10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________ 

FORM 10-Q

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

For the quarterly period ended June 30, 2013

or

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

For the transition period from              to            

Commission File Number 000-33387

_____________________________________________ 

GSI Technology, Inc.

(Exact name of registrant as specified in its charter)

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

1213 Elko Drive

Sunnyvale, California 94089

(Address of principal executive offices, zip code)

(408) 331-8800

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer  o	Accelerated filer x
Non-accelerated filer  o	Smaller reporting company  o

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

The number of shares of the registrant’s common stock outstanding as of July 31, 2013: 27,540,010

GSI TECHNOLOGY, INC.

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.	Exhibits	36
Signatures		37
Exhibit Index		38

  i

PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements

GSI TECHNOLOGY, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			March 31,
	2013			2013
	(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents	$	42,781		$	41,120
Short-term investments		21,065			26,139
Accounts receivable, net		10,284			10,241
Inventories		12,177			13,809
Prepaid expenses and other current assets		4,570			4,945
Deferred income taxes		1,098			1,224
Total current assets		91,975			97,478
Property and equipment, net		10,325			10,774
Long-term investments		41,449			35,495
Other assets		2,162			2,098
Total assets	$	145,911		$	145,845
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	$	3,475		$	3,804
Accrued expenses and other liabilities		3,896			3,978
Deferred revenue		2,589			3,077
Total current liabilities		9,960			10,859
Income taxes payable		2,755			2,803
Total liabilities		12,715			13,662
Commitments and contingencies (Note 6)
Stockholders' equity:
Preferred stock: $0.001 par value authorized: 5,000,000 shares; issued and outstanding: none		-			-
Common Stock: $0.001 par value authorized: 150,000,000 shares; issued and outstanding: 27,357,797 and 27,065,209 shares, respectively		27			27
Additional paid-in capital		55,543			54,004
Accumulated other comprehensive income		(40	)		45
Retained earnings		77,666			78,107
Total stockholders' equity		133,196			132,183
Total liabilities and stockholders' equity	$	145,911		$	145,845

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

1

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited) 

	Three Months Ended June 30,
	2013			2012
	(In thousands, except per share amounts)
Net revenues	$	16,412		$	16,783
Cost of revenues		8,946			10,018
Gross profit		7,466			6,765
Operating expenses:
Research and development		2,997			2,838
Selling, general and administrative		5,010			3,047
Total operating expenses		8,007			5,885
Income (loss) from operations		(541	)		880
Interest income, net		105			124
Other income (expense), net		6			12
Income (loss) before income taxes		(430	)		1,016
Provision for income taxes		11			96
Net income (loss)	$	(441	)	$	920
Net income (loss) per share:
Basic	$	(0.02	)	$	0.03
Diluted	$	(0.02	)	$	0.03
Weighted average shares used in per share calculations:
Basic		27,178			27,361
Diluted		27,178			27,963

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

2

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited) 

	Three Months Ended June 30,
	2013			2012
	(In thousands)
Net income (loss)	$	(441	)	$	920
Net unrealized loss on available-for-sale investments, net of tax		(85	)		(33	)
Comprehensive net income (loss)	$	(526	)	$	887

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

3

GSI TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended June 30,
	2013			2012
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(441	)	$	920
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Allowance for sales returns, doubtful accounts and other		(16	)		21
Provision for excess and obsolete inventories		507			116
Depreciation and amortization		494			638
Stock-based compensation		565			562
Deferred income taxes		126			122
Windfall tax benefits from stock options exercised		(177	)		(5	)
Amortization of bond premium on investments		220			292
Changes in assets and liabilities:
Accounts receivable		(27	)		76
Inventory		1,125			(539	)
Prepaid expenses and other assets		282			216
Accounts payable		(346	)		(1,474	)
Accrued expenses and other liabilities		98			(1,362	)
Deferred revenue		(488	)		2
Net cash provided by (used in) operating activities		1,922			(415	)
Cash flows from investing activities:
Purchase of investments		(11,584	)		(10,052	)
Sales and maturities of short-term investments		10,383			11,050
Purchases of property and equipment		(34	)		(174	)
Net cash provided by (used) in investing activities		(1,235	)		824
Cash flows from financing activities:
Repurchase of common stock		-			(1,815	)
Windfall tax benefits from stock options exercised		177			5
Proceeds from issuance of common stock under employee stock plans		797			222
Net cash provided by (used in) financing activities		974			(1,588	)
Net increase (decrease) in cash and cash equivalents		1,661			(1,179	)
Cash and cash equivalents at beginning of the period		41,120			31,634
Cash and cash equivalents at end of the period	$	42,781		$	30,455
Non-cash investing activities:
Purchases of property and equipment through accounts payable and accruals	$	17		$	166
Supplemental cash flow information:
Net cash paid for income taxes	$	-		$	331

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

4

GSI TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of GSI Technology, Inc. and its subsidiaries (“GSI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.  Accordingly, the interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements.  These interim financial statements contain all adjustments (which consist of only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the interim financial information included therein.  The Company believes that the disclosures are adequate to make the information not misleading.  However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

The consolidated results of operations for the three months ended June 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Litigation and settlement costs

From time to time, the Company is involved in legal actions. The Company currently is a party to pending legal proceedings which it is defending aggressively.  See Note 6 for additional information regarding this pending litigation.  There are many uncertainties associated with any litigation, and the Company may not prevail.  The litigation, regardless of its eventual outcome, will be costly and time consuming and, should the outcome be adverse to the Company, could result in the Company being required to pay significant monetary damages.  If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, or the settlement of such litigation, is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with GAAP. However, the actual liability in any such litigation may be materially different from our estimates, which could require us to record additional costs.

NOTE 2—NET INCOME (LOSS) PER COMMON SHARE

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

	Three Months Ended June 30,
	2013			2012
	(In thousands, except per share amounts)
Net income (loss)	$	(441	)	$	920
Denominators:
Weighted average shares—Basic		27,178			27,361
Dilutive effect of employee stock options		-			601
Dilutive effect of employee stock purchase plan options		-			1
Weighted average shares—Dilutive		27,178			27,963
Net income (loss) per common share—Basic	$	(0.02	)	$	0.03
Net income (loss)  per common share—Diluted	$	(0.02	)	$	0.03

5

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Shares underlying options		3,377		3,473

6

NOTE 3—BALANCE SHEET DETAIL

	June 30, 2013		March 31, 2013
	(In thousands)
Inventories:
Work-in-progress	$	3,780	$	4,236
Finished goods		7,793		8,772
Inventory at distributors		604		801
	$	12,177	$	13,809

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable, net:
Accounts receivable	$	10,384		$	10,357
Less: Allowances for sales returns, doubtful accounts and other		(100	)		(116	)
	$	10,284		$	10,241

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses and other current assets:
Prepaid tooling and masks	$	1,002	$	1,230
Prepaid income taxes		2,262		2,037
Other receivables		461		557
Other prepaid expenses		845		1,121
	$	4,570	$	4,945

	June 30, 2013			March 31, 2013
	(In thousands)
Property and equipment, net:
Computer and other equipment	$	16,344		$	16,344
Software		4,741			4,690
Land		3,900			3,900
Building and building improvements		2,256			2,256
Furniture and fixtures		110			110
Leasehold improvements		768			767
Construction in progress		-			51
		28,119			28,118
Less: Accumulated depreciation and amortization		(17,794	)		(17,344	)
	$	10,325		$	10,774

Depreciation and amortization expense was $449,000 and $593,000, respectively, for the three months ended June 30, 2013 and 2012.

	June 30, 2013		March 31, 2013
	(In thousands)
Other Assets:
Non-current deferred income taxes	$	1,377	$	1,272
Intangibles, net		699		744
Deposits		86		82
	$	2,162	$	2,098

7

The following table summarizes the components of intangible assets and related accumulated amortization balances at June 30, 2013 (in thousands):

	Gross
	Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Intangible assets:
Product designs	$	590	$	(323	)	$	267
Patents		720		(307	)		413
Software		80		(61	)		19
Total	$	1,390	$	(691	)	$	699

Amortization of intangible assets included in cost of revenues was $45,000 and $45,000, respectively, for the three months ended June 30, 2013 and 2012.

	June 30, 2013		March 31, 2013
	(In thousands)
Accrued expenses and other liabilities:
Accrued compensation	$	1,825	$	2,181
Accrued professional fees		929		560
Accrued commissions		390		353
Accrued royalties		16		28
Accrued equipment and software costs		-		51
Other accrued expenses		736		805
	$	3,896	$	3,978

NOTE 4—INCOME TAXES

The current portion of the Company’s unrecognized tax benefits at June 30, 2013and March 31, 2013 was $0and $0, respectively.  The long-term portion at June 30, 2013 and March 31, 2013 was $2,755,000and $2,803,000, respectively, of which the timing of the resolution is uncertain.  As of June 30, 2013, $235,000 of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets.  The unrecognized tax benefit balance of $2,829,000  as of June 30, 2013 would affect the Company’s effective tax rate if recognized.  It is possible, however, that some months or years may elapse before an uncertain position for which the Company has established a reserve is resolved.

Management believes that it is reasonably possible that within the next twelve months the Company could have a reduction in uncertain tax benefits of up to $637,000, including interest and penalties, related to positions taken with respect to credits and loss carryforwards on previously filed tax returns.

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

The Company is subject to taxation in the United States and various state and foreign jurisdictions.  Fiscal years 2010 through 2013 remain open to examination by federal tax authorities, and fiscal years 2009 through 2013 remain open to examination by California tax authorities.  In the three months ended June 30, 2012, the Company settled an examination by the California Franchise Tax Board.  The tax provision for the three month period ended June 30, 2012 includes a discrete benefit of $168,000 associated with the net result of the settlement and the associated tax reserves, including interest to date.

The Company’s estimated annual effective income tax rate was approximately 3.3% and 29.1% as of June 30, 2013 and 2012, respectively.  The differences between the effective income tax rate and the applicable statutory U.S. income tax rate in each period were primarily due to the effects of tax credits, foreign tax rate differentials and tax free interest income, offset by stock-based compensation expense.

8

NOTE 5—FINANCIAL INSTRUMENTS

Fair value measurements

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

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities.  The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market.  As of June 30, 2013, the Level 1 category included money market funds of $8.8 million, which were included in cash and cash equivalents in the Condensed Consolidated Balance Sheet.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well established independent pricing vendors and broker-dealers. As of June 30, 2013, the Level 2 category included short-term investments of $21.1 million and long-term investments of $41.4 million, which were comprised of certificates of deposit, corporate debt securities and government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.  As of June 30, 2013, the Company had no Level 3 financial assets measured at fair value in the Condensed Consolidated Balance Sheet.

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

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	8,819	$	8,819	$	-	$	-
Marketable securities		62,514		-		62,514		-
Total	$	71,333	$	8,819	$	62,514	$	-

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	March 31, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	10,445	$	10,445	$	-	$	-
Marketable securities		61,634		-		61,634		-
Total	$	72,079	$	10,445	$	61,634	$	-

Short-term and long-term investments

All of the Company’s short-term and long-term investments are classified as available-for-sale.  Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations.  Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive income in the Condensed Consolidated Balance Sheets.  The Company had money market funds of $8.8 millionand $10.4 million at June 30, 2013 and March 31, 2013, respectively, included in cash and cash equivalents in the Condensed Consolidated Balance Sheet.  The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

9

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

	June 30, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	6,238	$	11	$	-		$	6,249
Corporate notes		5,023		7		-			5,030
Certificates of deposit		8,225		9		-			8,234
Other		1,552		-		-			1,552
Total short-term investments	$	21,038	$	27	$	-		$	21,065
Long-term investments:
State and municipal obligations	$	20,804	$	-	$	(48	)	$	20,756
Corporate notes		9,455		-		(11	)	$	9,444
Certificates of deposit		11,260		-		(11	)	$	11,249
Total long-term investments	$	41,519	$	-	$	(70	)	$	41,449

	March 31, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	10,564	$	17	$	-		$	10,581
Corporate notes		6,052		14		-			6,066
Certificates of deposit		9,480		12		-			9,492
Total short-term investments	$	26,096	$	43	$	-		$	26,139
Long-term investments:
State and municipal obligations	$	11,992	$	3	$	-		$	11,995
Corporate notes		8,436		14		-			8,450
Certificates of deposit		9,008		18		-			9,026
Other		6,042		-		(18	)		6,024
Total long-term investments	$	35,478	$	35	$	(18	)	$	35,495

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

As of June 30, 2013 the deferred tax asset related to unrecognized gains and losses on short-term and long-term investments was $2,000. As of March 31, 2013, the deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $14,000.

10

As of June 30, 2013, contractual maturities of the Company’s available-for-sale non-equity investments were as follows: 

			Fair
	Cost		Value
	(In thousands)
Maturing within one year	$	21,038	$	21,065
Maturing in one to three years		41,519		41,449
Maturing in more than three years		-		-
	$	62,557	$	62,514

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

NOTE 6—COMMITMENTS AND CONTINGENCIES

Indemnification obligations

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

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

11

Product warranties

The Company warrants its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues. Warranty costs were not significant for the three months ended June 30, 2013 or 2012.

