which then has discretion whether or not to purchase ourproducts from that list.Direct sales to contract manufacturers and consignment warehouses accounted for 33.1%, 37.5% and 42.0% of ournet revenues for fiscal 2015, 2014 and 2013, respectively. Sales to foreign and domestic distributors accounted for58.7%, 50.0% and 47.6% of our net revenues for fiscal 2015, 2014 and 2013, respectively.The following direct customers accounted for 10% or more of our net revenues in one or more of the followingperiods: Fiscal Year Ended March 31, 2015 2014 2013 Contract manufacturers and consignment warehouses: SMART Modular Technologies 5.2 %14.4 %14.4 % Flextronics Technology 8.1 11.9 10.2 Sanmina 12.6 8.5 7.1 Distributors: Avnet Logistics 35.2 30.3 26.5 Nexcomm 12.3 10.2 10.8 Alcatel-Lucent was our largest customer in fiscal 2015 and 2014. Alcatel-Lucent purchases products directly fromus and through contract manufacturers and distributors. Based on information provided to us by Alcatel-Lucent’scontract manufacturers and our distributors, purchases by Alcatel-Lucent represented approximately 25%, 19% and 12%of our net revenues in fiscal 2015, 2014 and 2013, respectively. Cisco Systems, historically our largest OEM customer,purchases our products primarily through its consignment warehouses, and also purchases some products through itscontract manufacturers and directly from us. Based on information provided to us by Cisco Systems' consignmentwarehouses and contract manufacturers, purchases by Cisco Systems represented approximately 13%, 19% and 29% ofour net revenues in fiscal 2015, 2014 and 2013, respectively. To our knowledge, none of our other OEM customersaccounted for more than 10% of our net revenues in any of these periods.Sales, Marketing and Technical SupportWe sell our products primarily through our worldwide network of independent sales representatives anddistributors. As of March 31, 2015, we employed 18 sales and marketing personnel, and were supported by over 200independent sales representatives. We believe that our relationship with our U.S. distributor, Avnet, puts us in a strongposition to address the Very Fast SRAM and LLDRAM memory markets in the United States. We currently have regionalsales offices located in Canada, China, Hong Kong, Israel and the United States. We believe this international coverageallows us to better serve our distributors and OEM customers by providing them with coordinated support. We believethat our customers' purchasing decisions are based primarily on product performance, availability, features, quality,reliability, price, manufacturing flexibility and service. Many of our OEM customers have had long-term relationshipswith us based on our success in meeting these criteria.Our sales are generally made pursuant to purchase orders received between one and six months prior to thescheduled delivery date. Because industry practice allows customers to reschedule or cancel orders on relatively14 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsshort notice, these orders are not firm and hence we believe that backlog is not a good indicator of our future sales. Wetypically provide a warranty of up to 36 months on our products. Liability for a stated warranty period is usually limitedto replacement of defective products.Our marketing efforts are focused on increasing brand name awareness and providing solutions that address ourcustomers' needs. Key components of our marketing efforts include maintaining an active role in industry standardscommittees, such as the JEDEC Solid State Technology Association (formerly the Joint Electron Device EngineeringCouncil), or JEDEC, which is responsible for establishing detailed specifications that can be utilized in future systemdesigns. We believe that our participation in and sponsorship of numerous proposals within these committees haveincreased our profile among leading manufacturers in the networking and telecommunications segment of the Very FastSRAM market. Our marketing group also provides technical, strategic and tactical sales support to our direct salespersonnel, sales representatives and distributors. This support includes in-depth product presentations, datasheets,application notes, simulation models, sales tools, marketing communications, marketing research, trademarkadministration and other support functions.We emphasize customer service and technical support in an effort to provide our OEM customers with theknowledge and resources necessary to successfully use our products in their designs. Our customer service organizationincludes a technical team of applications engineers, technical marketing personnel and, when required, product designengineers. We provide customer support throughout the qualification and sales process and continue providing follow-upservice after the sale of our products and on an ongoing basis. In addition, we provide our OEM customers withcomprehensive datasheets, application notes and reference designs and access to our FPGA controller IP for use in theirproduct development.ManufacturingWe outsource our wafer fabrication, assembly and wafer sort testing, which enables us to focus on our designstrengths, minimize fixed costs and capital expenditures and gain access to advanced manufacturing technologies. Ourengineers work closely with our outsource partners to increase yields, reduce manufacturing costs, and help assure thequality of our products.Currently, all of our wafers are manufactured by TSMC and Powerchip under individually negotiated purchaseorders. We do not currently have a long-term supply contract with either of these foundries, and, therefore, neither of themis obligated to manufacture products for us for any specified period, in any specified quantity or at any specified price,except as may be provided in a particular purchase order. Our future success depends in part on our ability to securesufficient capacity at TSMC, Powerchip or other independent foundries to supply us with the wafers we require.Our newest, leading edge SRAM and Bandwidth Engine products are manufactured using 40 nanometer processtechnology at TSMC. The majority of our current SRAM products are manufactured using 0.13 micron, 90 nanometer and65 nanometer process technologies on 300 millimeter wafers at TSMC. Our LLDRAM production at Powerchip uses 72nanometer and 63 nanometer process technologies. On-going development programs are underway to extend, expandand/or cost reduce most our product families.Our master die methodology enables multiple product families, and variations thereof, to be manufactured from asingle mask set. As a result, based upon the way available die from a wafer are metalized, wire bonded, packaged andtested, we can create a number of different products. The manufacturing process consists of two phases, the first of whichtakes approximately eight to twelve weeks and results in wafers that have the potential to yield multiple products within agiven product family. After the completion of this phase, the wafers are stored pending customer orders. Once we receiveorders for a particular product, we perform the second phase, consisting15 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsof final wafer processing, assembly, burn-in and test, which takes approximately four to eight weeks to complete. Thistwo-step manufacturing process enables us to significantly shorten our product lead times, providing flexibility forcustomization and to increase the availability of our products.All of our manufactured wafers are tested for electrical compliance and most are packaged at AdvancedSemiconductor Engineering, or ASE, which is located in Taiwan. Our test procedures require that all of our products besubjected to accelerated burn-in and extensive functional electrical testing which is performed at our Taiwan and U.S. testfacilities.Research and DevelopmentResearch and development expenses were $11.9 million in fiscal 2015, $13.1 million in fiscal 2014 and $11.5million in fiscal 2013. Our research and development staff includes engineering professionals with extensive experiencein the areas of SRAM design, DRAM design and systems level networking and telecommunications equipment design.The design process for our products is complex. As a result, we have made substantial investments in computer-aideddesign and engineering resources to manage our design process. Our current development focus is on the SigmaQuadSRAM family and our family of LLDRAM products.CompetitionOur existing competitors include many large domestic and international companies, some of which havesubstantially greater resources, offer other types of memory and/or non-memory technologies and may have longerstanding relationships with OEM customers than we do. Unlike us, some of our principal competitors maintain their ownsemiconductor fabs, which may, at times, provide them with capacity, cost and technical advantages.Our principal competitors include Cypress Semiconductor, Integrated Silicon Solution, Micron and REC. Whilesome of our competitors offer a broad array of memory products and offer some of their products at lower prices than wedo, we believe that our focus on, and performance leadership in, low latency, high density Very Fast SRAMs provide uswith key competitive advantages.We believe that our ability to compete successfully in the rapidly evolving markets for memory products for thenetworking and telecommunications markets depends on a number of factors, including:·product performance, features, quality, reliability and price;·manufacturing flexibility, product availability and customer service throughout the lifetime of the product;·the timing and success of new product introductions by us, our customers and our competitors; and·our ability to anticipate and conform to new industry standards.We believe we compete favorably with our competitors based on these factors. However, we may not be able to competesuccessfully in the future with respect to any of these factors. Our failure to compete successfully in these or other areascould harm our business.The market for networking memory products is competitive and is characterized by technological change, decliningaverage selling prices and product obsolescence. Competition could increase in the future from existing competitors andfrom other companies that may enter our existing or future markets with solutions that may be less16 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscostly or provide higher performance or more desirable features than our products. This increased competition may resultin price reductions, reduced profit margins and loss of market share.In addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures aswell as new forms of DRAM and other new memory technologies. Because we have limited experience developing ICproducts other than Very Fast SRAMs and LLDRAMs, any efforts by us to introduce new products based on a newmemory technology may not be successful and, as a result, our business may suffer.Intellectual PropertyOur ability to compete successfully depends, in part, upon our ability to protect our proprietary technology andinformation. We rely on a combination of patents, copyrights, trademarks, trade secret laws, non-disclosure and othercontractual arrangements and technical measures to protect our intellectual property. We currently hold 23 United Statespatents and have 12 patent applications pending. We do not consider our existing patents to be materially important toour business, and we cannot assure you that any patents will be issued as a result of our pending applications or that anypatents issued will be valuable to our business. We believe that factors such as the technological and creative skills of ourpersonnel and the success of our ongoing product development efforts are more important than our patent portfolio inmaintaining our competitive position. We generally enter into confidentiality or license agreements with our employees,distributors, customers and potential customers and limit access to our proprietary information. Our intellectual propertyrights, if challenged, may not be upheld as valid, may not be adequate to prevent misappropriation of our technology ormay not prevent the development of competitive products. Additionally, we may not be able to obtain patents or otherintellectual property protection in the future. Furthermore, the laws of certain foreign countries in which our products areor may be developed, manufactured or sold, including various countries in Asia, may not protect our products orintellectual property rights to the same extent as do the laws of the United States and thus make the possibility of piracyof our technology and products more likely in these countries.The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights,which have resulted in significant and often protracted and expensive litigation. We or our foundry from time to time arenotified of claims that we may be infringing patents or other intellectual property rights owned by third parties. We haverecently been involved in patent infringement litigation. See Item 3. Legal Proceedings. We have been subject to otherintellectual property claims in the past and we may be subject to additional claims and litigation in the future. Litigationby or against us relating to allegations of patent infringement or other intellectual property matters could result insignificant expense to us and divert the efforts of our technical and management personnel, whether or not such litigationresults in a determination favorable to us. In the event of an adverse result in any such litigation, we could be required topay substantial damages, cease the manufacture, use and sale of infringing products, expend significant resources todevelop non-infringing technology, discontinue the use of certain processes or obtain licenses to the infringingtechnology. Licenses may not be offered or the terms of any offered licenses may not be acceptable to us. If we fail toobtain a license from a third party for technology used by us, we could incur substantial liabilities and be required tosuspend the manufacture of products or the use by our foundry of certain processes.EmployeesAs of March 31, 2015, we had 138 full-time employees, including 74 engineers, of which 43 are engaged in researchand development and 37 have PhD or MS degrees, 18 employees in sales and marketing, ten employees in general andadministrative capacities and 68 employees in manufacturing. Of these employees, 57 are based in our Sunnyvale facilityand 60 are based in our Taiwan facility. We believe that our future success will depend in large part on our ability toattract and retain highly-skilled, engineering, managerial, sales and marketing personnel. Our17 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsemployees are not represented by any collective bargaining unit, and we have never experienced a work stoppage. Webelieve that our employee relations are good.Investor InformationYou can access financial and other information in the Investor Relations section of our website atwww.gsitechnology.com. We make available, on our website, free of charge, copies of our annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuantto Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically orotherwise furnishing it to the SEC.The charters of our Audit Committee, our Compensation Committee, and our Nominating and GovernanceCommittee, our code of conduct (including code of ethics provisions that apply to our principal executive officer,principal financial officer, controller, and senior financial officers) and our corporate governance guidelines are alsoavailable at our website under "Corporate Governance." These items are also available to any stockholder who requeststhem by calling (408) 331-8800. The contents of our website are not incorporated by reference in this report.The SEC maintains an Internet site that contains reports, proxy statements and other information regarding issuersthat file electronically with the SEC at www.sec.gov.Executive OfficersThe following table sets forth certain information concerning our executive officers as of June 1, 2015:NameAgeTitleLee-Lean Shu60 President, Chief Executive Officer and ChairmanDidier Lasserre50 Vice President, SalesDouglas Schirle60 Chief Financial OfficerBor-Tay Wu63 Vice President, Taiwan OperationsPing Wu58 Vice President, U.S. OperationsRobert Yau62 Vice President, Engineering, Secretary and Director Lee-Lean Shu co-founded our company in March 1995 and has served as our President and Chief Executive Officerand as a member of our Board of Directors since inception. Since October 2000, Mr. Shu has also served as Chairman ofour Board. From January 1995 to March 1995, Mr. Shu was Director, SRAM Design at Sony MicroelectronicsCorporation, a semiconductor company and a subsidiary of Sony Corporation, and from July 1990 to January 1995, hewas a design manager at Sony Microelectronics Corporation. Didier Lasserre has served as our Vice President, Sales since July 2002. From November 1997 to July 2002,Mr. Lasserre served as our Director of Sales for the Western United States and Europe. From July 1996 to October 1997,Mr. Lasserre was an account manager at Solectron Corporation, a provider of electronics manufacturing services. FromJune 1988 to July 1996, Mr. Lasserre was a field sales engineer at Cypress Semiconductor Corporation, a semiconductorcompany.18 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Douglas Schirle has served as our Chief Financial Officer since August 2000. From June 1999 to August 2000,Mr. Schirle served as our Corporate Controller. From March 1997 to June 1999, Mr. Schirle was the Corporate Controllerat Pericom Semiconductor Corporation, a provider of digital and mixed signal integrated circuits. From November 1996to February 1997, Mr. Schirle was Vice President, Finance for Paradigm Technology, a manufacturer of SRAMs, and fromDecember 1993 to October 1996, he was the Controller for Paradigm Technology. Mr. Schirle was formerly a certifiedpublic accountant. Bor-Tay Wu has served as our Vice President, Taiwan Operations since January 1997. From January 1995 toDecember 1996, Mr. Wu was a design manager at Atalent, an IC design company in Taiwan. Ping Wu has served as our Vice President, U.S. Operations since September 2006. He served in the same capacity fromFebruary 2004 to April 2006. From April 2006 to August 2006, Mr. Wu was Vice President of Operations at QPixelTechnology, a semiconductor company. From July 1999 to January 2004, Mr. Wu served as our Director of Operations.From July 1997 to June 1999, Mr. Wu served as Vice President of Operations at Scan Vision, a semiconductormanufacturer. Robert Yau co-founded our company in March 1995 and has served as our Vice President, Engineering and as amember of our Board of Directors since inception. From December 1993 to February 1995, Mr. Yau was design managerfor specialty memory devices at Sony Microelectronics Corporation. From 1990 to 1993, Mr. Yau was design manager atMOSEL/VITELIC, a semiconductor company. 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 ourbusiness operations. You should also refer to other information contained in this report, including our consolidatedfinancial statements and related notes.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 varyin the future. For example, in the twelve fiscal quarters ended March 31, 2015, we recorded net revenues of as much as$17.5 million and as little as $12.8 million and quarterly operating income of as much as $1.5 million and, in sevenquarters, operating losses, including the operating loss of $3.6 million in the quarter ended March 31, 2014. We thereforebelieve 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. In futureperiods, we may not have any revenue growth, or our revenues could decline. Furthermore, if our operating expensesexceed our expectations, our financial performance could be adversely affected. Factors that may affect periodic operatingresults in the future include:·our ability to anticipate and conform to new industry standards.·unpredictability of the timing and size of customer orders, since most of our customers purchase ourproducts on a purchase order basis rather than pursuant to a long-term contract;·changes in our customers' inventory management practices;19 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents·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, losepotential 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 announcementsand pricing changes of our competitors;·fluctuations in our quarterly operating expenses due to substantial litigation-related expenses in somequarters; and·our ability to address technology issues as they arise, improve our products' functionality and expand ourproduct offerings.Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future. We will notbe able to adjust our spending quickly if our revenues fall short of our expectations. If this were to occur, our operatingresults would be harmed. If our operating results in future quarters fall below the expectations of market analysts andinvestors, the price of our common stock could fall.Our two largest OEM customers account for a significant percentage of our net revenues. If either of thesecustomers, or any of our other major customers, reduces the amount they purchase or stop purchasing our products, ouroperating results will suffer.Alcatel-Lucent, currently our largest customer, purchases our products directly from us and through contractmanufacturers and distributors. Purchases by Alcatel-Lucent represented approximately 25%, 19% and 12% of our netrevenues in fiscal 2015, 2014 and 2013, respectively. Cisco Systems, historically our largest OEM customer, purchasesour products through its consignment warehouses and contract manufacturers and directly from us. Purchases by CiscoSystems represented approximately 13%, 19% and 29% of our net revenues in fiscal 2015, 2014 and 2013, respectively.We expect that our operating results in any given period will continue to depend significantly on orders from our keyOEM customers, particularly Alcatel-Lucent and Cisco Systems, and our future success is dependent to a large degree onthe business success of these OEMs over which we have no control. We do not have long-term contracts with Alcatel-Lucent, Cisco Systems or any of our other major OEM customers, distributors or contract manufacturers that obligate themto purchase our products. We expect that future direct and indirect sales to Alcatel-Lucent and Cisco Systems willcontinue to fluctuate significantly on a quarterly basis and that such fluctuations may substantially affect our operatingresults in future periods. If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers insufficient quantities, our business could be harmed.We have incurred significant losses in prior periods and may incur losses in the future.We have incurred significant losses in prior periods. We incurred losses of $5.0 million and $6.2 million duringfiscal 2015 and 2014, respectively. Although we have operated profitably during nine of our last eleven fiscal years, therecan be no assurance that our Very Fast SRAMs will continue to receive broad market acceptance or that we will be able toachieve sustained revenue growth. Our failure to do so may result in additional losses in the future. In addition, ouroperating expenses over the past several years have included substantial litigation-related expenses, and we expect thatthese expenses will continue to be substantial over the next several quarters. Our expenses will also increase if we areable to expand our business. If our revenues do not grow to offset these expected expenses, our business will suffer.20 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe depend upon the sale of our Very Fast SRAMs for most of our revenues, and a downturn in demand for theseproducts 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 willrepresent the substantial majority of our revenues for the foreseeable future. Our business depends in large part uponcontinued demand for our products in the markets we currently serve, 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 toprove their high-performance and cost-effectiveness. We may not be able to sustain or increase our revenues from sales ofour products, particularly if the networking and telecommunications markets were to experience another significantdownturn in the future. Any decrease in revenues from sales of our products could harm our business more than it would ifwe offered a more diversified line of products.If we do not successfully develop new products to respond to rapid market changes due to changing technologyand evolving industry standards, particularly in the networking and telecommunications markets, our business will beharmed.If we fail to offer technologically advanced products and respond to technological advances and emergingstandards, we may not generate sufficient revenues to offset our development costs and other expenses, which will hurtour business. The development of new or enhanced products is a complex and uncertain process that requires the accurateanticipation of technological and market trends. In particular, the networking and telecommunications markets arerapidly 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 couldenable 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 limitedexperience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce newproducts 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 alternativetechnologies;·we may not have sufficient resources to develop or acquire new technologies or to introduce new productscapable of competing with future technologies;·new products that we develop may not successfully integrate with our end-users' products into which theyare 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 implementnew technologies; and·when introducing new or enhanced products, we may be unable to manage effectively the transition fromolder products.21 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe 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, wirelessbase stations and network access equipment used in the highly cyclical networking and telecommunications markets. Weexpect that the networking and telecommunications markets will continue to be highly cyclical, characterized by periodsof rapid growth and contraction. Our business and our operating results are likely to fluctuate, perhaps quite severely, as aresult 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, ischaracterized by price erosion, rapid technological change, cyclical market patterns and intense foreign and domesticcompetition. 