GSI Technology, Inc. Aktie

Good day, and welcome to GSI Technology's Second Quarter Fiscal Year 2027 Results Conference Call. [Operator Instructions]

Before we begin today's call, GSI Technology has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission.

Additionally, I have also been asked to advise you that this conference call is being recorded today, November 5, 2026, at the request of GSI Technology. Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer, will be hosting the call today.

With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr. Shu. Please go ahead, sir.

Thank you, operator, and thank you all for joining us today. In the second quarter of fiscal 2027, we made progress on our projects and plan to bring our APU technology to market. We recently announced that the initial stage of our Smart Guardian Eye Phase I project in Taiwan was accepted. The system is now providing live AI video monitoring and incident reporting, confirming Gemini-II can perform in real-world applications. We plan to leverage these projects into repeatable business and revenue.

In addition to securing design wins for Gemini-II, we are advancing 2 important initiatives to grow our APU business: our AI-assisted software development kit, or SDK, and the Plato, our next-generation APU. Our team continues to test and improve our AI-assisted SDK, and I will update you on that progress.

Plato, our next-generation APU, remains on schedule for tape-out in March 2027. We expect to have the first-spin chips ready for initial sampling by late summer of calendar 2027. Plato is designed to run AI inference at less than 10 watts of power. We believe its low-power capability will open new market opportunities for GSI. We are also seeing interest from potential strategic partners who could help us to expand our capabilities to enter new markets.

For the remainder of fiscal 2027, we have 3 main goals. We plan to pursue Phase II of the Smart Guardian Eye project, finalize our AI-assisted SDK for commercial release in the first half of calendar 2027, and complete Plato's tape-out by seeking strategic partners as we prepare to bring it to market.

Didier will now provide more detail on our business and technology progress, followed by Doug, who will review our financial results and outlook. Afterwards, we will be happy to answer your questions. Didier over to you.

Thank you, Lee-Lean. As we discussed on our last call, our Gemini-II commercialization strategy is to focus our resources on a small number of proof of concepts and early deployment programs. Our goal is to turn these projects into reference applications and apply the software and engineering work to similar opportunities. This approach will allow us to pursue new applications more efficiently without significantly expanding our internal engineering resources.

I'll begin with Smart Guardian Eye in Hsinchu County, Taiwan, where shortly after the quarter end in early October, we achieved our first most visible commercial milestone to date. As Lee-Lean mentioned, the county accepted the initial stage of Phase I, and the system is now providing live AI video monitoring and incident reporting.

As a reminder, the Phase I program covers approximately 20 cameras and demonstrates that Gemini-II can support real-world applications where timely detection and response are crucial to public safety.

Our next opportunity in this project will be Phase II, which is expected to expand the deployment to approximately 80 cameras and introduce automatic speech recognition. We are preparing to submit a proposal once the government issues its quote request. Any additional work we receive on this project will depend on the competitive procurement process and the county's final decision.

The Smart Guardian Eye platform combines image interpretation, event detection, and natural language capabilities that identify relevant activity and help operators respond more rapidly. We are pursuing opportunities to apply these capabilities to other surveillance and smart infrastructure applications, leveraging the software and integration work developed for this project.

This is the model we intend to use: develop a solution for a specific application, demonstrate its performance in the field, and reuse the technology across future deployments.

Let me switch gears now to talk about the AI-assisted SDK that we are now calling GRINN. GRINN. GRINN which stands for GSI Runtime Infrastructure for Neural Networks, is expected to play an important role in our Gemini-II commercialization strategy.

Our software engineers are now using GRINN for model and algorithm development. They can take existing models from open source platforms such as Hugging Face and GitHub and adapt them to run on the APU within hours. GRINN is designed to support a broad range of neural networks, significantly reducing engineering efforts previously required to bring models onto our architecture.

On our last call, we reported that GRINN had reduced development work previously requiring approximately 1 man-year to less than a month. Since then, we have made further improvements, with some development tasks now completed in less than a week. While development times vary depending on the complexity of the model application, these improvements demonstrate GRINN's growing capabilities.

Beyond reducing development time, GRINN has developed an ability to understand the APU architecture and apply that knowledge to optimize how AI models are implemented on our chip. We believe that this hardware-aware approach is an important differentiator from conventional software development tools.

By simplifying model adaptation and reducing engineering effort, GRINN should make it easier and faster for customers and system integrators to evaluate Gemini-II, while allowing GSI to support more simultaneous evaluations. Our development team is incorporating feedback from internal users to further refine GRINN's performance. We expect to release it to initial customers before the end of December 2026, followed by a commercial release in the first half of calendar '27.

Turning to our Sentinel program with G2 Tech. We have completed our chip and software deliverables for the early phase of the project. Laboratory testing demonstrated a fast first to -- I'm sorry, time to first token of approximately 2.4 seconds for the Gemma-3 12B model, meeting the low latency and power efficiency requirements of this drone and perimeter security applications.

