UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended March 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                  to


Commission File Number 000-33387



GSI Technology, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of incorporation
or organization)

77-0398779(IRS Employer Identification No.)2360 Owen Street
Santa Clara, California 95054(Address of principal executive offices, zip code)


(408) 980-8388(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on which RegisteredCommon Stock, $0.001 par value

The NASDAQ Stock Market LLC


Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    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 o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. 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 Act. (Check one):

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company ý


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

The aggregate market value of the registrant's voting stock held by non-affiliates of the registrant, based upon the closing sale price of the common
stock on September 30, 2008, as reported on the NASDAQ Global Market was approximately $72.5 million. Shares of the registrant's common stock held by each officer and director and each
person who owns 10% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. As of June 4, 2009, there were 26,929,469 shares of the registrant's common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for its 2009 annual meeting of stockholders are incorporated by
reference into Part III hereof.



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Table of Contents



GSI TECHNOLOGY, INC.    2009 FORM 10-K ANNUAL REPORT    TABLE OF CONTENTS



PagePART IItem 1.

Business

3Item 1A.

Risk Factors

15Item 1B.

Unresolved Staff Comments

30Item 2.

Properties

30Item 3.

Legal Proceedings

30Item 4.

Submission of Matters to a Vote of Security Holders

30PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

31Item 6.

Selected Financial Data

33Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

35Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

47Item 8.

Financial Statements and Supplementary Data

48Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

79Item 9A(T).

Controls and Procedures

79Item 9B.

Other Information

80PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

81Item 11.

Executive Compensation

81Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

81Item 13.

Certain Relationships and Related Transactions, and Director Independence

81Item 14.

Principal Accounting Fees and Services

81PART IVItem 15.

Exhibits and Financial Statement Schedules

82Signatures

84


Forward-looking Statements

In addition to historical information, this Annual Report on Form 10-K 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 "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Risk Factors," those described elsewhere in this report, and those described in our other reports filed with the Securities and 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.

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Table of Contents

PART I

Item 1.Business

Overview

We develop and market "Very Fast" static random access memory, or SRAM, products that are incorporated primarily in
high-performance networking and telecommunications equipment, such as routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment. In
addition, we serve the ongoing needs of the military, industrial, test equipment and medical markets for high-performance SRAMs. Based on the performance characteristics of our
products and the breadth of our product portfolio, we consider ourselves to be a leading provider of Very Fast SRAMs.

We
sell our products to leading original equipment manufacturer, or OEM, customers including Alcatel-Lucent, Cisco Systems and Huawei Technologies. We utilize a fabless business model,
which allows us both to focus our resources on research and development, product design and marketing, and to gain access to advanced process technologies with only modest capital investment and fixed
costs.

We
were incorporated in California in 1995 under the name Giga Semiconductor, Inc. We changed our name to GSI Technology in December 2003 and reincorporated in Delaware in June
2004 under the name GSI Technology, Inc. Our principal executive offices are located at 2360 Owen Street, Santa Clara, California, 95054, and our telephone number is
(408) 980-8388.

Industry Background



Virtually all types of high-performance electronic systems incorporate SRAMs. An SRAM is a memory device that
retains data as long as power is supplied, without requiring any further user intervention. SRAMs offer the fastest access to stored data of any type of memory device.

There
is a broad variety of SRAMs, characterized by a number of attributes, such as speed, memory capacity, or density, and power consumption. There are several different industry
measures of speed:



Historically,
SRAMs have been utilized wherever other memory technologies have been inadequate. SRAMs demonstrate lower latency, resulting in faster random access times,
relative to dynamic random access memory, or DRAM, and other types of memory technologies. However, over the past few decades, less expensive alternatives have been introduced to address certain
applications formerly using lower performance SRAMs. For example, new types of DRAM are now in the process of displacing lower performance SRAM products in applications such as cell phones. As
a result of the displacement of low performance SRAMs, the total market size for SRAMs is diminishing. However, due to their inherent higher latency characteristics, DRAMs cannot match
the random access speed of high-performance SRAMs. Gartner Dataquest divides the SRAM market into segments based on speed.

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The
highest performance segment is comprised of SRAMs that operate at speeds of less than 10 nanoseconds, which we refer to as "Very Fast SRAMs." Very Fast SRAMs are predominantly
utilized in high-performance networking and telecommunications equipment.



Growth in data, voice and video traffic has driven the need for greater networking bandwidth, resulting in the continued expansion of
the networking and telecommunications infrastructure. The continued growth in the level of Internet usage has led to the proliferation of a wide variety of equipment throughout the networking and
telecommunications infrastructure, including routers, switches, wireless local area network infrastructure equipment, wireless base stations and network access equipment and a demand for new equipment
with faster and higher performance. High-performance networking and telecommunications equipment requires Very Fast SRAMs. For example, in a typical router or switch, multiple Very
Fast SRAMs are required to temporarily store, or buffer, data traffic and to provide rapid lookup of information in data tables. As networking equipment must increasingly support advanced
traffic content such as Voice over Internet Protocol, or VoIP, and video streaming, demand for even higher performance Very Fast SRAMs is expected to continue to increase.



The pressure on networking and telecommunications OEMs to bring higher performance equipment to market rapidly to support not
only more traffic but also more advanced traffic content is compounded by the requirement that this new equipment occupy no more space than the equipment it replaces, which results in increased board
density and the need for low power operations. In response to these pressures, OEMs have increasingly relied on providers that are capable of rapidly developing and introducing advanced, higher
density, low power Very Fast SRAMs. The variety of applications for Very Fast SRAMs within the networking and telecommunications markets has also driven a need for more specialized
products available in relatively low volumes. These specialized products include high-speed synchronous SRAMs with different density, latency and bandwidth capabilities. In general,
OEMs prefer to work with a supplier who can address the full range of their high-performance Very Fast SRAM product requirements and, just as importantly, can offer the technical
and logistic support necessary to sustain and accelerate their efforts.

We
believe the key success factors for a Very Fast SRAM vendor are the ability to offer a broad catalog of high-performance, high-quality and
high-reliability Very Fast SRAM products, to continuously introduce new products with higher speeds, lower power and greater densities, to maintain timely availability of prior generations
of products for several years after their introductions, and to provide effective logistic and technical support throughout OEM customers' product development and manufacturing life cycles.

The GSI Solution

We endeavor to address the overall needs of our OEM customers for Very Fast SRAMs, not only satisfying their immediate requirements for
our latest generation, highest performance integrated circuits, or ICs, but also providing them with the ongoing long-term support necessary during the entire lives of the systems in which
our products are utilized. Accordingly, the key elements of our solution include:



High Speed.Through the use of advanced architectures, design methodologies and silicon process technologies, we have developed a wide
variety of
high-performance Very Fast SRAMs. The vast

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majority
of our products have random access times of 9 nanoseconds or less, while our newest products have random access times of less than 5 nanoseconds and clock access times as fast as 0.45
nanoseconds with bandwidth as high as 48 gigabits per second. By providing higher performance Very Fast SRAMs, we enable our networking and telecommunications OEMs to continually design and
develop higher performance products that support increasingly complex traffic content.

Low Power Consumption.Many of our Very Fast SRAMs require significantly less power than comparable products offered by our
principal
competitors. Because these products utilize less power and generate less heat, the reliability of the networking or telecommunications equipment in which they are employed increases. Furthermore, the
low power utilization of our Very Fast SRAMs helps enable OEMs to add capabilities to their systems, which otherwise might not have been possible due to overall system power constraints.

Process Technology Leadership.We maintain our own process engineering capability and resources, which are located in close physical
proximity to our
manufacturer, Taiwan Semiconductor Manufacturing Company, or "TSMC." This enhances our ability to work closely with TSMC to develop certain modifications of the advanced process technologies used in
the manufacturing of our Very Fast SRAMs in order to maximize product performance, optimize yields, lower manufacturing costs and improve quality. Our most advanced 36 and 72 megabit, or Mb,
synchronous Very Fast SRAMs are manufactured using 90 nanometer process technology. We are currently developing 72 and 144 megabit synchronous Very Fast SRAMs using 65 nanometer process
technology, which will allow us to further increase product performance, lower power consumption and reduce costs.

Product Innovation.We believe we have established a position as a technology leader in the design and development of Very Fast
SRAMs. For
example, we were the first supplier to introduce 72-bit-wide SRAMs as single monolithic ICs. In addition, we are the only vendor to offer a full line of Very Fast
Synchronous SRAMs that operate and interface at 1.8 to 3.3 volts, giving our OEM customers the ability to use the same product in systems of theirs that operate at any voltage within that
range. Moreover, for certain Very Fast Synchronous SRAMs, we are the only vendor to offer a product that operates at 1.8 volts, which uses approximately one half to two-thirds the power of
our competitors' 2.5 volt products.



Extensive Product Catalog.The Very Fast SRAM market is highly fragmented in terms of product features and specifications. To meet our
OEM customers'
diverse needs, we have what we believe is the broadest catalog of Very Fast SRAM products currently available. Our product line includes a wide range of Very Fast SRAMs with varying densities,
features, clock speeds, and voltages, as well as several operating temperature ranges and numerous package options in both 5/6 (leaded) and 6/6 (lead-free) versions, which are compliant
with the European Union's Restriction on the Use of Hazardous Substances Directive 2002/95/EC.

Advanced Feature Sets.Our products offer features that address a broad range of our networking and telecommunications OEMs' system
requirements.
Among these features is a JTAG test port, named for the IEEE Joint Test Action Group, which enables post-assembly verification of the connection between our Very Fast SRAMs and an
OEM customer's system board, thereby allowing an OEM customer of ours to develop, test and ship their products more rapidly. Additionally, we offer our FLXDrive feature, which allows system designers
to optimize the signal integrity for any given
requirement. We also provide OEMs the ability to employ certain of our Very Fast SRAMs in various modes of operation by using our products' mode control pins, thus increasing the
flexibility of those products and their ready availability from our inventory.

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Superior Lifetime Availability of Products.Unlike the market for consumer electronics, the markets in which we compete, particularly
the networking
and telecommunications market, generally keep their system designs in production for extended periods of time and maintenance of those systems in the field for even longer periods is critical to their
success. Our foundry-based manufacturing strategy, our process technology selections, our master-die design strategy and the design of our packaging, burn-in and test
work-flows all contribute to allow us to meet and exceed our guarantee of providing a product life of at least seven years for any new product family we bring to market. These techniques
also allow us to keep our delivery lead-times relatively short even for specialized, infrequently ordered members of those product families. We believe our approach is better suited to
address the needs of our target markets than attempts to apply mass market manufacturing strategies to Very Fast SRAM products.

Multiple Temperature Grades.We offer both commercial and industrial temperature grades for all of our Very Fast SRAMs. This
ability to
perform at specification throughout the industrial temperature range of -40°C to +85°C is critical for Very Fast SRAMs used in a broad variety of networking
and telecommunications applications, where the operating environments may be harsh. We can also offer military and extended temperature grades upon request for most of our Very Fast SRAMs.



Our master die methodology enables multiple product families, and variations thereof, to be manufactured from a single mask set. As a
result, based upon the way available die from a wafer are metalized, wire bonded, packaged and tested, from 19 mask sets we have created over 9,500 different products. Using these mask sets, we
produce wafers that can be further processed upon customer orders into the final specified product thereby significantly shortening the overall manufacturing time. For example, from a 72 megabit mask
set, we can produce three families of 72 megabit SRAM products. Our unique methodology results in the following benefits:

Rapid Order Fulfillment.We maintain a common pool of wafers that incorporate all available master die. Because we can typically create
several
different products from a single master die, we can respond to unforecasted customer orders more quickly than our competitors.

Reduced Cost.Our master die methodology allows us to reduce our costs through the purchase of fewer mask sets by allowing faster and
less expensive
internal product qualifications, by enabling more cost-efficient use of engineering resources and by reducing the incidence of obsolete inventory.



Customer-driven Solutions.We work closely with leading networking and telecommunications OEMs, as well as their chip-set suppliers, to
better anticipate their requirements and to rapidly develop and implement solutions that allow them to meet their specific product performance objectives. Customer demand drives our business. For
example, to address near term needs, we offer critical specification variations, such as special operating ranges or wire bond options on currently available products, while we also design new
families of products to meet their emerging long term needs. As a consequence, our portfolio not only includes the widest selection of catalog parts available, it also includes an extensive list of
custom, customer-specific products. This degree of responsiveness enables us to provide our OEM customers with the Very Fast SRAMs required for their applications.

Accelerated Time-to-market.Our extensive open libraries of design support tools as well as our ability to deliver the
specific device required for system prototyping with very short notice enables networking and telecommunication OEMs to design and introduce differentiated products quickly as well as to reduce
their development costs. Our open libraries give designers access 24 hours a day, seven days a week to electrical and behavioral simulation models. Behavioral models are offered in both Verilog
and very high speed integrated circuits hardware description language ("VHDL") format

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to
better fit different customers' simulation environments, further streamlining the customers' development process.

Quality and Reliability.Networking and telecommunications equipment typically have long product lives, and the cost to repair or
replace this
equipment due to product failure at any time is prohibitively expensive. The high-quality and reliability of Very Fast SRAMs incorporated in our OEM customers' products is, thus,
critical. Every product family we offer is subjected to extensive long term reliability testing before receiving qualification certification, and every Very Fast SRAM shipped is first subjected to
burn-in and then to final tests in which the SRAM is operated beyond its specified operating voltage and temperature ranges.

The GSI Strategy

Our objective is to profitably increase our market share in the Very Fast SRAM market. Our strategy includes the following key
elements:

Continue to Focus on the Networking and Telecommunications Markets.We intend to continue to focus on designing and developing low
latency, high
bandwidth and feature-rich memory products targeted primarily at the networking and telecommunications markets. Increasing network complexity due to higher traffic volume and more advanced
traffic content continues to drive OEMs' demand for high-performance Very Fast SRAMs. We believe our active high-performance SRAM development and manufacturing expertise
will continue to allow us to provide networking and telecommunications OEMs with the early access to next generation Very Fast SRAMs that offer superior performance, advanced feature
sets and continued high reliability, which they need to allow them to design and develop new products that support increasingly complex traffic content and to bring networking and telecommunications
equipment to market quickly.

Strengthen and Expand Customer Relationships.We are focused on maintaining close relationships with industry leaders to facilitate
rapid adoption of
our products and to enhance our position as a leading provider of high-performance Very Fast SRAM. We work with both our customers and with their non-memory IC suppliers that
require high-performance memory support. We will continue to work with both groups at the pre-design and design stage of their projects in order to anticipate their future
high-performance memory needs and to identify and respond to their immediate requests for currently available products and variants on currently available products. We plan to enhance our
relationships with those leading OEMs and IC vendors and to develop similar relationships with additional OEMs and IC vendors.

Continue to Invest in Research and Development to Extend Our Technology Leadership.We believe we have established a position as a
technology leader
in the design and development of Very Fast SRAMs. Our Very Fast SRAM products most often provide the highest speed available at a given density for a given device configuration. We intend to
maintain and advance our technology leadership through continual enhancement of our existing Very Fast SRAM products, particularly our SigmaQuad family of low latency, high-bandwidth
synchronous SRAMs while we continue to broaden our product line with the introduction of other new Very Fast SRAMs.

Collaborate with Wafer Foundries to Leverage Leading-edge Process Technologies.We will continue to rely upon advanced complementary
metal oxide semiconductor, or CMOS, technologies, the most commonly used process technologies for manufacturing semiconductor devices, from TSMC, to manufacture our products and will continue to
provide TSMC with the sort of in-depth feedback for yield and performance improvement that can best come from very large array structures like those found on our products. Our most
advanced products currently in production were designed using 90 nanometer process technology on 300 millimeter wafers. We intend to continue to collaborate closely with TSMC in the refinement of 65
nanometer process technology.

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Exploit New Market Opportunities.While we design our Very Fast SRAMs specifically for the networking and telecommunications
markets, our
products are applicable across a wide range of industries and applications. We have recently experienced significant growth in both the defense and medical markets
and intend to continue penetrating these and other new markets with similar needs for high-performance memory technologies.

Products

We design, develop and market a broad range of high-performance Very Fast SRAMs primarily for the networking and
telecommunications markets. We specialize in Very Fast SRAMs featuring high density, low latency, high bandwidth, fast clock access times and low power consumption. We continue to offer
products for longer periods of time than our competitors, typically seven years or more following their initial introduction. Accordingly, we continue to offer products in a variety of package types
that have been discontinued by other suppliers.

We
currently offer more than 30 basic product configurations of our SRAMs based on their basic product type and their storage densities. These basic product configurations are the
basis for over 9,500 individual products that incorporate a variety of performance specifications and optional features. Our products can be found in a wide range of networking and telecommunications
equipment, including multi-service access routers, universal gateways, enterprise edge routers, service provider edge routers, optical edge routers, fast Ethernet switches, gigabit Ethernet switches,
wireless base stations, Asymmetric Digital Subscriber Line ("ADSL") modems, wireless local area networks, Internet Protocol phones and OC192 layer 2 switches. 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.



Synchronous SRAMs are controlled by timing signals, referred to as clocks, which make them easier to use than older style
asynchronous SRAMs with similar latency characteristics in applications requiring high bandwidth data transfers. Synchronous SRAMs that employ double data rate interface protocols can
transfer data at much higher bandwidth than both single data rate and asynchronous SRAMs. Our single data rate synchronous SRAMs feature clock access times as short as 2 nanoseconds and
our double data rate synchronous SRAMs have clock access times as fast as 0.45 nanoseconds. Today, we supply synchronous SRAMs that can cycle at operating frequencies as high as
450 MHz.