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 semiconductorfabrication facilities, which may provide them with capacity, cost and technical advantages over us. We cannot assureyou that we will be able to compete successfully against any of these competitors. Our ability to compete successfully inthis market depends on factors both within and outside of our control, including:·real or perceived imbalances in supply and demand of Very Fast SRAMs;·the rate at which OEMs incorporate our products into their systems;·the success of our customers' products;·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 andnew forms of DRAM, or the emergence of new memory technologies that could enable the development of products thatfeature higher performance, lower cost or lower power capabilities. Additionally, the trend toward incorporating SRAMinto other chips in the networking and telecommunications markets has the potential to reduce future demand for VeryFast SRAM products. There can be no assurance that we will be able to compete successfully in the future. Our failure tocompete successfully in these or other areas could harm our business. 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 theproducts, and we expect this trend to continue. A reduction in overall average selling prices of our products could resultin reduced revenues and lower gross margins. Our ability to increase our net revenues and maintain our gross marginsdespite a decline in the average selling prices of our products will depend on a variety of factors, including our ability tointroduce lower cost versions of our existing products, increase unit sales volumes of these products, and introduce newproducts 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, negotiatereduced purchase prices from our independent foundries and our independent assembly and test vendors, and successfullymanage our manufacturing and subcontractor relationships. Because we22 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsdo not operate our own wafer foundry or assembly facilities, we may not be able to reduce our costs as rapidly ascompanies that operate their own foundries or facilities.Global economic and market conditions may adversely affect our business, financial condition andresults of operations.We sell our products to end customers both in the United States and internationally. We also rely heavily on oursuppliers in Asia. We are therefore susceptible to adverse domestic and international economic and market conditions. Inrecent years, turmoil in global financial markets and economic conditions has impacted credit availability, consumerspending and capital expenditures, including expenditures for networking and telecommunications equipment. Weakness in global networking and telecommunications markets, particularly in Asia, has continued to adversely impactour revenues in recent quarters. Slowness in economic growth, domestically and in our key markets, uncertaintyregarding 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 businesswill 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 aredependent upon supply from these sources to meet our needs. If any of these suppliers cannot provide components on atimely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business willsuffer. Most significantly, we obtain wafers for our Very Fast SRAM products from a single foundry, TSMC, and most ofthem are packaged at ASE. Wafers for our LLDRAM products are obtained exclusively from Powerchip. If we are unableto obtain an adequate supply of wafers from TSMC or Powerchip or find alternative sources in a timely manner, we will beunable to fulfill our customer orders and our operating results will be harmed. We do not have supply agreements withTSMC, Powerchip, ASE or any of our other independent assembly and test suppliers, and instead obtain manufacturingservices and products from these suppliers on a purchase-order basis. Our suppliers, including TSMC and Powerchip, haveno obligation to supply products or services to us for any specific product, in any specific quantity, at any specific priceor for any specific time period. As a result, the loss or failure to perform by any of these suppliers could adversely affectour business and operating results.Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted bynatural disaster or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminatedeliveries to us for any other reason, we likely will not be able to enforce fulfillment of any delivery commitments and wewould have to identify and qualify acceptable replacements from alternative sources of supply. In particular, if TSMC isunable to supply us with sufficient quantities of wafers to meet all of our requirements, we would have to allocate ourproducts among our customers, which would constrain our growth and might cause some of them to seek alternativesources of supply. Since the manufacturing of wafers and other components is extremely complex, the process ofqualifying new foundries and suppliers is a lengthy process and there is no assurance that we would be able to find andqualify another supplier without materially adversely affecting our business, financial condition and results of operationsBecause we outsource our wafer manufacturing and independent wafer foundry capacity is limited, we may berequired 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 purchaseorder basis. In order to secure future wafer supply from TSMC or Powerchip or from other independent foundries, we maybe required to enter into various arrangements with them, which could include:23 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents·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.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 beobligated to use all of that capacity or incur penalties. These penalties may be expensive and could harm our financialresults.If we are unable to offset increased wafer fabrication costs by increasing the average selling prices of ourproducts, our gross margins will suffer.If there is a significant upturn in the networking and telecommunications markets that results in increased demandfor our products and competing products, the available supply of wafers may be limited. As a result, we could be requiredto obtain additional manufacturing capacity in order to meet increased demand. Securing additional manufacturingcapacity may cause our wafer fabrication costs to increase. If we are unable to offset these increased costs by increasingthe 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 indirectdistribution channels.A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate ourproducts into end products for OEMs. For example, in fiscal 2015, 2014 and 2013, our distributor Avnet Logisticsaccounted for 35.2%, 30.3% and 26.5%, respectively, of our net revenues. Avnet Logistics and our other existingdistributors may choose to devote greater resources to marketing and supporting the products of other companies. Sincewe sell through multiple channels and distribution networks, we may have to resolve potential conflicts between thesechannels. For example, these conflicts may result from the different discount levels offered by multiple channeldistributors to their customers or, potentially, from our direct sales force targeting the same equipment manufactureraccounts 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 toefficiently manage our resources to match market demand.Our financial results, quarterly product sales, trends and comparisons are affected by fluctuations in the buyingpatterns of the OEMs that purchase our products from our distributors. While we attempt to assist our distributors inmaintaining targeted stocking levels of our products, we may not consistently be accurate or successful. This processinvolves 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 agoing-forward basis. This could result in distributors returning unsold inventory to us, or in us not having sufficientinventory to meet the demand for our products. If we are not able to accurately predict sales through our distributors oreffectively manage our relationships with our distributors, our business and financial results will suffer.24 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsA small number of customers generally account for a significant portion of our accounts receivable in any period,and if any one of them fails to pay us, our financial position and operating results will suffer.At March 31, 2015, four customers accounted for 25%, 20%, 16% and 13% 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 theevaluation and calculation of our inventory reserve which management believes has been fully remediated. Should wehave inadequately remediated this material weakness or should we otherwise fail to maintain effective internal controlover financial reporting and disclosure controls and processes, our ability to report our financial condition and resultsof 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 endedDecember 31, 2013, certain errors were identified in the evaluation and calculation of our inventory write-down for thequarter and nine month period then ended that were the result of a material weakness in our internal control over financialreporting. 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 willnot be prevented or detected on a timely basis.During these closing and review procedures, our management determined that we had not designed and maintainedeffective controls over the review of supporting information to confirm the completeness and accuracy of our calculationsfor 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, itdid result in adjustments identified by our auditors as part of their quarterly review process, and require corrections afterour 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 providetimely and accurate financial information. Following the identification of the error in our third quarter financialstatements and the material weakness that gave rise to the error, our management implemented a remediation plan whichit believes fully remediated the material weakness. Should our remediation efforts prove to have been inadequate orshould we otherwise fail to maintain effective internal control over financial reporting and disclosure controls andprocedures, we could be unable to meet our reporting obligations accurately and on a timely basis. Inferior internalcontrols could also cause investors to lose confidence in our reported financial information, which could adversely affectthe trading price of our common stock.Our acquisition of companies or technologies could prove difficult to integrate, disrupt our business, dilutestockholder value and adversely affect our operating results.In August 2009, we consummated the acquisition of substantially all of the assets related to the SRAM memorydevice product line of Sony Corporation. We intend to supplement our internal development activities by seekingopportunities to make additional acquisitions or investments in companies, assets or technologies that we believe arecomplementary or strategic. Other than the Sony acquisition, we have not made any such acquisitions or investments, andtherefore our experience as an organization in making such acquisitions and investments is limited. In connection withfuture acquisitions or investments we may make, we face numerous risks, including:·difficulties in integrating operations, technologies, products and personnel;25 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents·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 litigationthat 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 ourcash, or to finance the transaction through debt or equity securities offerings, which may decrease our financial liquidityor dilute our stockholders and affect the market price of our stock. As a result, if we fail to properly evaluate and executeacquisitions 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 usto incur significant costs.In recent years, there has been significant litigation in the semiconductor industry involving patents and otherintellectual property rights. We have recently been involved in protracted patent infringement litigation, and we couldbecome subject to additional claims or litigation in the future as a result of allegations that we infringe others' intellectualproperty rights or that our use of intellectual property otherwise violates the law. Claims that our products infringe theproprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturersagainst the alleged infringement. Any such litigation regarding intellectual property could result in substantial costs anddiversion of resources and could have a material adverse effect on our business, financial condition and results ofoperations. Similarly, changing our products or processes to avoid infringing the rights of others may be costly orimpractical. 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 reasonableterms 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, wemay not be able in any or every instance to settle an alleged patent infringement claim through a cross-licensingarrangement in part because we have a more limited patent portfolio than many of our competitors. If a successful claim ismade against us or any of our customers and a license is not made available to us on commercially reasonable terms or weare required to pay substantial damages or awards, our business, financial condition and results of operations would bematerially adversely affected.26 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur 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 acombination of patent, trade secret, copyright and trademark laws and non-disclosure and other contractual agreements toprotect 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 thesteps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws maynot protect our proprietary rights as fully as in the United States. Our attempts to enforce our intellectual property rightscould be time consuming and costly. We are currently involved in litigation to enforce our intellectual property rightsand to protect our trade secrets. Additional litigation of this type may be necessary in the future. Any such litigationcould result in substantial costs and diversion of resources. If competitors are able to use our technology without ourapproval or compensation, our ability to compete effectively could be harmed.We may experience difficulties in transitioning to smaller geometry process technologies and other moreadvanced manufacturing process technologies, which may result in reduced manufacturing yields, delays in productdeliveries and increased expenses.In order to remain competitive, we expect to continue to transition the manufacture of our products to smallergeometry process technologies. This transition will require us to migrate to new manufacturing processes for our productsand redesign certain products. The manufacture and design of our products is complex, and we may experience difficultyin transitioning to smaller geometry process technologies or new manufacturing processes. These difficulties could resultin reduced manufacturing yields, delays in product deliveries and increased expenses. We are dependent on ourrelationships with TSMC and Powerchip to transition successfully to smaller geometry process technologies and to moreadvanced manufacturing processes. We cannot assure you that TSMC or Powerchip will be able to effectively manage thetransition or that we will be able to maintain our relationship with them. If we or TSMC or Powerchip experiencesignificant delays in this transition or fail to implement these transitions, our business, financial condition and results ofoperations could be materially and adversely affected.Manufacturing process technologies are subject to rapid change and require significant expenditures for researchand development.We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improveperformance and reduce costs. Historically, these migrations to new manufacturing processes have resulted in significantinitial design and development costs associated with pre-production mask sets for the manufacture of new products withsmaller geometry process technologies. For example, in fiscal 2014, we incurred $809,000 and $648,000, respectively,in research and development expense associated with pre-production mask sets which were not later used in production aspart of the transition to our new 40 nanometer SRAM process technology and 63 nanometer DRAM process technology. We will incur similar expenses in the future as we continue to transition our products to smaller geometry processes. Thecosts inherent in the transition to new manufacturing process technologies will adversely affect our operating results andour gross margin.Our products are complex to design and manufacture and could contain defects, which could reduce revenues orresult in claims against us.We develop complex products. Despite testing by us and our OEM customers, design or manufacturing errors maybe found in existing or new products. These defects could result in a delay in recognition or loss of revenues, loss ofmarket 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 development27 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsefforts, result in a loss of market acceptance of our products and harm our relationships with our OEM customers. OurOEM 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 productsmay not be fully recoverable from TSMC or our other suppliers. For example, in the quarter ended December 31, 2005, weincurred a charge of approximately $900,000 related to the write-off of inventory resulting from an error in the assemblyprocess 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 orselling their products.Our products are used as components in our OEM customers' products. For example, Cisco Systems, historically ourlargest OEM customer, incorporates our products in a number of its networking routers and switches. Accordingly,demand for our products is subject to factors affecting the ability of our OEM customers to successfully introduce andmarket their products, including:·capital spending by telecommunication and network service providers and other end-users who purchaseour 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 propertyrights.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, theirdecisions to use our products often require significant expenditures by us without any assurance of success, and oftenprecede volume sales, if any, by a year or more. If an OEM customer decides at the design stage not to incorporate ourproducts into their products, we will not have another opportunity for a design win with respect to that customer's productfor many months or years, if at all. Our sales cycle can take up to 24 months to complete, and because of this lengthy salescycle, we may experience a delay between increasing expenses for research and development and our sales and marketingefforts and the generation of volume production revenues, if any, from these expenditures. Moreover, the value of anydesign win will largely depend on the commercial success of our OEM customers' products. There can be no assurancethat we will continue to achieve design wins or that any design win will result in future revenues.28 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAny 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 noticewithout incurring a significant penalty. Any significant cancellations or deferrals in the future could materially andadversely affect our business, financial condition and results of operations. Cancellations or deferrals could cause us tohold excess inventory, which could reduce our profit margins, increase product obsolescence and restrict our ability tofund our operations. We generally recognize revenue upon shipment of products to a customer. If a customer refuses toaccept shipped products or does not pay for these products, we could miss future revenue projections or incur significantcharges against our income, which could materially and adversely affect our operating results.If our business grows, such growth may place a significant strain on our management and operations and, as aresult, our business may suffer.We are endeavoring to expand our business, and any growth that we are successful in achieving could place asignificant strain on our management systems, infrastructure and other resources. To manage such growth of ouroperations and resulting increases in the number of our personnel, we will need to invest the necessary capital to continueto 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 nothave sufficient administrative staff to support our operations. For example, we currently have only five employees in ourfinance department in the United States, including our Chief Financial Officer. Furthermore, our officers have limitedexperience in managing large or rapidly growing businesses. If our management fails to respond effectively to changes inour business, our business may suffer.Our international business exposes us to additional risks.Products shipped to destinations outside of the United States accounted for 66.2%, 69.2% and 68.8% of our netrevenues in fiscal 2015, 2014 and 2013, respectively. Moreover, a substantial portion of our products is manufacturedand tested in Taiwan. We intend to continue expanding our international business in the future. Conducting businessoutside 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 andregulations; ·legal uncertainties regarding taxes, tariffs, quotas, export controls, competition, export licenses and othertrade barriers;·potential political and economic instability in, or foreign conflicts that involve or affect, the countries inwhich we, our customers and our suppliers are located; ·difficulties in collecting accounts receivable and longer accounts receivable payment cycles;·difficulties and costs of staffing and managing personnel, distributors and representatives across differentgeographic areas and cultures, including assuring compliance with the U. S. Foreign Corrupt Practices Actand other U. S. and foreign anti-corruption laws;·limited protection for intellectual property rights in some countries; and29 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents·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 expensesis denominated in currencies other than the U.S. dollar, primarily the New Taiwanese dollar. As a result, appreciation ordepreciation of other currencies in relation to the U.S. dollar could result in transaction gains or losses that could impactour operating