Legal proceedings

In March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against the Company 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.  The complaint seeks 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 Trade Commission (the “ITC”).  The ITC complaint, as subsequently amended, alleged infringement by the Company of three of the five patents involved in the District Court case and one additional patent and also alleged infringement by three of our distributors and 11 of our customers who allegedly incorporate our SRAMs in their products.  The ITC complaint sought a limited exclusion order excluding the allegedly infringing SRAMs, and products containing them, from entry into the United States and permanent orders directing the Company and the other respondents to cease and desist from selling or distributing such products in the United States.  On July 21, 2011, the ITC formally instituted an investigation in response to Cypress's complaint.  Two of the distributor-respondents and ten of the customer-respondents were subsequently dismissed from the investigation.  The evidentiary hearing took place in March 2012. On October 25, 2012, Chief Administrative Law Judge Charles E. Bullock issued his initial determination in which he held that the Company's SRAM products, and products containing them, do not infringe the asserted patent claims and that Cypress had failed to establish the existence of a domestic industry that practices the asserted patents.  Because he found that the accused products do not infringe any of the asserted patent claims, Judge Bullock did not consider or rule on the additional arguments of the Company and the other respondents that the Cypress patents are invalid and unenforceable. Following a remand by the ITC, on February 25, 2012, Judge Bullock issued a supplemental initial determination finding that the asserted patents are enforceable and not invalid.  On June 7, 2013, the ITC announced that the full Commission had affirmed Judge Bullock’s determination that GSI’s SRAM devices, and products containing them, do not infringe the Cypress patents and that Cypress had failed to establish the requisite domestic industry.  Moreover, the Commission reversed a portion of Judge Bullock’s supplemental determination with respect to validity, finding the asserted claims of one of the patents to have been anticipated by prior art and, therefore, invalid.  The Commission also ordered the investigation terminated.

The Minnesota District Court case had been stayed pending the conclusion of the ITC proceeding. Following the termination of the ITC investigation, the stay was lifted.  On May 1, 2013, Cypress filed a lawsuit in the United States District Court for the Northern District of California alleging infringement by our products of five additional Cypress patents.  Like the Minnesota case, the complaint in the California lawsuit seeks unspecified damages for past infringement and a permanent injunction against future infringement.  The Company has filed answers in both cases denying liability and asserting affirmative defenses.  Discovery is in the preliminary stage in both cases.

The Company believes that it has strong defenses against Cypress’ claims in both District Court cases.  The Company intends to continue to defend itself vigorously in these proceedings. However, the litigation process is inherently uncertain, and the Company may not prevail.  Patent litigation is particularly complex and can extend for a protracted period of time, which can substantially increase the cost of such litigation.  The Company has not recorded any loss contingency during fiscal 2011, fiscal 2012 or fiscal 2013 in connection with these legal proceedings as the Company cannot predict their outcome and cannot estimate the likelihood or potential dollar amount of any adverse results.  However, an unfavorable outcome in these proceedings could have a material adverse impact on the Company's financial position, results of operations or cash flows for the period in which the outcome occurs and in future periods.

NOTE 7—STOCK-BASED COMPENSATION

As of June 30, 2013, 6,088,423 shares of common stock were available for grant under the Company’s 2007 Equity Incentive Plan.

12

The following table summarizes the Company’s stock option activities for the three months ended June 30, 2013:

				Weighted
	Number of Shares			Average	Weighted
	Underlying			Remaining	Average
	Options			Contractual	Exercise		Intrinsic
	Outstanding			Life (Years)	Price		Value
Balance at March 31, 2013		6,336,319			$	4.73
Granted		246,770				5.76
Exercised		(233,985	)			2.25	$	821,923
Forfeited		(114,475	)			6.39
Balance at June 30, 2013		6,234,629			$	4.83
Options vested and exercisable		3,965,905		4.68	$	4.37	$	7,956,296
Options vested and expected to vest		6,176,382		6.00	$	4.83	$	9,842,057

The weighted average fair value per underlying share of options granted during the three months ended June 30, 2013 and 2012 was $2.45 and $1.91, respectively.

Options outstanding by exercise price at June 30, 2013 were as follows:

		Number of		Options Outstanding				Options Exercisable
		Shares		Weighted		Weighted Average				Weighted
		Underlying		Average		Remaining		Number		Average
		Options		Exercise		Contractual		Vested and		Exercise
Exercise Price		Outstanding		Price		Life (Years)		Exercisable		Price
$	2.10 - 3.37		844,942	$	2.79		3.93		844,942	$	2.79
$	3.38 - 3.76		636,358	$	3.51		4.97		542,390	$	3.52
$	3.81 - 3.94		38,000	$	3.87		5.71		38,000	$	3.87
$	4.00		714,263	$	4.00		5.93		714,263	$	4.00
$	4.17 - 4.50		687,944	$	4.26		6.37		369,335	$	4.31
$	4.81 - 4.92		523,913	$	4.87		8.69		99,184	$	4.87
$	5.50		881,708	$	5.50		3.16		881,708	$	5.50
$	5.59 - 5.76		624,410	$	5.70		8.06		150,000	$	5.75
$	6.00 - 6.54		822,208	$	6.32		7.91		139,570	$	6.33
$	6.82 - 9.20		460,883	$	7.49		7.28		186,513	$	7.45
			6,234,629						3,965,905

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Cost of revenues	$	94	$	90
Research and development		258		283
Selling, general and administrative		213		189
Total	$	565	$	562

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

The Company recognized related income tax benefits of $17,000 and $90,000, respectively, for the three months ended June 30, 2013 and 2012.Windfall tax benefits realized from exercised stock options were $177,000 and $5,000, respectively, for the three months ended June 30, 2013 and 2012.  Compensation cost capitalized within inventory at June 30, 2013 was insignificant.As of June 30, 2013, the Company’s total unrecognized compensation cost was $3.9 million, which will be recognized over a weighted average period of 2.12 years.  The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:

	Three Months Ended June 30,
	2013			2012
	(In thousands)
Stock Option Plans:
Risk-free interest rate		0.91	%		0.79	%
Expected life (in years)		5.00			5.00
Volatility		48.4	%		52.9	%
Dividend yield		-	%		-	%
Employee Stock Purchase Plan:
Risk-free interest rate		0.09	%		0.15	%
Expected life (in years)		0.50			0.50
Volatility		30.4	%		23.4	%
Dividend yield		-	%		-	%

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NOTE 8—SEGMENT AND GEOGRAPHIC INFORMATION

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

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
United States	$	5,971	$	4,776
China		3,477		4,928
Malaysia		2,347		3,143
Singapore		1,453		1,977
Rest of the world		3,164		1,959
	$	16,412	$	16,783

All sales are denominated in United States dollars.

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

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

Overview

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

Revenues.    Our revenues are derived primarily from sales of our Very Fast SRAM products. Sales to networking and telecommunications original equipment manufacturers, or OEMs, accounted for 75% to 80% of our net revenues during our last three fiscal years. We also sell our products to OEMs that manufacture products for defense applications such as radar and guidance systems, for professional audio applications such as sound mixing systems, for test and measurement applications such as high-speed testers, for automotive applications such as smart cruise control and voice recognition systems, and for medical applications such as ultrasound and CAT scan equipment.

As is typical in the semiconductor industry, the selling prices of our products generally decline over the life of the product. Our ability to increase net revenues, therefore, is dependent upon our ability to increase unit sales volumes of existing products and to introduce and sell new products with higher average selling prices in quantities sufficient to compensate for the anticipated declines in selling prices of our more mature products.  Although we expect the average selling prices of individual products to decline over time, we believe that, over the next several quarters, our overall average selling prices will increase due to a continuing shift in product mix to a higher percentage of higher price, higher density products. Our ability to increase unit sales volumes is dependent primarily upon increases in customer demand but, particularly in periods of increasing demand, can also be affected by our ability to increase production through the availability of increased wafer fabrication capacity from Taiwan Semiconductor Manufacturing Company, or TSMC, and Powerchip, our wafer suppliers, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and yield enhancement activities.

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We may experience fluctuations in quarterly net revenues for a number of reasons. Historically, orders on hand at the beginning of each quarter are insufficient to meet our revenue objectives for that quarter and are generally cancelable up to 30 days prior to scheduled delivery. Accordingly, we depend on obtaining and shipping orders in the same quarter to achieve our revenue objectives. In addition, the timing of product releases, purchase orders and product availability could result in significant product shipments at the end of a quarter. Failure to ship these products by the end of the quarter may adversely affect our operating results. Furthermore, our customers may delay scheduled delivery dates and/or cancel orders within specified timeframes without significant penalty.

We sell our products through our direct sales force, international and domestic sales representatives and distributors. Revenues from product sales, except for sales to distributors, are generally recognized upon shipment, net of sales returns and allowances. Sales to consignment warehouses, who purchase products from us for use by contract manufacturers, are recorded upon delivery to the contract manufacturer. Sales to distributors are recorded as deferred revenues for financial reporting purposes and recognized as revenues when the products are resold by the distributors to the OEM. Sales to distributors are made under agreements allowing for returns or credits under certain circumstances. We therefore defer recognition of revenue on sales to distributors until products are resold by the distributor.

Cisco Systems, our largest OEM customer, purchases our products primarily through its consignment warehouses, SMART Modular Technologies, Jabil Circuit and Flextronics Technology, and also purchases some products through its contract manufacturers and directly from us. Historically, purchases by Cisco Systems have fluctuated from period to period. Based on information provided to us by Cisco Systems' consignment warehouses and contract manufacturers, purchases by Cisco Systems represented approximately 17%, 29%, 41% and 37% of our net revenues in the three months ended June 30, 2013 and in fiscal 2013, 2012 and 2011, respectively.  Our revenues have been substantially impacted by the fluctuations in sales to Cisco Systems, and we expect that future direct and indirect sales to Cisco Systems will continue to fluctuate significantly on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods.  To our knowledge, none of our other OEM customers accounted for more than 10% of our net revenues in fiscal 2013, 2012 or 2011.

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

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

Research and Development Expenses.    Research and development expenses consist primarily of salaries and related expenses for design engineers and other technical personnel, the cost of developing prototypes, stock-based compensation and fees paid to consultants. We charge all research and development expenses to operations as incurred. We charge mask costs used in production to cost of revenues over a 12-month period. However, we charge costs related to pre-production mask sets, which are not used in production, to research and development expenses at the time they are incurred. These charges often arise as we transition to new process technologies and, accordingly, can cause research and development expenses to fluctuate on a quarterly basis. We believe that continued investment in research and development is critical to our long-term success, and we expect to continue to devote significant resources to product development activities. Accordingly, we expect that our research and development expenses will increase in future periods, although such expenses as a percentage of net revenues may fluctuate.

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 Selling, General and Administrative Expenses.Selling, general and administrative expenses consist primarily of commissions paid to independent sales representatives, salaries, stock-based compensation and related expenses for personnel engaged in sales, marketing, administrative, finance and human resources activities, professional fees, costs associated with the promotion of our products and other corporate expenses. We expect that our sales and marketing expenses will increase in absolute dollars in future periods as we continue to grow and expand our sales force but that, to the extent our revenues increase in future periods, these expenses will generally decline as a percentage of net revenues. We also expect that, in support of our anticipated growth, general and administrative expenses will generally increase in absolute dollars for the foreseeable future.  General and administrative expenses increased significantly in fiscal 2012, primarily as a result of substantial legal expenses related to our pending patent infringement and antitrust litigation with Cypress Semiconductor Corporation.  These expenses have varied significantly from quarter to quarter, depending on the relative level of activity in the Cypress litigation.  They were substantially reduced during the six months ended September 30, 2012 while the issuance of the initial determination in the ITC proceeding was pending, although they increased again in the following three quarters as the parties filed and responded to petitions for review of the initial determination, which was issued on October 25, 2012 and as activities related to our pending antitrust litigation with Cypress entered the discovery phase.  Legal expenses related to the patent litigation may again become substantial in future quarters, depending on any court appeals of the ITC outcome and how the other pending patent litigation with Cypress.  Whatever the outcome of the patent litigation with Cypress, we expect to continue to incur additional legal expenses as we pursue our pending antitrust lawsuit against Cypress, and we may incur additional expenses in connection with other pending and future litigation.  These expenses may be substantial during some quarters over the next one to two years.

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Results of Operations

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

	Three Months Ended June 30,
	2013			2012
Net revenues		100.0	%		100.0	%
Cost of revenues		54.5			59.7
Gross profit		45.5			40.3
Operating expenses:
Research and development		18.3			16.9
Selling, general and administrative		30.5			18.2
Total operating expenses		48.8			35.1
Income (loss) from operations		(3.3	)		5.2
Interest and other income (expense), net		0.7			0.8
Income (loss) before income taxes		(2.6	)		6.0
Provision for income taxes		0.1			0.6
Net income (loss)		(2.7	) %		5.4	%

Net Revenues.  Net revenues decreased by 2.2% from $16.8 million in the three months ended June 30, 2012 to $16.4 million in the three months ended June 30, 2013 reflecting continuing weakness in the global networking and telecommunications markets. Direct and indirect sales to Cisco Systems, historically our largest customer, decreased by $1.3 million from $4.1 million in the three months ended June 30, 2012 to $2.8 million in the three months ended June 30, 2013.Alcatel-Lucent replaced Cisco Systems as our largest customer in the three months ended June 30, 2013.Direct sales to Alcatel-Lucent increased by $1.2 million from $2.0 million in the three months ended June 30, 2012 to $3.2 million in the three months ended June 30, 2013. We believe that our net revenues in each of these periods were also negatively impacted by uncertainty regarding the outcome of our pending patent litigation with Cypress Semiconductor.  We believe that the favorable final determination in the ITC proceeding in June 2013 has reduced this market uncertainty, although it is likely to continue to have some effect on our revenues over the next several quarters while our customers re-evaluate their SRAM sourcing strategies.  Shipments of our SigmaQuad product line accounted for 38.0% of total shipments in the three months ended June 30, 2012 compared to 41.6% of total shipments in the three months ended June 30, 2013.