Burst and NBT SRAMs.We currently offer BurstRAMs and No Bus Turnaround, or NBT, SRAMs that implement a single data rate bus
protocol.
BurstRAMs were originally developed for microprocessor cache applications and have become the most widely used synchronous SRAM on the market. They are used in applications where large amounts
of data are read or written in single sessions, or bursts. NBT SRAMs are a variation on the BurstRAM theme that were developed to address the needs of moderate performance networking
applications. NBT SRAMs feature a single data rate bus protocol designed to minimize or eliminate wasted data transfer time slots on the bus when BurstRAMs switch from read to write
operations. Both families of products can perform burst data transfers or single cycle transfers at the discretion of the user.

Our
BurstRAMs and NBT SRAMs are offered in both pipeline and flow-through modes. Flow-through SRAMs allow the shortest latency. Pipelined
SRAMs break the access into discrete clock-controlled steps, allowing new access commands to be accepted while an access is already in progress. Therefore, while flow-through
SRAMs offer lower latency, pipelined SRAMs offer greater data bandwidth. Our BurstRAM and NBT SRAM products incorporate a number of features that reduce

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our
OEM customers' cost of ownership and increase their design flexibility, including a JTAG test port and our FLXDrive feature, which allows system designers to optimize signal integrity for a given
application.

We
currently offer BurstRAMs and NBT SRAMs with storage densities of up to 144 megabits with clock frequency of up to 333 MHz and clock access times as fast as 2
nanoseconds that operate at 3.3, 2.5 or 1.8 volts.

SigmaQuad Products.High-performance quad data rate synchronous SRAMs have become the de facto standard for the networking and
telecommunications industry. We offer a full line of quad data rate SRAMs, our SigmaQuad family. Quad data rate SRAMs are separate input/output, or I/O, synchronous SRAMs that features
two independent double data rate data ports (two data ports times double data rate transfers equals quad data rate) controlled via a single address and control port. We offer our SigmaQuad devices in
two different bus protocol versions, two different power supply and interface voltage versions, with two different data burst length options, all under the name SigmaQuad or SigmaQuad-II.
In addition, the family also includes derivative products including a family of common I/O (a single bi-directional data port) double data rate SRAMs known as SigmaCIO
DDR-II SRAMs and a smaller family of double data rate separate I/O SRAMs designed to address some segments of the market currently served by dual-port SRAMs,
known as SigmaSIO DDR-II SRAMs.

We
currently offer SigmaQuad products in three storage densities, 18 megabits, 36 megabits and 72 megabits, with clock frequency rates up to 450 MHz and clock access times as fast
as 0.45 nanoseconds, that operate at voltages of 2.5 and 1.8 volts.

SigmaRAM Products.We offer a family of high-performance, low voltage, HSTL, or high speed transceiver logic, I/O synchronous SRAM
products based on the SigmaRAM architecture, which are designed for use on large format printed circuit boards common in many networking and telecommunication products. These SRAMs utilize a
unique architecture that provides the capability to incorporate the full range of popular SRAM functionality, including late write and double late write protocols, pipelined read cycles, burst data
transfers, and double data rate read and write data transfers in common I/O format.

We
currently offer SigmaRAM products with storage density of 18 megabits, speeds of up to 350 MHz and clock access times as fast as 1.7 nanoseconds that operate at 1.8 volts.



Unlike synchronous SRAMs, asynchronous SRAMs employ a clock-free control interface. They are widely used in support
of high-end digital signal processors, or DSPs. We believe we have one of the broadest portfolios of 3.3 volt, high-speed asynchronous SRAMs. These products are designed
to meet the stringent power and performance requirements of networking and telecommunications applications, such as VoIP, cellular base stations, DSL line cards and modems.

We
currently offer asynchronous SRAM products with a variety of storage densities between 1 megabit and 8 megabits and random access times ranging from 7 nanoseconds to 15 nanoseconds.
All of our asynchronous SRAMs operate at 3.3 volts.

We
intend to regularly introduce new products with high-performance advanced features of increasing complexity. These product solutions will require us to achieve volume
production in a rapid timeframe. We believe that by using the advanced technologies offered by our fabrication partner and its expertise in high-volume manufacturing, we can rapidly
achieve volume production. However, lead times for materials and components we order vary significantly and depend on such factors as the specific supplier, contract terms and demand for a component
at a given time.

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Customers

Our primary sales and marketing strategy is to achieve design wins with OEM customers who are leading networking and telecommunications
companies. The following is a representative list of our OEM customers that directly or indirectly purchased more than $550,000 of our products in the fiscal year ended March 31, 2009:

Alcatel-Lucent

Cisco Systems

EricssonHoneywell

Huawei Technologies

MotorolaRaytheon

Tellabs

ZTE


Many
of our OEM customers use contract manufacturers to assemble their equipment. Accordingly, a significant percentage of our net revenues is derived from sales to these contract
manufacturers and to consignment warehouses who purchase products from us for use by contract manufacturers. In addition, we sell our products to networking and telecommunications OEM customers
indirectly through domestic and international distributors.

In
the case of sales of our products to distributors and consignment warehouses, the decision to purchase our products is typically made by the OEM customers. In the case of contract
manufacturers, OEM customers typically provide a list of approved products to the contract manufacturer, which then has discretion whether or not to purchase our products from that list.

Direct
sales to contract manufacturers and consignment warehouses accounted for 29.3, 32.3% and 34.7% of our net revenues for fiscal 2009, 2008 and 2007, respectively. Sales to foreign
and domestic distributors accounted for 61.1%, 63.1% and 59.0% of our net revenues for fiscal 2009, 2008 and 2007, respectively.

The
following direct customers accounted for 10% or more of our net revenues in one or more of the following periods:

Fiscal Year Ended
March 31,2009

2008

2007Consignment warehouses:SMART Modular Technologies


25.7
%

28.3
%

29.7
%Distributors:Avnet Logistics


25.3


29.2


24.7Nexcomm


10.6


7.4


7.0


Cisco
Systems, our largest OEM customer, purchases our products primarily through its consignment warehouse, SMART Modular Technologies, and also purchases some products through its
contract manufacturers and directly from us. Based on information provided to us by Cisco Systems' consignment warehouse and contract manufacturers, purchases by Cisco Systems represented
approximately 26%, 28% and 30% of our net revenues in fiscal 2009, 2008 and 2007, respectively.

Sales, Marketing and Technical Support

We sell our products primarily through our worldwide network of independent sales representatives and distributors. As of
March 31, 2009, we employed 18 sales and marketing personnel, and were supported by over 200 independent sales representatives. We believe that our relationship with our three U.S.
distributors, Arrow, Avnet and Nu Horizons, puts us in a strong position to address the Very Fast SRAM market in the U.S. We currently have regional sales offices located in Canada, China, Italy and
the United States. We believe this international coverage allows us to better serve our distributors and OEM customers by providing them with coordinated support. We believe that our customers'
purchasing decisions are based primarily on product performance, availability, features,

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quality,
reliability, price, manufacturing flexibility and service. Many of our OEM customers have had long-term relationships with us based on our success in meeting these criteria.

Our
sales are generally made pursuant to purchase orders received between one and six months prior to the scheduled delivery date. Because industry practice allows customers to
reschedule or cancel orders on relatively short notice, these orders are not firm and hence we believe that backlog is not a good indicator of our future sales. We typically provide a warranty of up
to 36 months on our products. Liability for a stated warranty period is usually limited to replacement of defective products.

Our
marketing efforts are focused on increasing brand name awareness and providing solutions that address our customers' needs. Key components of our marketing efforts include
maintaining an active role in industry standards committees, such as the JEDEC Solid State Technology Association (formerly the Joint Electron Device Engineering Council), or JEDEC, which is
responsible for establishing detailed specifications, which can be utilized in future system designs. We believe that our participation in and sponsorship of numerous proposals within these committees
have increased our profile among leading manufacturers in the networking and telecommunications segment of the Very Fast SRAM market. Our marketing group also provides technical, strategic and
tactical sales support to our direct sales personnel, sales representatives and distributors. This support includes in-depth product presentations, datasheets, application notes,
simulation models, sales tools, marketing communications, marketing research, trademark administration and other support functions.

We
emphasize customer service and technical support in an effort to provide our OEM customers with the knowledge and resources necessary to successfully use our products in their
designs. Our customer service organization includes a technical team of applications engineers, technical marketing personnel and, when required, product design engineers. We provide customer support
throughout the qualification and sales process and continue providing follow-up service after the sale of our products and on an ongoing basis. In addition, we provide our OEM customers
with comprehensive datasheets, application notes and reference designs.

Manufacturing

We outsource our wafer fabrication, assembly and a significant portion of our testing, which enables us to focus on our design
strengths, minimize fixed costs and capital expenditures and gain access to advanced manufacturing technologies. Our engineers work closely with our outsource partners to increase yields, reduce
manufacturing costs, and help assure the quality of our products.

Currently,
all of our wafers are manufactured by TSMC under individually negotiated purchase orders. We do not currently have a long-term supply contract with TSMC, and
therefore, TSMC is not obligated to manufacture products for us for any specified period, in any specified quantity or at any specified price, except as may be provided in a particular purchase order.
Our future success depends in part on our ability to secure sufficient capacity at TSMC or other independent foundries to supply us with the wafers we require.

Most
of our products are implemented using 0.13 micron and 90 nanometer process technologies on 300 millimeter wafers using process technology developed by TSMC. We currently have five
separate product families in production using the 0.13 micron process. Our 72 megabit SigmaQuad, 72 megabit synchronous BurstRAM and NBT SRAM and our 36 megabit SigmaQuad products are currently
manufactured using 90 nanometer process technology. We are also developing new synchronous SRAMs using 65 nanometer process technology.

Our
master die methodology enables multiple product families, and variations thereof, to be manufactured from a single mask set. As a result, based upon the way available die from a
wafer are metalized, wire bonded, packaged and tested, we can create a number of different products. The manufacturing process consists of two phases, the first of which takes approximately eight to
twelve

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weeks
and results in wafers that have the potential to yield multiple products within a given product family. After the completion of this phase, the wafers are stored pending customer orders. Once we
receive orders for a particular product, we perform the second phase, consisting of final wafer processing, assembly, burn-in and test, which takes approximately six to ten weeks to
complete. This two-step manufacturing process enables us to significantly shorten our product lead times, providing flexibility for customization and to increase the availability of our
products.

All
of our manufactured wafers are tested for electrical compliance and most are packaged at Advanced Semiconductor Engineering, or ASE, which is located in Taiwan. Our test procedures
require that all of our products be subjected to accelerated burn-in and extensive functional electrical testing, a significant portion of which occurs at Sigurd
Microelectronics Co. and King Yuan Electronics Company. We perform testing for most of our low volume products in-house at our Santa Clara, California and our Taiwan facilities and
continue to transition final test away from outside test houses to our Taiwan facility.

Research and Development

The design process for our products is complex. As a result, we have made substantial investments in computer-aided design and
engineering resources to manage our design process. Research and development expenses were $5.7 million in fiscal 2009, $4.4 million in fiscal 2008 and $5.0 million in fiscal
2007. Our research and development staff includes engineering professionals with extensive experience in the areas of SRAM design, DRAM design and systems level networking and telecommunications
equipment design. Our current development focus is on the SigmaQuad SRAM family and a low latency DRAM family.

We
are also leveraging our advanced design capabilities to expand into other networking and telecommunications products, including a channelized OC-3 processor that
incorporates 20 megabits of SRAM. When completed, we believe this will be the first low-power, single IC device solution capable of simultaneously processing multiple types of traffic with
OC-3 bandwidth. We have established a design center in Norcross, Georgia, to focus on the development of these products.

Competition

Our existing competitors include many large domestic and international companies, some of which have substantially greater resources,
offer other sorts of memory and/or non-memory technologies and may have longer standing relationships with OEM customers than we do. Unlike us, some of our principal competitors maintain
their own semiconductor fabs, which may, at times, provide them with capacity, cost and technical advantages.

Our
principal competitors include Cypress Semiconductor, Integrated Device Technology, Integrated Silicon Solution, NEC, Renesas and Samsung Electronics. While some of our competitors
offer a broad array of memory products and offer some of their products at lower prices than we do, we believe that our focus on and performance leadership in low latency, high density Very Fast
SRAMs provide us with key competitive advantages.

We
believe that our ability to compete successfully in the rapidly evolving markets for Very Fast SRAM products depends on a number of factors, including:



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We
believe we compete favorably with our competitors based on these factors. However, we may not be able to compete successfully in the future with respect to any of these factors. Our failure to
compete successfully in these or other areas could harm our business.

The
market for Very Fast SRAM products is competitive and is characterized by technological change, declining average selling prices and product obsolescence. Competition could increase
in the future from existing competitors and from other companies that may enter our existing or future markets with solutions that may be less costly or provide higher performance or more desirable
features than our products. This increased competition may result in price reductions, reduced profit margins and loss of market share.

In
addition, we are vulnerable to advances in technology by competitors, including new SRAM architectures as well as new forms of DRAM and other new memory technologies. Because we have
limited experience developing IC products other than Very Fast SRAMs, any efforts by us to introduce new products based on a new memory technology may not be successful and our business may suffer.

Intellectual Property

Our ability to compete successfully depends, in part, upon our ability to protect our proprietary technology and information. We rely
on a combination of patents, copyrights, trademarks, trade secret laws, non-disclosure and other contractual arrangements and technical measures to protect our intellectual property. We
currently hold five United States patents and have several patent applications pending. We do not consider our existing patents to be materially important to our business, and we cannot assure you
that any patents will be issued as a result of our pending applications or that any patents issued will be valuable to our business. We believe that factors such as the technological and creative
skills of our personnel and the success of our ongoing product development efforts are more important than our patent portfolio in maintaining our competitive position. We generally enter into
confidentiality or license agreements with our employees, distributors, customers and potential customers and limit access to our proprietary information. Our intellectual property rights, if
challenged, may not be upheld as valid, may not be adequate to prevent misappropriation of our technology or may not prevent the development of competitive products. Additionally, we may not be able
to obtain patents or other intellectual property protection in the future. Furthermore, the laws of certain foreign countries in which our products are or may be developed, manufactured or sold,
including various countries in Asia, may not protect our products or intellectual property rights to the same extent as do the laws of the United States and thus make the possibility of piracy of our
technology and products more likely in these countries.

The
semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights, which have resulted in significant and often protracted and expensive
litigation. We or our foundry from time to time are notified of claims that we may be infringing patents or other intellectual property rights owned by third parties. We have been subject to
intellectual property claims in the past and we may be subject to additional claims and litigation in the future. Litigation by or against us relating to allegations of patent infringement or other
intellectual property matters could result in significant expense to us and divert the efforts of our technical and management personnel, whether or not such litigation results in a determination
favorable to us. In the event of an adverse result in any such litigation, we could be required to pay substantial damages, cease the manufacture, use and sale of infringing products, expend
significant resources to develop non-infringing technology, discontinue the use of certain processes or obtain licenses to the infringing technology. Licenses may not be offered or the
terms of any offered licenses may not be acceptable to us. If we fail to obtain a license from a third party for technology used by us, we could incur substantial liabilities and be required to
suspend the manufacture of products or the use by our foundry of certain processes.

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Employees

As of March 31, 2009, we had 108 full-time employees, including 48 engineers, of which 31 are in research and
development and 29 have PhD or MS degrees, 18 employees in sales and marketing, eight employees in general and administrative capacities and 52 employees in manufacturing. Of these employees, 43 are
based in our Santa Clara facility and 45 are based in our Taiwan facility. We believe that our future success will depend in large part on our ability to attract and retain highly-skilled,
engineering, managerial, sales and marketing personnel. Our employees are not represented by any collective bargaining unit, and we have never experienced a work stoppage. We believe that our employee
relations are good.

Investor Information

You can access financial and other information in the Investor Relations section of our website at www.gsitechnology.com. We make
available, on our website, free of charge, copies of our annual report on Form 10-K, quarterly reports
on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon
as reasonably practicable after filing such material electronically or otherwise furnishing it to the SEC.

The
charters of our Audit Committee, our Compensation Committee, and our Nominating and Governance Committee, and our code of conduct (including code of ethics provisions that apply to
our principal executive officer, principal financial officer, controller, and senior financial officers) are also available at our website under "Corporate Governance." These items are also available
to any stockholder who requests them by calling (408) 980-8388. The contents of our website are not incorporated by reference in this report.

The
SEC maintains an Internet site that contains reports, proxy statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.

Executive Officers

The following table sets forth certain information concerning our executive officers as of June 1, 2009:

Name

Age

TitleLee-Lean Shu


54

President, Chief Executive Officer and ChairmanDavid Chapman


53

Vice President, MarketingDidier Lasserre


44

Vice President, SalesDouglas Schirle


54

Chief Financial OfficerBor-Tay Wu


57

Vice President, Taiwan OperationsPing Wu


52

Vice President, U.S. OperationsRobert Yau


56

Vice President, Engineering, Secretary and Director


Lee-Lean Shuco-founded our company in March 1995 and has served as our President and Chief Executive Officer and
as a member of our Board of Directors since inception. In October 2000, Mr. Shu became Chairman of our Board. From January 1995 to March 1995, Mr. Shu was Director, SRAM Design at Sony
Microelectronics Corporation, a semiconductor company and a subsidiary of Sony Corporation, and from July 1990 to January 1995, he was a design manager at Sony Microelectronics Corporation.