results. We do not currently engage in currency hedging activities to reduce the risk of financial exposurefrom fluctuations in foreign exchange rates.TSMC and Powerchip, as well as our other independent suppliers and many of our OEM customers haveoperations in the Pacific Rim, an area subject to significant earthquake risk and adverse consequences related to thepotential outbreak of contagious diseases such as the H1N1 Flu.The foundries that manufacture our Fast SRAM and LLDRAM products, TSMC and Powerchip, and all of theprincipal independent suppliers that assemble and test our products are located in Taiwan. Many of our customers are alsolocated in the Pacific Rim. The risk of an earthquake in these Pacific Rim locations is significant. The occurrence of anearthquake or other natural disaster near the fabrication facilities of TSMC or our other independent suppliers could resultin damage, power outages and other disruptions that impair their production and assembly capacity. Any disruptionresulting from such events could cause significant delays in the production or shipment of our products until we are ableto 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.The outbreak of SARS in 2003 curtailed travel to and from certain countries, primarily in the Asia-Pacific region,and limited travel within those countries. If there were to be another outbreak of a contagious disease, such as SARS or theH1N1 Flu, that significantly affected the Asia-Pacific region, the operations of our key suppliers could be disrupted. Inaddition, our business could be harmed if such an outbreak resulted in travel being restricted, as it was during parts of2003, or if it adversely affected the operations of our suppliers or our OEM customers or the demand for our products orour OEM customers' products.Changes in Taiwan's political, social and economic environment may affect our business performance.Because much of the manufacturing and testing of our products is conducted in Taiwan, our business performancemay be affected by changes in Taiwan's political, social and economic environment. For example, any political instabilityresulting from the relationship among the United States, Taiwan and the People's Republic of China could damage ourbusiness. Moreover, the role of the Taiwanese government in the Taiwanese economy is significant. Taiwanese policiestoward economic liberalization, and laws and policies affecting technology companies, foreign investment, currencyexchange 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 beharmed and our stock price could decline.We are substantially dependent on the continued services and performance of our senior management and otherkey personnel.Our future success is substantially dependent on the continued services and continuing contributions of our seniormanagement who must work together effectively in order to design our products, expand our business, increase ourrevenues and improve our operating results. Members of our senior management team have long-standing and importantrelationships with our key customers and suppliers. The loss of services of Lee-Lean Shu, our President and ChiefExecutive Officer, Robert Yau, our Vice President of Engineering, any other executive officer or other key employeecould significantly delay or prevent the achievement of our development and strategic30 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsobjectives. We do not have employment contracts with, nor maintain key person insurance on, any of our executiveofficers.If we are unable to recruit or retain qualified personnel, our business and product development efforts could beharmed.We must continue to identify, recruit, hire, train, retain and motivate highly skilled technical, managerial, sales andmarketing and administrative personnel. Competition for these individuals is intense, and we may not be able tosuccessfully recruit, assimilate or retain sufficiently qualified personnel. We may encounter difficulties in recruiting andretaining a sufficient number of qualified engineers, which could harm our ability to develop new products and adverselyimpact our relationships with existing and future end-users at a critical stage of development. The failure to recruit andretain necessary technical, managerial, sales, marketing and administrative personnel could harm our business and ourability to obtain new OEM customers and develop new products.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 additionalfinancing on favorable terms, if at all. If we cannot raise funds on acceptable terms, if and when needed, we may not beable to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures orunanticipated 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 haverights, preferences or privileges senior to those of our common stock.Some of our products are incorporated into advanced military electronics, and changes in internationalgeopolitical 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, as the currentconflict in Afghanistan winds down, demand for our products for use in military applications may decrease, and ouroperating results could suffer. Domestic budget considerations may also adversely affect our operating results. Forexample, if governmental appropriations for military purchases of electronic devices that include our products arereduced, our revenues will likely decline.Our operations involve the use of hazardous and toxic materials, and we must comply with environmental lawsand 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 humanexposure to hazardous and toxic materials. If we were to violate or become liable under environmental laws in the futureas a result of our inability to obtain permits, human error, accident, equipment failure or other causes, we could be subjectto fines, costs, or civil or criminal sanctions, face property damage or personal injury claims or be required to incursubstantial investigation or remediation costs, which could be material, or experience disruptions in our operations, anyof which could have a material adverse effect on our business. In addition, environmental laws could become morestringent over time imposing greater compliance costs and increasing risks and penalties associated with violations,which could harm our business.We also face increasing complexity in our product design as we adjust to new and future requirements relating tothe materials composition of our products, including the restrictions on lead and other hazardous substances applicable tospecified electronic products placed on the market in the European Union (Restriction on the Use of31 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHazardous Substances Directive 2002/95/EC, also known as the RoHS Directive). We also expect that our operations willbe affected by other new environmental laws and regulations on an ongoing basis. Although we cannot predict theultimate impact of any such new laws and regulations, they will likely result in additional costs, and could require that wechange the design and/or manufacturing of our products, any of which could have a material adverse effect on ourbusiness.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 ofwhich are beyond our control, including:·actual or anticipated declines in operating results;·changes in financial estimates or recommendations by securities analysts;·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 technologicalinnovations, contracts, acquisitions, strategic relationships, joint ventures, capital commitments or otherevents;·changes in industry estimates of demand for Very Fast SRAM products;·the gain or loss of significant orders or customers;·recruitment or departure of key personnel; and·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 experiencedextreme price fluctuations, which have often been unrelated to the operating performance of affected companies. Themarket price of our common stock might experience significant fluctuations in the future, including fluctuationsunrelated to our performance. These fluctuations could materially adversely affect our business relationships, our abilityto obtain future financing on favorable terms or otherwise harm our business. In addition, in the past, securities classaction litigation has often been brought against a company following periods of volatility in the market price of itssecurities. This risk is especially acute for us because the extreme volatility of market prices of technology companies hasresulted 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 divertmanagement'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 anddisadvantages to us and our continuing stockholders. From November 2008 through March 2015 we repurchased and retired an aggregate of 8,728,532 shares of ourcommon stock at a total cost of $46.5 million, including 3,846,153 shares repurchased at a total cost of $25 millionpursuant to a modified “Dutch auction” self-tender offer that we completed in August 2014 and additional sharesrepurchased in the open market pursuant to our stock repurchase program. At March 31, 2015, we had outstandingauthorization from our Board of Directors to purchase up to an additional $8.5 million of our 32 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscommon stock from time to time under our repurchase program. Although our Board has determined that theserepurchases are in the best interests of our stockholders, they expose us to certain risks including: ·the risks resulting from a reduction in the size of our “public float,” which is the number of shares of ourcommon stock that are owned by non-affiliated stockholders and available for trading in the securitiesmarkets, 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 commonstock in the future at a lower price per share than the prices we have paid in our tender offer and repurchaseprogram; and·the risk that the use of a portion of our cash reserves for this purpose has reduced, or may reduce, the amountof cash that would otherwise be available to pursue potential cash acquisitions or other strategic businessopportunities.Our executive officers, directors and entities affiliated with them hold a substantial percentage of our commonstock.As of May 31, 2015, our executive officers, directors and entities affiliated with them beneficially ownedapproximately 31% of our outstanding common stock. As a result, these stockholders will be able to exercise substantialinfluence over, and may be able to effectively control, matters requiring stockholder approval, including the election ofdirectors and approval of significant corporate transactions, which could have the effect of delaying or preventing a thirdparty from acquiring control over or merging with us.The provisions of our charter documents might inhibit potential acquisition bids that a stockholder might believeare 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 Directorscan fix the price, rights, preferences, privileges and restrictions of the preferred stock without any further vote or action byour stockholders. The issuance of shares of preferred stock might delay or prevent a change in control transaction. As aresult, the market price of our common stock and the voting and other rights of our stockholders might be adverselyaffected. The issuance of preferred stock might result in the loss of voting control to other stockholders. We have nocurrent plans to issue any shares of preferred stock. Our charter documents also contain other provisions, which mightdiscourage, delay or prevent a merger or acquisition, including:·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 call a special meeting of stockholders; and·stockholders must comply with advance notice requirements to nominate directors or submit proposals forconsideration 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 inresponse to actual or rumored takeover attempts. These provisions might also prevent changes in our management.33 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 1B. Unresolved Staff CommentsNone. Item 2. PropertiesOur executive offices, our principal administration, marketing and sales operations and a portion of our research anddevelopment operations are located in a 44,277 square foot facility in Sunnyvale, California, which we purchased infiscal 2010. In addition, we occupy approximately 25,250 square feet in a facility located in Hsin Chu, Taiwan under alease expiring in August 2017. This facility supports our manufacturing activities. We believe that both our Sunnyvaleand Taiwan facilities are adequate for our needs for the foreseeable future. We also lease space in Georgia and Texas. Theaggregate annual gross rent for our leased facilities was approximately $354,000 in fiscal 2015. Item 3. Legal ProceedingsIn March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against us inthe United States District Court for the District of Minnesota alleging that our products, including our SigmaDDR andSigmaQuad families of Very Fast SRAMs, infringe five patents held by Cypress. The complaint sought unspecifieddamages for past infringement and a permanent injunction against future infringement.On June 10, 2011, Cypress filed a complaint against us with the United States International Trade Commission (the“ITC”). The ITC complaint, as subsequently amended, alleged infringement by GSI of three of the five patents involvedin the District Court case and one additional patent and also alleged infringement by three of our distributors and 11 ofour customers who allegedly incorporate our SRAMs in their products. The ITC complaint sought a limited exclusionorder excluding the allegedly infringing SRAMs, and products containing them, from entry into the United States andpermanent orders directing GSI and the other respondents to cease and desist from selling or distributing such products inthe United States. On July 21, 2011, the ITC formally instituted an investigation in response to Cypress’s complaint. OnJune 7, 2013, the ITC announced that the full Commission had affirmed the determination of Chief Administrative LawJudge Charles E. Bullock that GSI’s SRAM devices, and products containing them, do not infringe the Cypress patentsand that Cypress had failed to establish the existence of a domestic industry that practices the patents. Moreover, theCommission reversed a portion of Judge Bullock’s determination with respect to the validity of the patents, finding theasserted claims of one of the patents to have been anticipated by prior art and, therefore, invalid. The Commissionordered the investigation terminated, and Cypress did not appeal the ruling.The Minnesota District Court case had been stayed pending the conclusion of the ITC proceeding. Following thetermination of the ITC proceeding, the stay was lifted. On May 1, 2013, Cypress filed an additional lawsuit in the UnitedStates District Court for the Northern District of California alleging infringement by our products of five additionalCypress patents. Like the Minnesota case, the complaint in the California lawsuit sought unspecified damages for pastinfringement and a permanent injunction against future infringement. We filed answers in both cases denying liabilityand asserting affirmative defenses. On August 7, 2013, the parties stipulated that the claims in the Minnesota case withrespect to three of the asserted patents would be dismissed without prejudice and that the claims with respect to theremaining two patents would be transferred to the Northern District of California and consolidated with the pendingCalifornia case. On August 20, 2013, the Court in the California case ordered the cases consolidated.On July 22, 2011, we filed a complaint against Cypress in the United States District Court for the Northern Districtof California. Our complaint alleged that Cypress had conducted an unlawful combination and conspiracy to monopolizethe market for certain high-performance SRAM devices, known as fast synchronous Quad Data Rate34 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents(or QDR) SRAMs and Double Data Rate (or DDR) SRAMs. The complaint alleged that the anti-competitive, collusiveand conspiratorial conduct of Cypress and certain co-conspirators violated Section 1 of the Sherman Act and alsoconstituted unlawful restraint of trade and unfair competition under applicable provisions of California law. Thecomplaint sought treble damages, in an amount to be determined at trial, a preliminary and permanent injunctionprohibiting the continuation of the unfair and illegal business practices and recovery of GSI’s attorneys’ fees and costs.On May 6, 2015, the Company and Cypress entered into a settlement agreement to resolve the patent infringementand antitrust litigation. Under the settlement agreement: ·Each of the parties agreed to dismiss its lawsuit with prejudice in consideration of the dismissal withprejudice of the lawsuit brought by the other party; and ·Each party agreed to release all claims against the other with respect to issues raised in the two lawsuits. The parties agreed that the settlement agreement was entered into to resolve disputed claims, and that each party deniesany liability to the other party. Item 4. Mine Safety DisclosuresNot applicable.35 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecuritiesMarket InformationOur common stock has traded on the Nasdaq Global Market under the symbol "GSIT" since our initial publicoffering on March 29, 2007. The following table sets forth, for the periods indicated, the high and low sales prices for ourcommon stock on such market. Fiscal Year Ended March 31, 2014HighLowFirst quarter$6.85 $5.53 Second quarter7.24 5.95 Third quarter7.40 6.25 Fourth quarter7.25 6.36 Fiscal Year Ended March 31, 2015 First quarter$7.15 $5.36 Second quarter6.62 4.91 Third quarter5.50 4.52 Fourth quarter5.90 4.87 Holders of Common StockOn May 29, 2015, the closing price of our common stock on the Nasdaq Global Market was $5.08, and there were36 holders of record of our common stock. Because many of such shares are held by brokers and other institutions onbehalf of stockholders, we are unable to estimate the total number of beneficial holders of our common stock representedby these record holders.Dividend PolicyWe have never declared or paid cash dividends on our common stock. The payment of dividends in the future willbe at the discretion of our Board of Directors. However, we currently intend to retain future earnings to finance the growthand development of our business, and we do not anticipate declaring or paying any cash dividends in the foreseeablefuture.Securities Authorized for Issuance under Equity Compensation PlansPlease see Part III, Item 12 of this report for information regarding securities authorized for issuance under ourequity compensation plans. Such information is incorporated by reference from our definitive proxy statement for our2015 annual meeting of stockholders.36 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIssuer Purchases of Equity SecuritiesOur Board of Directors has authorized us to repurchase, at management’s discretion, shares of our commonstock. On August 20, 2013, the Board increased the dollar value of shares that may be repurchased by $10 million. Underthe repurchase program, we may repurchase shares from time to time on the open market or in private transactions. Thespecific timing and amount of the repurchases will be dependent on market conditions, securities law limitations andother factors. The repurchase program may be suspended or terminated at any time without prior notice. Below issummary of the repurchases of our common stock made during the quarter ended March 31, 2015, all of which were madeunder our repurchase program. Value of SharesThat May Yet BeAverageRepurchasedSharesPrice perUnder thePeriodRepurchasedShareProgramBeginning approximate dollar value available to berepurchased as of December 31, 2014$11,408,859 January 1 to January 31, 2015271,326 $5.17 $10,004,912 February 1 to February 28, 2015194,690 $5.43 $8,946,881 March 1 to March 31, 201576,518 $5.81 $8,502,425 Total shares repurchased542,534 Ending approximate dollar value that may be repurchasedunder the program as of March 31, 2015$8,502,425 Item 6. Selected Financial DataYou should read the following selected consolidated financial data in conjunction with "Management's Discussionand Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the relatednotes included elsewhere in this report. The selected consolidated statement of operations data set forth below for thefiscal years ended March 31, 2015, 2014 and 2013 and the selected consolidated balance sheet data as of March 31, 2015and 2014 are derived from, and are qualified by reference to, our audited consolidated financial statements includedelsewhere in this report. The selected consolidated statement of operations data set forth below for the fiscal years endedMarch 31, 2012 and 2011 and the selected consolidated balance sheet data as of March 31, 2013, 2012 and 2011 arederived from audited consolidated financial statements not included in this report.37 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Fiscal Year Ended March 31, 2015 2014 2013 2012 2011 (In thousands, except per share amounts)Consolidated Statement of Operations Data: Net revenues $53,498 $58,579 $66,014 $82,540 $97,763 Cost of revenues 28,375 32,469 37,426 45,891 53,009 Gross profit 25,123 26,110 28,588 36,649 44,754 Operating expenses: Research and development 11,917 13,110 11,472 10,637 10,632 Selling, general and administrative 19,247 18,814 13,696 19,356 10,722 Total operating expenses 31,164 31,924 25,168 29,993 21,354 Income (loss) from operations (6,041) (5,814) 3,420 6,656 23,400 Interest and other income (expense), net 388 338 464 525 461 Income (loss) before income taxes (5,653) (5,476) 3,884 7,181 23,861 Provision (benefit) for income taxes (675) 713 38 425 4,985 Net income (loss) $(4,978) $(6,189) $3,846 $6,756 $18,876 Basic and diluted net income (loss) per shareavailable to common stockholders: Basic $(0.20) $(0.23) $0.14 $0.24 $0.67 Diluted $(0.20) $(0.23) $0.14 $0.23 $0.64 Weighted average shares used in per sharecalculations: Basic 25,029 27,505 27,124 28,497 28,013 Diluted 25,029 27,505 28,077 29,496 29,685 March 31, 2015 2014 2013 2012 2011 (In thousands)Consolidated Balance Sheet Data: Cash, cash equivalents and short-terminvestments $58,977 $80,932 $67,259 $58,678 $51,985 Working capital 66,230 90,670 86,619 82,684 80,035 Total assets 108,889 141,677 145,845 143,117 141,917 Total stockholders' equity 96,396 128,378 132,183 128,779 124,680 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains forward-looking statements that involve risks and uncertainties. Our actualresults could differ substantially from those anticipated in these forward-looking statements as a result of many factors,including those set forth under "Risk Factors" and elsewhere in this report. The following discussion should be readtogether with our consolidated financial statements and the related notes included elsewhere in this report.OverviewWe are a fabless semiconductor company that designs, develops and markets static random access memories, orSRAMs, that operate at speeds of less than 10 nanoseconds, which we refer to as Very Fast SRAMs, and low38 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentslatency 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 significantfluctuations, 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 Cisco Systems, historically ourlargest customer, and more recently to Alcatel-Lucent. We expect that future direct and indirect sales to these twocustomers will continue to fluctuate significantly on a quarterly basis. The worldwide financial crisis and the resultingeconomic impact on the end markets we serve have adversely impacted our financial results since the second half of fiscal2009, and we expect that the unsettled global economic environment will continue to affect our operating results infuture periods. However, with no debt, substantial liquidity and a history of positive cash flows from operations, webelieve we are in a better financial position than many other companies of our size.Revenues. Our revenues are derived primarily from sales of our Very Fast SRAM products. Sales to networking andtelecommunications OEMs accounted for 64% to 79% of our net revenues during our last three fiscal years. We also sellour products to OEMs that manufacture products for defense applications such as radar and guidance systems, forprofessional audio applications such as sound mixing systems, for test and measurement applications such as high-speedtesters, for automotive applications such as smart cruise control and voice