Cost of Revenues.  Cost of revenues decreased by 10.7% from $10.0 million in the three months ended June 30, 2012 to $8.9 million in the three months ended June 30, 2013.  The decrease was primarily due to a favorable product mix which resulted in an increased gross margin in the three months ended June 30, 3013 and a reduction in variable manufacturing expenses compared to the year ago quarter.  Cost of revenues included stock-based compensation expense of $94,000 and $90,000, respectively, for the three months ended June 30, 2013 and 2012.

Gross Profit.  Gross profit increased by 10.4% from $6.8 million in the three months ended June 30, 2012 to $7.5 million in the three months ended June 30, 2013.  Gross margin increased from 40.3% in the three months ended June 30, 2012 to 45.5% in the three months ended June 30, 2013.  The increases in gross profit and gross margin were primarily related to changes in the mix of products and customers and the reduction in variable manufacturing expenses discussed above.

Research and Development Expenses.  Research and development expenses increased 5.6% from $2.8 million in the three months ended June 30, 2012 to $3.0 million in the three months ended June 30, 2013. This increase was primarily due to increases of $184,000 in payroll related expenses and $38,000 in patent related legal expenses.  Research and development expenses included stock-based compensation expense of $258,000 and $283,000, respectively, for the three months ended June 30, 2013 and 2012

Selling, General and Administrative Expenses.  Selling, general and administrative expenses increased 64.4% from $3.0 million in the three months ended June 30, 2012 to $5.0 million in the three months ended June 30, 2013.  This increase was primarily due to an increase of $1.9 million in legal fees related to the pending patent infringement and antitrust litigation involving Cypress Semiconductor Corporation.  Selling, general and administrative expenses included stock-based compensation expense of $213,000 and $189,000, respectively, for the three months ended June 30, 2013 and 2012.

Interest and Other Income (Expense), Net.  Interest and other income (expense), net decreased 18.4%, from $136,000 in the three months ended June 30, 2012 to $111,000 in the three months ended June 30, 2013.  Interest income decreased by $19,000 due to lower interest rates received on our cash and short-term and long-term investments. In addition, we recorded a foreign currency exchange gain of $6,000 for the three months ended June 30, 2013 compared to an exchange gain of $13,000 for the three months ended June 30, 2012.  The exchange gains in each period were related to our Taiwan branch operations.

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Provision for Income Taxes.  The provision for income taxes decreased from $96,000 in the three months ended June 30, 2012 to $11,000 in the three months ended June 30, 2013. This change was due primarily to the changes in pre-tax income for the respective periods.  During the three months ended June 30, 2012, we settled a tax audit for less than the amount previously provided for resulting in a tax benefit of $168,000.

Net Income (Loss).  Net income decreased from $920,000 in the three months ended June 30, 2012 to a net loss of $441,000 in the three months ended June 30, 2013.  This decrease was primarily due to the decrease in net revenues and the changes in operating expenses discussed above.

Liquidity and Capital Resources

As of June 30, 2013, our principal sources of liquidity were cash, cash equivalents and short-term investments of $63.8 million compared to $67.3 million as of March 31, 2013.

Net cash provided by operating activities was $1.9 million for the three months ended June 30, 2013 compared to net cash used by operating activities of $415,000 for the three months ended June 30, 2012.  The primary sources of cash in the current three month period were a reduction in inventory of $1.1 million, and adjustments for stock-based compensation expense, a provision for excess and obsolete inventory and depreciation expense, partially offset by decreases in deferred revenue and accounts payable. We have allowed inventory to decrease in response to the slowdown in our business in the past fiscal year.

Net cash used by investing activities was $1.2 million in the three months ended June 30, 2013 compared to net cash provided by investing activities of $824,000 in the three months ended June 30, 2012.  Investment activities in the three months ended June 30, 2013 consisted primarily of the purchase of state and municipal obligations, corporate notes and certificates of deposit of $11.6 million, partially offset by sales and maturities of investments of $10.4 million.  Investment activities in the three months ended June 30, 2012 consisted primarily of the purchase of state and municipal obligations, corporate notes and certificates of deposit of $10.0 million and the purchase of property and equipment.  These uses were more than offset by sales and maturities of investments of $11.1 million.

Net cash provided by financing activities in the three months ended June 30, 2013 primarily consisted of the net proceeds from the sale of common stock pursuant to our employee stock plans. Net cash used by financing activities in the three months ended June 30, 2012 primarily consisted of the repurchase of $1.8 million of our common stock at an average purchase price of $4.25, partially offset by the net proceeds from the sale of common stock pursuant to our employee stock plans.

We believe that our existing balances of cash, cash equivalents and short-term investments, and cash flow expected to be generated from our future operations will be sufficient to meet our cash needs for working capital and capital expenditures for at least the next 12 months, although we could be required, or could elect, to seek additional funding prior to that time. Our future capital requirements will depend on many factors, including the rate of revenue growth that we experience, the extent to which we utilize subcontractors, the levels of inventory and accounts receivable that we maintain, the timing and extent of spending to support our product development efforts and the expansion of our sales and marketing efforts and the extent of legal expenses that we incur in connection with our pending patent and antitrust litigation. 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, if required, will be available on terms that are acceptable or at all.

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Contractual Obligations

The following table describes our contractual obligations as of June 30, 2013:

	Payments due by period
	Up to 1 year		1 - 3 years		3 - 5 years		More than 5 years		Total
Facilities and equipment leases	$	285,000	$	166,000	$	17,000	$	-	$	468,000
Wafer, test and mask purchase obligations		3,084,000		1,022,000		-		-		4,106,000
	$	3,369,000	$	1,188,000	$	17,000	$	-	$	4,574,000

As of June 30, 2013, the current portion of our unrecognized tax benefits was $0, and the long-term portion was $2,755,000.  The unrecognized tax benefits balance of $2,829,000 as of June 30, 2013 would affect our effective tax rate if recognized.  As of June 30, 2013, $235,000 of unrecognized tax benefits have been recorded as a reduction of net deferred tax assets. 

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Off-Balance Sheet Arrangements

At June 30, 2013, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not exposed to the type of financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 3.   Quantitative and Qualitative Disclosure About Market Risk

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

Interest Rate Sensitivity.  We had cash, cash equivalents, short-term investments and long-term investments totaling $105.3 million at June 30, 2013. These amounts were invested primarily in money market funds, state and municipal obligations, corporate notes and certificates of deposit. The cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. We believe a hypothetical 100 basis point increase or decrease in interest rates would not materially affect the fair value of our interest-sensitive financial instruments.  Declines in interest rates, however, will reduce future investment income.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of June 30, 2013, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report for the purpose of ensuring that the information required to be disclosed by us in this report is made known to them by others on a timely basis, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized, and reported by us within the time periods specified in the SEC’s rules and instructions for Form 10-Q.

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Changes in Internal Control over Financial Reporting.  There were no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.                      Legal Proceedings

In March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against us in the United States District Court for the District of Minnesota alleging that our products, including our SigmaDDR and SigmaQuad families of Very Fast SRAMs, infringe five patents held by Cypress.  The complaint seeks unspecified damages 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 involved in the District Court case and one additional patent and also alleged infringement by three of our distributors and 11 of our customers who allegedly incorporate our SRAMs in their products.  The ITC complaint sought a limited exclusion order excluding the allegedly infringing SRAMs, and products containing them, from entry into the United States and permanent orders directing GSI and the other respondents to cease and desist from selling or distributing such products in the United States.  On July 21, 2011, the ITC formally instituted an investigation in response to Cypress's complaint.  Two of the distributor-respondents and ten of the customer-respondents were subsequently dismissed from the investigation.  The evidentiary hearing took place in March 2012. On October 25, 2012, Chief Administrative Law Judge Charles E. Bullock issued his initial determination in which he held that our SRAM products, and products containing them, do not infringe the asserted patent claims and that Cypress had failed to establish the existence of a domestic industry that practices the asserted patents.  Because he found that the accused products do not infringe any of the asserted patent claims, Judge Bullock did not consider or rule on the additional arguments of GSI and the other respondents that the Cypress patents are invalid and unenforceable.  Following a remand by the ITC, on February 25, 2012, Judge Bullock issued a supplemental initial determination finding that the asserted patents are enforceable and not invalid.  On June 7, 2013, the ITC announced that the full Commission had affirmed Judge Bullock’s determination that GSI’s SRAM devices, and products containing them, do not infringe the Cypress patents and that Cypress had failed to establish the requisite domestic industry.  Moreover, the Commission reversed a portion of Judge Bullock’s supplemental determination with respect to validity, finding the asserted claims of one of the patents to have been anticipated by prior art and, therefore, invalid.  The Commission also ordered the investigation terminated.

The Minnesota District Court case had been stayed pending the conclusion of the ITC proceeding.  Following the termination of the ITC proceeding, the stay was lifted.  On May 1, 2013, Cypress filed a lawsuit in the United States District Court for the Northern District of California alleging infringement by our products of five additional Cypress patents.  Like the Minnesota case, the complaint in the California lawsuit seeks unspecified damages for past infringement and a permanent injunction against future infringement.  We have filed answers in both cases denying liability and asserting affirmative defenses.  Discovery is in the preliminary stage in both cases.

On July 22, 2011, we filed a complaint against Cypress in the United States District Court for the Northern District of California.  Our complaint alleges that Cypress has conducted an unlawful combination and conspiracy to monopolize the market for certain high-performance SRAM devices, known as fast synchronous Quad Data Rate (or QDR) SRAMs and Double Data Rate (or DDR) SRAMs.  The complaint alleges that the anti-competitive, collusive and conspiratorial conduct of Cypress and certain co-conspirators has violated Section 1 of the Sherman Act and also constitutes unlawful restraint of trade and unfair competition under applicable provisions of California law.  The complaint seeks treble damages, in an amount to be determined at trial, a preliminary and permanent injunction prohibiting the continuation of the unfair and illegal business practices and recovery of GSI's attorneys' fees and costs.   On July 6, 2012, the Court denied Cypress' motion to dismiss the complaint, upholding the sufficiency of the antitrust claims asserted, and discovery in the case is proceeding.

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 We believe that we have strong defenses against Cypress’ infringement claims in both District Court cases.  We intend to continue to defend ourselves vigorously in both of these proceedings while vigorously continuing to prosecute our antitrust claims against Cypress.  However, the litigation process is inherently uncertain, and we may not prevail. Patent litigation is particularly complex and can extend for a protracted period of time, which can substantially increase the cost of such litigation. We have incurred and expect to continue to incur substantial legal fees and expenses in connection with the Cypress patent and antitrust litigation, and we also expect the litigation to continue to divert the efforts and attention of some of our key management and technical personnel. As a result, the litigation will be costly and time consuming.  In addition, we believe that uncertainty regarding the outcome of the litigation has caused some of our customers and potential customers to reduce purchases of our products and/or seek second sources of supply, which adversely affected our revenues during the past several quarters.  We believe that the Commission’s favorable final determination in the ITC proceeding has reduced this market uncertainty, although it is likely to continue to have some effect on our revenues over the next several quarters while our customers re-evaluate their SRAM sourcing strategies.

 Should the outcome of either of the two District Court cases be adverse to us, we could be required to pay significant monetary damages to Cypress and could be enjoined from selling those of our products found to infringe Cypress's patents unless and until we are able to negotiate a license from Cypress. Any such license arrangement with Cypress would likely require the payment of royalties which would increase our cost of revenues and reduce our gross profit. If we are required to pay significant monetary damages, are enjoined from selling any of our products or are required to make substantial royalty payments pursuant to any such license arrangement, our business would be significantly harmed.

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Item 1A.   Risk Factors

Our future performance is subject to a variety of risks.  If any of the following risks actually occur, our business, financial condition and results of operations could suffer and the trading price of our common stock could decline.  Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations. You should also refer to other information contained in this report, including our condensed consolidated financial statements and related notes.  The risk factors described below do not contain any material changes from those previously disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

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

Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future. For example, in the nine fiscal quarters ended June 30, 2013, we recorded net revenues of as much as $23.0 million and as little as $15.7 million and quarterly operating income of as much as $4.1 million and, in two quarters, operating losses, including the operating loss of $541,000 in the quarter ended June 30, 2013. We therefore believe that period-to-period comparisons of our operating results are not a good indication of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price. In future periods, we may not have any revenue growth, or our revenues could decline. Furthermore, if our operating expenses exceed our expectations, our financial performance could be adversely affected. Factors that may affect periodic operating results in the future include:

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

•   unpredictability of the timing and size of customer orders, since most of our customers purchase our products on a purchase order basis rather than pursuant to a long term contract;

•   changes in our customers' inventory management practices;

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

•   manufacturing defects, which could cause us to incur significant warranty, support and repair costs, lose potential sales, harm our relationships with customers and result in write-downs;

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

•   fluctuations in our quarterly operating expenses due to substantial litigation-related expenses in some quarters; and

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

Our expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future. We will not be able to adjust our spending quickly if our revenues fall short of our expectations. If this were to occur, our operating results would be harmed. If our operating results in future quarters fall below the expectations of market analysts and investors, the price of our common stock could fall.

Cisco Systems, our largest OEM customer, accounts for a significant percentage of our net revenues. If Cisco Systems, or any of our other major customers reduce the amount they purchase or stop purchasing our products, our operating results will suffer.

Cisco Systems, historically our largest OEM customer, purchases our products through its consignment warehouses and its contract manufacturers and directly from us. Based on information provided to us by its consignment warehouses and contract manufacturers, purchases by Cisco Systems represented approximately 29%, 41% and 37% of our net revenues in fiscal 2013, 2012 and 2011, respectively, but represented approximately 17% of our net revenues in the three months ended June 30, 2013.We expect that our operating results in any given period will continue to depend significantly on orders from our key OEM customers, particularly Cisco Systems, and our future success is dependent to a large degree on the business success of these OEMs over which we have no control. We do not have long-term contracts with Cisco Systems or any of our other major OEM customers, distributors or contract manufacturers that obligate them to purchase our products.  We expect that future direct and indirect sales to Cisco Systems will continue to fluctuate significantly on a quarterly basis and that such fluctuations may significantly affect our operating results in future periods. If we fail to continue to sell to our key OEM customers, distributors or contract manufacturers in sufficient quantities, our business could be harmed.