David Chapmanhas served as our Vice President, Marketing since July 2002. From November 1998 to June 2002, Mr. Chapman served as
our Director of Strategic Marketing and Applications Engineering. From February 1988 to November 1998, Mr. Chapman served in various product planning and applications engineering management
capacities in the Memory Operation division and later the

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Fast
SRAM division of Motorola Semiconductor Product Sector, Motorola, Inc., an electronics manufacturer. Mr. Chapman has been a member of JEDEC since 1985, and served as Chairman of its
SRAM committee in 1999.

Didier Lasserrehas served as our Vice President, Sales since July 2002. From November 1997 to July 2002, Mr. Lasserre served as
our Director of Sales for the Western United States and Europe. From July 1996 to October 1997, Mr. Lasserre was an account manager at Solectron Corporation, a provider of electronics
manufacturing services. From June 1988 to July 1996, Mr. Lasserre was a field sales engineer at Cypress Semiconductor, a semiconductor company.

Douglas Schirlehas served as our Chief Financial Officer since August 2000. From June 1999 to August 2000, Mr. Schirle served as
our Corporate Controller. From March 1997 to June 1999, Mr. Schirle was the Corporate Controller at Pericom Semiconductor Corporation, a provider of digital and mixed signal integrated
circuits. From November 1996 to February 1997, Mr. Schirle was Vice President, Finance for Paradigm Technology, a manufacturer of SRAMs, and from December 1993 to October 1996, he was the
Controller for Paradigm Technology. Mr. Schirle was formerly a certified public accountant.

Bor-Tay Wuhas served as our Vice President, Taiwan Operations since January 1997. From January 1995 to December 1996,
Mr. Wu was a design manager at Atalent, an IC design company in Taiwan.

Ping Wuhas served as our Vice President, U.S. Operations since September 2006. He served in the same capacity from February 2004 to April
2006. From April 2006 to August 2006, Mr. Wu was Vice President of Operations at QPixel Technology, a semiconductor company. From July 1999 to January 2004, Mr. Wu served as our Director
of Operations. From July 1997 to June 1999, Mr. Wu served as Vice President of Operations at Scan Vision, a semiconductor manufacturer.

Robert Yauco-founded our company in March 1995 and has served as our Vice President, Engineering and as a member of our Board
of Directors since inception. From December 1993 to February 1995, Mr. Yau was design manager for specialty memory devices at Sony Microelectronics Corporation. From 1990 to 1993,
Mr. Yau was design manager at MOSEL/VITELIC, a semiconductor company.

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 consolidated financial statements and related
notes.



Our quarterly and annual revenues, expenses and operating results have varied significantly and are likely to vary in the future. For
example, in the twelve fiscal quarters ended March 31, 2009, we recorded net revenues of as much as $17.3 million and as little as $11.3 million and quarterly operating income of
as much as $4.1 million and as little as $1.1 million. We therefore believe that period-to-period comparisons of our operating results are not a good indication
of our future performance, and you should not rely on them to predict our future performance or the future performance of our stock price. 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

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performance
could be adversely affected. Factors that may affect periodic operating results in the future include:



Our
expenses are, to a large extent, fixed, and we expect that these expenses will increase in the future. 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, purchases our products through SMART Modular Technologies, its consignment warehouse, through
its contract manufacturers and directly from us. Based on information provided to us by consignment warehouses and contract manufacturers, purchases by Cisco Systems represented approximately 26%, 28%
and 30% of our net revenues in fiscal 2009, 2008 and 2007, respectively. In the quarter ended March 31, 2007, Cisco Systems implemented a "lean manufacturing" program under which it reduced the
levels of inventory carried by it and by its contract manufacturers. The transition to this new program resulted in reductions in purchases of our products by Cisco Systems' contract manufacturers
during the quarters ended June 30, 2007 and March 31, 2007, as they drew down their existing inventories, and such reductions resulted in our net revenues for these quarters being less
than in the quarter ended December 31, 2006. Purchases by Cisco Systems' consignment warehouses and contract manufacturers increased in the four quarters ended June 30, 2008 compared to
the two prior quarters and then declined again in the three quarters ended March 31, 2009.

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. Although Cisco Systems
has completed the transition to its "lean manufacturing" program, 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, the growth of our business could be harmed.

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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. Although we have operated profitably during the last five 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 sustain 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 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.



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. 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.



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 foundry, TSMC, 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.

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A significant percentage of our sales are made to distributors and to contract manufacturers who incorporate our products into end
products for OEMs. For example, in fiscal 2009, 2008 and 2007, our distributor Avnet Logistics accounted for 25.3%, 29.2% and 24.7%, 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.



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.



At March 31, 2009, five customers accounted for 27%, 16%, 14%, 10% and 10% 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.



Recent U.S. sub-prime mortgage defaults have had a significant impact across various sectors of the financial markets,
causing global credit and liquidity issues. The short-term funding markets experienced credit issues during the second half of fiscal 2008 which continued throughout fiscal 2009, leading
to liquidity disruption in asset-backed commercial paper and failed auctions in the auction rate securities markets. If the global credit market continues to deteriorate, our investment portfolio may
be impacted and we could determine that some of our investments are impaired. This could materially adversely impact our results of operations and financial condition.



In recent years, there has been significant litigation in the semiconductor industry involving patents and other intellectual property
rights. In the past, we have been subject to claims and litigation regarding alleged infringement of other parties' intellectual property rights. In 2002, we settled patent litigation filed against us
by one of our competitors. In connection with the settlement, we obtained a license from that competitor and agreed to pay a license fee and ongoing royalties. We could become

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subject
to additional 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 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:



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 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, 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:



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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.



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 to transition successfully to smaller geometry process technologies and to more advanced manufacturing processes. We
cannot assure you that TSMC will be able to effectively manage the transition or that we will be able to maintain our relationship with TSMC. If we or TSMC experience significant delays in this
transition or fail to implement these transitions, our business, financial condition and results of operations could be materially and adversely affected.



We 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 2006, we incurred $678,000 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 90 nanometer process technology. 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.



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

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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.



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

Should
any of our single source suppliers experience manufacturing failures or yield shortfalls, be disrupted by 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 will be able to find and qualify another supplier without materially adversely
affecting our business, financial condition and results of operations.



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



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

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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 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.



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:



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



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. For example, the SRAM industry experienced significant declines in the average selling prices of SRAM products
during the recent downturn in the semiconductor industry. We expect similar declines to occur in the future. 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 expenses adequately in response to reduced net sales, our results of operations would be
negatively impacted. For example, the industry downturn in 2001 resulted in a $3.9 million inventory write-off in fiscal 2002.

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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 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.



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.

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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.



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 improve our
operational, financial and management controls and our reporting systems and procedures. Our controls, systems and procedures might not be adequate to support a growing public company. 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 and the majority of our management had no previous experience in managing a public company or
communicating with securities analysts and
public company investors. If our management fails to respond effectively to changes in our business, our business may suffer.



Products shipped to destinations outside of the United States accounted for 61.6%, 53.0% and 48.9% of our net revenues in fiscal 2009,
2008 and 2007, respectively. Moreover, a substantial portion of our products is manufactured and tested in Taiwan. We intend to expand our international business in the future. Conducting business
outside of the United States subjects us to additional risks and challenges, including:



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.

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The foundry that manufactures our products, TSMC, 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 OEM customers or the demand for our products or our OEM customers' products.



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.



Our revenues and gross profit depend largely on general economic conditions and, in particular, the strength of demand for our products
in the markets in which we are doing business. From time to time, customers and potential customers have elected not to make purchases of our products due to reduced budgets and uncertainty about the
future, and, in the case of distributors, declining demand from their customers for their solutions in which they integrate our products. Similarly, from time to time, acts of terrorism have had a
negative impact on information technology spending. High fuel prices, ongoing concerns regarding the U.S. and worldwide economies and continuing turmoil in the Middle East and elsewhere have increased
uncertainty in the United States and our other markets. Should the downturn in U.S. and global economic activity continue, our customers may delay or reduce their purchases of information technology,
which would result in lower demand for our products and adversely affect our results of operations.

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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. 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.



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.



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.



Our products are increasingly being 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, should the current conflicts in Iraq and Afghanistan and the general war on terror subside, our
operating results would likely 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.



In the future, we may acquire or make investments in companies, assets or technologies that we believe are complementary or strategic.
We have not made any acquisitions or investments to date, and therefore our ability as an organization to make acquisitions or investments is unproven. If we decide to make an acquisition or
investment, we face numerous risks, including:



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If
we proceed with an acquisition or investment, 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.



As a public company, we are incurring and will continue to incur additional legal, accounting and other expenses that we did not incur
as a private company. The
Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and The NASDAQ Marketplace Rules now apply to us as a public company. Compliance with
these rules and regulations have required significant increases in our legal and financial budgets and may also strain our personnel, systems and resources.

The
Exchange Act requires, among other things, filing of annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Satisfying these requirements involves a commitment of significant
resources and management oversight. As a result of management's efforts to comply with such requirements, other important business concerns may receive insufficient attention, which could have a
material adverse effect on our business, financial condition and results of operations. Failure to meet certain of these regulatory requirements could also cause us to be delisted from the NASDAQ
Global Market.

In
addition, in order to comply with these requirements, we are hiring and will continue to hire additional accounting and financial staff with appropriate public company experience and
technical accounting knowledge, which will increase our operating expenses in future periods.

We
also expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept
reduced coverage or incur substantially higher costs to maintain coverage. If we are unable to maintain adequate directors' and officers' insurance, it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors, particularly to serve on our audit committee, and qualified executive officers.



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

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process.
On a continuous basis, we update our internal controls documentation and, where appropriate, improve our internal controls and procedures as we are subject to Section 404 of the
Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of our internal control over financial reporting and in the future 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 are, or will be, testing our internal
controls in
anticipation of becoming fully subject to Section 404 requirements and, as part of that documentation and testing, will 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.



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.



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:



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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.



As of May 31, 2009, our executive officers, directors and entities affiliated with them beneficially owned approximately 24% 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.



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:



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

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We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Accordingly,
investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends in
the foreseeable future should not purchase our common stock.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

Our executive offices, our principal administration, marketing and sales operations and a portion of our research and development
operations are located in approximately 20,300 square feet of space in Santa Clara, California, which we occupy under a lease expiring in May 2010. In addition, we occupy approximately 25,250 square
feet in a facility located in Hsin Chu, Taiwan under a lease expiring in August 2010. This facility supports our manufacturing activities. We believe that both our Santa Clara and Taiwan facilities
are adequate for our needs for the foreseeable future. We also lease space in Georgia and Texas. The aggregate annual gross rent for our facilities was approximately $616,000 in fiscal 2009.

Item 3.Legal Proceedings

None.

Item 4.Submission of Matters to a Vote of the Security Holders

None.

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PART II

Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has traded on the NASDAQ Global Market under the symbol "GSIT" since our initial public offering on March 29,
2007. The following table sets forth, for the periods indicated, the high and low sales prices for our common stock on such market.

Fiscal Year Ended March 31, 2009

High

LowFirst quarter

$
4.44

$
2.68Second quarter

$
4.22

$
3.21Third quarter

$
3.75

$
2.42Fourth quarter

$
2.88

$
2.00Fiscal Year Ended March 31, 2008First quarter

$
5.80

$
4.17Second quarter

$
5.09

$
2.47Third quarter

$
3.39

$
2.22Fourth quarter

$
3.06

$
2.25


Holders of Common Stock

On June 4, 2009, the closing price of our common stock on the NASDAQ National Market was $3.43 and there were 69 holders of
record of our common stock. Because many of
such shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.

Dividend Policy

We have never declared or paid cash dividends on our common stock. We currently intend to retain future earnings to finance the growth
and development of our business, and we do not anticipate declaring or paying any cash dividends in the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans

Please see Part III, Item 12 of this report for information regarding securities authorized for issuance under our equity
compensation plans. Such information is incorporated by reference from our definitive proxy statement for our 2009 annual meeting of stockholders.

Use of Proceeds

On March 29, 2007, our Registration Statement on Form S-1 (333-139885) covering the initial
public offering of our common stock was declared effective by the SEC. We registered 6,131,111 shares to be sold by us and up to 919,667 shares to be sold by selling stockholders to cover an
over-allotment option granted to the underwriters. All 6,131,111 shares offered by us were sold at an initial public offering price of $5.50, for an aggregate offering price of
$33,721,111. On April 27, 2007, the underwriters partially exercised their over-allotment option, and an additional 303,583 shares were sold by the selling stockholders for an
aggregate offering price of $1,669,706. We did not receive any portion of the proceeds from the sale of shares by the selling stockholders upon exercise of the underwriters' over-allotment
option.

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The
principal purposes of the offering were to obtain additional capital, establish a public market for our common stock and facilitate our future access to public capital markets. We
have used the proceeds from the offering as follows:

Underwriting discount

$
2,360,000Offering expenses


739,000Repurchase of common stock


3,706,736Capital expenditures


3,935,000Accounts payable


4,360,000Income taxes


5,412,800Payroll and payroll related expenses


13,207,575Total

$
33,721,111


Issuer Purchases of Equity Securities

On November 6, 2008, our Board of Directors authorized us to repurchase, at management's discretion, up to $10 million of
our common stock. Under the repurchase program, we may repurchase shares from time to time on the open market or in private transactions. The specific timing and amount of the repurchases will be
dependent on market conditions, securities law limitations and other factors. The repurchase program may be suspended or terminated at any time without prior notice. During the quarter ended
March 31, 2009, we repurchased 590,765 shares at an average price of $2.68. Below is a summary of our common stock repurchases during the quarter ended March 31, 2009.

Period

Average
Shares
Repurchased

Price Per
Share

Value that May
Yet Be Repurchased
Under the ProgramBeginning approximate dollar value available to be repurchased as of January 1, 2009







$
7,491,714January 1 - January 31, 2009


447,043

$
2.78


6,249,073February 1 - February 28, 2009


86,311

$
2.45


6,037,846March 1 - March 31, 2009


57,411

$
2.22


5,910,387Total shares repurchased


590,765Ending approximate dollar value that may be repurchased under the Program as of March 31, 2009







$
5,910,387


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Item 6.Selected Financial Data

You should read the following selected consolidated financial data in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this report. The selected consolidated statement of operations data
set forth below for the fiscal years
ended March 31, 2009, 2008 and 2007 and the selected consolidated balance sheet data as of March 31, 2009 and 2008 are derived from, and are qualified by reference to, our audited
consolidated financial statements included elsewhere in this report. The selected consolidated statement of operations data set forth below for the fiscal years ended March 31, 2006 and 2005
and the selected consolidated balance sheet data as of March 31, 2007, 2006 and 2005 are derived from audited consolidated financial statements not included in this report.

Fiscal Year Ended March 31,2009(1)

2008(1)

2007(1)

2006

2005(In thousands, except per share amounts)Consolidated Statement of Operations Data:Net revenues

$
62,108

$
53,170

$
58,159

$
43,141

$
45,736Cost of revenues


35,552


31,847


36,042


29,229


30,715Gross profit


26,556


21,323


22,117


13,912


15,021Operating expenses:Research and development


5,737


4,365


4,951


5,377


4,804Selling, general and administrative


9,295


9,464


6,209


4,797


5,756Total operating expenses


15,032


13,829


11,160


10,174


10,560Income from operations


11,524


7,494


10,957


3,738


4,461Interest and other income (expense), net


1,363


1,784


728


682


164Income before income taxes


12,887


9,278


11,685


4,420


4,625Provision for (benefit from) income taxes


3,598


2,505


4,251


171


(155
)Net income

$
9,289

$
6,773

$
7,434

$
4,249

$
4,780Basic and diluted net income per share available to common stockholders:Basic

$
0.33

$
0.25

$
1.04

$
0.54

$
0.63Diluted

$
0.33

$
0.24

$
0.32

$
0.19

$
0.21Weighted average shares used in per share calculations:Basic


27,735


27,537


6,253


6,148


6,112Diluted


28,836


28,624


22,837


22,586


22,562


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March 31,2009

2008

2007

2006

2005(In thousands)Consolidated Balance Sheet Data:Cash, cash equivalents and short-term investments

$
47,337

$
39,565

$
8,275

$
15,505

$
11,522Working capital


59,754


55,070


32,999


26,453


23,504Total assets


92,673


88,315


49,910


39,544


33,524Redeemable convertible preferred stock








9,007


9,007


9,007Total stockholders' equity


84,705


77,140


29,732


20,958


16,568


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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

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

Overview

We are a fabless semiconductor company that designs, develops and markets Very Fast static random access memories, or SRAMs, primarily
for the networking and
telecommunications markets. We are subject to the highly cyclical nature of the semiconductor industry, which has experienced significant fluctuations, often in connection with fluctuations in demand
for the products in which semiconductor devices are used. Beginning in fiscal 2001, the networking and telecommunications markets experienced an extended period of severe contraction, during which our
operating results sharply declined. Between fiscal 2004 and fiscal 2006, demand for networking and telecommunications equipment recovered. During the first three quarters of fiscal 2007, demand for
such equipment accelerated and, as a result, our operating results improved. In the fourth quarter of fiscal 2007 and the first quarter of fiscal 2008, revenues again declined due, in part, to the
implementation of a "lean manufacturing" program by our largest customer, Cisco Systems. Purchases by Cisco Systems' consignment warehouses and contract manufacturers increased in the four quarters
ended June 30, 2008 compared to the two prior quarters and then declined again in the three quarters ended March 31, 2009. We expect that future direct and indirect sales to Cisco
Systems will continue to fluctuate significantly on a quarterly basis. The worldwide credit crisis and the resulting economic impact on the end markets we serve adversely impacted our financial
results for the two quarters ended March 31, 2009, and we expect that such fluctuations may significantly affect our operating results in future periods. However, with no debt, substantial
liquidity and anticipated positive cash flows from operations, we believe we are in a better 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
OEMs accounted for 65% 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 TSMC, our wafer supplier, and our ability to increase the number of good integrated circuit die produced from each wafer through die size reductions and
yield enhancement activities.