recognition systems, and for medicalapplications 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 theproduct. Our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes ofexisting products and to introduce and sell new products with higher average selling prices in quantities sufficient tocompensate for the anticipated declines in selling prices of our more mature products. Although we expect the averageselling prices of individual products to decline over time, we believe that, over the next several quarters, our overallaverage selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price, higherdensity products. Our ability to increase unit sales volumes is dependent primarily upon increases in customer demandbut, particularly in periods of increasing demand, can also be affected by our ability to increase production through theavailability of increased wafer fabrication capacity from TSMC and Powerchip, our wafer suppliers, and our ability toincrease the number of good integrated circuit die produced from each wafer through die size reductions and yieldenhancement activities.We may experience fluctuations in quarterly net revenues for a number of reasons. Historically, orders on hand atthe beginning of each quarter are insufficient to meet our revenue objectives for that quarter and are generally cancelableup to 30 days prior to scheduled delivery. Accordingly, we depend on obtaining and shipping orders in the same quarterto achieve our revenue objectives. In addition, the timing of product releases, purchase orders and product availabilitycould result in significant product shipments at the end of a quarter. Failure to ship these products by the end of thequarter may adversely affect our operating results. Furthermore, our customers may delay scheduled delivery dates and/orcancel orders within specified timeframes without significant penalty.We sell our products through our direct sales force, international and domestic sales representatives and distributors.Revenues from product sales, except for sales to distributors, are generally recognized upon shipment, net of sales returnsand allowances. Sales to consignment warehouses, who purchase products from us for use by contract manufacturers, arerecorded upon delivery to the contract manufacturer. Sales to distributors are recorded as deferred revenues for financialreporting purposes and recognized as revenues when the products are resold by the distributors to the OEM. Sales todistributors are made under agreements allowing for returns or credits under certain circumstances. We therefore deferrecognition of revenue on sales to distributors until products are resold by the distributor.39 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHistorically, a small number of OEM customers have accounted for a substantial portion of our net revenues, and weexpect that significant customer concentration will continue for the foreseeable future. Many of our OEMs use contractmanufacturers to manufacture their equipment. Accordingly, a significant percentage of our net revenues is derived fromsales to these contract manufacturers and to consignment warehouses. In addition, a significant portion of our sales aremade to foreign and domestic distributors who resell our products to OEMs, as well as their contract manufacturers. Directsales to contract manufacturers and consignment warehouses accounted for 33.1%, 37.5% and 42.0% of our net revenuesfor fiscal 2015, 2014 and 2013, respectively. Sales to foreign and domestic distributors accounted for 58.7%, 50.0% and47.6% of our net revenues for fiscal 2015, 2014 and 2013, respectively. The following direct customers accounted for10% or more of our net revenues in one or more of the following periods:Fiscal Year EndedMarch 31,201520142013Contract manufactures and consignment warehouses:SMART Modular Technologies5.2 %14.4 %14.4 % Flextronics Technology8.1 11.9 10.2 Sanmina12.6 8.5 7.1 Distributors:Avnet Logistics35.2 30.3 26.5 Nexcomm12.3 10.2 10.8 Alcatel-Lucent was our largest customer in fiscal 2015 and 2014. Alcatel-Lucent purchases products directly fromus and through contract manufacturers and distributors. Based on information provided to us by Alcatel-Lucent’scontract manufacturers and our distributors, purchases by Alcatel-Lucent represented approximately 25%, 19% and 12%of our net revenues in fiscal 2015, 2014 and 2013, respectively. Cisco Systems, historically our largest OEM customer,purchases our products primarily through its consignment warehouses and also purchases some products through itscontract manufacturers and directly from us. Based on information provided to us by Cisco Systems' consignmentwarehouses and contract manufacturers, purchases by Cisco Systems represented approximately 13%, 19% and 29% ofour net revenues in fiscal 2015, 2014 and 2013, respectively. Our revenues have been substantially impacted bysignificant fluctuations in sales to Alcatel-Lucent and Cisco Systems, and we expect that future direct and indirect sales tothese two customers will continue to fluctuate substantially on a quarterly basis and that such fluctuations maysignificantly affect our operating results in future periods. To our knowledge, none of our other OEM customersaccounted for more than 10% of our net revenues in fiscal 2015, 2014 or 2013.Cost of Revenues. Our cost of revenues consists primarily of wafer fabrication costs, wafer sort, assembly, test andburn-in expenses, the amortized cost of production mask sets, excess and obsolete inventory write-downs, stock-basedcompensation and the cost of materials and overhead from operations. All of our wafer manufacturing and assemblyoperations, and a significant portion of our wafer sort testing operations, are outsourced. Accordingly, most of our cost ofrevenues consists of payments to TSMC, Powerchip and independent assembly and test houses. Because we do not havelong-term, fixed-price supply contracts, our wafer fabrication and other outsourced manufacturing costs are subject to thecyclical fluctuations in demand for semiconductors. Cost of revenues also includes expenses related to supply chainmanagement, quality assurance, and final product testing and documentation control activities conducted at ourheadquarters in Sunnyvale, California and our branch operations in Taiwan.40 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGross Profit. Our gross profit margins vary among our products and are generally greater on our higher densityproducts and, within a particular density, greater on our higher speed and industrial temperature products. We expect thatour overall gross margins will fluctuate from period to period as a result of shifts in product mix, changes in averageselling prices and our ability to control our cost of revenues, including costs associated with outsourced wafer fabricationand product assembly and testing.Research and Development Expenses. Research and development expenses consist primarily of salaries andrelated expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-basedcompensation and fees paid to consultants. We charge all research and development expenses to operations as incurred.We charge mask costs used in production to costs of revenues over a 12-month period. However, we charge costs relatedto pre-production mask sets, which are not used in production, to research and development expenses at the time they areincurred. These charges often arise as we transition to new process technologies and, accordingly, can cause research anddevelopment expenses to fluctuate on a quarterly basis. We believe that continued investment in research anddevelopment is critical to our long-term success, and we expect to continue to devote significant resources to productdevelopment activities. Accordingly, we expect that our research and development expenses will increase in futureperiods, although such expenses as a percentage of net revenues may fluctuate.Selling, General and Administrative Expenses. Selling, general and administrative expenses consist primarily ofcommissions paid to independent sales representatives, salaries, stock-based compensation and related expenses forpersonnel engaged in sales, marketing, administrative, finance and human resources activities, professional fees, costsassociated with the promotion of our products and other corporate expenses. We expect that our sales and marketingexpenses will increase in absolute dollars in future periods if we are able to grow and expand our sales force but that, tothe 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 willgenerally increase in absolute dollars. General and administrative expenses increased significantly beginning in fiscal2012 as a result of substantial legal expenses, principally related to our patent infringement and antitrust litigation withCypress Semiconductor Corporation. These expenses varied significantly from quarter to quarter thereafter, depending onthe relative level of activity in the Cypress litigation. They were substantially reduced during the six months endedSeptember 30, 2012 while the issuance of the initial determination in the ITC proceeding was pending. They increasedagain in the following quarters as the parties filed and responded to petitions for review of the initial determination,activities related to the antitrust litigation with Cypress entered the discovery phase, activity resumed in the federal courtpatent litigation that had been stayed pending the conclusion of the ITC proceeding, and we began to incur expenses inunrelated commercial and trade secret litigation in which we are the plaintiff. In May 2015, we entered into a settlementagreement to resolve our protracted litigation with Cypress. See “Part I. Item 3. Legal Proceedings.” Although we willcease to incur legal expenses related to our litigation with Cypress after the quarter ending June 30, 2015, we expect thatlegal expenses associated with the unrelated pending litigation will be substantial over the next several quarters asactivity in that case ramps up in anticipation of trial currently scheduled for October 2015.41 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsResults of OperationsThe following table sets forth statement of operations data as a percentage of net revenues for the periods indicated: Fiscal Year Ended March 31, 2015 2014 2013 Net revenues 100.0 % 100.0 % 100.0 %Cost of revenues 53.0 55.4 56.7 Gross profit 47.0 44.6 43.3 Operating expenses: Research and development 22.3 22.4 17.4 Selling, general and administrative 36.0 32.1 20.7 Total operating expenses 58.3 54.5 38.1 Income (loss) from operations (11.3) (9.9) 5.2 Interest and other income (expense), net 0.7 0.6 0.7 Income (loss) before income taxes (10.6) (9.3) 5.9 Provision for income taxes (1.3) 1.3 0.1 Net income (loss) (9.3)% (10.6)% 5.8 % Fiscal Year Ended March 31, 2015 Compared to Fiscal Year Ended March 31, 2014Net Revenues. Net revenues decreased by 8.7% from $58.6 million in fiscal 2014 to $53.5 million in fiscal2015. The reduction reflected the continuing weakness in the global networking and telecommunications markets and, inparticular, continued weakness in Asia. Direct and indirect sales to Alcatel-Lucent, currently our largest customer,increased by $2.0 million from $11.2 million in fiscal 2014 to $13.2 million fiscal 2015. However, direct and indirectsales to Cisco Systems, historically our largest customer, decreased by $3.9 million from $11.0 million in fiscal 2014 to$7.1 million in fiscal 2015 due to softness in the market for its switches and routers that incorporate our products. Webelieve that our net revenues in each of these periods were also negatively impacted by uncertainty regarding theoutcome of our patent litigation with Cypress Semiconductor. We believe that the Commission’s favorable determinationin the ITC proceeding in June 2013 reduced this market uncertainty, although some design-in losses that we sufferedduring the pendency of the ITC proceeding will continue to adversely affect our revenues throughout the life of therelated products. Shipments of our SigmaQuad product line accounted for 41.6% of total shipments in fiscal 2015compared to 42.2% of total shipments in fiscal 2014.Cost of Revenues. Cost of revenues decreased by 12.6% from $32.5 million in fiscal 2014 to $28.4 million infiscal 2015. This decrease was primarily due to the corresponding decrease in net revenues, favorable product mix andreductions in variable manufacturing costs in fiscal 2015, in addition to a decrease of $1.0 million in non-cash write-downs of excess or obsolete inventory compared to fiscal 2014. A write-down of $985,000 was taken in the three monthsended December 31, 2013 to reflect the fact that management’s prior expectations of increasing demand for our products,following the favorable ITC ruling in June 2013 and the exit of a competitor from the SRAM market in the December2012 quarter, did not materialize. Cost of revenues included stock-based compensation expense of $401,000 and$386,000, respectively, in fiscal 2015 and fiscal 2014. Gross Profit. Gross profit decreased by 3.8% from $26.1 million in fiscal 2014 to $25.1 million in fiscal 2015. However, gross margin increased from 44.6% in fiscal 2014 to 47.0% in fiscal 2015. The decrease in gross profit wasrelated to the corresponding decrease in net revenues, while the improvement in gross margin was due to42 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsfavorable changes in the mix of products and customers and the reduction in the non-cash write-down of excess orobsolete inventory.Research and Development Expenses. Research and development expenses decreased 9.1% from $13.1 million infiscal 2014 to $11.9 million in fiscal 2015. This decrease was primarily due to decreases of $1.5 million in expensesrelated to pre-production mask sets, a $177,000 decrease in depreciation expense and lesser decreases in repairs andmaintenance expense and patent-related expenses, partially offset by an increase of $567,000 in payroll-related expenses.Research and development expenses included stock-based compensation expense of $941,000 and $970,000,respectively, in fiscal 2015 and fiscal 2014.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 2.3% from $18.8 million in fiscal 2014 to $19.2 million in fiscal 2015. This increase was primarily related to increases of $346,000in payroll-related expenses and $308,000 in non-legal professional fees and lesser increases in travel related expenses andlegal fees related to the patent infringement and antitrust litigation involving Cypress Semiconductor Corporation andother pending litigation, partially offset by decreases in stock-based compensation expense and independent salesrepresentative commissions. Selling, general and administrative expenses included stock-based compensation expense of$735,000 and $872,000, respectively, in fiscal 2015 and fiscal 2014. Interest and Other Income (Expense), Net. Interest and other income (expense), net increased 14.8% from$338,000 in fiscal 2014 to $388,000 in fiscal 2015. Interest income decreased by $63,000 due to lower interest ratesreceived on reduced balances of cash and short-term and long-term investments. These decreases were more than offset bya foreign currency exchange gain of $64,000 in fiscal 2015 compared to a foreign currency exchange loss of $49,000 infiscal 2014. The exchange gain or loss in each period was related to our Taiwan branch operations.Provision for Income Taxes. The provision for income taxes of $713,000 in fiscal 2014 compared to a benefit of$675,000 in fiscal 2015. Because we recorded a cumulative three-year loss on a U.S. tax basis for the year ended March31, 2015, we recorded a tax provision reflecting a full valuation allowance of our $6.0 million in deferred tax assets infiscal 2015.Net Income (Loss). Net loss decreased from $6.2 million in fiscal 2014 to $5.0 million in fiscal 2015. This decreasewas primarily due to the changes in net revenues, gross profit and operating expenses discussed above.Fiscal Year Ended March 31, 2014 Compared to Fiscal Year Ended March 31, 2013Net Revenues. Net revenues decreased by 11.3% from $66.0 million in fiscal 2013 to $58.6 million in fiscal2014. The reduction reflected the continued slowness in the global networking and telecommunications markets and inparticular, continued weak sales in Asia. Direct and indirect sales to Cisco Systems, historically our largest customer,decreased by $8.3 million from $19.3 million in fiscal 2013 to $11.0 million in fiscal 2014 due to softness in the marketfor its switches and routers that incorporate our products. Direct and indirect sales to Alcatel-Lucent increased by $3.1million from $8.1 million in fiscal 2013 to $11.2 million fiscal 2014. We believe that our net revenues in each of theseperiods were also negatively impacted by uncertainty regarding the outcome of our pending patent litigation withCypress Semiconductor. Shipments of our SigmaQuad product line accounted for 42.2% of total shipments in fiscal 2014compared to 36.1% of total shipments in fiscal 2013.Cost of Revenues. Cost of revenues decreased by 13.2% from $37.4 million in fiscal 2013 to $32.5 million infiscal 2014. This decrease was primarily due to the corresponding decrease in net revenues, favorable product mix andreductions in variable manufacturing costs in fiscal 2014, offset by an increase of $1.3 million in non-cash write-downs ofexcess or obsolete inventory in fiscal 2014. The increased write-downs were taken to reflect the fact that management’sprior expectations of increasing demand for our products, following the favorable ITC ruling in June 2013 and the exit ofa competitor from the SRAM market in the December 2012 quarter, did not materialize.43 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCost of revenues included stock-based compensation expense of $386,000 and $338,000, respectively, in fiscal 2014 andfiscal 2013. Gross Profit. Gross profit decreased by 8.7% from $28.6 million in fiscal 2013 to $26.1 million in fiscal2014. Gross margin increased from 43.3% in fiscal 2013 to 44.6% in fiscal 2014. The decrease in gross profit wasprimarily related to the decrease in net revenues. The change in gross margin was primarily related to changes in the mixof products and customers, the reduction in variable manufacturing expenses and the write-down of excess inventorydiscussed above.Research and Development Expenses. Research and development expenses increased 14.3% from $11.5 million infiscal 2013 to $13.1 million in fiscal 2014. This increase was primarily due to an increase of $1.5 million in expensesrelated to pre-production mask sets and an increase of $338,000 in payroll related expenses, partially offset by decreasesin stock-based compensation expense and facilities related expenses. Research and development expenses includedstock-based compensation expense of $970,000 and $1,140,000, respectively, in fiscal 2014 and fiscal 2013.Selling, General and Administrative Expenses. Selling, general and administrative expenses increased 37.4% from $13.7 million in fiscal 2013 to $18.8 million in fiscal 2014. This increase was primarily related to an increase of $5.6million in legal fees related to the pending patent infringement and antitrust litigation involving Cypress SemiconductorCorporation and other pending litigation, partially offset by decreases in independent sales representative commissions,non-legal professional fees and stock-based compensation expense. Selling, general and administrative expensesincluded stock-based compensation expense of $872,000 and $800,000, respectively, in fiscal 2014 and fiscal 2013. Interest and Other Income (Expense), Net. Interest and other income (expense), net decreased 27.2% from$464,000 in fiscal 2013 to $338,000 in fiscal 2014. Interest income decreased by $68,000 due to lower interest ratesreceived on our cash and short-term and long-term investments. In addition, we recorded a foreign currency exchangeloss of $49,000 in fiscal 2014 compared to a foreign currency exchange gain of $9,000 in fiscal 2013. The exchange gainor loss in each period was related to our Taiwan branch operations.Provision for Income Taxes. The provision for income taxes increased from $38,000 in fiscal 2013 to $713,000 infiscal 2014. Because we recorded a cumulative three-year loss on a U.S. tax basis for the period ended March 31, 2014,we recorded a tax provision reflecting a full valuation allowance of our $3.7 million in deferred tax assets.Net Income (Loss). Net income decreased from $3.8 million in fiscal 2013 to a net loss of $6.2 million in fiscal2014. This decrease was primarily due to the decreased net revenues, changes in operating expenses and our income taxprovision discussed above.Liquidity and Capital ResourcesAs of March 31, 2015, our principal sources of liquidity were cash, cash equivalents and short-term investments of$59.0 million compared to $80.9 million as of March 31, 2014.Net cash provided by operating activities was $1.1 million for fiscal 2015 compared to $8.4 million for fiscal 2014and $14.7 million for fiscal 2013. The primary sources of cash in fiscal 2015 were a decrease in prepaid expenses andother assets of $2.9 million, non-cash stock-based compensation expense of $2.1 million, depreciation and amortizationexpense of $1.6 million and a provision for excess and obsolete inventory of $1.1 million. The primary uses of cash infiscal 2015 were a net loss of $5.0 million, a decrease of $1.9 million in accounts payable and an increase of $1.3 millionin inventories. The primary sources of cash in fiscal 2014 were a reduction in44 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsinventory of $3.5 million, adjustments for non-cash stock-based compensation expense of $2.2 million, a provision forexcess and obsolete inventory of $2.1 million and depreciation expense of $2.0 million, partially offset by a net loss of$6.2 million and a decrease in accrued expenses and other liabilities. We allowed inventory levels to decrease inresponse to the slowdown in our business during fiscal 2013 and fiscal 2014. The primary sources of cash in fiscal 2013were net income of $3.8 million, a reduction in inventory of $2.1 million and a reduction in prepaid expenses of $2.5million, offset by a decrease in accounts payable of $1.6 million. The decrease in accounts payable in fiscal 2013 wasprimarily due to decreased legal expenses related to the pending patent infringement and antitrust litigation involvingCypress Semiconductor Corporation compared to fiscal 2012. Net cash provided by investing activities was $23.2 million in fiscal 2015 compared to net cash used by investingactivities of $8.2 million in fiscal 2014 and $2.5 million in fiscal 2013. Investment activities in fiscal 2015 consistedprimarily of the sale and maturity of corporate notes and certificates of deposits of $39.7 million, partially offset by thepurchase of investments of $16.0 million. Investment activities in fiscal 2014 consisted primarily of the purchase ofagency bonds, state and municipal obligations, corporate notes and certificates of deposit of $35.9 million, substantiallyoffset by proceeds from the sales and maturities of investments of $28.4 million. Investment activities in fiscal 2013consisted primarily of the purchase of state and municipal obligations, corporate notes and certificates of deposit of $35.6million, substantially offset by sales and maturities of investments of $33.4 million. Cash used in financing activities in fiscal 2015, fiscal 2014 and in fiscal 2013 included the repurchase of ourcommon stock for a total purchase price of $30.0 million, $2.9 million and $3.6 million, respectively. We repurchased4,661,775 shares of our common stock at an average price of $6.33 per share in fiscal 2015. Cash provided by financingactivities in fiscal 2015, fiscal 2014 and fiscal 2013 primarily consisted of the net proceeds from the sale of commonstock pursuant to our employee stock plans.At March 31, 2015, we had total minimum lease obligations of approximately $619,000 from April 1, 2015 throughAugust 31, 2017, under non-cancelable operating leases.We believe that our existing balances of cash, cash equivalents and short-term investments, and cash flow expectedto be generated from our future operations, will be sufficient to meet our cash needs for working capital and capitalexpenditures for at least the next 12 months, although we could be required, or could elect, to seek additional fundingprior to that time. Our future capital requirements will depend on many factors, including the rate of revenue growth thatwe experience, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that wemaintain, the timing and extent of