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

We have incurred significant losses in prior periods. For example, in fiscal 2003 and 2004, we incurred losses of $7.4 million and $670,000, respectively, and we incurred a loss of $441,000 in the first quarter of fiscal 2014. Although we have operated profitably during each of the last nine fiscal years, there can be no assurance that our Very Fast SRAMs will continue to receive broad market acceptance or that we will be able to consistently achieve period-to-period revenue growth or profitability. Our failure to do so may result in additional losses in the future. In addition, we expect our operating expenses to increase as we expand our business. If our revenues do not grow to offset these expected increased expenses, our business will suffer.

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

We derive most of our revenues from the sale of Very Fast SRAMs, and we expect that sales of these products will represent the substantial majority of our revenues for the foreseeable future. Our business depends in large part upon continued demand for our products in the markets we currently serve, and adoption of our products in new markets. Market adoption will be dependent upon our ability to increase customer awareness of the benefits of our products and to prove their high-performance and cost-effectiveness. We may not be able to sustain or increase our revenues from sales of our products, particularly if the networking and telecommunications markets were to experience another significant downturn in the future. Any decrease in revenues from sales of our products could harm our business more than it would if we offered a more diversified line of products.

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

Our products are incorporated into routers, switches, wireless local area network infrastructure equipment, wireless base stations and network access equipment used in the highly cyclical networking and telecommunications markets. For example, our operating results declined sharply in fiscal 2002 and 2003 as a result of the severe contraction in demand for networking and telecommunications equipment in which our products are incorporated. Prior to this period of contraction, the networking and telecommunications markets experienced a period of rapid growth, which resulted in a significant increase in demand for our products. We expect that the networking and telecommunications markets will continue to be highly cyclical, characterized by periods of rapid growth and contraction. Our business and our operating results are likely to fluctuate, perhaps quite severely, as a result of this cyclicality.

We are subject to pending patent infringement litigation.

In March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against us in the United States District Court for the District of Minnesota alleging that our products, including our SigmaDDR and SigmaQuad families of Very Fast SRAMs, infringe five patents held by Cypress.  The complaint seeks unspecified damages for past infringement and a permanent injunction against future infringement.  The case was stayed pending the conclusion of an investigation by the International Trade Commission (the “ITC”) in response to a complaint filed by Cypress.  In July 2013, following the termination of the ITC investigation, the stay was lifted.  On May 1, 2013, Cypress filed a lawsuit in the United States District Court for the Northern District of California alleging infringement by our products of five additional Cypress patents.  Like the Minnesota case, the complaint in the California lawsuit seeks unspecified damages for past infringement and a permanent injunction against future infringement.

On July 22, 2011, we filed a complaint against Cypress in the United States District Court for the Northern District of California.  Our complaint alleges that Cypress has conducted an unlawful combination and conspiracy to monopolize the market for certain high-performance SRAM devices, known as fast synchronous Quad Data Rate (or QDR) SRAMs and Double Data Rate (or DDR) SRAMs.  The complaint alleges that the anti-competitive, collusive and conspiratorial conduct of Cypress and certain co-conspirators has violated Section 1 of the Sherman Act and also constitutes unlawful restraint of trade and unfair competition under applicable provisions of California law.  The complaint seeks treble damages, in an amount to be determined at trial, a preliminary and permanent injunction prohibiting the continuation of the unfair and illegal business practices and recovery of GSI's attorneys' fees and costs.   On July 6, 2012, the Court denied Cypress' motion to dismiss the complaint, upholding the sufficiency of the antitrust claims asserted, and discovery in the case is proceeding.

We believe that we have strong defenses against Cypress’ infringement claims in both District Court cases.  We intend to continue to defend ourselves vigorously in both of these proceedings while vigorously continuing to prosecute our antitrust claims against Cypress.  However, the litigation process is inherently uncertain, and we may not prevail. Patent litigation is particularly complex and can extend for a protracted period of time, which can substantially increase the cost of such litigation. We have incurred and expect to continue to incur substantial legal fees and expenses in connection with the Cypress patent and antitrust litigation, and we also expect the litigation to continue to divert the efforts and attention of some of our key management and technical personnel. As a result, the litigation will be costly and time consuming.  In addition, we believe that uncertainty regarding the outcome of the litigation has caused some of our customers and potential customers to reduce purchases of our products and/or seek second sources of supply, which adversely affected our revenues during the past several quarters.  We believe that the Commission’s favorable final determination in the ITC proceeding has reduced this market uncertainty, although it is likely to continue to have some effect on our revenues over the next several quarters while our customers re-evaluate their SRAM sourcing strategies.

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Should the outcome of either of the two District Court cases be adverse to us, we could be required to pay significant monetary damages to Cypress and could be enjoined from selling those of our products found to infringe Cypress's patents unless and until we are able to negotiate a license from Cypress. Any such license arrangement with Cypress would likely require the payment of royalties which would increase our cost of revenues and reduce our gross profit. If we are required to pay significant monetary damages, are enjoined from selling any of our products or are required to make substantial royalty payments pursuant to any such license arrangement, our business would be significantly harmed.

The average selling prices of our products are expected to decline, and if we are unable to offset these declines, our operating results will suffer.

Historically, the average unit selling prices of our products have declined substantially over the lives of the products, and we expect this trend to continue. A reduction in overall average selling prices of our products could result in reduced revenues and lower gross margins. Our ability to increase our net revenues and maintain our gross margins despite a decline in the average selling prices of our products will depend on a variety of factors, including our ability to introduce lower cost versions of our existing products, increase unit sales volumes of these products, and introduce new products with higher prices and greater margins. If we fail to accomplish any of these objectives, our business will suffer. To reduce our costs, we may be required to implement design changes that lower our manufacturing costs, negotiate reduced purchase prices from our independent foundries and our independent assembly and test vendors, and successfully manage our manufacturing and subcontractor relationships. Because we do not operate our own wafer foundry or assembly facilities, we may not be able to reduce our costs as rapidly as companies that operate their own foundries or facilities.

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

We have significant customer sales both in the United States and internationally. We are also reliant upon U.S. and international suppliers, manufacturing partners and distributors. We are therefore susceptible to adverse U.S. and international economic and market conditions, including the challenging economic conditions that have prevailed and continue to prevail in the United States and worldwide. The recent turmoil in the financial markets has resulted in higher borrowing costs and tightened credit markets which have made it more difficult (in some cases, prohibitively so) for many companies to fund their working capital obligations. If any of our manufacturing partners, customers, distributors or suppliers experiences serious financial difficulties or ceases operations, our business could be adversely affected. The adverse impact of the credit crisis on consumers, including higher unemployment rates, is also adversely impacting consumer spending, which adversely impacts demand for consumer products, including certain end products in which our SRAMs are embedded.  In addition, ongoing economic turmoil has recently had an adverse affect on capital expenditures for network equipment, particularly in Europe, which has impacted sales to some or our largest customers.  The difficulty that businesses (including our customers) may have in obtaining credit, the decreased consumer spending resulting from the credit market crisis, high unemployment rates and continued global economic and market turmoil are likely to continue to have an adverse impact on our business, financial condition, results of operations and cash flows, at least over the near term.

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

We currently purchase several key components used in the manufacture of our products from single sources and are dependent upon supply from these sources to meet our needs. If any of these suppliers cannot provide components on a timely basis, at the same price or at all, our ability to manufacture our products will be constrained and our business will suffer. Most significantly, we obtain wafers for our Very Fast SRAM products from a single foundry, TSMC, and most of them are packaged at ASE. Wafers for our LLDRAM products are obtained exclusively from Powerchip.  If we are unable to obtain an adequate supply of wafers from TSMC or Powerchip or find alternative sources in a timely manner, we will be unable to fulfill our customer orders and our operating results will be harmed. We do not have supply agreements with TSMC, Powerchip, ASE or any of our other independent assembly and test suppliers, and instead obtain manufacturing services and products from these suppliers on a purchase-order basis. Our suppliers, including TSMC and Powerchip, have no obligation to supply products or services to us for any specific product, in any specific quantity, at any specific price or for any specific time period. As a result, the loss or failure to perform by any of these suppliers could adversely affect our business and operating results.

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Should any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by natural disaster or political instability, choose to prioritize capacity or inventory for other uses or reduce or eliminate deliveries to us, we likely will not be able to enforce fulfillment of any delivery commitments and we would have to identify and qualify acceptable replacements from alternative sources of supply. In particular, if TSMC is unable to supply us with sufficient quantities of wafers to meet all of our requirements, we would have to allocate our products among our customers, which would constrain our growth and might cause some of them to seek alternative sources of supply. Since the manufacturing of wafers and other components is extremely complex, the process of qualifying new foundries and suppliers is a lengthy process and there is no assurance that we would be able to find and qualify another supplier without materially adversely affecting our business, financial condition and results of operations.

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

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

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

•   investments in and joint ventures with the foundries; or

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

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

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

If there is a significant upturn in the networking and telecommunications markets that results in increased demand for our products and competing products, the available supply of wafers may be limited. As a result, we could be required to obtain additional manufacturing capacity in order to meet increased demand. Securing additional manufacturing capacity may cause our wafer fabrication costs to increase. If we are unable to offset these increased costs by increasing the average selling prices of our products, our gross margins will decline.

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

A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate our products into end products for OEMs. For example, in the three months ended June 30, 2013 and in fiscal 2013, 2012 and 2011, our distributor Avnet Logistics accounted for 30%, 27%, 20% and 17%, respectively, of our net revenues. Avnet Logistics and our other existing distributors may choose to devote greater resources to marketing and supporting the products of other companies. Since we sell through multiple channels and distribution networks, we may have to resolve potential conflicts between these channels. For example, these conflicts may result from the different discount levels offered by multiple channel distributors to their customers or, potentially, from our direct sales force targeting the same equipment manufacturer accounts as our indirect channel distributors. These conflicts may harm our business or reputation.

We may be unable to accurately predict future sales through our distributors, which could harm our ability to efficiently manage our resources to match market demand.

Our financial results, quarterly product sales, trends and comparisons are affected by fluctuations in the buying patterns of the OEMs that purchase our products from our distributors. While we attempt to assist our distributors in maintaining targeted stocking levels of our products, we may not consistently be accurate or successful. This process involves the exercise of judgment and use of assumptions as to future uncertainties, including end user demand. Inventory levels of our products held by our distributors may exceed or fall below the levels we consider desirable on a going-forward basis. This could result in distributors returning unsold inventory to us, or in us not having sufficient inventory to meet the demand for our products. If we are not able to accurately predict sales through our distributors or effectively manage our relationships with our distributors, our business and financial results will suffer.  Moreover, sales to our distributors are recorded as deferred revenue for financial accounting purposes and recognized as revenue when the products are resold by the distributor to their OEM customers.  Accordingly, our distributor’s management of inventory can have a significant impact on our reported revenues and contribute to quarter-to-quarter revenue volatility.

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A small number of customers generally account for a significant portion of our accounts receivable in any period, and if any one of them fails to pay us, our operating results will suffer.

At June 30, 2013, four customers accounted for 20%, 18%, 16% and 14% of our accounts receivable, respectively. If any of these customers do not pay us, our operating results will be harmed. Generally, we do not require collateral from our customers.

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

In August 2009, we consummated the acquisition of substantially all of the assets related to the SRAM memory device product line of Sony Corporation. In the future, we may make additional acquisitions or investments in companies, assets or technologies that we believe are complementary or strategic. Prior to the Sony acquisition, we had not made any such acquisitions or investments, and therefore our experience as an organization in making such acquisitions and investments is limited. In connection with future acquisitions or investments we may make, we face numerous risks, including:

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

•   diversion of financial and managerial resources from existing operations;

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

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

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

•   inability to generate sufficient return on investment;

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

•   delays in customer purchases due to uncertainty.

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

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Claims that we infringe third party intellectual property rights could seriously harm our business and require us to incur significant costs.

In recent years, there has been significant litigation in the semiconductor industry involving patents and other intellectual property rights.  We are currently involved in patent infringement litigation.  See "We are subject to pending patent infringement litigation" above.  We could become subject to additional claims or litigation in the future as a result of allegations that we infringe others' intellectual property rights or that our use of intellectual property otherwise violates the law. Claims that our products infringe the proprietary rights of others would force us to defend ourselves and possibly our customers, distributors or manufacturers against the alleged infringement. Any such litigation regarding intellectual property could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition and results of operations. Similarly, changing our products or processes to avoid infringing the rights of others may be costly or impractical. If any claims received in the future were to be upheld, the consequences to us would be severe and could require us to:

•   stop selling our products that incorporate the challenged intellectual property;

•   obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms or at all;

•   pay damages; or

•   redesign those products that use the disputed technology.

Although patent disputes in the semiconductor industry have often been settled through cross-licensing arrangements, we may not be able in any or every instance to settle an alleged patent infringement claim through a cross-licensing arrangement. We have a more limited patent portfolio than many of our competitors. If a successful claim is made against us or any of our customers and a license is not made available to us on commercially reasonable terms or we are required to pay substantial damages or awards, our business, financial condition and results of operations would be materially adversely affected.

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

Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trade secret, copyright and trademark laws and non-disclosure and other contractual agreements to protect our proprietary rights. These agreements and measures may not be sufficient to protect our technology from third-party infringement, or to protect us from the claims of others. Monitoring unauthorized use of our products is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. Our attempts to enforce our intellectual property rights could be time consuming and costly. Litigation may be necessary in order to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement. If competitors are able to use our technology without our approval or compensation, our ability to compete effectively could be harmed.