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

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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 time frames 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.

Historically,
a small number of OEM customers have accounted for a substantial portion of our net revenues, and we expect that significant customer concentration will continue for the
foreseeable future. Many of our OEMs use contract manufacturers to manufacture their equipment. Accordingly, a significant percentage of our net revenues is derived from sales to these contract
manufacturers and to consignment warehouses. In addition, a significant portion of our sales are made to foreign and domestic distributors who resell our products to OEMs, as well as their contract
manufacturers. Direct sales to contract manufacturers and consignment warehouses accounted for 29.3%, 32.3% and 34.7% of our net revenues for fiscal 2009, 2008 and 2007, respectively. Sales to foreign
and domestic distributors accounted for 61.1%, 63.1% and 59.0% of our net revenues for fiscal 2009, 2008 and 2007, respectively. The following direct customers accounted for 10% or more of our net
revenues in one or more of the following periods:

Fiscal Year Ended
March 31,2009

2008

2007Consignment warehouses:SMART Modular Technologies


25.7
%

28.3
%

29.7
%Distributors:Avnet Logistics


25.3


29.2


24.7Nexcomm


10.6


7.2


8.7


Cisco
Systems, our largest OEM customer, purchases our products primarily through its consignment warehouse, SMART Modular Technologies, 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 warehouse
and contract manufacturers, purchases by Cisco Systems represented approximately 26%, 28% and 30% of our net revenues in fiscal 2009, 2008 and 2007, respectively. During the quarter ended
March 31, 2007, Cisco Systems announced the implementation of a "lean manufacturing" program under which it reduced the levels of inventory carried by it and by its contract manufacturers. The
transition to this new program resulted in reductions in purchases of our products by Cisco Systems' contract manufacturers during the quarter ended March 31, 2007, as they drew down existing
inventories. This transition continued to impact our revenues in the quarter ended June 30, 2007. Purchases by Cisco Systems' consignment warehouses and contract manufacturers increased in the
four quarters ended June 30, 2008 compared to the two immediately preceding quarters and then declined again in the three quarters ended March 31, 2009. 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

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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 2009, 2008 or 2007.

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 product testing operations, are outsourced. Accordingly, most of our cost of revenues consists of payments to TSMC 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 Santa Clara,
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 costs 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.

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 continued growth and our operations as a public company, general and administrative expenses will continue to increase in absolute dollars for the foreseeable future but will fluctuate as a
percentage of net revenues.

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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:

Fiscal Year Ended
March 31,2009

2008

2007Net revenues


100.0
%

100.0
%

100.0
%Cost of revenues


57.2


59.9


62.0Gross profit


42.8


40.1


38.0Operating expenses:Research and development


9.2


8.2


8.5Selling, general and administrative


15.0


17.8


10.7Total operating expenses


24.2


26.0


19.2Income from operations


18.6


14.1


18.8Interest and other income (expense), net


2.2


3.4


1.3Income before income taxes


20.8


17.5


20.1Provision for income taxes


5.8


4.7


7.3Net income


15.0
%

12.8
%

12.8
%




Net Revenues.Net revenues increased by 16.8% from $53.2 million in fiscal 2008 to $62.1 in fiscal 2009. Direct and indirect sales
to Cisco
Systems, our largest customer, increased by $0.9 million from $15.1 million in fiscal 2008 to $16.0 million in fiscal 2009. Strength in our North American business and Asian
business accounted for the balance of the increase in net revenues. The improvement in net revenues was positively affected by the continued acceptance of our SigmaQuad product line which resulted in
221% increase in Sigma Quad shipments compared to fiscal 2008, accounting for 12.8% of total shipments in fiscal 2009.

Cost of Revenues.Cost of revenues increased by 11.6% from $31.8 million in fiscal 2008 to $35.6 million in fiscal 2009. This
increase
was due to the increase in net revenues. Cost of revenues included stock-based compensation expense of $297,000 and $294,000, respectively, in fiscal 2009 and fiscal 2008. Cost of revenues in fiscal
2008 also benefited from a one time payment of $371,000 received from a third party for rights to second source our 36 megabit SigmaQuad products.

Gross Profit.Gross profit increased by 24.5% from $21.3 million in fiscal 2008 to $26.6 in fiscal 2009. Gross margin increased
from 40.1% in
fiscal 2008 to 42.8% in fiscal 2009. The increase in gross margin was primarily related to a shift in product mix to higher density, higher margin products.

Research and Development Expenses.Research and development expenses increased 31.4% from $4.4 million in fiscal 2008 to
$5.7 million
in fiscal 2009. This increase was primarily due to increases in payroll related expenses and outside design fees, both related to our low latency DRAM project. Research and development expenses
included stock-based compensation expense of $436,000 and $469,000, respectively, in fiscal 2009 and fiscal 2008.

Selling, General and Administrative Expenses.Selling, general and administrative expenses decreased 1.8% from $9.5 million in
fiscal 2008 to
$9.3 million in fiscal 2009. This decrease was primarily related to a $368,000 decrease in outside consulting expenses related to implementation and maintenance of our new enterprise resource
planning ("ERP") system and Sarbanes-Oxley Act

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compliance,
a $318,000 decrease in legal expenses and a decrease in stock-based compensation, partially offset by increases of $433,000 in payroll related expenses and $121,000 in commissions for our
independent sales representatives. Stock-based compensation expense of $595,000 and $698,000 were included in selling, general and administrative expenses in fiscal 2009 and fiscal 2008, respectively.

Interest and Other Income (Expense), Net.Interest and other income (expense), net decreased 23.6% from $1.8 million in fiscal 2008
to
$1.4 million in fiscal 2009. This decrease was primarily the result of a decrease in interest income due to lower interest rates earned on our invested cash balances.

Provision for Income Taxes.The provision for income taxes increased from $2.5 million in fiscal 2008 to $3.6 million in
fiscal 2009.
This increase was due to the increased pre-tax income in fiscal 2009 compared to fiscal 2008.

Net Income.Net income increased 37.1% from $6.8 million in fiscal 2008 to $9.3 million in fiscal 2009. This increase was
primarily due
to the increased net revenues and changes in operating expenses and gross profit discussed above.



Net Revenues.Net revenues decreased by 8.6% from $58.2 million in fiscal 2007 to $53.2 in fiscal 2008. This reduction in net
revenues was
principally due to overall weakness in the telecommunications segment of the network equipment market resulting in decreased orders from our distributors as they, and a number of our OEM customers who
buy from them, adjusted their purchasing based on their own inventory levels. In addition, direct and indirect sales to Cisco Systems, our largest customer, were down approximately 13% in fiscal 2008
compared to fiscal 2007 due, in part, to the continued impact of the implementation of its lean manufacturing program, described above. During the first six months of fiscal 2008, Cisco Systems'
contract manufacturers further curtailed their purchases of our products as they continued to work against their existing inventories. Although sales for Cisco Systems related business increased in
the three quarters ending March 31, 2008 compared to the quarter ended June 30, 2007, they were still less than the levels achieved in each of the three quarters ended
December 31, 2006.

Cost of Revenues.Cost of revenues decreased by 11.6% from $36.0 million in fiscal 2007 to $31.8 million in fiscal 2008. This
decrease
was due to the decrease in net revenues. Cost of revenues included stock-based compensation expense of $294,000 and $227,000, respectively, in fiscal 2008 and fiscal 2007. Cost of revenues in fiscal
2008 also reflected a one time payment of $371,000 received from a third party for rights to second source our 36 megabit SigmaQuad products.

Gross Profit.Gross profit decreased by 3.6% from $22.1 million in fiscal 2007 to $21.3 in fiscal 2008. Gross margin increased
from 38.0% in
fiscal 2007 to 40.1% in fiscal 2008. The increase in gross margin was primarily related to a shift in product mix to higher density, higher margin products.

Research and Development Expenses.Research and development expenses decreased 11.8% from $5.0 million in fiscal 2007 to
$4.4 million
in fiscal 2008. This decrease was primarily due to decreases in prototype expenses, depreciation expense and stock-based compensation expense. Research and development expenses included stock-based
compensation expense of $469,000 and $515,000, respectively, in fiscal 2008 and fiscal 2007.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased 52.4% from $6.2 million in
fiscal 2007 to
$9.5 million in fiscal 2008. Major contributors to the increased selling, general and administrative expenses were increases in outside accounting fees, outside legal expenses, outside
consultant fees, insurance expenses and stock-based compensation costs. Most of the increases in outside accounting fees, legal fees, insurance costs and consulting expenses during fiscal 2008 were
related to our becoming a public company. Stock-based compensation expense of $698,000

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and
$474,000 were included in selling, general and administrative expenses in fiscal 2008 and fiscal 2007, respectively.

Interest and Other Income (Expense), Net.Interest and other income (expense), net increased 145.1% from $728,000 in fiscal 2007 to
$1,784,000 in
fiscal 2008. This increase was primarily the result of an increase in interest income due to higher interest rates and higher average balances of invested cash resulting from the investment of the net
proceeds from our initial public offering which closed on April 3, 2007.

Provision for Income Taxes.The provision for income taxes decreased from $4.3 million in fiscal 2007 to $2.5 million in
fiscal 2008.
This decrease was due to the decreased pre-tax income in fiscal 2008 compared to fiscal 2007 and increases in pre-tax income in low tax jurisdictions in fiscal 2008 compared to
fiscal 2007.

Net Income.Net income decreased 8.9% from $7.4 million in fiscal 2007 to $6.8 million in fiscal 2008. This decrease was
primarily due
to the decreased net revenues and changes in operating expenses and gross profit discussed above.

Liquidity and Capital Resources

Since our inception, we have used proceeds from a number of sources, including the private sale of $9.6 million of equity
securities, bank borrowings and cash generated by operating activities to support our operations, acquire capital equipment and finance accounts receivable and inventory growth. Our liquidity was
enhanced by the receipt of net proceeds of approximately $30.0 million from the initial public offering of our common stock which closed on April 3, 2007.

As
of March 31, 2009, our principal sources of liquidity were cash, cash equivalents and short-term investments of $47.3 million compared to
$39.6 million as of March 31, 2008.

Net
cash provided by operating activities was $16.2 million for fiscal 2009 compared to $18.8 million for fiscal 2008 and net cash used by operating activities of
$4.7 million for fiscal 2007. The primary uses of cash in fiscal 2009 were reductions of $2.2 million in deferred revenue and $1.3 million in accounts payable. These reductions
were both in response to the current worldwide credit crisis as we and our distributors both reduced inventory levels. These uses of cash were primarily offset by decreases of $3.8 million in
inventory and $1.8 million in accounts receivable. The reduction in accounts receivable reflects the lower level of net revenues in the fourth quarter of fiscal 2009 compared to the fourth
quarter of fiscal 2008. The primary uses of cash in fiscal 2008 were an increase in receivables of $1.1 million and a reduction in accounts payable of $578,000. These uses of cash were offset
primarily by a decrease in inventory of $7.8 million as we reduced inventory purchases from TSMC and net income of $6.8 million. The primary uses of cash in fiscal 2007 were increases of
$12.0 million for inventory and $2.0 million for accounts receivable. Inventory levels increased in fiscal 2007 as we took advantage of favorable wafer pricing offered to us by TSMC. The
increased level of accounts receivable reflects the higher level of net revenues in the fourth quarter of fiscal 2007 compared to the fourth quarter of fiscal 2006. These uses of cash were partially
offset by net income of $7.4 million.

Net
cash used in investing activities was $16.2 million in fiscal 2009, $37.9 million in fiscal 2008 and $2.0 million in fiscal 2007. Investing activity in fiscal
2009 consisted primarily of the purchase of short-term and long-term investments of $49.7 million, primarily state and municipal obligations and corporate notes, and the
purchase of test equipment and software in the amount of $674,000. These uses were partially offset by the sale and current maturities of short-term investments of $34.2 million. As
of March 31, 2009 we had no investments in auction rate securities or other illiquid investments. Investing activity in fiscal 2008 consisted primarily of the purchase of short-term
and long-term investments of $75.8 million, primarily state and municipal obligations and auction rate securities, and

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the
purchase of test equipment and software in the amount of $3.3 million. These uses were partially offset by the sale and current maturities of short-term investments of
$40.2 million, including the majority of the auction rate securities that we previously purchased. As of March 31, 2008, the carrying value of our two investments in auction rate
securities totaled $2.8 million. These auction rate securities were called at par in April 2008 and December 2008, respectively, and we received the entire par value amount. Investing
activities in fiscal 2007 consisted primarily of purchases of test equipment and expenditures related to the implementation of our new enterprise resource planning, or ERP, system.

Net
cash used in financing activities in fiscal 2009 primarily consisted of the repurchase of our common stock for a total purchase price of $4.1 million, partially offset by
$544,000 in net proceeds from the sale of common stock pursuant to our employee stock plans. Net cash provided by financing activities in fiscal 2008 included $97,000 in net proceeds from the sale of
common stock pursuant to option exercises and $31.4 million in net proceeds from our initial public offering of common stock that occurred on April 3, 2007, offset by $739,000 in costs
related to our initial public offering. Net cash provided by financing activities in fiscal 2007 included net proceeds of $124,000 from the sale of common stock pursuant to option exercises. Fiscal
2007 financing activities included the use of $580,000 of cash for offering expenses paid in connection with our initial public offering.

At
March 31, 2009 we had total minimum lease obligations of approximately $749,000 from April 1, 2009 through August 31, 2010, under non-cancelable
operating leases.

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. 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.

Contractual Obligations

The following table describes our contractual obligations as of March 31, 2009:

Payments due by periodUp to
1 year

1-3
years

3-5
years

More than
5 years

TotalFacilities and equipment leases

$
607,000

$
142,000

$


$


$
749,000Wafer purchase obligations


5,145,000











5,145.000$
5,752,000

$
142,000

$


$


$
5,894,000


As
of March 31, 2009, the current portion of our unrecognized tax benefits was $471,000, and the long-term portion was $351,000. The unrecognized tax benefits balance
as of March 31, 2009 of $1,107,000 would affect our effective tax rate if recognized. As of March 31, 2009, $365,000 of unrecognized tax benefits have been recorded as a reduction to net
deferred tax assets.

Critical Accounting Policies and Estimates

The preparation of our financial statements and related disclosures in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

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the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates are inherent in the preparation of the consolidated financial
statements and include estimates affecting revenue recognition, obsolete and excess inventory, the valuation allowance on deferred tax assets, the valuation of equity instruments and stock-based
compensation. We believe that we consistently apply these judgments and estimates and that our
financial statements and accompanying notes fairly represent all periods presented. However, any errors in these judgments and estimates may have a material impact on our balance sheet and statement
of operations. Critical accounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our financial condition and results of
operations and require our most difficult and subjective judgments and estimates of matters that are inherently uncertain. Our critical accounting estimates include those regarding revenue
recognition, the valuation of inventories, taxes and stock-based compensation.

Revenue Recognition.We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed
or
determinable and collectibility of the resulting receivable is reasonably assured. Under these criteria, revenue from the sale of our products is generally recognized upon shipment according to our
shipping terms, net of accruals for estimated sales returns and allowances based on historical experience. Sales to distributors are made under agreements allowing for returns or credits. We defer
recognition of revenue on sales to distributors until products are resold by the distributor to the end-user. Distributors have stock rotation, price protection and ship from stock pricing
adjustment rights, and we therefore defer recognition of revenue on sales to distributors until products are resold by the distributor. We are unable to reasonably estimate the inventory that could be
returned pursuant to the stock rotation rights. In light of possible changes to sales prices resulting from price protection and price adjustment rights granted, we are unable to reasonably estimate
possible changes and the resulting sales price to the distributor is not fixed or determinable until the final sale to the end user. Sales to consignment warehouses, who purchase products from us for
use by contract manufacturers, are recorded upon delivery to the contract manufacturers.

The
timing of recognizing revenues on product sales to distributors is dependent on receiving pertinent and accurate data from our distributors in a timely fashion. Distributors provide
us monthly data regarding the product, price, quantity, and end customer for their shipments as well as the quantities of our products they have in stock at month end. In determining the appropriate
amount of revenue to recognize, we use this data in reconciling differences between our estimate of their inventory levels and their reported inventories and shipment activities. If distributors
incorrectly report their inventories or shipment activities, it could lead to inaccurate reporting of our revenues and income. As of March 31, 2009 and 2008, reconciling differences were not
significant after appropriately accounting for goods-in-transit.