The next step is a field demonstration under G2 Tech's leadership. The timing depends on our partner and the participating defense agencies. We currently anticipate that this demonstration could take place in the first half of calendar 2027. A successful demonstration would represent another important validation of Gemini-II, along further funding and commercial orders will depend on subsequent program decisions.

We also continue to advance our government-funded Small Business Innovation Research, or SBIR programs. Under the U.S. Army Phase I SBIR award, we are developing a ruggedized Gemini-II-based Edge AI node designed for demanding military environments. This program is valuable because government funding supports the development of the hardware and software that could potentially be adapted by us for other defense applications.

It also allows us to demonstrate the APU's capabilities and systems that operate reliably under difficult field conditions. We expect this project to be completed in summer 2027. In our work with the Space Development Agency, we completed radiation testing on a standard off-the-shelf Gemini-II device. We received and reviewed the single event latch-up test results and are awaiting the final interpretation of the total ionizing dose results.

The preliminary findings based on the single event latch-up test results are very encouraging and indicate that Gemini-II is radiation tolerant. This implies that an off-the-shelf Gemini-II chip can be suitable for certain space and harsh environment applications. We look forward to sharing the information once the final reports are available.

As Lee mentioned, Plato remains on schedule for tape-out in March 2027. We are targeting our first-spin chips for initial sampling by late summer of calendar '27. Plato is designed to deliver AI inference at less than 10 watts, making it suitable for AI processing that takes place locally with limited power, cooling, or access to electricity.

Examples would include battery-powered cameras, small autonomous drones, mobile robots, and remote industrial sensors. To put that into perspective, Plato utilizes about the same amount of power as an LED bulb in a desk lamp. We believe this combination of low power consumption and fast response times would open up a large market for GSI in autonomous systems, robotics, intelligent cameras, and other edge AI applications.

As we experienced with Gemini-II, initial silicon may be suitable for evaluation with software workarounds while additional testing and refinement continue. However, it remains to be seen whether a subsequent chip revision will be necessary before commercial production.

Plato's preliminary performance and power efficiency targets are also attracting interest from potential strategic partners. Partnerships are an important part of our commercialization strategy for Plato. They could provide the resources, software expertise, and market access to pursue new opportunities that we cannot address independently today.

In summary, our recent progress provides further evidence that Gemini-II can perform in real-world customer applications. Going forward, our focus remains on completing existing programs, turning successful projects into additional commercial opportunities, and delivering GRINN to support a broader ecosystem for customers and system integrators. At the same time, we are keeping Plato's development program on schedule and pursuing strategic partners to support its commercialization.

With that, I'll turn it over to Doug. Doug, go ahead, please.

Thank you, Didier. In my comments, I will provide additional context around the second quarter financial results included in the earnings release we issued today after the market close. Revenue for the second quarter of fiscal 2027 was $6 million, within our guidance range but slightly below the midpoint.

During the quarter, some inventory levels were insufficient to fulfill certain customer orders, and extended manufacturing lead times made it more difficult to replenish inventory. As a result, some customer shipments have been delayed, which is also affecting our revenue outlook for the third quarter.

Overall, our SRAM revenue has remained relatively stable over the past 6 quarters, although customer ordering patterns have become more variable in this fiscal year. As we have discussed previously, these fluctuations in customer order patterns can affect quarterly revenue and gross margin.

For example, we had no shipments to Cadence during the second quarter, while sales to KYEC represented 19.7% of net revenues compared to 16.1% in the preceding quarter. Despite the variability in quarterly orders, we continue to anticipate shipments to our customers supporting AI chip design and semiconductor manufacturing.

Shipments to military and defense customers accounted for 46.7% of total shipments in the second quarter, compared with 28.9% in the year-ago quarter and 31.3% in the preceding quarter. This proportion is consistent with historical levels before the recent increase in sales to customers supporting AI chip design and semiconductor manufacturing.

Second quarter gross margin was 48.5%, below our guidance range of 53% to 55%, primarily reflecting higher manufacturing costs related to constraints affecting wafers and outsourced assembly, burn-in, and testing. These cost pressures are continuing into the third quarter. Together with the anticipated product mix, they are affecting our gross margin outlook.

As stated in today's earnings release, we currently anticipate third quarter fiscal 2027 revenue of $5 million to $6 million with gross margin of approximately 38% to 40%. To address higher manufacturing costs, we plan to implement customer price increases immediately on new orders and effective January 1 on existing backlog. We're also working with our manufacturing partners to improve inventory availability, while the replenishment will take time given current manufacturing lead times. We anticipate that these measures will support a recovery in revenue and gross margin beginning in the fourth quarter of fiscal 2027.

Turning to operating expenses. Total operating expenses increased to $10.4 million compared with $6.7 million in the year-ago quarter and $8.8 million in the preceding quarter. Two factors contributed to this increase. The year-over-year increase in R&D this quarter was primarily driven by external design services related to Plato.