The market for Very Fast SRAMs is highly competitive.

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

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

•   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.

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In addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures and new forms of DRAM, or the emergence of new memory technologies that could enable the development of products that feature higher performance, lower cost or lower power capabilities. Additionally, the trend toward incorporating SRAM into other chips in the networking and telecommunications markets has the potential to reduce future demand for Very Fast SRAM products. There can be no assurance that we will be able to compete successfully in the future. Our failure to compete successfully in these or other areas could harm our business.

We may experience difficulties in transitioning to smaller geometry process technologies and other more advanced manufacturing process technologies, which may result in reduced manufacturing yields, delays in product deliveries and increased expenses.

In order to remain competitive, we expect to continue to transition the manufacture of our products to smaller geometry process technologies. This transition will require us to migrate to new manufacturing processes for our products and redesign certain products. The manufacture and design of our products is complex, and we may experience difficulty in transitioning to smaller geometry process technologies or new manufacturing processes. These difficulties could result in reduced manufacturing yields, delays in product deliveries and increased expenses. We are dependent on our relationships with TSMC and Powerchip to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes. We cannot assure you that TSMC or Powerchip will be able to effectively manage these transitions or that we will be able to maintain our relationship with them. If we or TSMC or Powerchip experience significant delays or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.

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

We continuously evaluate the benefits of migrating to smaller geometry process technologies in order to improve performance and reduce costs. Historically, these migrations to new manufacturing processes have resulted in significant initial design and development costs associated with pre-production mask sets for the manufacture of new products with smaller geometry process technologies. For example, in fiscal 2010 and 2011, we incurred $650,000 and $727,000, respectively, in research and development expense associated with pre-production mask sets which were not later used in production as part of the transition to our new 65 nanometer SRAM process technology and 72 nanometer DRAM process technology, respectively. We will incur similar expenses in the future as we continue to transition our products to smaller geometry processes. The transition costs inherent in the transition to new manufacturing process technologies will adversely affect our operating results and our gross margin.

Our products are complex to design and manufacture and could contain defects, which could reduce revenues or result in claims against us.

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

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

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

Our products are used as components in our OEM customers' products. For example, Cisco Systems, our largest 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 and market their products, including:

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

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

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

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

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

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

Downturns in the semiconductor industry may harm our revenues and margins.

The semiconductor industry is highly cyclical. The industry has experienced significant downturns, often in connection with, or in anticipation of, maturing product cycles of both semiconductor companies' and their customers' products and declines in general economic conditions. These downturns have been characterized by production overcapacity, high inventory levels and accelerated erosion of average selling prices. From time to time, the semiconductor industry also has experienced periods of increased demand and production capacity constraints.  Our operating results may suffer during the down portion of these cycles. Downturns in the semiconductor industry could cause our stock price to be volatile, and a prolonged decline in the industry could adversely affect our revenues. If we are unable to control our inventory levels or expenses adequately in response to reduced net sales, our results of operations would be negatively impacted.

If we do not successfully develop new products to respond to rapid market changes due to changing technology and evolving industry standards, particularly in the networking and telecommunications markets, our business will be harmed.

If we fail to offer technologically advanced products and respond to technological advances and emerging standards, we may not generate sufficient revenues to offset our development costs and other expenses, which will hurt our business. The development of new or enhanced products is a complex and uncertain process that requires the accurate anticipation of technological and market trends. In particular, the networking and telecommunications markets are rapidly evolving and new standards are emerging. We are vulnerable to advances in technology by competitors, including new SRAM architectures, new forms of DRAM and the emergence of new memory technologies that could enable the development of products that feature higher performance or lower cost. We may experience development, marketing and other technological difficulties that may delay or limit our ability to respond to technological changes, evolving industry standards, competitive developments or end-user requirements. For example, because we have limited experience developing integrated circuits, or IC, products other than Very Fast SRAMs, our efforts to introduce new products may not be successful and our business may suffer. Other challenges that we face include:

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

 • we may incur substantial costs if we need to modify our products to respond to these alternative technologies;

 • we may not have sufficient resources to develop or acquire new technologies or to introduce new products capable of competing with future technologies;

 • new products that we develop may not successfully integrate with our end-users' products into which they are incorporated;

 • we may be unable to develop new products that incorporate emerging industry standards;

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

 • when introducing new or enhanced products, we may be unable to manage effectively the transition from older products.

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Our products have lengthy sales cycles that make it difficult to plan our expenses and forecast results.

Our products are generally incorporated in our OEM customers' products at the design stage. However, their decisions to use our products often require significant expenditures by us without any assurance of success, and often precede volume sales, if any, by a year or more. If an OEM customer decides at the design stage not to incorporate our products into their products, we will not have another opportunity for a design win with respect to that customer's product for many months or years, if at all. Our sales cycle can take up to 24 months to complete, and because of this lengthy sales cycle, we may experience a delay between increasing expenses for research and development and our sales and marketing efforts and the generation of volume production revenues, if any, from these expenditures. Moreover, the value of any design win will largely depend on the commercial success of our OEM customers' products. There can be no assurance that we will continue to achieve design wins or that any design win will result in future revenues.

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

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

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

 We plan to continue expanding our business, and our expected growth could place a significant strain on our management systems, infrastructure and other resources. To manage the expected growth of our operations and increases in the number of our personnel, we will need to invest the necessary capital to continue to improve our operational, financial and management controls and our reporting systems and procedures. Our controls, systems and procedures may prove to be inadequate should we experience significant growth. In addition, we may not have sufficient administrative staff to support our operations. For example, we currently have only five employees in our finance department in the United States, including our Chief Financial Officer. Furthermore, our officers have limited experience in managing large or rapidly growing businesses. If our management fails to respond effectively to changes in our business, our business may suffer.

Our international business exposes us to additional risks.

Products shipped to destinations outside of the United States accounted for 64%, 69%, 77% and 70% of our net revenues in the three months ended June 30, 2013 and in fiscal 2013, 2012 and 2011, respectively. Moreover, we operate a facility in Taiwan, and a substantial portion of our products is manufactured and tested in Taiwan. We intend to continue expanding our international business in the future. Conducting business outside of the United States subjects us to additional risks and challenges, including:

 • heightened price sensitivity from customers in emerging markets;

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

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

 • potential political and economic instability in, or foreign conflicts that involve or affect, the countries in which we,  our customers and our suppliers are located;

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

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

 • limited protection for intellectual property rights in some countries;

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•   heightened price sensitivity from customers in emerging markets; and

•   fluctuations in freight rates and transportation disruptions.

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

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

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

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 the H1N1 Flu, that significantly affected the Asia-Pacific region, the operations of our key suppliers could be disrupted. In addition, our business could be harmed if such an outbreak resulted in travel being restricted, as it was during parts of 2003, or if it adversely affected the operations of our suppliers or our OEM customers or the demand for our products or our 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 performance may be affected by changes in Taiwan's political, social and economic environment. For example, any political instability resulting from the relationship among the United States, Taiwan and the People's Republic of China could damage our business. Moreover, the role of the Taiwanese government in the Taiwanese economy is significant. Taiwanese policies toward economic liberalization, and laws and policies affecting technology companies, foreign investment, currency exchange rates, taxes and other matters could change, resulting in greater restrictions on our ability and our suppliers' ability to do business and operate facilities in Taiwan. If any of these changes were to occur, our business could be harmed and our stock price could decline.

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

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

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

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

32

We may need to raise additional capital in the future, which may not be available on favorable terms or at all, and which may cause dilution to existing stockholders.

We may need to seek additional funding in the future. We do not know if we will be able to obtain additional financing on favorable terms, if at all. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, and we may be required to reduce operating costs, which could seriously harm our business. In addition, if we issue equity securities, our stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of our common stock.

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

Some of our products are incorporated into advanced military electronics such as radar and guidance systems. Military expenditures and appropriations for such purchases have risen significantly in recent years. However, as the current conflict in Afghanistan winds down, demand for our products for use in military applications may decrease and our operating results could suffer. Domestic budget considerations may also adversely affect our operating results. For example, if governmental appropriations for military purchases of electronic devices that include our products are reduced, our revenues will likely decline.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements could be impaired, which could adversely affect our operating results, our ability to operate our business and investors' views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming process. On a continuous basis, we update our internal controls documentation and, where appropriate, improve our internal controls and procedures. Section 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm addressing the effectiveness of our internal control over financial reporting. Both we and our independent registered public accounting firm test our internal controls and, as part of that documentation and testing process, identify areas for further attention and improvement. Implementing any appropriate changes to our internal controls may entail substantial costs in order to modify our existing financial and accounting systems, take a significant period of time to complete, and distract our officers, directors and employees from the operation of our business. These changes may not, however, be effective in maintaining the adequacy of our internal controls. Any failure to maintain that adequacy, or a consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs, materially impair our ability to operate our business, and adversely affect our stock price.

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

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

We also face increasing complexity in our product design as we adjust to new and future requirements relating to the materials composition of our products, including the restrictions on lead and other hazardous substances applicable to specified electronic products placed on the market in the European Union (Restriction on the Use of Hazardous Substances Directive 2002/95/EC, also known as the RoHS Directive). We also expect that our operations will be affected by other new environmental laws and regulations on an ongoing basis. Although we cannot predict the ultimate impact of any such new laws and regulations, they will likely result in additional costs, and could require that we change the design and/or manufacturing of our products, any of which could have a material adverse effect on our business.

33

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

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

 • 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 technological innovations, contracts, acquisitions, strategic relationships, joint ventures, capital commitments or other events;

 • 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 experienced extreme price fluctuations, which have often been unrelated to the operating performance of affected companies. The market price of our common stock might experience significant fluctuations in the future, including fluctuations unrelated to our performance. These fluctuations could materially adversely affect our business relationships, our ability to obtain future financing on favorable terms or otherwise harm our business. In addition, in the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. This risk is especially acute for us because the extreme volatility of market prices of technology companies has resulted in a larger number of securities class action claims against them. Due to the potential volatility of our stock price, we may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management's attention and resources. This could harm our business and cause the value of our stock to decline.

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

As of June 30, 2013, our executive officers, directors and entities affiliated with them beneficially owned approximately 26% of our outstanding common stock. As a result, these stockholders will be able to exercise substantial influence over, and may be able to effectively control, matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could have the effect of delaying or preventing a third party from acquiring control over or merging with us.

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

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

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

 • our stockholders have no right to 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 for consideration at stockholder meetings.

34

These provisions could also have the effect of discouraging others from making tender offers for our common stock. As a result, these provisions might prevent the market price of our common stock from increasing substantially in response to actual or rumored takeover attempts. These provisions might also prevent changes in our management. 

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

Stock Repurchase Program

On November 6, 2008, our Board of Directors authorized us to repurchase, at management's discretion, up to $10 million of our common stock. On January 25, 2012, the Board authorized the repurchase of additional shares having an aggregate purchase price of up to $10 million.  Under the repurchase program, we may repurchase shares from time to time on the open market or in private transactions. The specific timing and amount of the repurchases will be dependent on market conditions, securities law limitations and other factors. The repurchase program may be suspended or terminated at any time without prior notice.During the quarter ended June 30, 2013, we did not repurchase any of our shares under the repurchase program.  As of June 30, 2013, the approximate dollar value of shares that may be repurchased under the program was $5.9 million.

35

Item 6.Exhibits

Exhibit Number	Name of  Document
31.1	Certification of Lee-Lean Shu, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Douglas M. Schirle, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Lee-Lean Shu, President and Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Douglas M. Schirle, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS(1)	XBRL Instance Document
101.SCH(1)	XBRL Taxonomy Extension Schema Document
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document

  (1) XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

36

SIGNATURES

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

Date:	August 6, 2013
		GSI Technology, Inc.
		By:	/s/ LEE-LEAN SHU Lee-Lean Shu
			President, Chief Executive Officer and Chairman
		By:	/s/ DOUGLAS M. SCHIRLE Douglas M. Schirle
			Chief Financial Officer

37

EXHIBIT INDEX

Exhibit Number	Name of  Document
31.1	Certification of Lee-Lean Shu, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Douglas M. Schirle, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Lee-Lean Shu, President and Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Douglas M. Schirle, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS(1)	XBRL Instance Document
101.SCH(1)	XBRL Taxonomy Extension Schema Document
101.CAL(1)	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF(1)	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB(1)	XBRL Taxonomy Extension Label Linkbase Document
101.PRE(1)	XBRL Taxonomy Extension Presentation Linkbase Document

  (1) XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.

38

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lee-Lean Shu, certify that:

1.   I have reviewed this quarterly report on Form 10-Q 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 a material fact necessary to make the statements made, in light of the circumstances under which such statements were 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, fairly present 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 controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (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 to be 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, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the 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 that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial 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 a significant role in the registrant's internal control over financial reporting.

August 6, 2013

/s/ LEE-LEAN SHU

Lee-Lean Shu

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT

TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas M. Schirle, certify that:

1.   I have reviewed this quarterly report on Form 10-Q 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 a material fact necessary to make the statements made, in light of the circumstances under which such statements were 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, fairly present 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 controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (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 to be 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, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the 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 that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial 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 a significant role in the registrant's internal control over financial reporting.

August 6, 2013

/s/ DOUGLAS M. SCHIRLE

Douglas M. Schirle

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report of GSI Technology, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Lee-Lean Shu, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the 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 and results of operations of the Company.

August 6, 2013
	/s/ LEE-LEAN SHU Lee-Lean Shu
	President and Chief Executive 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 statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Quarterly Report of GSI Technology, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Douglas M. Schirle, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the 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 and results of operations of the Company.