Valuation of Inventories.Inventories are stated at the lower of cost or market value, cost being determined on a weighted average
basis. Our
inventory write-down allowance is established when conditions indicate that the selling price of our products could be less than cost due to physical deterioration, obsolescence, changes
in price levels, or other causes. We consider the need to establish the allowance for excess inventory generally based on inventory levels in excess of 12 months of forecasted demand for each
specific product. Inventory consists of finished goods at our premises or consignment warehouses, work in progress at our premises or our contract manufacturers and finished goods at distributors.
Historically, it has been difficult to forecast customer demand especially at the part-number level. Many of the orders we receive from our customers and distributors request delivery of
product on relatively short notice and with lead times less than our manufacturing cycle time. In order to provide competitive delivery times to our customers, we build and stock a certain amount of
inventory in anticipation of customer demand that may not materialize. Moreover, as is common in the semiconductor industry, we may allow customers to cancel orders with minimal advance notice. Thus,
even product built to satisfy specific customer orders may not ultimately be required to fulfill customer

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demand.
Nevertheless, at any point in time, some portion of our inventory is subject to the risk of being materially in excess of our projected demand. Additionally, our average selling prices could
decline due to market or other conditions, which creates a risk that costs of manufacturing our inventory may not be recovered. These factors contribute to the risk that we may be required to record
additional inventory write-downs in the future, which could be material. In addition, if actual market conditions are more favorable than expected, inventory previously written down may be sold to
customers resulting in lower cost of sales and higher income from operations than expected in that period.

Taxes.We account for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on the
difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. We make certain
estimates and judgments in the calculation of tax liabilities and the determination of deferred tax assets, which arise from temporary differences between tax and financial statement recognition
methods. We record a valuation allowance to reduce our deferred tax assets to the amount that management estimates is more likely than not to be realized. If in the future we determine that we are not
likely to realize all or part of our net deferred tax assets, an adjustment to deferred tax assets would be charged to earnings in the period such determination is made.

In
addition, the calculation of tax liabilities involves inherent uncertainty in the application of complex tax laws. We record tax reserves for additional taxes that we estimate we may
be required to pay as a result of future potential examinations by federal and state taxing authorities. If the payment ultimately proves to be unnecessary, the reversal of these tax reserves would
result in tax benefits being recognized in the period we determine such reserves are no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to
provision for income taxes will result.

FIN 48
prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has
taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under the Interpretation, the financial statements will
reflect expected future tax consequences of such positions presuming the taxing authorities' full knowledge of the position and all relevant facts, but without considering time values.

Stock Based Compensation.On April 1, 2006, we adopted SFAS No. 123(R),Share-Based
Payment("SFAS 123(R)"), using the modified prospective transition method. Under this method, our stock-based compensation costs recognized during the fiscal year ended
March 31, 2007 were comprised of compensation costs for all share-based payment awards granted subsequent to April 1, 2006 and of compensation costs related to share-based payment awards
that were unvested on April 1, 2006, based on their grant-date fair value estimated using the Black-Scholes option pricing model. Prior periods were not restated. As stock-based
compensation expense recognized in the statement of operations for fiscal 2009, 2008, 2007 is based on options ultimately expected to vest, it has been reduced by the amount of estimated forfeitures.

We
chose the straight-line method of allocating compensation cost over the requisite service period of the related award under SFAS 123(R). We calculated the expected
term based on the historical average period of time that options were outstanding as adjusted for expected changes in future exercise patterns, which, for options granted in fiscal 2009 resulted in an
expected term of approximately five years. For options granted in fiscal 2008 and fiscal 2007, our analysis resulted in an expected term of approximately four years. We based our estimate of expected
volatility on the estimated volatility of similar entities whose share prices are publicly available. The risk-free interest rate is based on the U.S. Treasury yields in effect at the time
of grant for periods corresponding to the expected life of the options. The dividend yield is 0%, based on the fact that we have never paid

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dividends
and have no present intention to pay dividends. Determining some of these assumptions requires significant judgment and changes to these assumptions could result in a significant change to
the calculation of stock-based compensation in future periods.

The
impact of adoption of SFAS 123(R) was to reduce income before income taxes by $1,216,000, net income by $1,165,000 and basic and diluted earnings per share by $0.19 and $0.05,
respectively, for fiscal 2007. SFAS 123(R) requires cash flows, if any, resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows. Adoption of FAS No. 123(R) did not have an impact on operating and financing cash flows because we did not have any excess tax
benefits in the period of adoption.

Prior
to the adoption of SFAS No. 123(R), we recognized forfeitures of unvested stock options as they occurred. Upon adoption of SFAS No. 123(R), we began estimating future
forfeitures and recognizing the effect of such forfeitures on the grant date of the awards. SFAS No. 123(R) requires a one-time cumulative adjustment at the adoption date to record
an estimate of future forfeitures on the unvested outstanding awards. Based on our estimate of the impact of future forfeitures on the expense recognized for unvested options at the date of adoption,
such one-time cumulative adjustment was determined to be immaterial.

We
have no stock-based compensation arrangements with non-employees.

Given
the absence of an active market for our common stock prior to our becoming a public company, our board of directors estimated the fair value of our common stock for purposes of
determining stock-based compensation expense for the periods presented. Through September 2006, the board of directors determined the estimated fair value of our common stock, based in part on our
historic net revenues and a market determined revenue multiplier as well as the following:



In
October 2006, we obtained an independent valuation from a third party valuation consultant of our common stock as of September 30, 2006 which assisted in our determination of
value for grants made from October 2006 to November 21, 2006. We continued to rely in part on this third party valuation for options granted in January 2007 in addition to the methods described
above for grants prior the October 2006.

We
believe that we have used reasonable methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Practice Guide, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation, to determine the fair value of our common stock. If we had made different assumptions and estimates than those
described above, the amount of our recognized and to be recognized stock-based compensation expense, net income (loss) and net income (loss) per share amounts could have been materially different.

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Off-Balance Sheet Arrangements

At March 31, 2009, 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.

Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165,Subsequent Events,to be effective
for interim or annual financial periods ending after June 15, 2009. This statement does not materially change the existing guidance but introduces the concept of financial statements being available to be
issued.It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that
is, whether that date represents the date the
financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in
the set of financial statements being presented. We plan to adopt this standard in the first quarter of fiscal 2010.

In
April 2009, the Financial Accounting Standards Board ("FASB") issued Staff Position ("FSP") No. 115-2 and No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments,which
amended previous guidance for determining whether
impairment is other-than-temporary for debt securities. The FSP requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required
to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is
recognized in earnings. For securities that do not meet the aforementioned criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment
related to other factors is recognized in other comprehensive income. Additionally, the FSP expands and increases the frequency of existing disclosures about
other-than-temporary impairments for debt and equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. We plan to adopt this FSP in the first quarter of fiscal 2010 and do not expect the adoption to have a material effect on our results
of operations or financial position.

In
April 2009, the FASB issued FSP No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of
activity, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that
is, not a forced liquidation or distressed sale) between market participants. The FSP provides a number of factors to consider when evaluating whether there has been a significant decrease in the
volume and level of activity for an asset or liability in relation to normal market activity. In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices
based on the weight of available information may be needed to determine the appropriate fair value. The FSP also requires increased disclosures. This FSP is effective for interim and annual reporting
periods ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. We plan to adopt this FSP in the first
quarter of fiscal 2010 and do not expect the adoption to have a material effect on our results of operations or financial position.

In
April 2009, the FASB issued FSP No. 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial
Instruments. This FSP amended FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require
disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial

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statements.
This FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We plan to adopt this
FSP in the first quarter of fiscal 2010.

In
March 2009, the FASB unanimously voted for theFASB Accounting Standards Codification(the "Codification") to be effective for interim
and annual periods beginning on September 15, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted Accounting Principles ("GAAP"), the
Codification is not meant to change GAAP, but is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification is a new
structure which organizes existing accounting pronouncements into approximately 90 accounting topics. Once approved, the Codification will be the single source of authoritative U.S. GAAP. All
guidance included in the Codification will be considered authoritative at that time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard.
Once the Codification becomes effective, all non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the
sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States. We adopted this statement in the fourth quarter of fiscal 2009 and the adoption did not result in a change in any of our current
accounting practices.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS
No. 133("SFAS 161"), which expanded the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 specifically requires
entities to provide enhanced disclosures addressing: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for
under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash
flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We adopted this pronouncement in the fourth quarter of fiscal 2009 and the adoption
did not have any affect as we do not engage in any hedging activities.

In
December 2007, the FASB issued SFAS No. 141(R),Business Combinations("SFAS 141R"). SFAS 141R replaces
SFAS 141,Business Combinations("SFAS 141"). SFAS 141R retains the fundamental requirements in SFAS 141 that the
acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.
SFAS 141R also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and
(c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141R will apply
prospectively to business combinations for which the acquisition date is on or after April 1, 2009, the beginning of our next fiscal year. While we have not yet evaluated this statement for the
impact, if any, that SFAS 141R will have on our consolidated financial statements, we will be required to expense costs related to any acquisitions after March 31, 2009.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements("SFAS 160").
SFAS 160 amended Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership

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Table of Contents

interest
in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS 160 is effective for our fiscal year beginning April 1, 2009. We do
not expect the impact of its adoption to have any affect as we have no noncontrolling interests.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"), which permits entities to choose to measure eligible financial instruments and certain other items at fair value that were not previously required to be measured at fair value.
Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The adoption of SFAS 159 did not have an effect on our financial position or results of operations as we did not elect this fair value option.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"). SFAS 157 established a
framework for measuring fair value and expands disclosures about fair value measurements. The changes to previous practice resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement Under Statement 13("FSP 157-1"). FSP 157-1 amended SFAS 157 to exclude from its scope SFAS No. 13 and other
pronouncements that address fair value measurements for purposes of lease classification or measurement. The scope exception does not apply to assets acquired and liabilities assumed in a business
combination that are required to be measured at
fair value (including assets and liabilities not related to leases). In February 2008, the FASB issued Staff Position 157-2,Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis. In October 2008, the FASB issued FSP FAS No. 157-3,Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active("FSP 157-3"). FSP 157-3 clarifies the application of SFAS 157, in situations where the market
is not active. We considered the guidance provided by FSP 157-3 in our determination of estimated fair values as of December 31, 2008, and determined that the impact was not
material. We adopted SFAS 157 effective April 1, 2008 for financial assets and liabilities measured on a recurring basis. The adoption of SFAS 157 for financial assets and
liabilities did not have a material impact on our financial position or results of operations. See Note 6 to the consolidated financial statements for more information regarding the adoption of
SFAS 157.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Risk.Our revenues and expenses, except those expenses related to our operations in 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 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 $66.8 million
at March 31, 2009. These amounts were invested primarily in money market funds, state and municipal obligations and corporate notes. 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
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.

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Item 8.Financial Statements and Supplementary Data

GSI TECHNOLOGY, INC.        INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



PageReport of Independent Registered Public Accounting Firm

49Consolidated Balance Sheets As of March 31, 2009 and
2008

50Consolidated Statements of Operations For the Three Years Ended March 31, 2009, 2008
and 2007

51Consolidated Statements of Stockholders' Equity For the Three Years Ended
March 31, 2009, 2008 and 2007

52Consolidated Statements of Cash Flows For the Three Years Ended March 31, 2009, 2008
and 2007

53Notes to Consolidated Financial Statements

54


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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
of GSI Technology, Inc.:

In
our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of GSI
Technology, Inc. and its subsidiaries at March 31, 2009 and March 31, 2008, and the results of their operations and their cash flows for each of the three years in the period
ended March 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

San
Jose, California
June 10, 2009

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Table of Contents

GSI TECHNOLOGY, INC.        CONSOLIDATED BALANCE SHEETS

March 31,2009

2008(In thousands,
except share and
per share amounts)ASSETSCash and cash equivalents

$
12,597

$
15,899Short-term investments


34,740


23,666Accounts receivable, net


5,622


7,476Inventories


10,995


15,704Prepaid expenses and other current assets


2,442


1,807Deferred income taxes


975


1,327Total current assets


67,371


65,879Property and equipment, net


5,126


5,840Long-term investments


19,428


15,605Other assets


748


991Total assets

$
92,673

$
88,315LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable

$
2,908

$
4,282Accrued expenses and other liabilities


1,973


1,584Deferred revenue


2,736


4,943Total current liabilities


7,617


10,809Income taxes payable


351


366Total liabilities


7,968


11,175Commitments and contingencies (Note 7)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: 26,719,537 and 27,755,490 shares, respectively


27


28Additional paid-in capital


46,202


48,139Accumulated other comprehensive income


230


16Retained earnings


38,246


28,957Total stockholders' equity


84,705


77,140Total liabilities and stockholders' equity

$
92,673

$
88,315


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

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Table of Contents

GSI TECHNOLOGY, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended March 31,2009

2008

2007(In thousands, except per
share amounts)Net revenues

$
62,108

$
53,170

$
58,159Cost of revenues


35,552


31,847


36,042Gross profit


26,556


21,323


22,117Operating expenses:Research and development


5,737


4,365


4,951Selling, general and administrative


9,295


9,464


6,209Total operating expenses


15,032


13,829


11,160Income from operations


11,524


7,494


10,957Interest income, net


1,461


1,703


769Other income (expense), net


(98
)

81


(41
)Income before income taxes


12,887


9,278


11,685Provision for income taxes


3,598


2,505


4,251Net income

$
9,289

$
6,773

$
7,434Basic and diluted net income per share available to common stockholders:Basic

$
0.33

$
0.25

$
1.04Diluted

$
0.33

$
0.24

$
0.32Weighted average shares used in per share calculations:Basic


27,735


27,537


6,253Diluted


28,386


28,624


22,837


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

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Table of Contents

GSI TECHNOLOGY, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

Common Stock





Accumulated
Other
Comprehensive
IncomeAdditional
Paid-in
Capital

Deferred
Stock-Based
Compensation

Retained
Earnings

Total
Stockholders'
EquityShares

Amount(In thousands, except share amounts)Balance, March 31, 2006


6,164,286

$
6

$
6,368

$
(166
)
$


$
14,750

$
20,958Issuance of common stock under employee stock option plans


179,125





124











124Reversal of deferred stock-based compensation upon adoption of SFAS 123(R)








(166
)

166








Stock-based compensation expense








1,216











1,216Net income and comprehensive income

















7,434


7,434Balance, March 31, 2007


6,343,411


6


7,542








22,184


29,732Conversion of preferred stock to common stock upon effective date of initial public offering


15,120,168


15


8,992











9,007Issuance of common stock upon effective date of initial public offering, net of issuance costs


6,131,111


6


30,035











30,041Issuance of common stock under employee stock option plans


160,800


1


96











97Stock-based compensation expense








1,461











1,461Windfall tax benefit from stock options exercised








13











13Comprehensive income:Net income

















6,773


6,773Net unrealized gain on available-for-sale investments














16





16Total comprehensive income




















6,789Balance, March 31, 2008


27,755,490


28


48,139





16


28,957


77,140Issuance of common stock under employee stock option plans


424,226





544











544Repurchase of common stock


(1,460,179
)

(1
)

(4,089
)










(4,090
)Stock-based compensation expense








1,328











1,328Windfall tax benefit from stock options exercised








280











280Comprehensive income:Net income

















9,289


9,289Net unrealized gain on available-for-sale investments














214





214Total comprehensive income




















9,503Balance, March 31, 2009


26,719,537

$
27

$
46,202

$


$
230

$
38,246

$
84,705


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

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GSI TECHNOLOGY, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended March 31,2009

2008

2007(In thousands)Cash flows from operating activities:Net income

$
9,289

$
6,773

$
7,434Adjustments to reconcile net income to net cash provided by (used in) operating activities:Allowance for sales returns and doubtful accounts


7


8


(105
)Provision for excess and obsolete inventories


942


713


388Depreciation and amortization


1,362


1,187


836Stock-based compensation


1,328


1,461


1,216Deferred income taxes


591


(211
)

40Windfall tax benefits from stock options exercised


(280
)

(13
)

Amortization of bond premium on investments


876


340


Changes in assets and liabilities:Accounts receivable


1,847


(1,087
)

(1,997
)Inventory


3,767


7,792


(11,997
)Prepaid expenses and other assets


(631
)

789


(806
)Accounts payable


(1,322
)

(578
)

(512
)Accrued expenses and other liabilities


628


413


162Deferred revenue


(2,207
)

1,239


600Net cash provided by (used in) operating activities


16,197


18,826


(4,741
)Cash flows from investing activities:Decrease in restricted cash





1,000


Purchase of investments


(49,713
)

(75,822
)

(9,500
)Sales and maturities of short-term investments


34,154


40,227


9,500Purchases of property and equipment


(674
)

(3,339
)

(2,033
)Net cash used in investing activities


(16,233
)

(37,934
)

(2,033
)Cash flows from financing activities:Initial public offering costs paid during the year





(739
)

(580
)Proceeds from initial public offering, net of underwriting discount





31,361


Repurchase of common stock


(4,090
)




Windfall tax benefits from stock options exercised


280


13


Proceeds from issuance of common stock under employee stock plans


544


97


124Net cash provided by (used in) financing activities


(3,266
)

30,732


(456
)Net increase (decrease) in cash and cash equivalents


(3,302
)

11,624


(7,230
)Cash and cash equivalents at beginning of the year


15,899


4,275


11,505Cash and cash equivalents at end of the year

$
12,597

$
15,899

$
4,275Non-cash financing activities:Purchases of property and equipment through accounts payable and accruals

$
259

$
285

$
1,342Conversion of preferred stock to common stock

$


$
9,007

$
Supplemental cash flow information:Cash paid for income taxes

$
2,732

$
2,777

$
4,096Cash paid for interest

$


$


$
8


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

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GSI TECHNOLOGY, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



GSI Technology, Inc. (the "Company") was incorporated in California in March 1995 and reincorporated in Delaware on
June 9, 2004. The Company is a provider of "Very Fast" SRAM products that are incorporated primarily in high-performance networking and telecommunications equipment, such as
routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment. In addition, the Company serves the ongoing needs of the military, industrial, test
equipment and medical markets for high-performance SRAMs.