spending to support our product development efforts and the expansion of our salesand marketing efforts. Additional capital may also be required for the consummation of any acquisition of businesses,products or technologies that we may undertake. We cannot assure you that additional equity or debt financing, ifrequired, will be available on terms that are acceptable or at all.Contractual ObligationsThe following table describes our contractual obligations as of March 31, 2015: Payments due by period Up to 1 year 1 - 3 years 3 - 5 years More than 5 years TotalFacilities and equipmentleases $280,000 $339,000 $ - $ - $619,000 Wafer, test and maskpurchase obligations 3,463,000 200,000 - - 3,663,000 $3,743,000 $539,000 $ - $ - $4,282,000 45 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAs of March 31, 2015, the current portion of our unrecognized tax benefits was $0, and the long-term portion was$780,000. We do not expect to make federal income tax payments in the next twelve months, and we are not able to makea reasonably reliable estimate of the timing of such payments due to uncertainties in the timing of tax credit outcomes.Critical Accounting Policies and EstimatesThe preparation of our consolidated financial statements and related disclosures in conformity with accountingprinciples generally accepted in the United States ("GAAP") requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reporting period. Significant estimates areinherent in the preparation of the consolidated financial statements and include estimates affecting revenue recognition,obsolete and excess inventory, the valuation allowance on deferred tax assets, the valuation of equity instruments andstock-based compensation. We believe that we consistently apply these judgments and estimates and that our financialstatements and accompanying notes fairly represent our financial results for all periods presented. However, any errors inthese judgments and estimates may have a material impact on our balance sheet and statement of operations. Criticalaccounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to theportrayal of our financial condition and results of operations and require our most difficult and subjective judgments andestimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding revenuerecognition, the valuation of inventories, taxes and stock-based compensation.Revenue Recognition. We recognize revenue when persuasive evidence of an arrangement exists, delivery hasoccurred, the price is fixed or determinable and collectability of the resulting receivable is reasonably assured. Underthese criteria, revenue from the sale of our products is generally recognized upon shipment according to our shippingterms, net of accruals for estimated sales returns and allowances based on historical experience. Sales to distributors aremade under agreements allowing for returns or credits. We defer recognition of revenue on sales to distributors untilproducts are resold by the distributor to the end-user. Distributors have stock rotation, price protection and ship fromstock pricing adjustment rights, and we therefore defer recognition of revenue on sales to distributors until products areresold by the distributor. In light of uncertainties related to the stock rotation rights and possible changes to sales pricesresulting from price protection and price adjustment rights granted, we are unable to reasonably estimate possible changesand the resulting sales price to the distributor is not fixed or determinable until the final sale to the end user. Sales toconsignment warehouses, who purchase products from us for use by contract manufacturers, are recorded upon delivery tothe contract manufacturers.The timing of recognizing revenues on product sales to distributors is dependent on receiving pertinent andaccurate data from our distributors in a timely fashion. Distributors provide us monthly data regarding the product, price,quantity, and end customer for their shipments as well as the quantities of our products they have in stock at month end.In determining the appropriate amount of revenue to recognize, we use this data in reconciling differences between ourestimate of their inventory levels and their reported inventories and shipment activities. If distributors incorrectly reporttheir inventories or shipment activities, it could lead to inaccurate reporting of our revenues and income.Valuation of Inventories. Inventories are stated at the lower of cost or market value, cost being determined on aweighted average basis. Our inventory write-down allowance is established when conditions indicate that the sellingprice of our products could be less than cost due to physical deterioration, obsolescence, changes in price levels, or othercauses. We consider the need to establish the allowance for excess inventory generally based on inventory levels inexcess of 12 months of forecasted demand for each specific product. Inventory consists of finished goods at our premisesor consignment warehouses, work in progress at our premises or our contract46 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmanufacturers and finished goods at distributors and takes into account any uncancellable purchase commitments.Historically, it has been difficult to forecast customer demand especially at the part-number level. Many of the orders wereceive from our customers and distributors request delivery of product on relatively short notice and with lead times lessthan our manufacturing cycle time. In order to provide competitive delivery times to our customers, we build and stock acertain amount of inventory in anticipation of customer demand that may not materialize. Moreover, as is common in thesemiconductor industry, we may allow customers to cancel orders with minimal advance notice. Thus, even product builtto satisfy specific customer orders may not ultimately be required to fulfill customer demand. Nevertheless, at any point intime, some portion of our inventory is subject to the risk of being materially in excess of our projected demand.Additionally, our average selling prices could decline due to market or other conditions, which creates a risk that costs ofmanufacturing our inventory may not be recovered. These factors contribute to the risk that we may be required to recordadditional inventory write-downs in the future, which could be material. In addition, if actual market conditions are morefavorable than expected, inventory previously written down may be sold to customers resulting in lower cost of sales andhigher income from operations than expected in that period.Taxes. We account for income taxes under the liability method, whereby deferred tax assets and liabilities aredetermined based on the difference between the financial statement and tax bases of assets and liabilities using enactedtax rates in effect for the year in which the differences are expected to affect taxable income. We make certain estimatesand judgments in the calculation of tax liabilities and the determination of deferred tax assets, which arise from temporarydifferences between tax and financial statement recognition methods. We record a valuation allowance to reduce ourdeferred tax assets to the amount that management estimates is more likely than not to be realized. As of March 31, 2015, our net deferred tax assets of $6.0 million are subject to a full valuation allowance. If, in the future we determine that weare likely to realize all or part of our net deferred tax assets, an adjustment to deferred tax assets would be added toearnings in the period such determination is made.In addition, the calculation of tax liabilities involves inherent uncertainty in the application of complex tax laws.We record tax reserves for additional taxes that we estimate we may be required to pay as a result of future potentialexaminations by federal and state taxing authorities. If the payment ultimately proves to be unnecessary, the reversal ofthese tax reserves would result in tax benefits being recognized in the period we determine such reserves are no longernecessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to provision forincome taxes will result.Authoritative guidance prescribes a comprehensive model for how a company should recognize, measure, present,and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a taxreturn (including a decision whether to file or not to file a return in a particular jurisdiction). Under this guidance, thefinancial statements will reflect expected future tax consequences of such positions presuming the taxing authorities' fullknowledge of the position and all relevant facts, but without considering time values.Stock-Based Compensation. Under authoritative guidance, stock-based compensation expense recognized in thestatement of operations is based on options ultimately expected to vest, reduced by the amount of estimatedforfeitures. We chose the straight-line method of allocating compensation cost over the requisite service period of therelated award in accordance with the authoritative guidance. We calculated the expected term based on the historicalaverage period of time that options were outstanding as adjusted for expected changes in future exercise patterns, which,for options granted in fiscal 2015, 2014 and 2013, resulted in an expected term of approximately five years. We usedhistorical volatility to estimate expected volatility in fiscal 2015, 2014 and 2013. The risk-free interest rate is based onthe U.S. Treasury yields in effect at the time of grant for periods corresponding to the expected life of the options. Thedividend yield is 0%, based on the fact that we have never paid dividends and have no present intention to paydividends. Determining some of these assumptions requires significant judgment and47 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentschanges to these assumptions could result in a significant change to the calculation of stock-based compensation infuture periods.Cash flows, if any, resulting from the tax benefits from tax deductions in excess of the compensation costrecognized for those options (excess tax benefits) are classified as financing cash flows.As stock-based compensation expense recognized in the Consolidated Statement of Operations is based on awardsultimately expected to vest, it has been reduced for estimated forfeitures. We estimate forfeitures at the time of grant andrevise the original estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.We have no stock-based compensation arrangements with non-employees except for stock options granted to ournon-employee directors.Off-Balance Sheet ArrangementsAt March 31, 2015, we did not have any off-balance sheet arrangements or relationships with unconsolidatedentities or financial partnerships, such as entities often referred to as structured finance or special purpose entities,established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limitedpurposes. Accordingly, we are not exposed to the type of financing, liquidity, market or credit risk that could arise if wehad engaged in such relationships.Recent Accounting PronouncementsIn August 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance related to ourresponsibility to evaluate whether there is substantial doubt about our ability to continue ongoing business operationsand to provide relevant footnote disclosures. The new guidance is effective for fiscal years, and interim periods withinthose fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidance is notexpected to have a material impact on our consolidated financial statements.In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers." The newaccounting standard outlines a single comprehensive model for entities to use in accounting for revenue arising fromcontracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effectivefor annual reporting periods (including interim reporting periods within those periods) beginning after December 15,2016. Early adoption is not permitted. ASU No. 2014-09 provides for one of two methods of transition: retrospectiveapplication to each prior period presented; or recognition of the cumulative effect of retrospective application of the newstandard in the period of initial application. On April 1, 2015, the FASB proposed a one year deferral of the effective dateto December 15, 2017, with early application permitted, but not before the original effective date of December 15, 2016.We are currently evaluating the impact of this accounting standard on our consolidated financial statements.In July 2013, the FASB issued an Accounting Standards Update (“ASU”) on Income Taxes, to improve thepresentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax creditcarryforward exists. This guidance is expected to reduce diversity in practice and is expected to better reflect the mannerin which an entity would settle at the reporting date any additional income taxes that would result from the disallowanceof a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist.Implementation of this guidance in the year ended March 31, 2015 did not have a material impact our financial positionor results of operations.48 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Item 7A. Quantitative and Qualitative Disclosures About Market RiskForeign Currency Exchange Risk. Our revenues and expenses, except those expenses related to our operations inTaiwan, including subcontractor manufacturing expenses, are denominated in U.S. dollars. As a result, we have relativelylittle exposure for currency exchange risks, and foreign exchange losses have been minimal to date. We do not currentlyenter into forward exchange contracts to hedge exposure denominated in foreign currencies or any other derivativefinancial instruments for trading or speculative purposes. In the future, if we feel our foreign currency exposure hasincreased, 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 investmentstotaling $80.7 million at March 31, 2015. These amounts were invested primarily in money market funds, state andmunicipal obligations, corporate notes, certificates of deposit and agency bonds. The cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading orspeculative purposes. Due to the short-term nature of these investments, we believe that we do not have any materialexposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. We believe ahypothetical 100 basis point increase in interest rates would not materially affect the fair value of our interest-sensitivefinancial instruments. Declines in interest rates, however, will reduce future investment income.49 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Item 8. Financial Statements and Supplementary DataGSI TECHNOLOGY, INC.INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 51 Consolidated Balance Sheets As of March 31, 2015 and 2014 52 Consolidated Statements of Operations For the Three Years Ended March 31, 2015, 2014and 2013 53 Consolidated Statements of Comprehensive Income (Loss) For the Three Years EndedMarch 31, 2015, 2014 and 2013 54 Consolidated Statements of Stockholders’ Equity For the Three Years Ended March 31,2015, 2014 and 2013 55 Consolidated Statements of Cash Flows For the Three Years Ended March 31, 2015, 2014and 2013 56 Notes to Consolidated Financial Statements 57 50 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of GSI Technology, Inc.:In our opinion, the accompanying consolidated balance sheets and the related consolidated statements ofoperations, comprehensive income (loss), stockholders’ equity and cash flows present fairly, in all material respects, thefinancial position of GSI Technology, Inc. and its subsidiaries at March 31, 2015 and 2014, and the results of theiroperations and their cash flows for each of the three years in the period ended March 31, 2015 in conformity withaccounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained,in all material respects, effective internal control over financial reporting as of March 31, 2015, based on criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). The Company's management is responsible for these financial statements, formaintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Management's Report on Internal Control over FinancialReporting under item 9A. Our responsibility is to express opinions on these financial statements and on the Company'sinternal control over financial reporting based on our integrated audits. We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan andperform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatementand whether effective internal control over financial reporting was maintained in all material respects. Our audits of thefinancial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimates made by management, and evaluating theoverall financial statement presentation. Our audit of internal control over financial reporting included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits alsoincluded performing such other procedures as we considered necessary in the circumstances. We believe that our auditsprovide a reasonable basis for our opinions.A company’s internal control over financial reporting is a process designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company’s internal control over financial reportingincludes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accuratelyand fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (iii) provide reasonable assurance regarding preventionor timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a materialeffect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controlsmay become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate./s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaJune 11, 201551 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGSI TECHNOLOGY, INC.CONSOLIDATED BALANCE SHEETS March 31, 2015 2014 (In thousands, except share and pershare amounts)ASSETS Cash and cash equivalents $36,776 $41,520 Short-term investments 22,201 39,412 Accounts receivable, net 8,257 8,238 Inventories 8,412 8,185 Prepaid expenses and other current assets 2,297 5,152 Total current assets 77,943 102,507 Property and equipment, net 8,708 9,683 Long-term investments 21,740 28,819 Other assets 498 668 Total assets $108,889 $141,677 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable $2,961 $4,870 Accrued expenses and other liabilities 5,937 4,444 Deferred revenue 2,815 2,523 Total current liabilities 11,713 11,837 Income taxes payable 780 1,462 Total liabilities 12,493 13,299 Commitments and contingencies (Note 6) Stockholders' equity: Preferred stock: $0.001 par value authorized: 5,000,000 shares; issued andoutstanding: none - -Common Stock: $0.001 par value authorized: 150,000,000 shares; issued andoutstanding: 23,128,372 and 27,561,482 shares, respectively 23 28 Additional paid-in capital 29,407 56,399 Accumulated other comprehensive income 26 33 Retained earnings 66,940 71,918 Total stockholders' equity 96,396 128,378 Total liabilities and stockholders' equity $108,889 $141,677 The accompanying notes are an integral part of these consolidated financial statements.52 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGSI TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended March 31, 2015 2014 2013 (In thousands, except per share amounts)Net revenues$53,498 $58,579 $66,014 Cost of revenues 28,375 32,469 37,426 Gross profit 25,123 26,110 28,588 Operating expenses: Research and development 11,917 13,110 11,472 Selling, general and administrative 19,247 18,814 13,696 Total operating expenses 31,164 31,924 25,168 Income (loss) from operations (6,041) (5,814) 3,420 Interest income, net 324 387 455 Other income (expense), net 64 (49) 9 Income (loss) before income taxes (5,653) (5,476) 3,884 Provision (benefit) for income taxes (675) 713 38 Net income (loss)$(4,978) $(6,189) $3,846 Net income (loss) per share: Basic$(0.20) $(0.23) $0.14 Diluted$(0.20) $(0.23) $0.14 Weighted average shares used in per share calculations: Basic 25,029 27,505 27,124 Diluted 25,029 27,505 28,077 The accompanying notes are an integral part of these consolidated financial statements.53 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents GSI TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Year Ended March 31, 2015 2014 2013 (In thousands, except per share amounts) Net income (loss) $(4,978) $(6,189) $3,846 Net unrealized loss on available-for-sale investments, net oftax (7) (12) (43)Comprehensive net income (loss) $(4,985) $(6,201) $3,803 The accompanying notes are an integral part of these consolidated financial statements.54 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsGSI TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AccumulatedAdditionalOtherTotalCommon StockPaid-inComprehensiveRetainedStockholders'SharesAmountCapitalIncomeEarningsEquityBalance, March 31, 201227,617,942 $28 $54,402 $88 $74,261 $128,779 Issuance of common stockunder employee stock optionplans258,437 -857 - -857 Repurchase and retirement ofcommon stock(811,170)(1)(3,625) - -(3,626)Stock-based compensationexpense - -2,278 - -2,278 Windfall tax benefit fromstock options exercised - -92 - -92 Comprehensive income:Net income - - - -3,846 3,846 Net unrealized loss onavailable-for-sale investments - - -(43) -(43)Total comprehensive income - - - - -3,803 Balance, March 31, 201327,065,209 27 54,004 45 78,107 132,183 Issuance of common stockunder employee stock optionplans932,800 1 3,080 - -3,081 Repurchase and retirement ofcommon stock(436,527) -(2,880) - -(2,880)Stock-based compensationexpense - -2,228 - -2,228 Windfall tax benefit fromstock options exercised - -(33) - -(33)Comprehensive income:Net loss - - - -(6,189)(6,189)Net unrealized loss onavailable-for-sale investments - - -(12) -(12)Total comprehensive loss - - - - -(6,201)Balance, March 31, 201427,561,482 28 56,399 33 71,918 128,378 Issuance of common stockunder employee stock optionplans228,665 -952 - -952 Repurchase and retirement ofcommon stock(4,661,775)(5)(30,021) - -(30,026)Stock-based compensationexpense - -2,077 - -2,077 Comprehensive income:Net loss - - - -(4,978)(4,978)Net unrealized loss onavailable-for-sale investments - - -(7) -(7)Total comprehensive loss - - - - -(4,985)Balance, March 31, 201523,128,372 $23 $29,407 $26 $66,940 $96,396 The accompanying notes are an integral part of these consolidated financial statements.55 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents GSI TECHNOLOGY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended March 31, 2015 2014 2013 (In thousands)Cash flows from operating activities: Net income (loss) $(4,978) $(6,189) $3,846 Adjustments to reconcile net income (loss) to net cash provided byoperating activities: Allowance for sales returns, doubtful accounts and other (8) (5) 16 Provision for excess and obsolete inventories 1,067 2,079 777 Depreciation and amortization 1,633 1,981 2,375 Stock-based compensation 2,077 2,228 2,278 Deferred income taxes - 1,224 (127)Windfall tax benefits from stock options exercised - 33 (92)Amortization of bond premium on investments 593 842 1,015 Changes in assets and liabilities: Accounts receivable (11) 2,008 322 Inventory (1,294) 3,545 2,139 Prepaid expenses and other assets 2,854 1,046 2,523 Accounts payable (1,915) 1,066 (1,607)Accrued expenses and other liabilities 811 (857) 839 Deferred revenue 292 (554) 407 Net cash provided by operating activities 1,121 8,447 14,711 Cash flows from investing activities: Purchase of investments (16,009) (35,866) (35,609)Sales and maturities of short-term investments 39,699 28,412 33,446 Purchases of property and equipment (481) (761) (385)Net cash provided by (used in) investing activities 23,209 (8,215) (2,548)Cash flows from financing activities: Repurchase of common stock (30,026) (2,880) (3,626)Windfall tax benefits from stock options exercised - (33) 92 Proceeds from issuance of common stock under employee stock plans 952 3,081 857 Net cash provided by (used in) financing activities (29,074) 168 (2,677)Net increase in cash and cash equivalents (4,744) 400 9,486 Cash and cash equivalents at beginning of the year 41,520 41,120 31,634 Cash and cash equivalents at end of the year $36,776 $41,520 $41,120 Non-cash financing activities: Purchases of property and equipment through accounts payable andaccruals $6 $ - $51 Supplemental cash flow information: Net cash paid (received) for income taxes $(2,394) $2 $(2,253) The accompanying notes are an integral part of these consolidated financial statements.56 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe CompanyGSI Technology, Inc. (the "Company") was incorporated in California in March 1995 and reincorporated inDelaware on June 9, 2004. The