August 6, 2013
	/s/ DOUGLAS M. SCHIRLE Douglas M. Schirle
	Chief 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 statement required by Section 906, has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

XML

NOTE 3 — BALANCE SHEET DETAIL (Tables)

3 Months Ended

Jun. 30, 2013

Note 3 Balance Sheet Detail Tables

Schedule of Inventories

	June 30, 2013		March 31, 2013
	(In thousands)
Inventories:
Work-in-progress	$	3,780	$	4,236
Finished goods		7,793		8,772
Inventory at distributors		604		801
	$	12,177	$	13,809

Schedule of Accounts Receivable, Net

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable, net:
Accounts receivable	$	10,384		$	10,357
Less: Allowances for sales returns, doubtful accounts and other		(100	)		(116	)
	$	10,284		$	10,241

Schedule of Prepaid Expenses and Other Current Assets

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses and other current assets:
Prepaid tooling and masks	$	1,002	$	1,230
Prepaid income taxes		2,262		2,037
Other receivables		461		557
Other prepaid expenses		845		1,121
	$	4,570	$	4,945

Schedule of Property and Equipment, Net

	June 30, 2013			March 31, 2013
	(In thousands)
Property and equipment, net:
Computer and other equipment	$	16,344		$	16,344
Software		4,741			4,690
Land		3,900			3,900
Building and building improvements		2,256			2,256
Furniture and fixtures		110			110
Leasehold improvements		768			767
Construction in progress		-			51
		28,119			28,118
Less: Accumulated depreciation and amortization		(17,794	)		(17,344	)
	$	10,325		$	10,774

Schedule of Other Assets

	June 30, 2013		March 31, 2013
	(In thousands)
Other Assets:
Non-current deferred income taxes	$	1,377	$	1,272
Intangibles, net		699		744
Deposits		86		82
	$	2,162	$	2,098

Schedule of Intangible Assets

	Gross
	Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Intangible assets:
Product designs	$	590	$	(323	)	$	267
Patents		720		(307	)		413
Software		80		(61	)		19
Total	$	1,390	$	(691	)	$	699

Schedule of Accrued Expenses and Other Liabilities

	June 30, 2013		March 31, 2013
	(In thousands)
Accrued expenses and other liabilities:
Accrued compensation	$	1,825	$	2,181
Accrued professional fees		929		560
Accrued commissions		390		353
Accrued royalties		16		28
Accrued equipment and software costs		-		51
Other accrued expenses		736		805
	$	3,896	$	3,978

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Income Statement [Abstract]
Net revenues	$ 16,412	$ 16,783
Cost of revenues	8,946	10,018
Gross profit	7,466	6,765
Operating expenses:
Research and development	2,997	2,838
Selling, general and administrative	5,010	3,047
Total operating expenses	8,007	5,885
Income (loss) from operations	(541)	880
Interest income, net	105	124
Other income (expense), net	6	12
Income (loss) before income taxes	(430)	1,016
Provision for income taxes	11	96
Net income (loss)	$ (441)	$ 920
Net income (loss) per share:
Basic	$ (0.02)	$ 0.03
Diluted	$ (0.02)	$ 0.03
Weighted average shares used in per share calculations:
Basic	27,178	27,361
Diluted	27,178	27,963

XML

NOTE 4—INCOME TAXES

3 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

NOTE 4—INCOME TAXES

NOTE 4—INCOME TAXES

The current portion of the Company’s unrecognized tax benefits at June 30, 2013 and March 31, 2013 was $0 and $0, respectively.  The long-term portion at June 30, 2013 and March 31, 2013 was $2,755,000 and $2,803,000, respectively, of which the timing of the resolution is uncertain.  As of June 30, 2013, $235,000 of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets.  The unrecognized tax benefit balance of $2,829,000  as of June 30, 2013 would affect the Company’s effective tax rate if recognized.  It is possible, however, that some months or years may elapse before an uncertain position for which the Company has established a reserve is resolved.

Management believes that it is reasonably possible that within the next twelve months the Company could have a reduction in uncertain tax benefits of up to $637,000, including interest and penalties, related to positions taken with respect to credits and loss carryforwards on previously filed tax returns.

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

The Company is subject to taxation in the United States and various state and foreign jurisdictions.  Fiscal years 2010 through 2013 remain open to examination by federal tax authorities, and fiscal years 2009 through 2013 remain open to examination by California tax authorities.  In the three months ended June 30, 2012, the Company settled an examination by the California Franchise Tax Board.  The tax provision for the three month period ended June 30, 2012 includes a discrete benefit of $168,000 associated with the net result of the settlement and the associated tax reserves, including interest to date.

The Company’s estimated annual effective income tax rate was approximately 3.3% and 29.1% as of June 30, 2013 and 2012, respectively.  The differences between the effective income tax rate and the applicable statutory U.S. income tax rate in each period were primarily due to the effects of tax credits, foreign tax rate differentials and tax free interest income, offset by stock-based compensation expense.

XML

NOTE 3 — BALANCE SHEET DETAIL (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Inventories:
Work-in-progress	$ 3,780	$ 4,236
Finished goods	7,793	8,772
Inventory at distributors	604	801
Total Inventory	$ 12,177	$ 13,809

XML

NOTE 5—FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Jun. 30, 2013

Note 5Financial Instruments Tables

Schedule of Fair value of financial assets and liabilities measured on a recurring basis

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	8,819	$	8,819	$	-	$	-
Marketable securities		62,514		-		62,514		-
Total	$	71,333	$	8,819	$	62,514	$	-

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	March 31, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	10,445	$	10,445	$	-	$	-
Marketable securities		61,634		-		61,634		-
Total	$	72,079	$	10,445	$	61,634	$	-

Schedule of Available-for-sale investments

	June 30, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	6,238	$	11	$	-		$	6,249
Corporate notes		5,023		7		-			5,030
Certificates of deposit		8,225		9		-			8,234
Other		1,552		-		-			1,552
Total short-term investments	$	21,038	$	27	$	-		$	21,065
Long-term investments:
State and municipal obligations	$	20,804	$	-	$	(48	)	$	20,756
Corporate notes		9,455		-		(11	)	$	9,444
Certificates of deposit		11,260		-		(11	)	$	11,249
Total long-term investments	$	41,519	$	-	$	(70	)	$	41,449

	March 31, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	10,564	$	17	$	-		$	10,581
Corporate notes		6,052		14		-			6,066
Certificates of deposit		9,480		12		-			9,492
Total short-term investments	$	26,096	$	43	$	-		$	26,139
Long-term investments:
State and municipal obligations	$	11,992	$	3	$	-		$	11,995
Corporate notes		8,436		14		-			8,450
Certificates of deposit		9,008		18		-			9,026
Other		6,042		-		(18	)		6,024
Total long-term investments	$	35,478	$	35	$	(18	)	$	35,495

Schedule of Contractual maturities of the available-for-sale non-equity investments

			Fair
	Cost		Value
	(In thousands)
Maturing within one year	$	21,038	$	21,065
Maturing in one to three years		41,519		41,449
Maturing in more than three years		-		-
	$	62,557	$	62,514

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NOTE 9—SEGMENT AND GEOGRAPHIC INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Net revenues	$ 16,412	$ 16,783
United States
Net revenues	5,971	4,776
China
Net revenues	3,477	4,928
Malaysia
Net revenues	2,347	3,143
Singapore
Net revenues	1,453	1,977
Rest of the World
Net revenues	$ 3,164	$ 1,959

XML

NOTE 3 — BALANCE SHEET DETAIL (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Property and equipment, net:
Computer and other equipment	$ 16,344	$ 16,344
Software	4,741	4,690
Land	3,900	3,900
Building and building improvements	2,256	2,256
Furniture and fixtures	110	110
Leasehold improvements	768	767
Construction in progress	0	51
Property, Plant, and Equipment, Gross	28,119	28,118
Less: Accumulated depreciation and amortization	(17,794)	(17,344)
Property, Plant, and Equipment, Net	$ 10,325	$ 10,774

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NOTE 3 — BALANCE SHEET DETAIL (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Prepaid expenses and other current assets:
Prepaid tooling and masks	$ 1,002	$ 1,230
Prepaid income taxes	2,262	2,037
Other receivables	461	557
Other prepaid expenses	845	1,121
Total prepaid expenses and other current assets	$ 4,570	$ 4,945

XML

NOTE 5—FINANCIAL INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Note 5Financial Instruments Details 2
Maturing within one year, Cost	$ 21,038
Maturing in one to three years, Cost	41,519
Total, Cost	62,557
Maturing within one year, Fair Value	21,065
Maturing in one to three years, Fair Value	41,449
Fair Value	$ 62,514	$ 61,634

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NOTE 4—INCOME TAXES (Details Narrative) (USD $)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Mar. 31, 2013
Note 4Income Taxes Details Narrative
Unrecognized tax benefits, Current	$ 0		$ 0
Unrecognized tax benefits, Long Term	2,755,000		2,803,000
Unrecognized tax benefits had been recorded as a reduction to net deferred tax assets	235,000
Unrecognized tax benefits	$ 2,829,000
Effective annual income tax rate	3.30%	29.10%

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NOTE 3 — BALANCE SHEET DETAIL (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Accounts receivable, net:
Accounts receivable	$ 10,384	$ 10,357
Less: Allowances for sales returns, doubtful accounts and other	(100)	(116)
Total accounts receivable, net	$ 10,284	$ 10,241

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income (loss)	$ (441)	$ 920
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Allowance for sales returns and doubtful accounts	(16)	21
Provision for excess and obsolete inventories	507	116
Depreciation and amortization	494	638
Stock-based compensation	565	562
Deferred income taxes	126	122
Windfall tax benefits from stock options exercised	(177)	(5)
Amortization of bond premium on investments	220	292
Changes in assets and liabilities:
Accounts receivable	(27)	76
Inventory	1,125	(539)
Prepaid expenses and other assets	282	216
Accounts payable	(346)	(1,474)
Accrued expenses and other liabilities	98	(1,362)
Deferred revenue	(488)	2
Net cash provided by (used in) operating activities	1,922	(415)
Cash flows from investing activities:
Purchase of investments	(11,584)	(10,052)
Sales and maturities of short-term investments	10,383	11,050
Purchases of property and equipment	(34)	(174)
Net cash provied by (used) in investing activities	(1,235)	824
Cash flows from financing activities:
Repurchase of common stock	0	(1,815)
Windfall tax benefits from stock options exercised	177	5
Proceeds from issuance of common stock under employee stock plans	797	222
Net cash provided by (used in) financing activities	974	(1,588)
Net increase (decrease) in cash and cash equivalents	1,661	(1,179)
Cash and cash equivalents at beginning of the period	41,120	31,634
Cash and cash equivalents at end of the period	42,781	30,455
Non-cash investing activities:
Purchases of property and equipment through accounts payable and accruals	17	166
Supplemental cash flow information:
Net cash paid for income taxes	$ 0	$ 331

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NOTE 2 — NET INCOME (LOSS) PER COMMON SHARE

3 Months Ended

Jun. 30, 2013

Net income (loss) per share:

NOTE 2 — NET INCOME (LOSS) PER COMMON SHARE

NOTE 2—NET INCOME (LOSS) PER COMMON SHARE

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

	Three Months Ended June 30,
	2013			2012
	(In thousands, except per share amounts)
Net income (loss)	$	(441	)	$	920
Denominators:
Weighted average shares—Basic		27,178			27,361
Dilutive effect of employee stock options		-			601
Dilutive effect of employee stock purchase plan options		-			1
Weighted average shares—Dilutive		27,178			27,963
Net income (loss) per common share—Basic	$	(0.02	)	$	0.03
Net income (loss)  per common share—Diluted	$	(0.02	)	$	0.03

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Shares underlying options		3,377		3,473

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NOTE 5—FINANCIAL INSTRUMENTS

3 Months Ended

Jun. 30, 2013

Investments, All Other Investments [Abstract]

NOTE 5—FINANCIAL INSTRUMENTS

NOTE 5—FINANCIAL INSTRUMENTS

Fair value measurements

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

Level 1: Valuations based on quoted prices in active markets for identical assets and liabilities.  The fair value of available-for-sale securities included in the Level 1 category is based on quoted prices that are readily and regularly available in an active market.  As of June 30, 2013, the Level 1 category included money market funds of $8.8 million, which were included in cash and cash equivalents in the Condensed Consolidated Balance Sheet.

Level 2: Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. The fair value of available-for-sale securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well established independent pricing vendors and broker-dealers. As of June 30, 2013, the Level 2 category included short-term investments of $21.1 million and long-term investments of $41.4 million, which were comprised of certificates of deposit, corporate debt securities and government and agency securities.

Level 3: Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.  As of June 30, 2013, the Company had no Level 3 financial assets measured at fair value in the Condensed Consolidated Balance Sheet.

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

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	8,819	$	8,819	$	-	$	-
Marketable securities		62,514		-		62,514		-
Total	$	71,333	$	8,819	$	62,514	$	-

			Fair Value Measurments at Reporting Date Using
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical Assets		Observable		Unobservable
			and Liabilties		Inputs		Inputs
	March 31, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Money market funds	$	10,445	$	10,445	$	-	$	-
Marketable securities		61,634		-		61,634		-
Total	$	72,079	$	10,445	$	61,634	$	-

Short-term and long-term investments

All of the Company’s short-term and long-term investments are classified as available-for-sale.  Available-for-sale debt securities with maturities greater than twelve months are classified as long-term investments when they are not intended for use in current operations.  Investments in available-for-sale securities are reported at fair value with unrecognized gains (losses), net of tax, as a component of accumulated other comprehensive income in the Condensed Consolidated Balance Sheets.  The Company had money market funds of $8.8 million and $10.4 million at June 30, 2013 and March 31, 2013, respectively, included in cash and cash equivalents in the Condensed Consolidated Balance Sheet.  The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when declines are determined to be other-than-temporary.