The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP").



The consolidated financial statements include the accounts of the Company's two wholly-owned subsidiaries, GSI Technology
Holdings, Inc. and GSI Technology (BVI), Inc. All significant inter-company transactions and balances have been eliminated in consolidation.



The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Significant estimates are inherent in the preparation of the consolidated financial statements and include revenue recognition, obsolete and excess inventory, the valuation allowance
on deferred tax assets, the valuation of equity instruments and stock-based compensation. Actual results could differ from those estimates.



The Company buys all of its wafers, an integral component of its products, from a single supplier and is also dependent on independent
suppliers to assemble and test its products. During the years ended March 31, 2009, 2008 and 2007, all of the Company's wafers were supplied by Taiwan Semiconductor Manufacturing Company
Limited, or TSMC. If this supplier fails to satisfy the Company's requirements on a timely basis at competitive prices, the Company could suffer manufacturing delays, a possible loss of revenues, or
higher cost of revenues, any of which could adversely affect operating results.

A
majority of the Company's net revenues come from sales to customers in the networking and telecommunications equipment industry. A decline in demand in this industry could have a
material adverse affect on the Company's operating results and financial condition.

Because
much of the manufacturing and testing of the Company's products is conducted in Taiwan, its 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 the Company's business.
Moreover, the role of the Taiwanese government in the Taiwanese economy is significant. Taiwanese policies

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 the Company's and its suppliers' ability to do business and operate facilities in Taiwan. If any of these risks were to occur, the Company's business could be harmed.

Some
of the Company's suppliers and the Company's two principal operations are located near fault lines. In the event of a major earthquake or other natural disaster near the facilities
of any of these suppliers or the Company, the Company's business could be harmed.



The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or
determinable and collectibility of the resulting receivable is reasonably assured. Under these criteria, revenue from the sale of products is generally recognized upon shipment according to the
Company's shipping terms, net of accruals for estimated sales returns and allowances based on historical experience. Sales to distributors are made under agreements allowing for returns or credits.
Distributors have stock rotation, price protection and ship from stock pricing adjustment rights and the Company therefore defers recognition of revenue on sales to distributors until products are
resold by the distributor. The Company is unable to reasonably estimate the inventory that could be returned pursuant to the stock rotation rights. In light of possible changes to sales prices
resulting from price protection and price adjustment rights granted, we are unable to reasonably estimate possible changes and the resulting sales price to the distributor is not fixed or determinable
until the final sale to the end user. For sales to consignment warehouses, who purchase products from the Company for use by contract manufacturers, revenues are recognized upon delivery to the
contract manufacturer.



Cash and cash equivalents include cash in demand accounts and highly liquid investments purchased with an original or remaining
maturity of three months or less at the date of purchase, stated at cost, which approximates their fair market value.



All of the Company's short-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 Consolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when the declines are
determined to be other-than-temporary.



At March 31, 2007, restricted cash consisted of certificates of deposit totaling $1,000,000 held with a financial institution as
collateral for the Company's line of credit. During the year ended March 31, 2008, the line of credit was terminated and this cash is no longer restricted.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, cash
equivalents, short-term and long-term investments and accounts receivable. The Company places its cash primarily in checking, certificate of deposit, and money market accounts
with reputable financial institutions. The Company's accounts receivable are derived primarily from revenue earned from customers located in the U.S. and Asia. The Company performs ongoing credit
evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The Company maintains an allowance for doubtful accounts receivable based upon the expected
collectibility of accounts receivable. There were no write offs in the years ended March 31, 2009, 2008 or 2007.

In
fiscal 2009, 2008 and 2007, sales to the Company's top 10 customers accounted for approximately 94%, 89% and 88% of net revenues, respectively. At March 31, 2009, five
customers accounted for 27%, 16%, 14%, 10% and 10% of accounts receivable, and for the year then ended, three customers accounted for 26%, 25% and 11% of net revenues. At March 31, 2008, five
customers accounted for 17%, 15%, 13%, 12% and 12% of accounts receivable, and for the year then ended, two customers accounted for 29% and 28% of net revenues. At March 31, 2007, five
customers accounted for 25%, 16%, 14%, 11% and 11% of accounts receivable, and for the year then ended, two customers accounted for 30% and 25% of net revenues.



Inventories are stated at the lower of cost or market value, cost being determined on a weighted average basis. Inventory
write-down allowances are established when conditions indicate that the selling price could be less than cost due to physical deterioration, obsolescence, changes in price levels, or other
causes. These allowances, once recorded, result in a new cost basis for the related inventory. These allowances are also considered for excess inventory generally based on inventory levels in excess
of 12 months of forecasted demand, as estimated by management, for each specific product. The allowance is not reversed until the inventory is sold or disposed of.



Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as presented below:

Software

3 to 5 yearsComputer and other and equipment

5 yearsFurniture and fixtures

7 years


Leasehold
improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the remaining lease term of the respective
assets. Gains or losses on disposals of property and equipment are recorded within income from operations. Costs of repairs and maintenance are typically included as part of operating expenses unless
they are incurred in relation to major improvements to existing property and equipment, at which time they are capitalized.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances
indicate that their net book value may not be recoverable. If the sum of the expected future cash flows (undiscounted and before interest) from the use of the assets is less than the net book value of
the asset an impairment exists and the amount of the impairment loss, if any, will generally be measured as the difference between net book value of the assets and their estimated fair values. There
were no impairment losses recognized during the years ended March 31, 2009, 2008 or 2007.



Research and development expenses are related to new product designs, including, salaries, stock-based compensation, contractor fees,
and allocation of corporate costs and are charged to the statement of operations as incurred.



The Company accounts for income taxes under the liability method, whereby deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income.
Valuation allowances are established when it is more likely than not that the deferred tax asset will not be realized.

FIN 48
prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the company has
taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). Under the Interpretation, the financial statements will
reflect expected future tax consequences of such positions presuming the taxing authorities' full knowledge of the position and all relevant facts, but without considering time values. The first step
is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation process, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate
settlement. The Company adopted this standard in the first quarter of fiscal 2008 and the impact of the adoption of FIN 48 is disclosed in Note 5.



The Company records costs related to shipping and handling in cost of revenues.



Advertising costs are charged to expense in the period incurred. Advertising expense was $7,000, $11,000 and $8,000 for the years ended
March 31, 2009, 2008, and 2007, respectively.



The U.S. dollar is the functional currency for all of the Company's foreign operations. Foreign currency transaction gains and losses,
resulting from transactions denominated in currencies other than

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

U.S.
dollars are included in the statements of operations. These gains and losses have not been material for the years ended March 31, 2009, 2008 and 2007.



The Company operates in one segment for the design, development and sale of integrated circuits.



On April 1, 2006, the Company adopted SFAS No. 123(R),Share-Based
Payment("SFAS 123(R)"), using the modified prospective transition method. Under this method, the Company's stock-based compensation costs recognized during the fiscal
years ended March 31, 2009, 2008 and 2007 were comprised of compensation costs for all share-based payment awards granted subsequent to April 1, 2006 and of compensation costs related to
share-based payment awards that were unvested on April 1, 2006, based on their grant-date fair value estimated using the Black-Scholes option pricing model. Prior periods were not
restated. As stock-based compensation expense recognized in the statement of operations for fiscal 2009, 2008 and 2007 is based on options ultimately expected to vest, it has been reduced by the
amount of estimated forfeitures.

The
Company chose the straight-line method of allocating compensation cost over the requisite service period of the related award under SFAS 123(R). The Company
calculated the expected term based on the historical average period of time that options were outstanding as adjusted for expected changes in future exercise patterns, which, for options granted in
fiscal 2009 resulted in an expected term of approximately five years. For options granted in fiscal 2008 and 2007, the Company's analysis resulted in an expected term of approximately four years. The
Company based its estimate of
expected volatility on the estimated volatility of similar entities whose share prices are publicly available. The risk-free interest rate is based on the U.S. Treasury yields in effect at
the time of grant for periods corresponding to the expected life of the options. The dividend yield is 0%, based on the fact that the Company has never paid dividends and has no present intention to
pay dividends. Changes to these assumptions may have a significant impact on the results of operations.

In
November 2005, the FASB issued Staff Position No. FAS 123(R)-3,Transition Election Related to Accounting for the Tax Effects of Share-Based
Payment Awards("FSP 123R-3"). The Company has elected to adopt the alternative transition method provided in FSP 123R-3 for calculating the tax effects
of stock-based compensation under SFAS 123(R). The alternative transition method includes simplified methods to establish the beginning balance of the additional
paid-in-capital pool ("APIC pool") related to the tax effects of stock-based compensation, and for determining the subsequent impact on the APIC pool and consolidated
statements of cash flows of the tax effects of stock-based compensation awards that are outstanding upon adoption of SFAS 123(R).

The
impact of adoption of SFAS 123(R) was to reduce income before income taxes by $1,216,000, net income by $1,165,000 and basic and diluted earnings per share by $0.19 and $0.05,
respectively, for fiscal 2007. SFAS 123(R) requires cash flows, if any, resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows. Adoption of FAS No. 123(R) did not have an impact on operating and financing cash flows because the Company did not have any
excess tax benefits in the period of adoption.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prior
to the adoption of SFAS No. 123(R), the Company recognized forfeitures of unvested stock options as they occurred. Upon adoption of SFAS No. 123(R), the Company began
estimating future forfeitures and recognizing the effect of such forfeitures on the grant date of the awards. SFAS No. 123(R) requires a one-time cumulative adjustment at the
adoption date to record an estimate of future forfeitures on the unvested outstanding awards. Based on the Company's estimate of the impact of future forfeitures on the expense recognized for unvested
options at the date of adoption, such one-time cumulative adjustment was determined to be immaterial.



Comprehensive income is defined to include all changes in equity during a period except those resulting from investments by owners and
distributions to owners. For the years
ended March 31, 2009 and 2008, comprehensive income was $9,503,000 and $6,789,000, respectively. For the years ended March 31, 2007, net income equaled comprehensive income as there were
no other components of comprehensive income.



In May 2009, the FASB issued SFAS No. 165,Subsequent Events,to be effective
for interim or annual financial periods ending after June 15, 2009. This statement does not materially change the existing guidance but introduces the concept of financial statements being available to be
issued.It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that
is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not
evaluated subsequent events after that date in the set of financial statements being presented. The Company plans to adopt this standard in the first quarter of fiscal 2010.

In
April 2009, the FASB issued Staff Position (FSP) No. 115-2 and No. 124-2,Recognition and Presentation of
Other-Than-Temporary Impairments,which amended previous existing guidance for determining whether impairment is
other-than-temporary for debt securities. The FSP requires an entity to assess whether it intends to sell, or it is more likely than not that it will be required to sell a
security in an unrealized loss position before recovery of its amortized cost basis. If either of these criteria is met, the entire difference between amortized cost and fair value is recognized in
earnings. For securities that do not meet the aforementioned criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to
other factors is recognized in other comprehensive income. Additionally, the FSP expands and increases the frequency of existing disclosures about other-than-temporary
impairments for debt and equity securities. This FSP is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. The Company plans to adopt this FSP in the first quarter of fiscal 2010 and does not expect the adoption to have a material effect on its results of operations or financial
position.

In
April 2009, the FASB issued FSP No. 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset and Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of
activity, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that
is, not a

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

forced
liquidation or distressed sale) between market participants. The FSP provides a number of factors to consider when evaluating whether there has been a significant decrease in the volume and
level of activity for an asset or liability in relation to normal market activity. In addition, when transactions or quoted prices are not considered orderly, adjustments to those prices based on the
weight of available information may be needed to determine the appropriate fair value. The FSP also requires increased disclosures. This FSP is effective for interim and annual reporting periods
ending after June 15, 2009, and shall be applied prospectively. Early adoption is permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP in the first
quarter of fiscal 2010 and does not expect the adoption to have a material effect on its results of operations or financial position.

In
April 2009, the FASB issued FSP No. 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial
Instruments. This FSP amended FASB Statement No. 107,Disclosures about Fair Value of Financial Instruments, to require
disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies that were previously only required in annual financial statements. This FSP is
effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company plans to adopt this FSP in the
first quarter of fiscal 2010.

In
March 2009, the FASB unanimously voted for theFASB Accounting Standards Codification(the "Codification") to be effective for interim
and annual periods beginning on September 15, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted Accounting Principles ("GAAP"), the
Codification is not meant to change GAAP, but is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification is a new
structure which organizes existing accounting pronouncements into approximately 90 accounting topics. Once approved, the Codification will be the single source of authoritative U.S. GAAP. All
guidance included in the Codification will be considered authoritative at that time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard.
Once the Codification becomes effective, all non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.

In
May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles. This statement identifies the
sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States. The Company adopted this statement in the fourth quarter of fiscal 2009 and the adoption did not result in a change in any of our
current accounting practices.

In
March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of SFAS
No. 133("SFAS 161"), which expands the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 specifically requires
entities to provide enhanced disclosures addressing: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for
under SFAS No. 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash
flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company adopted this statement in the fourth quarter of fiscal 2009 and the
adoption did not have any affect as the Company does not engage in any hedging activities.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In December 2007, the FASB issued SFAS 141(R),Business Combinations("SFAS 141R"). SFAS 141R replaces
SFAS 141,Business Combinations("SFAS 141"). SFAS 141R retains the fundamental requirements in SFAS 141 that the
acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.
SFAS 141R also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill
acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R will apply prospectively to business combinations for which the acquisition date is on or after April 1, 2009, the beginning of
the Company's next fiscal year. While the Company has not yet evaluated this statement for the impact, if any, that SFAS 141R will have on its consolidated financial statements, the Company
will be required to expense costs related to any acquisitions after March 31, 2009.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements("SFAS 160").
SFAS 160 amended Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.
SFAS 160 is effective for the Company's fiscal year beginning April 1, 2009. The Company does not expect the impact of its adoption to have any affect as it has no noncontrolling
interests.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"), which permits entities to choose to measure eligible financial instruments and certain other items at fair value that were not previously required to be measured at fair value.
Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The adoption of SFAS 159 did not have an effect on the Company's financial position or results of operations as the Company did not elect this fair
value option.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"). SFAS No. 157 established a
framework for measuring fair value and expands disclosures about fair value measurements. The changes to previous practice resulting from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement Under Statement 13("FSP 157-1"). FSP 157-1 amended SFAS 157 to exclude from its scope SFAS No. 13 and other
pronouncements that address fair value measurements for purposes of lease classification or measurement. The scope exception does not apply to assets acquired and liabilities assumed in a business
combination that are required to be measured at fair value (including assets and liabilities not related to leases). In February 2008, the FASB issued Staff Position 157-2, Effective Date of FASB Statement
No. 157, which delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. In October 2008, the FASB issued FSP FAS No. 157-3, Determining the Fair Value of a Financial
Asset When the Market for That Asset is Not Active("FSP 157-3"). FSP 157-3

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

clarifies
the application of SFAS 157, 2008, in situations where the market is not active. The Company considered the guidance provided by FSP 157-3 in its determination of
estimated fair
values as of December 31, 2008, and determined that the impact was not material. The Company adopted the provisions of SFAS 157 effective April 1, 2008 for financial assets and
liabilities measured on a recurring basis. The adoption of SFAS 157 for financial assets and liabilities did not have a material impact on the Company's financial position or results of
operations. See Note 6 for further information regarding adoption of SFAS 157.

NOTE 2NET INCOME PER COMMON SHARE

The Company applies the provisions of EITF Issue No. 03-6,Participating Securities and the Two-Class Method under FASB Statement
128("EITF No. 03-6"), which established standards regarding the computation of earnings per share by companies with participating securities or multiple
classes of common stock. The Company's Series A through E redeemable convertible preferred stock were participating securities due to their participation rights related to cash dividends
declared by the Company.

Basic
net income available to common stockholders per share is computed by dividing the net income available to common stockholders by the weighted-average common shares outstanding for
the year. The net income available to common stockholders is calculated by deducting dividends allocable to the Company's redeemable convertible preferred stock from net income to determine the net
income available to common stockholders.