Company is a provider of "Very Fast" SRAM products and LLDRAM products that areincorporated primarily in high-performance networking and telecommunications equipment, such as routers, switches,wide area network infrastructure equipment, wireless base stations and network access equipment. In addition, theCompany serves the ongoing needs of the military, industrial, test equipment and medical markets for high-performanceSRAMs.Accounting principlesThe consolidated financial statements and accompanying notes were prepared in accordance with accountingprinciples generally accepted in the United States of America ("GAAP").Basis of consolidationThe consolidated financial statements include the accounts of the Company's three wholly-owned subsidiaries, GSITechnology Holdings, Inc., GSI Technology (BVI), Inc. and GSI Technology Taiwan, Inc. All significant inter-companytransactions and balances have been eliminated in consolidation.Use of estimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenue and expenses during the reporting period.Significant estimates are inherent in the preparation of the consolidated financial statements and include revenuerecognition, obsolete and excess inventory, the valuation allowance on deferred tax assets, the valuation of equityinstruments and stock-based compensation. Actual results could differ from those estimates.Risk and uncertaintiesThe Company buys all of its SRAM and LLDRAM wafers, integral components of its products, from singlesuppliers and is also dependent on independent suppliers to assemble and test its products. During the years endedMarch 31, 2015, 2014 and 2013, all of the wafers used in the Company's SRAM and LLDRAM products were suppliedby Taiwan Semiconductor Manufacturing Company Limited, or TSMC, and Powerchip Technology Corporation, orPowerchip, respectively. If these suppliers fail to satisfy the Company's requirements on a timely basis at competitiveprices, the Company could suffer manufacturing delays, a possible loss of revenues, or higher cost of revenues, any ofwhich could adversely affect operating results.A majority of the Company's net revenues come from sales to customers in the networking and telecommunicationsequipment industry. A decline in demand in this industry could have a material adverse affect on the Company'soperating results and financial condition.Because much of the manufacturing and testing of the Company's products is conducted in Taiwan, its businessperformance may be affected by changes in Taiwan's political, social and economic environment. For example, anypolitical instability resulting from the relationship among the United States, Taiwan and the People's Republic of Chinacould damage the Company's business. Moreover, the role of the Taiwanese government in the Taiwanese economy issignificant. Taiwanese policies toward economic liberalization, and laws and policies57 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsaffecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change,resulting in greater restrictions on the Company's and its suppliers' ability to do business and operate facilities in Taiwan.If any of these risks were to occur, the Company's business could be harmed.Some of the Company's suppliers and the Company's two principal operations are located near fault lines. In theevent of a major earthquake or other natural disaster near the facilities of any of these suppliers or the Company, theCompany's business could be harmed.From time to time, the Company is involved in legal actions. See Note 6 for information regarding litigation thatwas pending at March 31, 2015 and Note 12 regarding its subsequent resolution. There are many uncertainties associatedwith any litigation, and the Company may not prevail. If information becomes available that causes us to determine thata loss in any of our pending litigation, or the settlement of such litigation, is probable, and we can reasonably estimate theloss associated with such events, we will record the loss in accordance with GAAP. However, the actual liability in anysuch litigation may be materially different from our estimates, which could require us to record additional costs.Revenue recognitionThe Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, theprice is fixed or determinable and collectability of the resulting receivable is reasonably assured. Under these criteria,revenue from the sale of products is generally recognized upon shipment according to the Company's shipping terms, netof accruals for estimated sales returns and allowances based on historical experience. Sales to distributors are made underagreements allowing for returns or credits. Distributors have stock rotation, price protection and ship from stock pricingadjustment rights and the Company therefore defers recognition of revenue on sales to distributors until products areresold by the distributor. In light of possible changes to sales prices resulting from price protection and price adjustmentrights granted, sales prices to the distributor are not fixed or determinable until the final sale to the end user. For sales toconsignment warehouses, who purchase products from the Company for use by contract manufacturers, revenues arerecognized upon delivery to the contract manufacturer.Cash and cash equivalentsCash and cash equivalents include cash in demand accounts and highly liquid investments purchased with anoriginal or remaining maturity of three months or less at the date of purchase, stated at cost, which approximates their fairmarket value.Short-term and long-term investmentsAll of the Company's short-term and long-term investments are classified as available-for-sale. Available-for-saledebt securities with maturities greater than twelve months are classified as long-term investments when they are notintended for use in current operations. Investments in available-for-sale securities are reported at fair value withunrecognized gains (losses), net of tax, as a component of "Accumulated other comprehensive income" on theConsolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriatereductions in carrying values when the declines in fair value are determined to be other-than-temporary.Concentration of credit riskFinancial instruments that potentially subject the Company to a concentration of credit risk consist primarily ofcash, cash equivalents, short-term and long-term investments and accounts receivable. The Company places its cashprimarily in checking, certificate of deposit, and money market accounts with reputable financial institutions. TheCompany's accounts receivable are derived primarily from revenue earned from customers located in the U.S.58 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsand Asia. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requiresno collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon theexpected collectability of accounts receivable. There were no write offs of accounts receivable in the years endedMarch 31, 2015, 2014 or 2013.At March 31, 2015, four customers accounted for 25%, 20%, 16%, and 13% of accounts receivable, and for theyear then ended, three customers accounted for 35%, 13%, and 12% of net revenues. At March 31, 2014, four customersaccounted for 20%, 16%, 14%, and 12% of accounts receivable, and for the year then ended, four customers accountedfor 30%, 14%, 12% and 10% of net revenues. At March 31, 2013, six customers accounted for 20%, 16%, 15%, 10%, 10% and 10% of accounts receivable, and for the year then ended, four customers accounted for 27%, 14%, 11% and10% of net revenues.InventoriesInventories are stated at the lower of cost or market value, cost being determined on a weighted average basis.Inventory write-down allowances are established when conditions indicate that the selling price could be less than costdue to physical deterioration, obsolescence, changes in price levels, or other causes. These allowances, once recorded,result in a new cost basis for the related inventory. These allowances are also considered for excess inventory generallybased on inventory levels in excess of 12 months of forecasted demand, as estimated by management, for each specificproduct. The allowance is not reversed until the inventory is sold or disposed of.The Company recorded write-downs of excess and obsolete inventories of $1.1 million, $2.1 million and$777,000, respectively, in fiscal 2015, 2014 and 2013. Property and equipment, netProperty and equipment are stated at cost. Depreciation is computed using the straight-line method over theestimated useful lives of the assets as presented below:Software 3 to 5 yearsComputer and other equipment 5 to 10 yearsBuilding and building improvements10 to 25 yearsFurniture and fixtures 7 years Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful livesof the assets or the remaining lease term of the respective assets. Gains or losses on disposals of property and equipmentare recorded within income from operations. Costs of repairs and maintenance are typically included as part of operatingexpenses unless they are incurred in relation to major improvements to existing property and equipment, at which timethey are capitalized.Impairment of long-lived assetsLong-lived assets held and used by the Company are reviewed for impairment whenever events or changes incircumstances indicate that their net book value may not be recoverable. If the sum of the expected future cash flows(undiscounted and before interest) from the use of the assets is less than the net book value of the asset an impairmentexists and the amount of the impairment loss, if any, will generally be measured as the difference59 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsbetween net book value of the assets and their estimated fair values. There were no impairment losses recognized duringthe years ended March 31, 2015, 2014 or 2013.Intangible assetsIntangible assets are amortized over their estimated useful lives, generally on a straight-line basis over five to nineyears. The Company reviews identifiable amortizable intangible assets for impairment whenever events or changes incircumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability isbased on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and itseventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over itsfair value.Research and developmentResearch and development expenses are related to new product designs, including, salaries, stock-basedcompensation, contractor fees, and allocation of corporate costs and are charged to the statement of operations asincurred.Income taxesThe Company accounts for income taxes under the liability method, whereby deferred tax assets and liabilities aredetermined based on the difference between the financial statement and tax bases of assets and liabilities using enactedtax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances areestablished when it is more likely than not that the deferred tax asset will not be realized. Because the Company recordeda cumulative three-year loss on a U.S. tax basis for the year ended March 31, 2015, the Company recorded a tax provisionreflecting a full valuation allowance of our $6.0 million in deferred tax assets.Authoritative guidance prescribes a comprehensive model for how a company should recognize, measure, present,and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a taxreturn (including a decision whether to file or not to file a return in a particular jurisdiction). Under the guidance, thefinancial statements will reflect expected future tax consequences of such positions presuming the taxing authorities' fullknowledge of the position and all relevant facts, but without considering time values. The first step is to evaluate the taxposition for recognition by determining if the weight of available evidence indicates that it is more likely than not thatthe position will be sustained on audit, including resolution of related appeals or litigation process, if any. The secondstep is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimatesettlement.Shipping and handling costsThe Company records costs related to shipping and handling in cost of revenues.Advertising expenseAdvertising costs are charged to expense in the period incurred. Advertising expense was $5,000, $7,000 and$10,000 for the years ended March 31, 2015, 2014, and 2013, respectively.Foreign currency transactionsThe U.S. dollar is the functional currency for all of the Company's foreign operations. Foreign currency transactiongains and losses, resulting from transactions denominated in currencies other than U.S. dollars are60 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsincluded in the Consolidated Statements of Operations. These gains and losses were not material for the years endedMarch 31, 2015, 2014 or 2013.SegmentsThe Company operates as one segment for the design, development and sale of integrated circuits.Accounting for stock-based compensationStock-based compensation expense recognized in the Consolidated Statement of Operations is based on optionsultimately expected to vest, reduced by the amount of estimated forfeitures. The Company chose the straight-line methodof allocating compensation cost over the requisite service period of the related award according to authoritative guidance.The Company calculated the expected term based on the historical average period of time that options were outstandingas adjusted for expected changes in future exercise patterns, which, for options granted in fiscal 2015, 2014 and 2013resulted in an expected term of approximately five years. The Company used historical volatility to estimate expectedvolatility in fiscal 2015, 2014 and 2013. The risk-free interest rate is based on the U.S. Treasury yields in effect at thetime of grant for periods corresponding to the expected life of the options. The dividend yield is 0%, based on the factthat the Company has never paid dividends and has no present intention to pay dividends. Changes to these assumptionsmay have a significant impact on the results of operations.Authoritative guidance requires cash flows, if any, resulting from the tax benefits from tax deductions in excess ofthe compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows.Comprehensive income (loss)Comprehensive income (loss) is defined to include all changes in stockholders’ equity during a period except thoseresulting from investments by owners and distributions to owners. For the years ended March 31, 2015, 2014 and 2013,comprehensive income (loss) was $(4,985,000), $(6,201,000) and $3,803,000, respectively.61 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRecent accounting pronouncementsIn August 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance related to theCompany’s responsibility to evaluate whether there is substantial doubt about its ability to continue ongoing businessoperations and to provide relevant footnote disclosures. The new guidance is effective for fiscal years, and interim periodswithin those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The adoption of this guidanceis not expected to 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." The new accountingstandard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts withcustomers and supersedes most current revenue recognition guidance. The accounting standard is effective for annualreporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Earlyadoption is not permitted. ASU No. 2014-09 provides for one of two methods of transition: retrospective application toeach prior period presented; or, recognition of the cumulative effect of retrospective application of the new standard inthe period of initial application. On April 1, 2015, the FASB proposed a one year deferral of the effective date toDecember 15, 2017, with early application permitted, but not before the original effective date of December 15, 2016. TheCompany is currently evaluating the impact of this accounting standard on its consolidated financial statements.In July 2013, the FASB issued an Accounting Standards Update (“ASU”) on Income Taxes, to improve thepresentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax creditcarryforward exists. This guidance is expected to reduce diversity in practice and is expected to better reflect the mannerin which an entity would settle at the reporting date any additional income taxes that would result from the disallowanceof a tax position when net operating loss carryforwards, similar tax losses, or tax credit carryforwards exist.Implementation of this guidance in the year ended March 31, 2015 did not have a material impact on the Company’sfinancial position or results of operations.NOTE 2—NET INCOME (LOSS) PER COMMON SHAREThe Company uses the treasury stock method to calculate the weighted average shares used in computing dilutednet income per share. The following table sets forth the computation of basic and diluted net income (loss) per share: Year Ended March 31,201520142013(In thousands, except per share amounts)Net income (loss)$(4,978)$(6,189)$3,846 Denominators:Weighted average shares—Basic25,029 27,505 27,124 Dilutive effect of employee stock options - -940 Dilutive effect of employee stock purchase plan options - -13 Weighted average shares—Dilutive25,029 27,505 28,077 Net income (loss) per common share—Basic$(0.20)$(0.23)$0.14 Net income (loss) per common share—Diluted$(0.20)$(0.23)$0.14 62 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following shares of common stock underlying outstanding stock options, determined on a weighted averagebasis, were excluded from the computation of diluted net income (loss) per common share as they had an anti-dilutiveeffect: Year Ended March 31, 2015 2014 2013 (In thousands)Shares underlying options 3,851 2,911 3,105 NOTE 3—BALANCE SHEET DETAIL March 31, 2015 2014 (In thousands)Inventories: Work-in-progress $2,422 $2,011 Finished goods 5,362 5,588 Inventory at distributors 628 586 $8,412 $8,185 March 31, 2015 2014 (In thousands)Accounts receivable, net: Accounts receivable $8,360 $8,349 Less: Allowances for sales returns, doubtful accountsand other (103) (111) $8,257 $8,238 March 31, 2015 2014 (In thousands)Prepaid expenses and other current assets: Prepaid tooling and masks $1,208 $833 Prepaid income taxes 139 2,598 Other receivables 350 596 Other prepaid expenses 600 1,125 $2,297 $5,152 63 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents March 31, 2015 2014 (In thousands)Property and equipment, net: Computer and other equipment $17,264 $16,990 Software 4,792 4,780 Land 3,900 3,900 Building and building improvements 2,256 2,256 Furniture and fixtures 110 110 Leasehold improvements 791 791 29,113 28,827 Less: Accumulated depreciation and amortization (20,405) (19,144) $8,708 $9,683 Depreciation and amortization expense was $1,633,000, $1,981,000 and $2,375,000 for the years ended March 31,2015, 2014 and 2013, respectively. March 31, 2015 2014 (In thousands)Other assets: Non-current deferred income taxes $27 $24 Intangible assets, net 393 564 Deposits 78 80 $498 $668 The following table summarizes the components of intangible assets and related accumulated amortizationbalances at March 31, 2015 (in thousands): Gross Carrying Accumulated Net Carrying Amount Amortization AmountIntangible assets: Product designs $590 $(470) $120 Patents 720 (447) 273 Software 80 (80) -Total $1,390 $(997) $393 Amortization of intangible assets of $171,000 was included in cost of revenues for the year ended March 31, 2015.64 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAs of March 31, 2015, the estimated future amortization expense of intangible assets in the table above is as follows(in thousands): Year Ending March 31,2016$164 2017115 201880 201934 2020 -Thereafter -Total$393 March 31,20152014(In thousands)Accrued expenses and other liabilities:Accrued compensation$3,386 $2,330 Accrued professional fees1,380 824 Accrued commissions268 307 Accrued royalties26 23 Other accrued expenses877 960 $5,937 $4,444 NOTE 4—INCOME TAXESIncome (loss) before income taxes and income tax expense consists of the following: Year Ended March 31,201520142013(In thousands)Income (loss) before income taxes:U.S.$(6,910)$(6,388)$137 Foreign1,257 912 3,747 $(5,653)$(5,476)$3,884 Current income tax expense (benefit):U.S. federal$(619)$(1,782)$914 Foreign(2)113 26 State(54)(82)(134)(675)(1,751)806 Deferred income tax expense (benefit):U.S. federal -1,892 (529)State -572 (239) -2,464 (768)Provision (benefit) for income tax$(675)$713 $38 65 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIncome tax expense differs from the amount of income tax determined by applying the applicable U.S. statutoryincome tax rate to pre-tax income as follows: Year Ended March 31, 2015 2014 2013 (In thousands)U.S. Federal taxes at statutory rate $(1,922) $(1,862) $1,321 State taxes, net of federal benefit (39) 490 (276)Stock-based compensation 447 392 601 Tax credits (472) (338) (454)Foreign tax rate differential (916) (650) (1,099)Tax exempt interest (20) (29) (30)Other (35) (72) (25) (2,957) (2,069) 38 Valuation allowance 2,282 2,782 - $(675) $713 $38 Deferred tax assets and deferred tax liabilities consist of the following: March 31,20152014(In thousands)Deferred tax assets:Deferred revenue$110 $202 Tax credits1,766 1,154 Net operating losses1,165 141 Stock-based compensation1,387 1,247 Property and equipment193 -Other reserves and accruals1,407 1,020 Total deferred tax assets$6,028 $3,764 Deferred tax liabilities:Property and equipment$ -$(58)Unrecognized gains(11)(11)Total deferred tax liabilities$(11)$(69)Gross deferred tax assets$6,017 $3,695 Valuation allowance(6,017)(3,695)Net deferred tax assets$ -$ - U.S. income taxes and withholding taxes have not been provided on a cumulative total of $39.5 million ofundistributed earnings for certain non-U.S. subsidiaries. The Company currently intends to indefinitely reinvest theseearnings in operations outside the United States. No provision has been made for taxes that might be payable uponremittance of such earnings, nor is it practicable to determine the amount of such potential liability.The current portion of the Company's unrecognized tax benefits at March 31, 2015 and 2014 was $0 and $0,respectively. The long-term portion at March 31, 2015 and 2014 was $780,000 and $1,462,000, respectively, of whichthe timing of the resolution is uncertain. As of March 31, 2015, $1,277,000 of unrecognized tax benefits had66 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsbeen recorded as a reduction to net deferred tax assets. As of March 31, 2015, our net deferred tax assets of $6.0 millionare subject to a full valuation allowance. It is possible, however, that some months or years may elapse before an uncertainposition for which the Company has established a reserve is resolved. A reconciliation of unrecognized tax benefits is asfollows: Year Ended March 31, 2015 2014 2013 (In thousands)Unrecognized tax benefits, beginning of period $2,386 $2,760 $3,109 Additions based on tax positions related to current year 292 250 429 Additions based on tax positions related to prior years - 13 85 Settlements during the current year - - (231)Lapses during the current year applicable to statutes oflimitations (696) (637) (632)Unrecognized tax benefits, end of period $1,982 $2,386 $2,760 The unrecognized tax benefit balance as of March 31, 2015 of $1,982,000 would affect the Company's effective taxrate if recognized.Management believes that it is reasonably possible that within the next twelve months the Company could have areduction in uncertain tax benefits of up to $729,000, including interest and penalties, as a result of the lapse of statute oflimitations.The Company's policy is to include interest and penalties related to unrecognized tax benefits within the provisionfor income taxes in the Consolidated Statements of Operations.The Company is subject to taxation in the United States and various state and foreign jurisdictions. As of March31, 2015, the Company maintains a full valuation allowance of $6.0 million for deferred tax assets that are not expectedto be utilized in future years. Fiscal years 2012 through 2015 remain open to examination by the federal tax authoritiesand fiscal years 2010 through 2015 remain open to examination by California.NOTE 5—FINANCIAL INSTRUMENTSFair value measurementsAuthoritative accounting guidance for fair value measurements provides a framework for measuring fair value andrelated disclosure. The guidance applies to all financial assets and financial liabilities that are measured on a recurringbasis. The guidance requires fair value measurement to be classified and disclosed in one of the following threecategories:Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities. The fair value ofavailable-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularlyavailable in an active market. As of March 31, 2015, the Level 1 category included money market funds of $4.4 million,which were included in cash and cash equivalents on the Consolidated Balance Sheets.Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assetsat the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly orindirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market valuesobtained from an independent pricing service that were evaluated using pricing models that67 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsvary by asset class and may incorporate available trade, bid and other market information and price quotes from wellestablished independent pricing vendors and broker-dealers. As of March 31, 2015, the Level 2 category included short-term investments of $22.2 million and long term-investments of $21.7 million, which were primarily comprised ofcertificates 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 reportingentity's own assumptions about market participants and pricing. As of March 31, 2015, the Company had no Level 3financial assets measured at fair value on the Consolidated Balance Sheets.The fair value of financial assets measured on a recurring basis is as follows (in thousands): Fair Value Measurements at Reporting Date Using Quoted Pricesin ActiveMarkets forIdentical Assetsand Liabilities SignificantOtherObservableInputs SignificantUnobservableInputs March 31, 2015 (Level 1) (Level 2) (Level 3) Assets: Money market funds $4,409 $4,409 $ — $ — Marketable securities 43,941 — 43,941 — Total $48,350 $4,409 $43,941 $ — Fair Value Measurements at Reporting Date Using Quoted Pricesin ActiveMarkets forIdentical Assetsand Liabilities SignificantOtherObservableInputs SignificantUnobservableInputs March 31, 2014 (Level 1) (Level 2) (Level 3) Assets: Money market funds $3,852 $3,852 $ — $ — Marketable securities 68,231 — 68,231 — Total $72,083 $3,852 $68,231 $ — Short-term and long-term investmentsAll of the Company's short-term and long-term investments are classified as available-for-sale. Available-for-saledebt securities with maturities greater than twelve months are classified as long-term investments when they are notintended for use in current operations. Investments in available-for-sale securities are reported at fair value withunrecognized gains (losses), net of tax, as a component of accumulated other comprehensive income on the ConsolidatedBalance Sheets. The Company had money market funds of $4.4 million and $3.9 million at March 31, 2015 andMarch 31, 2014, respectively, included in cash and cash equivalents on the Consolidated Balance Sheets. The Companymonitors its investments for impairment periodically and records appropriate reductions in carrying values when thedeclines are determined to be other-than-temporary.68 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following table summarizes the Company's available-for-sale investments: March 31, 2015GrossGrossUnrealizedUnrealizedFairCostGainsLossesValue(In thousands)Short-term investments:State and municipal obligations$6,810 $ -$ -$6,810 Corporate notes7,366 10 -7,376 Agency bonds1,006 - -1,006 Certificates of deposit7,000 9 -7,009 Total short-term investments$22,182 $19 $ -$22,201 Long-term investments:State and municipal obligations$1,053 $4 $ -$1,057 Corporate notes4,232 -(10)4,222 Certificates of deposit9,750 24 (1)9,773 Agency bonds4,003 4 (2)4,005 Other2,684 -(1)2,683 Total long-term investments$21,722 $32 $(14)$21,740 March 31, 2014GrossGrossUnrealizedUnrealizedFairCostGainsLossesValue(In thousands)Short-term investments:State and municipal obligations$8,336 $4 $ -$8,340 Corporate notes5,023 12 -5,035 Agency bonds3,523 2 -3,525 Certificates of deposit14,997 9 (3)15,003 Other7,507 3 (1)7,509 Total short-term investments$39,386 $30 $(4)$39,412 Long-term investments:State and municipal obligations$8,227 $11 $(1)$8,237 Corporate notes6,392 18 (2)6,408 Certificates of deposit10,500 9 (11)10,498 Agency bonds2,011 -(5)2,006 Other1,670 - -1,670 Total long-term investments$28,800 $38 $(19)$28,819 The Company's investment portfolio consists of both corporate and governmental securities that have a maximummaturity of three years. All unrealized losses are due to changes in interest rates and bond yields. The Company has theability to realize the full value of all these investments upon maturity.69 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAt March 31, 2015, the deferred tax liability related to unrecognized gains and losses on short-term and long-terminvestments was $11,000. At March 31, 2014, the deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $11,000. As of March 31, 2015, contractual maturities of the Company's available-for-sale non-equity investments were asfollows: Fair Cost Value (In thousands)Maturing within one year $22,182 $22,201 Maturing in one to three years 21,722 21,740 Maturing in more than three years - - $43,904 $43,941 NOTE 6—COMMITMENTS AND CONTINGENCIESOperating leasesThe Company leases office space and equipment under noncancelable operating leases with various expirationdates through August 2017. Rent expense for the years ended March 31, 2015, 2014 and 2013 was $354,000, $368,000and $373,000, respectively. The terms of the facility leases provide for rental payments on a graduated scale. TheCompany recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurredbut not paid.Future minimum lease payments under noncancelable operating leases with remaining lease terms in excess of oneyear at March 31, 2015 are as follows: Operating Leases (In thousands)Fiscal Year Ending March 31, 2016 $280 2017 249 2018 90 2019 -2020 -Thereafter -Total $619 Royalty obligationsThe Company has license agreements that require it to pay royalties on the sale of products using the licensedtechnology. Royalty expense for the years ended March 31, 2015, 2014 and 2013 was $53,000, $59,000 and $65,000,respectively, and was included within cost of revenues.70 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIndemnification obligationsThe Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the otherparty with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by theCompany, under which the Company customarily agrees to hold the other party harmless against losses arising from abreach of representations and covenants related to such matters as title to assets sold and certain intellectual propertyrights. In each of these circumstances, payment by the Company is conditioned on the other party making a claimpursuant to the procedures specified in the particular contract, which procedures typically allow the Company tochallenge the other party's claims. Further, the Company's obligations under these agreements may be limited in terms oftime and/or amount, and in some instances, the Company may have recourse against third parties for certain paymentsmade by it under these agreements.It is not possible to predict the maximum potential amount of future payments under these or similar agreementsdue to the conditional nature of the Company's obligations and the unique facts and circumstances involved in eachparticular agreement. Historically, payments made by the Company under these agreements have not had a material effecton its business, financial condition, cash flows or results of operations. The Company believes that if it were to incur aloss in any of these matters, such loss should not have a material effect on its business, financial condition, cash flows orresults of operations.Product warrantiesThe Company warrants its products to be free of defects generally for a period of three years. The Companyestimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues.Warranty costs were not significant for the years ended March 31, 2015, 2014 or 2013.Legal proceedingsIn March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against theCompany in the United States District Court for the District of Minnesota alleging that the Company’s products,including its SigmaDDR and SigmaQuad families of Very Fast SRAMs, infringe five patents held by Cypress. Thecomplaint sought unspecified damages for past infringement and a permanent injunction against future infringement.On June 10, 2011, Cypress filed a complaint against the Company with the United States International TradeCommission (the “ITC”). The ITC complaint, as subsequently amended, alleged infringement by the Company of three ofthe five patents involved in the District Court case and one additional patent and also alleged infringement by three ofthe Company’s distributors and 11 of its customers who allegedly incorporate the Company’s SRAMs in theirproducts. The ITC complaint sought a limited exclusion order excluding the allegedly infringing SRAMs, and productscontaining them, from entry into the United States and permanent orders directing the Company and the otherrespondents to cease and desist from selling or distributing such products in the United States. On July 21, 2011, the ITCformally instituted an investigation in response to Cypress’s complaint. On June 7, 2013, the ITC announced that thefull Commission had affirmed the determination of Chief Administrative Judge Charles E. Bullock that GSI’s SRAMdevices, and products containing them, do not infringe the Cypress patents and that Cypress had failed to establishexistence of a domestic industry that practices the patents. Moreover, the Commission reversed a portion of JudgeBullock’s determination with respect to the validity of the patents, finding the asserted claims of one of the patents tohave been anticipated by prior art and, therefore, invalid. The Commission ordered the investigation terminated, andCypress did not appeal the ruling.The Minnesota District Court case had been stayed pending the conclusion of the ITC proceeding. Following thetermination of the ITC investigation, the stay was lifted. On May 1, 2013, Cypress filed an additional lawsuit in theUnited States District Court for the Northern District of California alleging infringement by our products of five 71 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsadditional Cypress patents. Like the Minnesota case, the complaint in the California lawsuit sought unspecified damagesfor past infringement and a permanent injunction against future infringement. The Company filed answers in both casesdenying liability and asserting affirmative defenses. On August 7, 2013, the parties stipulated that the claims in theMinnesota case with respect to three of the asserted patents would be dismissed without prejudice and that the claims withrespect to the remaining two patents would be transferred to the Northern District of California and consolidated with thepending California case. On August 20, 2013, the Court in the California case ordered the cases consolidated.The Company did not record any loss contingency during fiscal 2013, fiscal 2014 or fiscal 2015 in connection withthese legal proceedings as the Company was unable to predict their outcome and could not estimate the likelihood orpotential dollar amount of any adverse results.Subsequent to March 31, 2015, the Company and Cypress entered into a settlement agreement resolving the patentinfringement litigation and another lawsuit then pending in the same court in which the Company alleged that Cypresshad violated federal and state antitrust laws. See Note 12.NOTE 7—COMMON STOCKThe Company's Certificate of Incorporation, as amended, authorizes the Company to issue 150,000,000 shares of$0.001 par value common stock.On July 9, 2014, the Company announced that it had commenced a modified “Dutch auction” self-tender offer torepurchase for cash shares of its common stock for an aggregate purchase price of up to $25 million. Under the terms ofthe tender offer, the Company’s stockholders had the opportunity to tender some or all of their shares at a price within therange of $6.50 to $6.70 per share.The tender offer expired on August 6, 2014. The Company accepted for purchase and retirement an aggregate of3,846,153 shares of its common stock at a final purchase price of $6.50 per share, for an aggregate cost of approximately$25 million, excluding fees and expenses related to the tender offer. A total of 10,466,830 shares were properly tenderedand not properly withdrawn at a price of $6.50 per share. Since the offer was oversubscribed, the number of shares that theCompany accepted for purchase from tendering stockholders was prorated, based upon the proration procedures describedin the offer to purchase (other than shares tendered by “odd lot” holders, which were not subject to proration and wereaccepted in full).The aggregate number of shares purchased and retired by the Company in the tender offer representedapproximately 14.0 percent of its issued and outstanding shares of common stock as of August 8, 2014. Followingsettlement of the tender offer, the Company had approximately 23.7 million shares of its common stock outstanding.The Company’s board of directors has authorized the repurchase, at management's discretion, of shares its commonstock. Under the repurchase program, the Company may repurchase shares from time to time on the open market or inprivate 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 withoutprior notice. Through March 31, 2015, including the shares purchased in the modified “Dutch Auction” self-tenderoffer, the Company has repurchased and retired a total of 8,728,532 shares at an average cost of $5.33 per share for a totalcost of $46.5 million. At March 31, 2015, management was authorized to repurchase additional shares with a value of upto $8.5 million under the repurchase program.72 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNOTE 8—STOCK- BASED COMPENSATIONThe 2000 Stock Option PlanIn February 2001, the Company adopted the 2000 Stock Option Plan (the "2000 Plan"). The 2000 Plan provided forthe granting of stock options and stock purchase rights to employees, consultants and directors of the Company. Optionsgranted under the 2000 Plan could be either incentive stock options ("ISOs") or nonstatutory stock options ("NSOs"). InDecember 2006, the Company's board of directors authorized an additional 500,000 shares of the Company's commonstock to be reserved for issuance under the 2000 Plan. As of March 31, 2008, the Company had reserved 3,500,000 sharesof common stock for issuance under the 2000 Plan.Options under the 2000 Plan could be granted for periods of up to ten years. However, in the case of ISOs granted toan optionee who, at the time the option was granted, owned stock representing more than 10% of the voting power of allclasses of stock of the Company, the maximum term of an option was five years from the date of grant. The exercise priceof an ISO or NSO could not be less than 100% and 85% of the estimated fair value of the shares as determined by theboard of directors on the date of grant, respectively. However the exercise price of an ISO or NSO granted to a 10% orgreater stockholder could not be less than 110% of the estimated fair value of the shares on the date of grant.The 2007 Equity Incentive PlanIn January 2007, the Company's board of directors approved the 2007 Equity Incentive Plan, (the "Equity Plan"),which was subsequently approved by the Company's stockholders in March 2007. A total of 3,000,000 shares of commonstock were authorized and reserved for issuance under the Equity Plan. This reserve automatically increases on April 1 ofeach year through 2017 by an amount equal to the smaller of (a) five percent of the number of shares of common stockissued and outstanding on the immediately preceding March 31, or (b) a lesser amount determined by the board ofdirectors. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in theEquity Plan and in outstanding awards to prevent dilution or enlargement of participants' rights in the event of a stocksplit or other change in the Company's capital structure. Shares subject to awards which expire or are cancelled orforfeited will again become available for issuance under the Equity Plan. The shares available will not be reduced byawards settled in cash or by shares withheld to satisfy tax withholding obligations. Only the net number of shares issuedupon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previouslyowned shares will be deducted from the shares available under the Equity Plan.To enable compensation provided in connection with certain types of awards intended to qualify as “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code, the Equity Plan establishes limits on themaximum aggregate number of shares or dollar value for which awards may be granted to an employee in any fiscal year,as follows: ·No more than 300,000 shares subject to stock options and stock appreciation rights.·No more than 100,000 shares subject to restricted stock and restricted stock unit awards. ·For each full fiscal year of the Company contained in the performance period of the award, no more than50,000 shares subject to performance share awards and other stock-based awards or more than $500,000subject to performance unit awards and other cash-based awards.In addition, to comply with applicable tax rules, the Equity Plan also limits the number of shares that may be issued uponthe exercise of ISOs granted under the Equity Plan to 3,000,000, cumulatively increased on April 1 of each73 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssubsequent year through 2017, by an amount equal to the smallest of (a) five percent of the number of shares of commonstock issued and outstanding on the immediately preceding March 31, (b) 1,500,000 shares, or (c) a lesser amountdetermined by the board of directors.Upon the adoption of the Equity Plan in March 2007, the 2000 Plan was terminated, no further options were grantedunder the 2000 Plan, the 535,597 shares that remained reserved for grant under the 2000 Plan were cancelled, and allsubsequent grants of stock options were made pursuant to the Equity Plan.Awards may be granted under the Equity Plan to the Company's employees, including officers, directors, orconsultants or those of any present or future parent or subsidiary corporation or other affiliated entity. To date, optionsgranted to non-officer employees generally vest 25% on the first anniversary and subsequent anniversaries of the date ofgrant, while grants to officers vest in full four years after the anniversary date of the officer's employment that is closest tothe date of grant. While the Company may grant ISOs only to employees, the Company may grant NSOs, stockappreciation rights, restricted stock purchase rights or bonuses, restricted stock units, performance shares, performanceunits and cash-based awards or other stock-based awards to any eligible participant. Non-employee director awards maybe granted only to members of the Company's board of directors who, at the time of grant, are not employees. Deferredcompensation awards may be granted only to officers, directors and selected members of management or highlycompensated employees.Only members of the board of directors who are not employees at the time of grant are eligible to participate in thenonemployee director awards component of the Equity Plan. The board or the compensation committee shall set theamount and type of nonemployee director awards to be awarded on a periodic, non-discriminatory basis. Nonemployeedirector awards may be granted in the form of NSOs, stock appreciation rights, restricted stock awards and restricted stockunit awards. Subject to adjustment for changes in the Company's capital structure, no nonemployee director may beawarded, in any fiscal year, one or more nonemployee director awards for more than 2,000 shares. However, the annuallimit may be increased by the following additions: (i) an additional 10,000 shares in the fiscal year in which thenonemployee director is first appointed or elected to the board, (ii) an additional 2,000 shares in any fiscal year in whichthe nonemployee director is serving as the chairman or lead director of the board, (iii) an additional 1,000 shares in anyfiscal year for each committee of the board on which the nonemployee director is then serving other than as chairman ofthe committee, and (iv) an additional 2,000 shares in any fiscal year for each committee of the board on which thenonemployee director is then serving as chairman of the committee.In the event of a change in control as described in the Equity Plan, the acquiring or successor entity may assume orcontinue all or any awards outstanding under the Equity Plan or substitute substantially equivalent awards. Any awardswhich are not assumed or continued in connection with a change in control or exercised or settled prior to the change incontrol will terminate effective as of the time of the change in control. The administrator may provide for the accelerationof vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that the vesting ofall nonemployee director awards will automatically be accelerated in full. The Equity Plan also authorizes theadministrator, in its discretion and without the consent of any participant, to cancel each or any outstanding awarddenominated in shares upon a change in control in exchange for a payment to the participant with respect to each vestedshare subject to the cancelled award of an amount equal to the excess of the consideration to be paid per share of commonstock in the change in control transaction over the exercise price per share, if any, under the award.The 2007 Employee Stock Purchase PlanIn January 2007, the board of directors approved the 2007 Employee Stock Purchase Plan (the "2007 PurchasePlan") which was subsequently approved by the Company's stockholders in March 2007. A total of 500,000 shares of theCompany's common stock was authorized and reserved for sale under the 2007 Purchase Plan. In addition, the74 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents2007 Purchase Plan provides for an automatic annual increase in the number of shares available for issuance under theplan on April 1 of each year beginning in 2008 and continuing through and including April 1, 2017 equal to the lesser of(1) one percent of the number of issued and outstanding shares of common stock on the immediately preceding March 31,(2) 250,000 shares or (3) a number of shares as the board of directors may determine. Appropriate adjustments will bemade in the number of authorized shares and in outstanding purchase rights to prevent dilution or enlargement ofparticipants' rights in the event of a stock split or other change in our capital structure. Shares subject to purchase rightswhich expire or are canceled will again become available for issuance under the 2007 Purchase Plan.The Company's employees and employees of any parent or subsidiary corporation designated by the administratorwill be eligible to participate in the 2007 Purchase Plan if they are customarily employed by us for more than 20 hours perweek and more than five months in any calendar year. However, an employee may not be granted a right to purchase stockunder the 2007 Purchase Plan if: (1) the employee immediately after such grant would own stock possessing 5% or moreof the total combined voting power or value of all classes of our capital stock or of any parent or subsidiary corporation,or (2) the employee's rights to purchase stock under all of our employee stock purchase plans would accrue at a rate thatexceeds $25,000 in value for each calendar year of participation in such plans.The 2007 Purchase Plan is designed to be implemented through a series of sequential offering periods, generally six(6) months in duration beginning on the first trading day on or after May 1 and November 1 of each year. Theadministrator is authorized to establish additional or alternative sequential or overlapping offering periods and offeringperiods having a different duration or different starting or ending dates, provided that no offering period may have aduration exceeding 27 months.Amounts accumulated for each participant under the 2007 Purchase Plan are used to purchase shares of theCompany's common stock at the end of each offering period at a price generally equal to 85% of the lower of the fairmarket value of our common stock at the beginning of an offering period or at the end of the offering period. Prior tocommencement of an offering period, the administrator is authorized to reduce, but not increase, this purchase pricediscount for that offering period, or, under circumstances described in the 2007 Purchase Plan, during that offering period.The maximum number of shares a participant