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

	June 30, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	6,238	$	11	$	-		$	6,249
Corporate notes		5,023		7		-			5,030
Certificates of deposit		8,225		9		-			8,234
Other		1,552		-		-			1,552
Total short-term investments	$	21,038	$	27	$	-		$	21,065
Long-term investments:
State and municipal obligations	$	20,804	$	-	$	(48	)	$	20,756
Corporate notes		9,455		-		(11	)	$	9,444
Certificates of deposit		11,260		-		(11	)	$	11,249
Total long-term investments	$	41,519	$	-	$	(70	)	$	41,449

	March 31, 2013
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Short-term investments:
State and municipal obligations	$	10,564	$	17	$	-		$	10,581
Corporate notes		6,052		14		-			6,066
Certificates of deposit		9,480		12		-			9,492
Total short-term investments	$	26,096	$	43	$	-		$	26,139
Long-term investments:
State and municipal obligations	$	11,992	$	3	$	-		$	11,995
Corporate notes		8,436		14		-			8,450
Certificates of deposit		9,008		18		-			9,026
Other		6,042		-		(18	)		6,024
Total long-term investments	$	35,478	$	35	$	(18	)	$	35,495

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

As of June 30, 2013 the deferred tax asset related to unrecognized gains and losses on short-term and long-term investments was $2,000. As of March 31, 2013, the deferred tax liability related to unrecognized gains and losses on short-term and long-term investments was $14,000.

As of June 30, 2013, contractual maturities of the Company’s available-for-sale non-equity investments were as follows: 

			Fair
	Cost		Value
	(In thousands)
Maturing within one year	$	21,038	$	21,065
Maturing in one to three years		41,519		41,449
Maturing in more than three years		-		-
	$	62,557	$	62,514

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

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NOTE 3 — BALANCE SHEET DETAIL

3 Months Ended

Jun. 30, 2013

Balance Sheet Related Disclosures [Abstract]

NOTE 3 — BALANCE SHEET DETAIL

NOTE 3—BALANCE SHEET DETAIL

	June 30, 2013		March 31, 2013
	(In thousands)
Inventories:
Work-in-progress	$	3,780	$	4,236
Finished goods		7,793		8,772
Inventory at distributors		604		801
	$	12,177	$	13,809

	June 30, 2013			March 31, 2013
	(In thousands)
Accounts receivable, net:
Accounts receivable	$	10,384		$	10,357
Less: Allowances for sales returns, doubtful accounts and other		(100	)		(116	)
	$	10,284		$	10,241

	June 30, 2013		March 31, 2013
	(In thousands)
Prepaid expenses and other current assets:
Prepaid tooling and masks	$	1,002	$	1,230
Prepaid income taxes		2,262		2,037
Other receivables		461		557
Other prepaid expenses		845		1,121
	$	4,570	$	4,945

	June 30, 2013			March 31, 2013
	(In thousands)
Property and equipment, net:
Computer and other equipment	$	16,344		$	16,344
Software		4,741			4,690
Land		3,900			3,900
Building and building improvements		2,256			2,256
Furniture and fixtures		110			110
Leasehold improvements		768			767
Construction in progress		-			51
		28,119			28,118
Less: Accumulated depreciation and amortization		(17,794	)		(17,344	)
	$	10,325		$	10,774

Depreciation and amortization expense was $449,000 and $593,000, respectively, for the three months ended June 30, 2013 and 2012.

	June 30, 2013		March 31, 2013
	(In thousands)
Other Assets:
Non-current deferred income taxes	$	1,377	$	1,272
Intangibles, net		699		744
Deposits		86		82
	$	2,162	$	2,098

The following table summarizes the components of intangible assets and related accumulated amortization balances at June 30, 2013 (in thousands):

	Gross
	Carrying		Accumulated			Net Carrying
	Amount		Amortization			Amount
Intangible assets:
Product designs	$	590	$	(323	)	$	267
Patents		720		(307	)		413
Software		80		(61	)		19
Total	$	1,390	$	(691	)	$	699

Amortization of intangible assets included in cost of revenues was $45,000 and $45,000, respectively, for the three months ended June 30, 2013 and 2012.

	June 30, 2013		March 31, 2013
	(In thousands)
Accrued expenses and other liabilities:
Accrued compensation	$	1,825	$	2,181
Accrued professional fees		929		560
Accrued commissions		390		353
Accrued royalties		16		28
Accrued equipment and software costs		-		51
Other accrued expenses		736		805
	$	3,896	$	3,978

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NOTE 3 — BALANCE SHEET DETAIL (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Other assets:
Non-current deferred income taxes	$ 1,377	$ 1,272
Intangibles, net	699	744
Deposits	86	82
Total Other Assets	$ 2,162	$ 2,098

XML

NOTE 5—FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Assets:
Money market funds	$ 8,819	$ 10,445
Marketable securities	62,514	61,634
Total	71,333	72,079
Quoted Prices in Active Markets for Identical Assets and Liabilties (Level 1)
Assets:
Money market funds	8,819	10,445
Marketable securities	0	0
Total	8,819	10,445
Significant Other Observable Inputs (Level 2)
Assets:
Money market funds	0	0
Marketable securities	62,514	61,634
Total	62,514	61,634
Significant Unobservable Inputs (Level 3)
Assets:
Money market funds	0	0
Marketable securities	0	0
Total	$ 0	$ 0

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NOTE 7—STOCK- BASED COMPENSATION (Details 2)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock Options Plans
Risk-free interest rate	0.91%	0.79%
Expected life (in years)	5 years	5 years
Volatility	48.40%	52.90%
Dividend yield	0.00%	0.00%
Employee Stock Purchase Plan
Risk-free interest rate	0.09%	0.15%
Expected life (in years)	6 months	6 months
Volatility	30.40%	23.40%
Dividend yield	0.00%	0.00%

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Jun. 30, 2013	Mar. 31, 2013
Stockholders' Equity:
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	27,357,797	27,065,209
Common stock, shares outstanding	27,357,797	27,065,209

XML

NOTE 8—SEGMENT AND GEOGRAPHIC INFORMATION

3 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

NOTE 8—SEGMENT AND GEOGRAPHIC INFORMATION

NOTE 8—SEGMENT AND GEOGRAPHIC INFORMATION

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

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
United States	$	5,971	$	4,776
China		3,477		4,928
Malaysia		2,347		3,143
Singapore		1,453		1,977
Rest of the world		3,164		1,959
	$	16,412	$	16,783

All sales are denominated in United States dollars.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Consolidated Statements Of Comprehensive Income
Net income (loss)	$ (441)	$ 920
Net unrealized loss on available-for-sale investments, net of tax	(85)	(33)
Comprehensive net income (loss)	$ (526)	$ 887

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
ASSETS
Cash and cash equivalents	$ 42,781	$ 41,120
Short-term investments	21,065	26,139
Accounts receivable, net	10,284	10,241
Inventories	12,177	13,809
Prepaid expenses and other current assets	4,570	4,945
Deferred income taxes	1,098	1,224
Total current assets	91,975	97,478
Property and equipment, net	10,325	10,774
Long-term investments	41,449	35,495
Other assets	2,162	2,098
Total assets	145,911	145,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	3,475	3,804
Accrued expenses and other liabilities	3,896	3,978
Deferred revenue	2,589	3,077
Total current liabilities	9,960	10,859
Income taxes payable	2,755	2,803
Total liabilities	12,715	13,662
Commitments and Contingencies (Note 6)
Stockholders’ equity:
Preferred stock: $0.001 par value authorized: 5,000,000 shares; issued and outstanding: none	0	0
Common Stock: $0.001 par value authorized: 150,000,000 shares; issued and outstanding: 27,357,797 and 27,065,209 shares, respectively	27	27
Additional paid-in capital	55,543	54,004
Accumulated other comprehensive income	(40)	45
Retained earnings	77,666	78,107
Total stockholders’ equity	133,196	132,183
Total liabilities and stockholders’ equity	$ 145,911	$ 145,845

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NOTE 3 — BALANCE SHEET DETAIL (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Gross Carrying Amount	$ 1,390
Accumulated Amortization	(691)
Net Carrying Amount	699	744
Product Designs
Gross Carrying Amount	590
Accumulated Amortization	(323)
Net Carrying Amount	267
Patents
Gross Carrying Amount	720
Accumulated Amortization	(307)
Net Carrying Amount	413
Software
Gross Carrying Amount	80
Accumulated Amortization	(61)
Net Carrying Amount	$ 19

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NOTE 2 — NET INCOME (LOSS) PER COMMON SHARE (Details 1)	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 2 Net Income Loss Per Common Share Details 1
Shares underlying options	3,377	3,473

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NOTE 7—STOCK- BASED COMPENSATION (Details) (USD $)	3 Months Ended
	Jun. 30, 2013
Number of Options
Number of Underlying Options Outstanding, Beginning	6,336,319
Number of Underlying Options Granted	246,770
Number of Underlying Options Exercised	(233,985)
Number of Underlying Options Forfeited	(114,475)
Number of Options Underlying Outstanding, Ending	6,234,629
Options Vested and Exercisable	3,965,905
Options Vested and expected to vest	6,176,382
Weighted Average Exercise Price
Weighted Average Exercise Price Outstanding, Beginning	$ 4.73
Weighted Average Exercise Price Granted	$ 5.76
Weighted Average Exercise Price Exercised	$ 2.25
Weighted Average Exercise Price Forfeited	$ 6.39
Weighted Average Exercise Price Outstanding, Ending	$ 4.83
Weighted Average Exercise Price Vested and Exercisable	$ 4.37
Weighted Average Exercise Price vested and exprected to vest	$ 4.83
Weighted Average Remaining Contractual Life (in years)
Weighted Average Remaining Contractual Life (in years) Exercisable	4 years 8 months 5 days
Weighted Average Remaining Contractual Life (in years) Vested and expected to vest	6 years
Aggregate Intrinsic Value
Intrinsic Value	$ 821,923
Aggregate Intrinsic Value Exercisable	7,956,296
Aggregate Intrinsic Value vested and expected to vest	$ 9,842,057

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NOTE 7—STOCK- BASED COMPENSATION (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Stock-based compensation	$ 565	$ 562
Cost of revenues
Stock-based compensation	94	90
Research and Development
Stock-based compensation	258	283
Selling, general and administrative
Stock-based compensation	$ 213	$ 189

XML

NOTE 7—STOCK- BASED COMPENSATION

3 Months Ended

Jun. 30, 2013

Equity [Abstract]

NOTE 7—STOCK- BASED COMPENSATION

NOTE 7—STOCK-BASED COMPENSATION

As of June 30, 2013, 6,088,423 shares of common stock were available for grant under the Company’s 2007 Equity Incentive Plan.

The following table summarizes the Company’s stock option activities for the three months ended June 30, 2013:

				Weighted
	Number of Shares			Average	Weighted
	Underlying			Remaining	Average
	Options			Contractual	Exercise		Intrinsic
	Outstanding			Life (Years)	Price		Value
Balance at March 31, 2013		6,336,319			$	4.73
Granted		246,770				5.76
Exercised		(233,985	)			2.25	$	821,923
Forfeited		(114,475	)			6.39
Balance at June 30, 2013		6,234,629			$	4.83
Options vested and exercisable		3,965,905		4.68	$	4.37	$	7,956,296
Options vested and expected to vest		6,176,382		6.00	$	4.83	$	9,842,057

The weighted average fair value per underlying share of options granted during the three months ended June 30, 2013 and 2012 was $2.45 and $1.91, respectively.

Options outstanding by exercise price at June 30, 2013 were as follows:

		Number of		Options Outstanding				Options Exercisable
		Shares		Weighted		Weighted Average				Weighted
		Underlying		Average		Remaining		Number		Average
		Options		Exercise		Contractual		Vested and		Exercise
Exercise Price		Outstanding		Price		Life (Years)		Exercisable		Price
$	2.10 - 3.37		844,942	$	2.79		3.93		844,942	$	2.79
$	3.38 - 3.76		636,358	$	3.51		4.97		542,390	$	3.52
$	3.81 - 3.94		38,000	$	3.87		5.71		38,000	$	3.87
$	4.00		714,263	$	4.00		5.93		714,263	$	4.00
$	4.17 - 4.50		687,944	$	4.26		6.37		369,335	$	4.31
$	4.81 - 4.92		523,913	$	4.87		8.69		99,184	$	4.87
$	5.50		881,708	$	5.50		3.16		881,708	$	5.50
$	5.59 - 5.76		624,410	$	5.70		8.06		150,000	$	5.75
$	6.00 - 6.54		822,208	$	6.32		7.91		139,570	$	6.33
$	6.82 - 9.20		460,883	$	7.49		7.28		186,513	$	7.45
			6,234,629						3,965,905

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

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Cost of revenues	$	94	$	90
Research and development		258		283
Selling, general and administrative		213		189
Total	$	565	$	562

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

The Company recognized related income tax benefits of $17,000 and $90,000, respectively, for the three months ended June 30, 2013 and 2012.  Windfall tax benefits realized from exercised stock options were $177,000 and $5,000, respectively, for the three months ended June 30, 2013 and 2012.  Compensation cost capitalized within inventory at June 30, 2013 was insignificant. As of June 30, 2013, the Company’s total unrecognized compensation cost was $3.9 million, which will be recognized over a weighted average period of 2.12 years.  The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:

	Three Months Ended June 30,
	2013			2012
	(In thousands)
Stock Option Plans:
Risk-free interest rate		0.91	%		0.79	%
Expected life (in years)		5.00			5.00
Volatility		48.4	%		52.9	%
Dividend yield		-	%		-	%
Employee Stock Purchase Plan:
Risk-free interest rate		0.09	%		0.15	%
Expected life (in years)		0.50			0.50
Volatility		30.4	%		23.4	%
Dividend yield		-	%		-	%

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NOTE 3 — BALANCE SHEET DETAIL (Details 6) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Accrued expenses and other liabilities:
Accrued compensation	$ 1,825	$ 2,181
Accrued professional fees	929	560
Accrued commissions	390	353
Accrued royalties	16	28
Accrued equipment and software costs	0	51
Other accrued expenses	736	805
Total Accrued Expenses and Other Liabilities	$ 3,896	$ 3,978

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NOTE 2 — NET INCOME PER COMMON SHARE (Tables)

3 Months Ended

Jun. 30, 2013

Net income (loss) per share:

Basic and diluted net income per share

	Three Months Ended June 30,
	2013			2012
	(In thousands, except per share amounts)
Net income (loss)	$	(441	)	$	920
Denominators:
Weighted average shares—Basic		27,178			27,361
Dilutive effect of employee stock options		-			601
Dilutive effect of employee stock purchase plan options		-			1
Weighted average shares—Dilutive		27,178			27,963
Net income (loss) per common share—Basic	$	(0.02	)	$	0.03
Net income (loss)  per common share—Diluted	$	(0.02	)	$	0.03

Anti-dilutive shares

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Shares underlying options		3,377		3,473

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NOTE 6—COMMITMENTS AND CONTINGENCIES

3 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

NOTE 6—COMMITMENTS AND CONTINGENCIES

NOTE 6—COMMITMENTS AND CONTINGENCIES

Indemnification obligations

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

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

Product warranties

The Company warrants its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of revenues. Warranty costs were not significant for the three months ended June 30, 2013 or 2012.