Diluted
net income available to common stockholders per share is computed giving effect to all potentially dilutive common stock, including options and common stock subject to repurchase
using the treasury stock method, and all convertible securities using the if-converted method to the extent it is dilutive.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2NET INCOME PER COMMON SHARE (Continued)

The
following table sets forth the computation of basic and diluted net income attributable to common stockholders per share:

Year Ended March 31,2009

2008

2007(In thousands, except
per share amounts)Numerators:Net income

$
9,289

$
6,773

$
7,434Net income allocated to participating redeemable convertible preferred stockholders





(5
)

(901
)Net income available to common stockholdersBasic


9,289


6,768


6,533Net income allocated to participating redeemable convertible preferred stockholders





5


855Net income available to common stockholdersDiluted

$
9,289

$
6,773

$
7,388Denominators:Weighted average sharesBasic


27,735


27,537


6,253Dilutive effect of employee stock options


650


1,004


1,584Dilutive effect of employee stock purchase plan options


1


1


Dilutive effect of redeemable convertible preferred shares





82


15,000Weighted average sharesDilutive


28,386


28,624


22,837Net income per common shareBasic

$
0.33

$
0.25

$
1.04Net income per common shareDiluted

$
0.33

$
0.24

$
0.32


The
following outstanding redeemable convertible preferred stock and common stock options were excluded from the computation of diluted net income per share as they had an antidilutive
effect:

Year Ended March 31,2009

2008

2007(In thousands)Redeemable convertible preferred stock





1


120Stock options


3,062


2,554


6103,062


2,555


730


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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3BALANCE SHEET DETAIL

March 31,2009

2008(In thousands)Inventories:Work-in-progress

$
3,112

$
5,521Finished goods


6,882


8,549Inventory at distributors


1,001


1,634$
10,995

$
15,704




March 31,2009

2008(In thousands)Accounts receivable, net:Accounts receivable

$
5,745

$
7,592Less: Allowances for sales returns, doubtful accounts and other


(123
)

(116
)$
5,622

$
7,476




March 31,2009

2008(In thousands)Prepaid expenses and other current assets:Prepaid tooling and masks

$
1,107

$
516Other receivables


796


904Other prepaid expenses


539


387$
2,442

$
1,807




March 31,2009

2008(In thousands)Property and equipment, net:Computer and other equipment

$
9,383

$
9,240Software


3,536


3,288Furniture and fixtures


235


234Leasehold improvements


729


47413,883


13,236Less: Accumulated depreciation and amortization


(8,757
)

(7,396
)$
5,126

$
5,840


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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3BALANCE SHEET DETAIL (Continued)

Depreciation
and amortization expense was $1,362,000, $1,187,000 and $836,000 for the years ended March 31, 2009, 2008 and 2007, respectively.

March 31,2009

2008(In thousands)Other Assets:Non-current deferred income taxes

$
630

$
869Deposits


118


122$
748

$
991




March 31,2009

2008(In thousands)Accrued expenses and other liabilities:Accrued compensation

$
784

$
567Accrued professional fees


149


125Accrued commissions


340


390Accrued royalties


17


48Accrued income taxes


131


2Accrued equipment and software costs


135


109Other accrued expenses


417


343$
1,973

$
1,584


NOTE 4RELATED PARTY TRANSACTIONS

HolyStone Enterprises Co. Ltd., its subsidiaries, and its Chief Executive Officer, together held approximately 11% of the outstanding shares of the Company's common stock
at March 31, 2007. Holystone's Chief Executive Officer was a director of the Company through August 28, 2007. HolyStone is no longer a related party after August 28, 2007. The
Company made sales of $2,782,000 to HolyStone Enterprises Co. Ltd. during the year ended March 31, 2007. Sales to HolyStone in fiscal 2008 from April 1, 2007 to
August 28, 2007 were $347,000.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5INCOME TAXES

Income before income taxes and the income tax expense (benefit) consists of the following:

Year Ended March 31,2009

2008

2007(In thousands)Income before income taxes:U.S

$
8,209

$
7,597

$
10,593Foreign


4,678


1,681


1,092$
12,887

$
9,278

$
11,685Current:U.S. federal

$
2,416

$
2,702

$
4,107Foreign


35


36


66State


554


(21
)

383,005


2,717


4,211Deferred:U.S. federal


273


(430
)

(132
)State


320


218


172593


(212
)

40$
3,598

$
2,505

$
4,251


The
income tax expense (benefit) differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pre-tax income as follows:

Year Ended March 31,2009

2008

2007(In thousands)U.S. Federal taxes at statutory rate

$
4,382

$
3,200

$
3,974State taxes, net of federal benefit


684


198


197Stock-based compensation


301


367


367Tax credits


(12
)

(16
)

(123
)Foreign tax rate differential


(1,429
)

(592
)

(217
)Tax exempt interest


(322
)

(541
)

(6
)Other


(6
)

(111
)

59$
3,598

$
2,505

$
4,251


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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5INCOME TAXES (Continued)

Deferred tax assets consist of the following:

March 31,2009

2008(In thousands)Deferred tax assets:Deferred revenue

$
365

$
1,009Tax credits





259Property and equipment


275


418Stock-based compensation


354


192Other reserves and accruals


611


319$
1,605

$
2,197


The
Company has no federal and state research tax credit carryforwards for income tax purposes as of March 31, 2009.

U.S.
income taxes and withholding taxes have not been provided on a cumulative total of $7.8 million of undistributed earnings for certain non-U.S. subsidiaries. The
Company currently intends to reinvest these earnings in operations outside the U.S. No provision has been made for taxes that might be payable upon remittance of such earnings, nor is it practicable
to determine the amount of such potential liability.

Effective
April 1, 2007, the Company adopted the provisions of FIN 48,Accounting for Uncertainty in Income Taxesan interpretation of
FASB Statement No. 109. FIN 48 utilizes a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with the
provisions of SFAS No. 109,Accounting for Income Taxes.

The
adoption of FIN 48 did not have a material effect on the Company's consolidated results of operations or financial position. The total amount of gross unrecognized tax
benefits as of the date of adoption was $303,000 of which $276,000, if recognized, would affect the Company's effective tax rate. The Company historically classified unrecognized tax benefits in
current taxes payable. As a result of adoption of FIN 48, $273,000 of unrecognized tax benefits were classified to long-term income taxes payable. Interest and penalties related to
uncertain tax positions accrued as of the date of adoption of FIN 48 were approximately $45,000.

There
is no current portion of the Company's unrecognized tax benefits at March 31, 2008. The current portion of the Company's unrecognized tax benefits at March 31, 2009
was $471,000. The long-term portion at March 31, 2009 and 2008 was $351,000 and $327,000, respectively, of which the timing of the resolution is uncertain. As of March 31,
2009, $365,000 of unrecognized tax benefits has been recorded as a reduction to net deferred tax assets. It is possible, however, that some months or

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5INCOME TAXES (Continued)

years
may elapse before an uncertain position for which the Company has established a reserve is resolved. A reconciliation of unrecognized tax benefits is as follows:

(In thousands)Unrecognized tax benefits as of April 1, 2008

$
327Additions based on tax positions related to current year


118Additions based on tax positions related to prior years


682Lapses during the current year applicable to statute of limitations


(20
)Unrecognized tax benefits, as of March 31, 2009

$
1,107


The
unrecognized tax benefit balance as of March 31, 2009 of $1,107,000 would affect the Company's effective tax rate if recognized.

Management
believes that there are no events that are expected to occur during the next twelve months that would cause a material change in unrecognized tax benefits.

The
Company's policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes in the Consolidated Statements of Operations. This
policy did not change as a result of the implementation of FIN 48.

The
Company is subject to taxation in the U.S. and various state and foreign jurisdictions. Fiscal years 2004 through 2009 remain open to examination by the federal and most state tax
authorities.

NOTE 6FINANCIAL INSTRUMENTS



The Company adopted SFAS 157 effective April 1, 2008 for financial assets and liabilities measured on a recurring basis.
SFAS 157 applies to all financial assets and financial liabilities that are being measured on a recurring basis. SFAS 157 established a framework for measuring fair value and expands
related disclosures. The statement 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 March 31, 2009, the Level 1 category included money market
funds of $4.6 million, which were included in cash and cash equivalents in the 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 March 31, 2009, the Level 2 category included short-term investments
of $34.7 million and long term-investments of $19.4 million, which were comprised of corporate debt securities and government and agency securities.

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6FINANCIAL INSTRUMENTS (Continued)

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
March 31, 2009, the Company had no Level 3 financial assets measured at fair value in the Consolidated Balance Sheets.



All of the Company's short-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 Consolidated Balance Sheets. The Company monitors its investments for impairment periodically and records appropriate reductions in carrying values when the declines are
determined to be other-than-temporary.

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

March 31, 2009Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value(In thousands)Short-term investmentsState and municipal obligations

$
25,545

$
178

$


$
25,723Corporate notes


9,021





(4
)

9,017Total short-term investments

$
34,566

$
178

$
(4
)
$
34,740Long-term investmentsState and municipal obligations

$
5,802

$
55

$


$
5,857Corporate notes


13,573





(2
)

13,571Total long-term investments

$
19,375

$
55

$
(2
)
$
19,428




March 31, 2008Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair
Value(In thousands)Short-term investmentsAuction rate securities

$
1,000

$


$


$
1,000State and municipal obligations


21,578


88





21,666Certificates of deposit


1,000








1,000Total short-term investments

$
23,578

$
88

$


$
23,666Long-term investmentsAuction rate securities

$
1,950

$


$
(112
)
$
1,838State and municipal obligations


13,727


40





13,767Total long-term investments

$
15,677

$
40

$
(112
)
$
15,605


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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6FINANCIAL INSTRUMENTS (Continued)

At
March 31, 2007, restricted cash consisted of certificates of deposit totaling $1,000,000 held with a financial institution as collateral for the Company's line of credit. On
May 9, 2007, the line of credit expired and was not renewed and this cash is no longer restricted.

As
of March 31, 2009, the Company held no auction rate securities. As of March 31, 2008, the carrying value of the Company's two investments in auction rate securities
totaled $2.8 million. These auction rate securities were called at par in April 2008 and December 2008, respectively, and the Company received the entire par value amount. The
$1.0 million security classified as a short-term investment as of March 31, 2008 was called at par in April 2008 and the Company received the entire par value amount. The
remaining auction rate security was classified as a long-term investment as of March 31, 2008 due to lack of liquidity and as it was not expected to be sold or redeemed within the
next twelve months. As of March 31, 2008, the Company performed a discounted cash flow analysis based on variables that reflect the risks and nature of this security, including a sensitivity
analysis on the expected time to redemption given current market conditions, and determined that a temporary impairment in value of $112,000 existed as of March 31, 2008 that was recorded in
accumulated other comprehensive income. The Company determined that no other-than-temporary impairment losses related to auction rate securities existed as of March 31,
2008.

As
of March 31, 2009, contractual maturities of the Company's available-for-sale non-equity investments were as follows:

Cost

Fair
Value(In thousands)Maturing within one year

$
34,566

$
34,740Maturing in one to three years


19,375


19,428Maturing in more than three years





$
53,941

$
54,168


NOTE 7COMMITMENTS AND CONTINGENCIES



The Company leases office space and equipment under noncancelable operating leases with various expiration dates through August 2010.
Rent expense for the years ended March 31, 2009, 2008 and 2007 was $616,000, $561,000 and $525,000, respectively. The terms of the facility lease provide for rental payments on a graduated
scale. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.

70

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7COMMITMENTS AND CONTINGENCIES (Continued)

Future
minimum lease payments under noncancelable operating leases with remaining lease terms in excess of one year at March 31, 2009 are as follows:

Year Ending March 31,

Operating
Leases(In thousands)2010

$
6072011


1422012


2013


Thereafter


Total

$
749




The Company has license agreements that require it to pay royalties on the sale of products using the licensed technology. Royalty
expense for the years ended March 31, 2009, 2008 and 2007 was $88,000, $93,000 and $121,000, respectively, and was included within cost of revenues.



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

It
is not possible to predict the maximum potential amount of future payments 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 did not have a material effect on its business, financial condition,
cash flows or results of operations. The Company believes that if it were to incur a loss in any of these matters, such loss should not have a material effect on its business, financial condition,
cash flows or results of operations.



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 years ended March 31, 2009, 2008 or 2007.

71

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7COMMITMENTS AND CONTINGENCIES (Continued)



From time to time, the Company may be involved in litigation relating to claims arising out of day-to-day
operations.

NOTE 8REDEEMABLE CONVERTIBLE PREFERRED STOCK

On April 3, 2007, all shares of redeemable convertible preferred stock were converted into common stock immediately prior to the closing of the initial public offering of the
Company's common stock.

NOTE 9COMMON STOCK

The Company's Certificate of Incorporation, as amended, authorizes the Company to issue 150,000,000 shares of $0.001 par value common stock. The Company's initial public offering of
common stock
closed on April 3, 2007. The Company issued 6,131,111 shares of common stock at an initial public offering price of $5.50, for an aggregate offering price of $33.7 million. Net proceeds
to the Company after an underwriting discount of $2.4 million and offering expenses of $1.3 million were $30.0 million.

NOTE 10STOCK BASED COMPENSATION

In 1997, the Company adopted the 1997 Stock Plan (the "1997 Plan"). The 1997 Plan provides for the granting of stock options and stock purchase rights to employees and consultants of the
Company. Options granted under the 1997 Plan may be either incentive stock options ("ISOs") or nonstatutory stock options ("NSOs"). ISOs may be granted only to Company employees (including officers
and directors who are also employees). NSOs may be granted to Company employees and consultants. The Company has reserved 8,450,000 shares of common stock for issuance under the 1997 Plan.

In
February 2001, the Company adopted the 2000 Stock Option Plan (the "2000 Plan"). The 2000 Plan provides for the granting of stock options and stock purchase rights to employees,
consultants and directors of the Company. Options granted under the 2000 Plan may be either ISOs or NSOs. In December 2006, the Company's board of directors authorized an additional 500,000 shares of
the Company's common stock to be reserved for issuance under the 2000 Plan. As of March 31, 2008, the Company had reserved 3,500,000 shares of common stock for issuance under the 2000 Plan.

In
February 2001, the Company elected to terminate the 1997 Plan. The termination of the 1997 Plan included the provisions that no further options shall be granted under the 1997 Plan.
However, the outstanding options and the shares issued upon exercise of the options granted under the 1997 Plan shall continue to be governed by the terms and conditions of the 1997 Plan. All
2,748,298 shares not granted as of the adoption of the 2000 Plan were cancelled.

Options
under both the 1997 and 2000 Plans may be granted for periods of up to ten years, however in the case of ISOs granted to an optionee who, at the time the option is granted, owns
stock representing more than 10% of the voting power of all classes of stock of the Company, the term of the option shall be 5 years from the date of grant. The exercise price of an ISO and NSO
shall not be less than 100% and 85% of the estimated fair value of the shares as determined by the board of directors on the date of grant, respectively, however the exercise price of an ISO and NSO
granted to a 10% or greater stockholder shall not be less than 110% of the estimated fair value of the shares on the

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10STOCK BASED COMPENSATION (Continued)

date
of grant, respectively. To date, the initial options granted to each person generally vest 25% on the first anniversary and subsequent anniversaries of the date of grant.

In
January 2007, the Company's board of directors approved an equity incentive plan, (the "Equity Plan"), which was subsequently approved by the Company's stockholders in March 2007. A
total of 3,000,000 shares of common stock were authorized and reserved for issuance under the Equity Plan. This reserve will automatically increase on April 1, 2008 and each subsequent
anniversary through 2017, by an amount equal to the smaller of (a) five percent (5%) of the number of shares of stock issued and outstanding on the immediately preceding March 31, or
(b) a lesser amount determined by the board of directors. Appropriate adjustments will be made in the number of authorized shares and other numerical limits in the Equity Plan and in
outstanding awards to prevent dilution or enlargement of participants' rights in the event of a stock split or other change in our capital structure. Shares subject to awards which expire or are
cancelled or forfeited will again become available for issuance under the Equity Plan. The shares available will not be reduced by awards settled in cash or by shares withheld to satisfy tax
withholding obligations. Only the net number of shares issued upon the exercise of stock appreciation rights or options exercised by means of a net exercise or by tender of previously owned shares
will be deducted from the shares available under the Equity Plan. All 535,597 shares not granted under the 2000 Plan were cancelled upon adoption of the Equity Plan in March 2007 by the Company's
stockholders.

Awards
may be granted under the Equity Plan to the Company's employees, including officers, directors, or consultants or those of any present or future parent or subsidiary corporation
or other affiliated entity. While the Company may grant incentive stock options only to employees, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock
purchase rights or bonuses, restricted stock units, performance shares, performance units and cash-based awards or other stock-based awards to any eligible participant.
Non-employee director awards will be granted only to members of the Company's board of directors who, at the time of grant, are not employees. Deferred compensation awards may be granted
only to officers, directors and selected members of management or highly compensated employees.

Only
members of the board of directors who are not employees at the time of grant are eligible to participate in the nonemployee director awards component of the Equity Plan. The board
or the compensation committee shall set the amount and type of nonemployee director awards to be awarded on a periodic, non-discriminatory basis. Nonemployee director awards may be granted
in the form of nonstatutory stock options, stock appreciation rights, restricted stock awards and restricted
stock unit awards. Subject to adjustment for changes in our capital structure, no nonemployee director may be awarded, in any fiscal year, one or more nonemployee director awards for more than 2,000
shares. However, the annual limit may be increased by the following additions: (i) an additional 10,000 shares in the fiscal year in which the nonemployee director is first appointed or elected
to the board, (ii) an additional 2,000 shares in any fiscal year in which the nonemployee director is serving as the chairman or lead director of the board, (iii) an additional 1,000
shares in any fiscal year for each committee of the board on which the nonemployee director is then serving other than as chairman of the committee, and (iv) an additional 2,000 shares in any
fiscal year for each committee of the board on which the nonemployee director is then serving as chairman of the committee.