may purchase in any six-month offering period is the lesser of (i) thatnumber of shares determined by multiplying (x) 1,000 shares by (y) the number of months (rounded to the nearest wholemonth) in the offering period and rounding to the nearest whole share or (ii) that number of whole shares determined bydividing (x) the product of $2,083.33 and the number of months (rounded to the nearest whole month) in the offeringperiod and rounding to the nearest whole dollar by (y) the fair market value of a share of our common stock at thebeginning of the offering period. Prior to the beginning of any offering period, the administrator may alter the maximumnumber of shares that may be purchased by any participant during the offering period or specify a maximum aggregatenumber of shares that may be purchased by all participants in the offering period. If insufficient shares remain availableunder the plan to permit all participants to purchase the number of shares to which they would otherwise be entitled, theadministrator will make a pro rata allocation of the available shares. Any amounts withheld from participants'compensation in excess of the amounts used to purchase shares will be refunded, without interest.In the event of a change in control, an acquiring or successor corporation may assume our rights and obligationsunder the 2007 Purchase Plan. If the acquiring or successor corporation does not assume such rights and obligations, thenthe purchase date of the offering periods then in progress will be accelerated to a date prior to the change in control.75 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following table summarizes stock option activities: Weighted Number of Shares Average Weighted Shares Underlying Remaining Average Available for Options Contractual Exercise Intrinsic Grant Outstanding Life (Years) Price ValueBalance at March 31, 2012 4,361,464 5,626,148 $4.46 Options reserved 1,380,897 - - Granted (914,963) 914,963 5.04 Exercised - (123,732) 3.02 $351,120 Forfeited 40,060 (81,060) 4.74 Balance at March 31, 2013 4,867,458 6,336,319 4.46 Options reserved 1,353,260 - - Granted (784,303) 784,303 6.45 Exercised - (816,957) 3.10 2,629,982 Forfeited 149,085 (159,685) 6.04 Balance at March 31, 2014 5,585,500 6,143,980 5.13 Options reserved 1,377,699 - - Granted (791,903) 791,903 5.20 Exercised - (119,085) 3.88 262,253 Forfeited 42,647 (42,647) 5.49 Balance at March 31, 2015 6,213,943 6,774,151 $5.16 Options vested and exercisable 4,554,688 4.18 $4.98 $5,267,520 Options vested and expected tovest 6,717,297 5.49 $5.15 $6,518,173 The options outstanding and by exercise price at March 31, 2015 are as follows: Number ofOptions OutstandingOptions ExercisableSharesWeightedWeighted AverageWeightedUnderlyingAverageRemainingNumberAverageOptionsExerciseContractualVested andExerciseExercise PriceOutstandingPriceLife (Years)ExercisablePrice$2.43-3.43905,064 $3.17 3.85 905,064 $3.17 $3.75-4.00812,779 $3.96 3.96 812,779 $3.96 $4.17-4.68715,855 $4.32 5.45 391,791 $4.30 $4.81-5.231,077,436 $5.05 8.27 213,094 $4.88 $5.50783,433 $5.50 1.63 783,433 $5.50 $5.59-5.76695,410 $5.70 6.63 288,753 $5.70 $6.00-6.54798,358 $6.32 6.16 604,884 $6.31 $6.61-6.86666,003 $6.77 7.89 235,077 $6.77 $7.00206,193 $7.00 5.34 206,193 $7.00 $9.20113,620 $9.20 5.84 113,620 $9.20 6,774,151 $5.51 4,554,688 76 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsStock-based compensationThe Company recognized $2,077,000, $2,228,000 and $2,278,000 of stock-based compensation expense for theyears ended March 31, 2015, 2014 and 2013, respectively, as follows: Year Ending March 31, 2015 2014 2013 (In thousands)Cost of revenues $401 $386 $338 Research and development 941 970 1,140 Selling, general and administrative 735 872 800 Total $2,077 $2,228 $2,278 Stock-based compensation expense in the years ended March 31, 2015, 2014 and 2013 included $153,000, $152,000 and $145,000, respectively, related to the Company's Employee Stock Purchase Plan. No tax benefit was recognized in either fiscal 2015 or fiscal 2014 due to a full valuation allowance. The Companyrecognized related income tax benefits of $221,000 in fiscal 2013. There were no windfall tax benefits realized fromexercised stock options recognized in fiscal 2015. The reversal of previously recognized windfall tax benefits realizedfrom exercised stock options was $33,000 in fiscal 2014. Windfall tax benefits realized from exercised stock options were$92,000 during fiscal 2013. Compensation cost capitalized within inventory at March 31, 2015 was insignificant. As ofMarch 31, 2015, the Company's total unrecognized compensation cost was $3.3 million, which will be recognized overthe weighted average period of 1.99 years. The Company calculated the fair value of stock based awards in the periodspresented using the Black-Scholes option pricing model and the following weighted average assumptions: Year Ended March 31, 2015 2014 2013 (In thousands)Stock Option Plans: Risk-free interest rate 1.47 -1.7 % 0.91 -1.61 % 0.69 -0.82 %Expected life (in years) 5.00 5.00 5.00 Volatility 40.4 -44.8 % 45.5 -48.4 % 48.8 -52.9 %Dividend yield -% -% -%Employee Stock Purchase Plan: Risk-free interest rate 0.05 % 0.07 -0.09 % 0.14 -0.15 %Expected life (in years) 0.50 0.50 0.50 Volatility 30.8 -38.0 % 30.4 -32.8 % 23.4 -47.3 %Dividend yield -% -% -% The weighted average fair value of options granted during the years ended March 31, 2015, 2014 and 2013 was$2.08, $2.73 and $2.22, respectively.77 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNOTE 9—SEGMENT AND GEOGRAPHIC INFORMATIONBased on its operating management and financial reporting structure, the Company has determined that it has onereportable business segment: the design, development and sale of integrated circuits.The following is a summary of net revenues by geographic area based on the location to which product is shipped: Year Ended March 31, 2015 2014 2013 (In thousands)United States $18,099 $18,021 $20,588 China 15,695 13,294 14,000 Malaysia 2,720 9,827 16,352 Singapore 6,552 5,979 7,141 Rest of the world 10,432 11,458 7,933 $53,498 $58,579 $66,014 All sales are denominated in United States dollars.The locations and net book value of long-lived assets are as follows: March 31, 2015 2014 (In thousands)United States $6,630 $7,332 Taiwan 2,078 2,351 $8,708 $9,683 NOTE 10—EMPLOYEE BENEFIT PLANThe Company provides a defined contribution retirement plan (the "Retirement Plan"), which qualifies underSection 401(k) of the Internal Revenue Code of 1986. The Retirement Plan covers essentially all United Statesemployees. Eligible employees may make contributions to the Retirement Plan up to 15% of their annual compensation,but no greater than the annual IRS limitation for any plan year. The Retirement Plan does not provide for Companycontributions.78 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNOTE 11—QUARTERLY FINANCIAL DATA (Unaudited) Three Months Ended June 30, September 30, December 31, March 31, 2014 2014 2014 2015 (In thousands, except per share amounts)Consolidated Statement of Operations Data: Net revenues $12,945 $13,263 $14,227 $13,063 Gross profit $5,939 $6,061 $6,650 $6,473 Net income (loss) $(1,446) $(950) $148 $(2,730)Net income (loss) per common share—Basic $(0.05) $(0.04) $0.01 $(0.12)Net income (loss) per common share—Diluted $(0.05) $(0.04) $0.01 $(0.12) Three Months EndedJune 30,September 30,December 31,March 31,2013201320132014(In thousands, except per share amounts)Consolidated Statement of Operations Data:Net revenues$16,412 $15,542 $13,778 $12,847 Gross profit$7,466 $7,402 $5,368 $5,874 Net income (loss)$(441)$386 $(734)$(5,400)Net income (loss) per common share—Basic$(0.02)$0.01 $(0.03)$(0.20)Net income (loss) per common share—Diluted$(0.02)$0.01 $(0.03)$(0.20) NOTE 12 – SUBSEQUENT EVENTSettlement of Legal ProceedingsOn May 6, 2015, the Company and Cypress Semiconductor Corporation entered into a settlement agreement toresolve the patent infringement litigation described in Note 6 and a separate lawsuit pending in the United States DistrictCourt for the Northern District of California in which the Company alleged that Cypress had violated federal and stateantitrust laws. Under the settlement agreement: ·Each of the parties agreed to dismiss its lawsuit with prejudice in consideration of the dismissal withprejudice of the lawsuit brought by the other party; and ·Each party agreed to release all claims against the other with respect to issues raised in the two lawsuits. The parties agreed that the settlement agreement was entered into to resolve disputed claims, and that each party deniesany liability to the other party. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot applicable.79 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsItem 9A. Controls and ProceduresManagement's Evaluation of Disclosure Controls and ProceduresBased 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 March 31, 2015, our Chief Executive Officer and ChiefFinancial Officer, have concluded that our disclosure controls and procedures were effective as of the end of the periodcovered by this report for the purpose of ensuring that the information required to be disclosed by us in the reports we fileor submit under the Act is recorded, processed, summarized and reported within the time periods specified in the SEC’srules and forms, and that the information is accumulated and communicated to our management, including our ChiefExecutive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure.Changes in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting that occurred during the quarter ended March31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financialreporting.Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that ourdisclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matterhow well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the controlsystem are met. Further, the design of a control system must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems,no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within GSITechnology, have been detected.Management's Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reportingas defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financialreporting may not prevent or detect misstatements and can only provide reasonable assurance with respect to financialstatement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with the policies orprocedures may deteriorate.We assessed the effectiveness of our internal control over financial reporting as of March 31, 2015. In making thisassessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission("COSO") in Internal Control—Integrated Framework (2013). Based on our assessment using those criteria, ourmanagement (including our Chief Executive Officer and Chief Financial Officer) concluded that our internal control overfinancial reporting was effective as of March 31, 2015.The effectiveness of the Company's internal control over financial reporting as of March 31, 2015 has been auditedby PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appearson page 51 of this Annual Report on Form 10-K. Item 9B. Other Information Not applicable.80 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIIThe SEC allows us to include information required in this report by referring to other documents or reports we havealready filed or will soon be filing. This is called "incorporation by reference." We intend to file our definitive proxystatement for our 2015 annual meeting of stockholders (the "Proxy Statement") pursuant to Regulation 14A not later than120 days after the end of the fiscal year covered by this report, and certain information therein is incorporated in thisreport by reference. Item 10. Directors, Executive Officers and Corporate GovernanceThe information required by this item with respect to executive officers is set forth in Part I of this Annual Report onForm 10-K and the remaining information required by this item is incorporated by reference from the sections entitled"Proposal No. 1 - Election of Directors", "Corporate Governance" and "Section 16(a) Beneficial Ownership ReportingCompliance" to be included in the Proxy Statement. Item 11. Executive CompensationThe information required by this item is incorporated by reference from the section entitled "ExecutiveCompensation" to be included in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this item is incorporated by reference from the sections entitled "PrincipalStockholders and Stock Ownership by Management" and “Executive Compensation – Equity Compensation PlanInformation” to be included in the Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this item is incorporated by reference from the section entitled "Related PersonTransactions" and "Corporate Governance—Director Independence" to be included in the Proxy Statement. Item 14. Principal Accountant Fees and ServicesThe information required by this item is incorporated by reference from the section entitled "Proposal No. 2 -Ratification of Appointment of Independent Registered Public Accounting Firm" to be included in the Proxy Statement. 81 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules(a) The following documents are filed as part of this Form:1. Financial Statements PageReport of Independent Registered Public Accounting Firm 51 Consolidated Balance Sheets As of March 31, 2015 and 2014 52 Consolidated Statements of Operations For the Three Years Ended March31, 2015, 2014 and 2013 53 Consolidated Statements of Comprehensive Income For the Three YearsEnded March 31, 2015, 2014 and 2013 54 Consolidated Statements of Stockholders’ Equity For the Three YearsEnded March 31, 2015, 2014 and 2013 55 Consolidated Statements of Cash Flows For the Three Years Ended March31, 2015, 2014 and 2013 56 Notes to Consolidated Financial Statements 57 2. Financial Statement SchedulesSchedules not listed above have been omitted because the information required to be set forth therein is notapplicable, is not material or is shown in the consolidated financial statements or the notes thereto.82 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents3. Exhibits:The following exhibits are filed herewith:ExhibitNumbeName of Document3.1 Restated Certificate of Incorporation of Registrant (Incorporated by reference to Exhibit 3.3 toRegistrant's Registration Statement on Form S-1 (File No. 333-139885) filed on February 16, 2007)3.2 Bylaws of Registrant (Incorporated by reference to Exhibit 3.4 to Registrant's Registration Statement onForm S-1 (File No. 333-139885) filed on February 16, 2007)10.1 Form of Indemnity Agreement between Registrant and Registrant's directors and officers (Incorporatedby reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (FileNo. 333-139885) filed on January 10, 2007)10.2(1)1997 Stock Plan and form of Stock Option Agreement (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed onFebruary 16, 2007)10.3(1)2000 Stock Option Plan and form of Stock Option Agreement (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed onFebruary 16, 2007)10.4(1)2007 Equity Incentive Plan, as amended (Incorporated by reference to Appendix A to Registrant'sdefinitive Proxy Statement filed on July 21,2011)10.5(1)2007 Employee Stock Purchase Plan and form of Subscription Agreement (Incorporated by reference toidentically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885)filed on February 16, 2007)10.6(1)Form of Notice of Grant of Stock Option (U.S. Participant) (Incorporated by reference to Exhibit 99.1 toRegistrant's Current Report on Form 8-K filed on June 4, 2007)10.7(1)Form of Notice of Grant of Stock Option (Non-U.S. Participant) (Incorporated by reference toExhibit 99.2 to Registrant's Current Report on Form 8-K filed on June 4, 2007)10.8(1)Form of Stock Option Agreement (U.S. Participant) (Incorporated by reference to Exhibit 99.3 toRegistrant's Current Report on Form 8-K filed on June 4, 2007)10.9(1)Form of Stock Option Agreement (Non-U.S. Participant) (Incorporated by reference to Exhibit 99.4 toRegistrant's Current Report on Form 8-K filed on June 4, 2007)10.10 Intellectual Property Agreement dated August 28, 2009 between GSI Technology, Inc. and SonyElectronics Inc. (Incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q filed on November 16, 2009)10.11(1)GSI Technology, Inc. 2011 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 toRegistrant's Current Report on Form 8-K filed on April 5, 2010)10.12(1)GSI Technology, Inc. 2012 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 toRegistrant's Current Report on Form 8-K filed on May 10, 2011)10.13Factory Lease Agreement for No. 1, 6th Floor, 30 Tai-Yuan Street, Chu-Pei City, Taiwan dated August9, 2012 (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed onSeptember 11, 2012)10.14(2)Master Purchase Agreement dated August 31, 2011 between Registrant and Cisco Systems, Inc.(Incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10‑Q filed onNovember 4, 2011)10.15(2)Master Purchase Agreement dated August 31, 2011 between Registrant and Cisco Systems InternationalB.V. (Incorporated by reference to Exhibit 10.2 to Registrant's Quarterly Report on Form 10‑Q filed onNovember 4, 2011)10.16(1)GSI Technology, Inc. 2013 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 toRegistrant's Current Report on Form 8‑K filed on May 8, 2012)10.17(1)GSI Technology, Inc. 2014 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 toRegistrant's Current Report on Form 8-K filed on June 3, 2013) 83 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents10.18(1)GSI Technology, Inc. 2015 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 toRegistrant's Current Report on Form 8-K filed on May 30, 2014)10.19Factory Lease Agreement for No. 1, 6th Floor, 30 Tai-Yuan Street, Chu-Pei City, Taiwan dated August22, 2014 (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed onAugust 26, 2014)21.1 List of Subsidiaries23.1 Consent of Independent Registered Public Accounting Firm24.1 Power of Attorney (Incorporated by reference to the signature page of this Annual Report on Form 10-K)31.1 Certification of Lee-Lean Shu, President and Chief Executive Officer, pursuant to Section 302 of theSarbanes-Oxley Act of 200231.2 Certification of Douglas Schirle, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-OxleyAct of 200232.1 Certification of Lee-Lean Shu, President and Chief Executive Officer, and Douglas Schirle, ChiefFinancial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INSXBRL Instance Document101.SCHXBRL Taxonomy Extension Schema Document101.CALXBRL Taxonomy Extension Calculation Linkbase Document101.DEFXBRL Taxonomy Extension Definition Linkbase Document101.LABXBRL Taxonomy Extension Label Linkbase Document101.PREXBRL Taxonomy Extension Presentation Linkbase Document __________________________________(1)Compensatory plan or management contract.(2)This exhibit has been filed separately with the Commission pursuant to an application for confidential treatment whichhas been granted by the Commission. The confidential portions of this exhibit have been omitted and marked by asterisks. 84 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto duly authorized. June 11, 2015GSI TECHNOLOGY, INC. By:/s/ DOUGLAS M. SCHIRLEDouglas M. SchirleChief Financial Officer 85 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes andappoints Lee-Lean Shu and Robert Yau, jointly and severally, his attorneys-in-fact, each with the power of substitution,for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, withexhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, herebyratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be doneby virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has beensigned below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.Name Title Date /s/ LEE-LEAN SHU President, Chief Executive Officer and Chairman June 11, 2015Lee-Lean Shu(Principal Executive Officer)/s/ DOUGLAS M. SCHIRLE Chief Financial Officer June 11, 2015Douglas M. Schirle(Principal Financial and Accounting Officer)/s/ ROBERT YAU Vice President, Engineering, Secretary and Director June 11, 2015Robert Yau/s/ JACK A. BRADLEYDirectorJune 11, 2015 Jack A. Bradley /s/ E. THOMAS HARTDirectorJune 11, 2015 E. Thomas Hart /s/ HAYDN HSIEHDirectorJune 11, 2015 Haydn Hsieh /s/ RUEY L. LUDirectorJune 11, 2015Ruey L. Lu /s/ ARTHUR O. WHIPPLE Director June 11, 2015Arthur O. Whipple 86Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 21.1GSI TECHNOLOGY, INC. SUBSIDIARIESGSI Technology Holdings, Inc., a Cayman Islands companyGSI Technology (BVI), Inc., a British Virgin Islands companyGSI Technology Taiwan, Inc., a Republic of China company Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-144140) of GSI Technology, Inc. of our report dated June 11, 2015 relating to the financial statements and theeffectiveness of internal control over financial reporting, which appears in this Form 10-K./s/ PRICEWATERHOUSECOOPERS LLPSan Jose, CaliforniaJune 11, 2015 Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Exhibit 31.1CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Lee-Lean Shu, certify that:1.I have reviewed this annual report on Form 10-K of GSI Technology, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting thatoccurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the caseof an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting, which are reasonably likely to adversely affect the registrant's ability to record,process, summarize, and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant's internal control over financial reporting. June 11, 2015/s/ LEE-LEAN SHULee-Lean ShuPresident and Chief Executive Officer Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 31.2CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANTTO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Douglas M. Schirle, certify that:1.I have reviewed this annual report on Form 10-K of GSI Technology, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state amaterial fact necessary to make the statements made, in light of the circumstances under which such statementswere made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairlypresent in all material respects the financial condition, results of operations and cash flows of the registrant as of,and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controlsand procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financialreporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures tobe designed under our supervision, to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financialreporting to be designed under our supervision, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in thisreport our conclusions about the effectiveness of the disclosure controls and procedures, as of the end ofthe period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant's internal control over financial reporting thatoccurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the caseof an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internalcontrol over financial reporting, to the registrant's auditors and the audit committee of the registrant's board ofdirectors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control overfinancial reporting, which are reasonably likely to adversely affect the registrant's ability to record,process, summarize, and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have asignificant role in the registrant's internal control over financial reporting. June 11, 2015/s/ DOUGLAS M. SCHIRLEDouglas M. SchirleChief Financial Officer Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of GSI Technology, Inc. (the "Company") on Form 10-K for the yearending March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), theundersigned officers of the Company, each certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 ofthe Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934(15 U.S.C. 78m or 78o(d)); and(2)The information contained in the Report fairly presents, in all material respects, the financial condition andresults of operations of the Company. June 11, 2015/s/ LEE-LEAN SHULee-Lean ShuPresident and Chief Executive Officer/s/ DOUGLAS M. SCHIRLEDouglas M. SchirleChief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging,or otherwise adopting the signature that appears in typed form within the electronic version of this written statementrequired by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to theSecurities and Exchange Commission or its staff upon request. Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: GSI TECHNOLOGY INC, 10-K, June 11, 2015Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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