Legal proceedings

In March 2011, Cypress Semiconductor Corporation, a semiconductor manufacturer, filed a lawsuit against the Company 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.  The complaint seeks 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 Trade Commission (the “ITC”).  The ITC complaint, as subsequently amended, alleged infringement by the Company of three of the five patents involved in the District Court case and one additional patent and also alleged infringement by three of our distributors and 11 of our customers who allegedly incorporate our SRAMs in their products.  The ITC complaint sought a limited exclusion order excluding the allegedly infringing SRAMs, and products containing them, from entry into the United States and permanent orders directing the Company and the other respondents to cease and desist from selling or distributing such products in the United States.  On July 21, 2011, the ITC formally instituted an investigation in response to Cypress's complaint.  Two of the distributor-respondents and ten of the customer-respondents were subsequently dismissed from the investigation.  The evidentiary hearing took place in March 2012. On October 25, 2012, Chief Administrative Law Judge Charles E. Bullock issued his initial determination in which he held that the Company's SRAM products, and products containing them, do not infringe the asserted patent claims and that Cypress had failed to establish the existence of a domestic industry that practices the asserted patents.  Because he found that the accused products do not infringe any of the asserted patent claims, Judge Bullock did not consider or rule on the additional arguments of the Company and the other respondents that the Cypress patents are invalid and unenforceable. Following a remand by the ITC, on February 25, 2012, Judge Bullock issued a supplemental initial determination finding that the asserted patents are enforceable and not invalid.  On June 7, 2013, the ITC announced that the full Commission had affirmed Judge Bullock’s determination that GSI’s SRAM devices, and products containing them, do not infringe the Cypress patents and that Cypress had failed to establish the requisite domestic industry.  Moreover, the Commission reversed a portion of Judge Bullock’s supplemental determination with respect to validity, finding the asserted claims of one of the patents to have been anticipated by prior art and, therefore, invalid.  The Commission also ordered the investigation terminated.

The Minnesota District Court case had been stayed pending the conclusion of the ITC proceeding. Following the termination of the ITC investigation, the stay was lifted.  On May 1, 2013, Cypress filed a lawsuit in the United States District Court for the Northern District of California alleging infringement by our products of five additional Cypress patents.  Like the Minnesota case, the complaint in the California lawsuit seeks unspecified damages for past infringement and a permanent injunction against future infringement.  The Company has filed answers in both cases denying liability and asserting affirmative defenses.  Discovery is in the preliminary stage in both cases.

The Company believes that it has strong defenses against Cypress’ claims in both District Court cases.  The Company intends to continue to defend itself vigorously in these proceedings. However, the litigation process is inherently uncertain, and the Company may not prevail.  Patent litigation is particularly complex and can extend for a protracted period of time, which can substantially increase the cost of such litigation.  The Company has not recorded any loss contingency during fiscal 2011, fiscal 2012 or fiscal 2013 in connection with these legal proceedings as the Company cannot predict their outcome and cannot estimate the likelihood or potential dollar amount of any adverse results.  However, an unfavorable outcome in these proceedings could have a material adverse impact on the Company's financial position, results of operations or cash flows for the period in which the outcome occurs and in future periods.

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NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of GSI Technology, Inc. and its subsidiaries (“GSI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.  Accordingly, the interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements.  These interim financial statements contain all adjustments (which consist of only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the interim financial information included therein.  The Company believes that the disclosures are adequate to make the information not misleading.  However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

The consolidated results of operations for the three months ended June 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Litigation and settlement costs

From time to time, the Company is involved in legal actions. The Company currently is a party to pending legal proceedings which it is defending aggressively.  See Note 6 for additional information regarding this pending litigation.  There are many uncertainties associated with any litigation, and the Company may not prevail.  The litigation, regardless of its eventual outcome, will be costly and time consuming and, should the outcome be adverse to the Company, could result in the Company being required to pay significant monetary damages.  If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, or the settlement of such litigation, is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with GAAP. However, the actual liability in any such litigation may be materially different from our estimates, which could require us to record additional costs.

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NOTE 5—FINANCIAL INSTRUMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Mar. 31, 2013
Fair Value	$ 62,514	$ 61,634
Short Term Investments
Available-for-sale securities, Cost	21,038	26,096
Available-for-sale securities, Gross Unrealized Gains	27	43
Available-for-sale securities, Gross Unrealized Losses	0	0
Fair Value	21,065	26,139
Short Term Investments | State and municipal bonds
Available-for-sale securities, Cost	6,238	10,564
Available-for-sale securities, Gross Unrealized Gains	11	17
Available-for-sale securities, Gross Unrealized Losses	0	0
Fair Value	6,249	10,581
Short Term Investments | Corporate Notes
Available-for-sale securities, Cost	5,023	6,052
Available-for-sale securities, Gross Unrealized Gains	7	14
Available-for-sale securities, Gross Unrealized Losses	0	0
Fair Value	5,030	6,066
Short Term Investments | Certificate of deposits
Available-for-sale securities, Cost	8,225	9,480
Available-for-sale securities, Gross Unrealized Gains	9	12
Available-for-sale securities, Gross Unrealized Losses	0	0
Fair Value	8,234	9,492
Short Term Investments | Other
Available-for-sale securities, Cost	1,552
Available-for-sale securities, Gross Unrealized Gains	0
Available-for-sale securities, Gross Unrealized Losses	0
Fair Value	1,552
Long Term Investments
Available-for-sale securities, Cost	41,519	35,478
Available-for-sale securities, Gross Unrealized Gains	0	35
Available-for-sale securities, Gross Unrealized Losses	(70)	(18)
Fair Value	41,449	35,495
Long Term Investments | State and municipal bonds
Available-for-sale securities, Cost	20,804	11,992
Available-for-sale securities, Gross Unrealized Gains	0	3
Available-for-sale securities, Gross Unrealized Losses	(48)	0
Fair Value	20,756	11,995
Long Term Investments | Corporate Notes
Available-for-sale securities, Cost	9,455	8,436
Available-for-sale securities, Gross Unrealized Gains	0	14
Available-for-sale securities, Gross Unrealized Losses	(11)	0
Fair Value	9,444	8,450
Long Term Investments | Certificate of deposits
Available-for-sale securities, Cost	11,260	9,008
Available-for-sale securities, Gross Unrealized Gains	0	18
Available-for-sale securities, Gross Unrealized Losses	(11)	0
Fair Value	11,249	9,026
Long Term Investments | Other
Available-for-sale securities, Cost		6,042
Available-for-sale securities, Gross Unrealized Gains		0
Available-for-sale securities, Gross Unrealized Losses		(18)
Fair Value		$ 6,024

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NOTE 7—STOCK- BASED COMPENSATION (Tables)

3 Months Ended

Jun. 30, 2013

Note 7Stock- Based Compensation Tables

Summary of stock option activities

				Weighted
	Number of Shares			Average	Weighted
	Underlying			Remaining	Average
	Options			Contractual	Exercise		Intrinsic
	Outstanding			Life (Years)	Price		Value
Balance at March 31, 2013		6,336,319			$	4.73
Granted		246,770				5.76
Exercised		(233,985	)			2.25	$	821,923
Forfeited		(114,475	)			6.39
Balance at June 30, 2013		6,234,629			$	4.83
Options vested and exercisable		3,965,905		4.68	$	4.37	$	7,956,296
Options vested and expected to vest		6,176,382		6.00	$	4.83	$	9,842,057

Schedule of options outstanding by exercise price

		Number of		Options Outstanding				Options Exercisable
		Shares		Weighted		Weighted Average				Weighted
		Underlying		Average		Remaining		Number		Average
		Options		Exercise		Contractual		Vested and		Exercise
Exercise Price		Outstanding		Price		Life (Years)		Exercisable		Price
$	2.10 - 3.37		844,942	$	2.79		3.93		844,942	$	2.79
$	3.38 - 3.76		636,358	$	3.51		4.97		542,390	$	3.52
$	3.81 - 3.94		38,000	$	3.87		5.71		38,000	$	3.87
$	4.00		714,263	$	4.00		5.93		714,263	$	4.00
$	4.17 - 4.50		687,944	$	4.26		6.37		369,335	$	4.31
$	4.81 - 4.92		523,913	$	4.87		8.69		99,184	$	4.87
$	5.50		881,708	$	5.50		3.16		881,708	$	5.50
$	5.59 - 5.76		624,410	$	5.70		8.06		150,000	$	5.75
$	6.00 - 6.54		822,208	$	6.32		7.91		139,570	$	6.33
$	6.82 - 9.20		460,883	$	7.49		7.28		186,513	$	7.45
			6,234,629						3,965,905

Summary of stock-based compensation expense by line item

	Three Months Ended June 30,
	2013		2012
	(In thousands)
Cost of revenues	$	94	$	90
Research and development		258		283
Selling, general and administrative		213		189
Total	$	565	$	562

Summary of valuation assumptions

	Three Months Ended June 30,
	2013			2012
	(In thousands)
Stock Option Plans:
Risk-free interest rate		0.91	%		0.79	%
Expected life (in years)		5.00			5.00
Volatility		48.4	%		52.9	%
Dividend yield		-	%		-	%
Employee Stock Purchase Plan:
Risk-free interest rate		0.09	%		0.15	%
Expected life (in years)		0.50			0.50
Volatility		30.4	%		23.4	%
Dividend yield		-	%		-	%

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NOTE 1—THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of presenation

Basis of presentation

The accompanying unaudited condensed consolidated financial statements of GSI Technology, Inc. and its subsidiaries (“GSI” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission.  Accordingly, the interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements.  These interim financial statements contain all adjustments (which consist of only normal, recurring adjustments) that are, in the opinion of management, necessary to state fairly the interim financial information included therein.  The Company believes that the disclosures are adequate to make the information not misleading.  However, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

The consolidated results of operations for the three months ended June 30, 2013 are not necessarily indicative of the results to be expected for the entire fiscal year.

Significant accounting policies

Significant accounting policies

The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2013.

Litigation and settlement costs

Litigation and settlement costs

From time to time, the Company is involved in legal actions. The Company currently is a party to pending legal proceedings which it is defending aggressively.  See Note 6 for additional information regarding this pending litigation.  There are many uncertainties associated with any litigation, and the Company may not prevail.  The litigation, regardless of its eventual outcome, will be costly and time consuming and, should the outcome be adverse to the Company, could result in the Company being required to pay significant monetary damages.  If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation, or the settlement of such litigation, is probable, and we can reasonably estimate the loss associated with such events, we will record the loss in accordance with GAAP. However, the actual liability in any such litigation may be materially different from our estimates, which could require us to record additional costs.

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NOTE 2 — NET INCOME (LOSS) PER COMMON SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 2 Net Income Loss Per Common Share Details
Net income (loss)	$ (441)	$ 920
Weighted average shares—Basic	27,178	27,361
Dilutive effect of employee stock options	0	601
Dilutive effect of employee stock purchase plan options	0	1
Weighted average shares—Dilutive	27,178	27,963
Net income (loss) per common share—Basic	$ (0.02)	$ 0.03
Net income (loss) per common share—Diluted	$ (0.02)	$ 0.03

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NOTE 8—SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

3 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Net revenues by geographic area

	Three Months Ended June 30,
	2013		2012
	(In thousands)
United States	$	5,971	$	4,776
China		3,477		4,928
Malaysia		2,347		3,143
Singapore		1,453		1,977
Rest of the world		3,164		1,959
	$	16,412	$	16,783

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Document and Entity Information	3 Months Ended
	Jun. 30, 2013	Jul. 31, 2013
Document And Entity Information
Entity Registrant Name	GSI TECHNOLOGY INC
Entity Central Index Key	0001126741
Document Type	10-Q
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		27,540,010
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2014

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NOTE 1 — THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Note 1 Company And Summary Of Significant Accounting Policies Details Narrative
Comprehensive net income (loss)	$ (526)	$ 887