In
the event of a change in control as described in the Equity Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the Equity Plan or
substitute

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10STOCK BASED COMPENSATION (Continued)

substantially
equivalent awards. Any awards which are not assumed or continued in connection with a change in control or exercised or settled prior to the change in control will terminate effective as
of the time of the change in control. The administrator may provide for the acceleration of vesting of any or all outstanding awards upon such terms and to such extent as it determines, except that
the vesting of all nonemployee director awards will automatically be accelerated in full. The Equity Plan also authorizes the administrator, in its discretion and without the consent of any
participant, to cancel each or any outstanding award denominated in shares upon a change in control in exchange for a payment to the participant with respect to each vested share subject to the
cancelled award of an amount equal to the excess of the consideration to be paid per share of common stock in the change in control transaction over the exercise price per share, if any, under the
award.

In
January 2007, the board of directors approved the 2007 Employee Stock Purchase Plan (the "2007 Purchase Plan") which was subsequently approved by the Company's stockholders in March
2007. A total of 500,000 shares of the Company's common stock was authorized and reserved for sale under the 2007 Purchase Plan. In addition, the 2007 Purchase Plan provides for an automatic annual
increase in the number of shares available for issuance under the plan on April 1 of each year beginning in 2008 and continuing through and including April 1, 2017 equal to the lesser of
(1) one percent (1%) of our then issued and outstanding shares of common stock on the immediately preceding March 31, (2) 250,000 shares or (3) a number of shares as the
board of directors may determine. Appropriate adjustments will be made in the number of authorized shares and in outstanding purchase rights to prevent dilution or enlargement of participants' rights
in the event of a stock split or other change in our capital structure. Shares subject to purchase rights which expire or are canceled will again become available for issuance under the 2007 Purchase
Plan.

The
Company's employees and employees of any parent or subsidiary corporation designated by the administrator will be eligible to participate in the 2007 Purchase Plan if they are
customarily employed by us for more than 20 hours per week and more than 5 months in any calendar year. However, an employee may not be granted a right to purchase stock under the 2007
Purchase Plan if: (1) the employee immediately after such grant would own stock possessing 5% or more of the total combined voting power or value of all classes of our capital stock or of any
parent or subsidiary corporation, or
(2) the employee's rights to purchase stock under all of our employee stock purchase plans would accrue at a rate that exceeds $25,000 in value for each calendar year of participation in such
plans.

The
2007 Purchase Plan is designed to be implemented through a series of sequential offering periods, generally six (6) months in duration beginning on the first trading day on or
after May 1 and November 1 of each year. The administrator is authorized to establish additional or alternative sequential or overlapping offering periods and offering periods having a
different duration or different starting or ending dates, provided that no offering period may have a duration exceeding 27 months.

Amounts
accumulated for each participant under the 2007 Purchase Plan are used to purchase shares of the Company's common stock at the end of each offering period at a price generally
equal to 85% of the lower of the fair market value of our common stock at the beginning of an offering period or at the end of the offering period. Prior to commencement of an offering period, the
administrator is authorized to reduce, but not increase, this purchase price discount for that offering period, or, under circumstances described in the 2007 Purchase Plan, during that offering
period. The maximum number of shares a participant may purchase in any six-month offering period is the lesser of (i) that number of

74

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10STOCK BASED COMPENSATION (Continued)

shares
determined by multiplying (x) 1,000 shares by (y) the number of months (rounded to the nearest whole month) in the offering period and rounding to the nearest whole share or
(ii) that number of whole shares determined by dividing (x) the product of $2,083.33 and the number of months (rounded to the nearest whole month) in the offering period and rounding to
the nearest whole dollar by (y) the fair market value of a share of our common stock at the beginning of the offering period. Prior to the beginning of any offering period, the administrator
may alter the maximum number of shares that may be purchased by any participant during the offering period or specify a maximum aggregate number of shares that may be purchased by all participants in
the offering period. If insufficient shares remain available under the plan to permit all participants to purchase the number of shares to which they would otherwise be entitled, the administrator
will make a pro rata allocation of the available shares. Any amounts withheld from participants' compensation in excess of the amounts used to purchase shares will be refunded, without interest.

In
the event of a change in control, an acquiring or successor corporation may assume our rights and obligations under the 2007 Purchase Plan. If the acquiring or successor corporation
does not assume such rights and obligations, then the purchase date of the offering periods then in progress will be accelerated to a date prior to the change in control.

The
following table summarizes stock option activities:

Shares
Available
for Grant

Number of
Options
Outstanding

Weighted
Average
Remaining
Contractual
Life (Years)

Weighted
Average
Exercise
Price

Intrinsic
ValueBalance at March 31, 2006


4,024,178


3,502,963





2.76Options reserved


3,500,000








Plans terminated


(3,535,597
)







Granted


(1,204,169
)

1,204,169





5.57Exercised





(179,125
)




0.69

$
918,531Forfeited


215,588


(215,588
)




3.97Balance at March 31, 2007


3,000,000


4,312,419





3.57Granted


(444,216
)

444,216





3.47Exercised





(160,800
)




0.60


387,080Forfeited


3,680


(99,415
)




3.51Balance at March 31, 2008


2,559,464


4,496,420





3.67Options reserved


1,387,774








Granted


(956,338
)

956,338





3.34Exercised





(382,547
)




1.14


822,449Forfeited


32,488


(89,474
)




4.76Balance at March 31, 2009


3,023,388


4,980,737




$
3.78Options vested and exercisable





3,227,544


3.84

$
3.68

$
978,211Options vested and expected to vest





4,888,237


5.49

$
3.78

$
1,006,154


75

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10STOCK BASED COMPENSATION (Continued)

The
options outstanding and by exercise price at March 31, 2009 are as follows:

Options Outstanding

Options ExercisableExercise Price

Number
Outstanding

Weighted
Average
Exercise
Price

Weighted
Average
Remaining
Contractual
Life (Years)

Number
Vested and
Exercisable

Weighted
Average
Exercise
Price$0.15


160,004

$
0.15


0.35


160,004

$
0.15$2.00


569,027

$
2.00


1.03


569,027

$
2.00$2.10


653,391

$
2.10


4.18


653,391

$
2.10$2.43 - 3.37


799,750

$
2.93


9.49


30,640

$
2.60$3.50 - 4.00


628,402

$
3.80


6.22


338,866

$
3.76$4.20 - 4.70


348,360

$
4.32


7.73


104,564

$
4.44$5.40


656,067

$
5.40


2.04


656,067

$
5.40$5.50


960,536

$
5.50


7.56


602,385

$
5.50$5.75 - 6.00


171,200

$
5.78


7.15


95,600

$
5.80$6.70


34,000

$
6.70


7.78


17,000

$
6.704,980,737








3,227,544




The Company recognized $1,328,000, $1,461,000 and $1,216,000 of stock-based compensation expense for the years ended March 31,
2009, 2008 and 2007, respectively, as follows:

Year Ended March 31,2009

2008

2007(In thousands)Cost of revenues

$
297

$
294

$
227Research and development


436


469


515Selling, general and administrative


595


698


474Total

$
1,328

$
1,461

$
1,216


Stock
based compensation expense in the years ended March 31, 2009 and 2008 includes $54,000 and $8,000, respectively, related to the Company's Employee Stock Purchase Plan.

The
Company recognized related income tax benefits of $168,000, $141,000 and $51,000 in the years ended March 31, 2009, 2008 and 2007, respectively. Windfall tax benefits realized
from exercised stock options were $280,000, $13,000 and $0 during the fiscal years ended March 31, 2009, 2008 and 2007, respectively. Compensation cost capitalized within inventory at
March 31, 2009 was insignificant. As of March 31, 2009, the Company's total unrecognized compensation cost was $2.2 million, which will be recognized over the weighted average
period of 1.74 years. The Company calculated the fair value

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GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10STOCK BASED COMPENSATION (Continued)

of
stock based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:

Year Ended March 31,Stock Option Plans:

2009

2008

2007Risk-free interest rate


1.76 - 3.16
%

2.54 - 4.76
%

4.63 - 4.86
%Expected life (in years)


5.00


4.00


4.00Volatility


43.5 - 48.2
%

40.3 - 43.8
%

56 - 71
%Dividend yield


0
%

0
%

0
%ESPP:Risk-free interest rate


0.87 - 1.89
%

2.27
%

Expected life (in years)


0.5


0.28


Volatility


48.7 - 58.0
%

74.2
%

Dividend yield


0
%

0
%




The
weighted average fair value of options granted during the years ended March 31, 2009, 2008 and 2007 was $1.45, $1.32 and $3.08, respectively.

NOTE 11SEGMENT AND GEOGRAPHIC INFORMATION

The Company has adopted Statement of Financial Accounting Standards No. 131,Disclosure about Segments of an Enterprise and Related
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 revenue by geographic area based on the location to which product is shipped:

Year Ended March 31,2009

2008

2007(In thousands)United States

$
23,853

$
24,960

$
29,730China


13,242


7,841


5,885Malaysia


11,406


9,980


10,579Singapore


7,951


4,873


4,425Rest of the world


5,656


5,516


7,540$
62,108

$
53,170

$
58,159


All
sales are denominated in United States dollars.

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Table of Contents

GSI TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11SEGMENT AND GEOGRAPHIC INFORMATION (Continued)

The
locations and net book value of long-lived assets are as follows:

March 31,2009

2008(In thousands)United States

$
2,503

$
3,945Taiwan


2,623


1,895$
5,126

$
5,840


NOTE 12EMPLOYEE BENEFIT PLAN

The Company provides a defined contribution retirement plan (the "Retirement Plan"), which qualifies under Section 401(k) of the Internal Revenue Code of 1996. The Retirement Plan
covers essentially all United States employees. Eligible employees may make contributions to the Retirement Plan up to 15% of their annual compensation, but no greater than the annual IRS limitation
for any plan year. The Retirement Plan does not provide for Company contributions.

NOTE 13QUARTERLY FINANCIAL DATA (Unaudited)

Three Months EndedJune 30,
2008

Sept. 30,
2008

Dec. 31,
2008

March 31,
2009(In thousands, except per share amounts)Consolidated Statement of Operations Data:Net revenues

$
17,344

$
17,094

$
14,030

$
13,640Gross profit

$
7,691

$
7,818

$
5,996

$
5,051Net income

$
3,028

$
3,570

$
1,487

$
1,204Net income per common shareBasic

$
0.11

$
0.13

$
0.05

$
0.04Net income per common shareDiluted

$
0.11

$
0.12

$
0.05

$
0.04




Three Months EndedJune 30,
2007

Sept. 30,
2007

Dec. 31,
2007

March 31,
2008(In thousands, except per share amounts)Net revenues

$
11,305

$
12,672

$
13,978

$
15,215Gross profit

$
4,419

$
4,588

$
5,545

$
6,771Net income

$
1,054

$
1,249

$
1,658

$
2,812Net income per common shareBasic

$
0.04

$
0.05

$
0.06

$
0.10Net income per common shareDiluted

$
0.04

$
0.04

$
0.06

$
0.10


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Table of Contents

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T).Controls and Procedures

Management's Evaluation of Disclosure Controls and Procedures

Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2009, 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-K.

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 March 31, 2009 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our
management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all
error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the
design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any within GSI Technology, have been detected.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and can only provide
reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We
assessed the effectiveness of our internal control over financial reporting as of March 31, 2009. In making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO") inInternal ControlIntegrated Framework. Based on our assessment using those
criteria, our management (including our Chief Executive Officer and Chief Financial Officer) concluded that our internal control over financial reporting was effective as of March 31, 2009.

This
Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding our internal control over
financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to

79

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Table of Contents

temporary
rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report on Form 10-K.

Item 9B.Other Information

None.

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Table of Contents

PART III

The SEC allows us to include information required in this report by referring to other documents or reports we have already filed or
will soon be filing. This is called "incorporation by reference." We intend to file our definitive proxy statement for our 2009 annual meeting of stockholders (the "Proxy Statement") pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered by this report, and certain information therein is incorporated in this report by reference.

Item 10.Directors, Executive Officers and Corporate Governance

The information required by this item with respect to executive officers is set forth in Part I of this Annual Report on
Form 10-K and the remaining information required by this item is incorporated by reference from the sections entitled "Election of Directors," "Section 16(a) Beneficial
Ownership Reporting Compliance," and "Corporate Governance" to be included in the Proxy Statement.

Item 11.Executive Compensation

The information required by this item is incorporated by reference from the section entitled "Executive Compensation" to be included in
the Proxy Statement.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference from the section entitled "Principal Stockholders and Stock
Ownership by Management" to be included in the Proxy Statement.

Item 13.Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the section entitled "Related Person Transactions" and
"Corporate GovernanceDirector Independence" to be included in the Proxy Statement for its 2009 annual stockholders' meeting.

Item 14.Principal Accounting Fees and Services

The information required by this item is incorporated by reference from the section entitled "Ratification of Appointment of
Independent Auditors" to be included in the Proxy Statement.

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Table of Contents

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)   The
following documents are filed as part of this Form:



PageReport of Independent Registered Public Accounting Firm

49Consolidated Balance Sheets

50Consolidated Statements of Operations

51Consolidated Statements of Stockholders' Equity

52Consolidated Statements of Cash Flows

53Notes to Consolidated Financial Statements

54




Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in
the consolidated financial statements or notes herein.



The
following exhibits are filed herewith:

Exhibit
Number

Name of Document3.1

Restated Certificate of Incorporation of Registrant (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed on February 16,
2007)3.2

Bylaws of Registrant (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed on February 16, 2007)10.1

Form of Indemnification Agreement between Registrant and Registrant's directors and officers (Incorporated by reference to identically- numbered exhibit to Registrant's Registration Statement on Form S-1 (File
No. 333-139885) filed on January 10, 2007)10.2
*
1997 Stock Plan and form of Stock Option Agreement (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed on
February 16, 2007)10.3
*
2000 Stock Option Plan and form of Stock Option Agreement (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed on
February 16, 2007)10.4
*
2007 Equity Incentive Plan (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed on March 12, 2007)10.5
*
2007 Employee Stock Purchase Plan and form of Subscription Agreement (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File No. 333-139885) filed
on February 16, 2007)


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Exhibit
Number

Name of Document10.6

Building Office Lease for 2360 Owen Street, Santa Clara, California 95054, as amended (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File
No. 333-139885) filed on January 10, 2007)10.7

Building Office Lease for No. 1, 6th Floor, 30 Taiyuan Street, Chupei City, Taiwan (Incorporated by reference to identically-numbered exhibit to Registrant's Registration Statement on Form S-1 (File
No. 333-139885) filed on February 16, 2007)10.8
*
Form of Notice of Grant of Stock Option (U.S. Participant) (Incorporated by reference to Exhibit 99.1 to Registrant's Current Report on Form 8-K filed on June 4, 2007)10.9
*
Form of Notice of Grant of Stock Option (Non-U.S. Participant) (Incorporated by reference to Exhibit 99.2 to Registrant's Current Report on Form 8-K filed on June 4, 2007)10.10
*
Form of Stock Option Agreement (U.S. Participant) (Incorporated by reference to Exhibit 99.3 to Registrant's Current Report on Form 8-K filed on June 4, 2007)10.11
*
Form of Stock Option Agreement (Non-U.S. Participant) (Incorporated by reference to Exhibit 99.4 to Registrant's Current Report on Form 8-K filed on June 4, 2007)10.12
*
GSI Technology, Inc. 2009 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on June 13, 2008)10.13
*
GSI Technology, Inc. 2010 Variable Compensation Plan (Incorporated by reference to Exhibit 10.1 to Registrant's Current Report on Form 8-K filed on June 8, 2009)21.1

List of Subsidiaries23.1

Consent of Independent Registered Public Accounting Firm31.1

Certification of Lee-Lean Shu, President, Chief Executive Officer, and Director, pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.31.2

Certification of Douglas Schirle, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1

Certification of Lee-Lean Shu, President, Chief Executive Officer, and Director, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.32.2

Certification of Douglas Schirle, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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: June 10, 2009

GSI TECHNOLOGY, INC.By:

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


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Lee-Lean Shu
and Robert Yau, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual
Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Name

Title

Date/s/ LEE-LEAN SHU Lee-Lean Shu

President, Chief Executive Officer
and Chairman (Principal Executive Officer)

June 10, 2009/s/ DOUGLAS M. SCHIRLE Douglas M. Schirle

Chief Financial Officer (Principal Financial and Accounting
Officer)

June 10, 2009/s/ ROBERT YAU Robert Yau

Vice President, Engineering, Secretary
and Director

June 10, 2009/s/ RUEY L. LU Ruey L. Lu

Director

June 10, 2009/s/ ARTHUR O. WHIPPLE Arthur O. Whipple

Director

June 10, 2009/s/ HAYDN HSIEH Haydn Hsieh

Director

June 10, 2009


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SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

Description

Balance at
Beginning of
Period

Charges to Cost
and Expenses

Deductions

Balance at End
of Period(In thousands)Year ended March 31, 2009Allowance for sales returns, doubtful accounts and other

$
116

$
244

$
237

$
123Year ended March 31, 2008Allowance for sales returns, doubtful accounts and other

$
108

$
249

$
241

$
116Year ended March 31, 2007Allowance for sales returns, doubtful accounts and other

$
213

$
101

$
206

$
108


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