As I've stated on our prior earnings calls, we expect these development costs to continue through the planned tape-out in March 2027. The increase in R&D expenses was partially offset by higher government funding under our SBIR programs. These offsets totaled $556,000 during the quarter compared with $279,000 a year ago and $336,000 in the preceding quarter.

As a reminder, SBIR funding offsets certain development expenses and varies quarterly based on project milestones and the timing of reimbursements. Our software development costs can also be affected by fluctuations in the Israeli shekel relative to the U.S. dollar.

The second factor affecting operating expenses this quarter was an increase in selling, general and administrative expense, primarily related to approximately $2 million of non-routine legal and professional fees associated with an internal assessment of certain vendor matters within our foreign operations. These fees were partially offset by a $600,000 gain from assets received in the vendor settlement, resulting in a net impact of approximately $1.4 million. The internal assessment was concluded during the quarter, and we do not expect significant additional expenses related to these matters.

Further information is included in our earnings release and SEC filings. Operating loss for the second quarter was $7.4 million compared to $5.4 million in the preceding quarter. Our net loss was $7 million, or $0.18 per diluted share.

Turning to the balance sheet, our cash and our cash flow. We ended the quarter with $69.2 million in cash and cash equivalents compared with $77 million at June 30, 2026. Net cash used in operating activities was approximately $8 million during the quarter, reflecting spending on Plato development, Gemini-II commercialization, and the internal assessment discussed earlier. You can find the detail of the cash flow in today's earnings release.

Our operating cash usage this quarter exceeded our previously discussed expectation of approximately $4.0 million per quarter, primarily for the reasons I just reviewed. Despite the higher cash usage this quarter and based on our current operating plan, we continue to anticipate quarterly cash usage of approximately $4 million, or $16 million annually, as we complete Gemini-II software development and advance Plato toward tape-out. Actual cash usage may vary depending on the timing of development milestones and other program activities.

We ended the quarter with no debt and a cash balance of $69.2 million, above the $67.2 million we reported as of the end of fiscal 2026. Our debt-free balance sheet provides the financial resources to continue our planned investments in Gemini-II commercialization, including software development and ongoing development of Plato, while maintaining a disciplined approach to capital allocation. This concludes our prepared remarks.

Operator, at this point, please open the call to Q&A.

[Operator Instructions] Our first question will come from David Williams of Needham.

I guess maybe first, maybe around the constraints that you mentioned and maybe some of the order patterns. And if you can maybe give us a little more color around where you're seeing the constraints and the magnitude of those and where you think you might have an opportunity to overcome some of that in the next couple of quarters?

Well, we have issues with customers, particularly the larger customers, that as much as we tell them that they need to place backlog given the manufacturing constraints that we're seeing and lead times we're seeing, that hasn't happened yet. A lot of our smaller customers have placed backlog, and that's probably okay. But the real issue has been with the larger customers with the higher volume products.

Yes. And that also is coupled with the extension on the lead times, substrate lead times, assembly lead times have all gone out as well. So it's between those 2, it's affected -- that's the constraint.

Okay. Great. And then maybe, Didier, I think you had mentioned the strategic partners in your script. And just wonder if you can elaborate a bit more on those strategic partners, what that could look like and maybe when you expect to be able to announce something more solid there.

That's a good question. We can't discuss anything yet because nothing is signed at this point. We are having discussions and as we discussed, it would be to bring us into a market or markets that we are currently not addressing ourselves.

And so it's certainly interesting for us for that to have somebody else do the development, both on the hardware system side along with the software to support those. And so we've been negotiating for some time now. There might be something by the end of this year or into early next year.

Okay. Great. And then maybe just any color on the SDK, like the GRINN, I believe, is what you've named that. But maybe just talk about that expectation. Obviously, it's doing better today. You said 1 week versus a month in terms of how quickly that's accelerating. But it seems like that platform opens a lot of opportunities and really gets you close to that commercialization. And one, I guess, is that fair? And then what maybe are you most encouraged by from -- that you've seen from GRINN so far?

Yes, absolutely. We need the software tools. Up until now, we've been completely reliant on our Israeli team for all of the models and algorithm development. And as you guys know, it's -- we have limited resources within the company. And so in that respect, it limits what we can do. And so what we're doing now, and we kind of discussed this, is to try and different POCs.

We've done a drone. We're in a smart city. We're looking at other POCs. And that shows that we're viable for a certain market. But then in order to attract customers and integrators to really address all the customers within those markets, they're going to need the tools.

And so with GRINN, it's going to allow them to develop their own algorithms and models without us helping them. And because, again, we just can't scale that way the way we're doing it now. So GRINN is going to be critical for us to be able to build the ecosystem for all the customers along the markets.

Great. Fantastic. And then maybe just lastly, you talked a little bit about seeing some interest in Plato. Can you talk a little bit about the different platforms and where you're seeing the interest between Gemini and Plato and maybe just the size of the magnitude of that interest today? And that's all for me.

Yes. We -- we are seeing all kind of use cases for Plato from the battery operator, operation to industrial PC to enterprise server, even to the data center. So we can almost see the whole spectrum of the AI application with Plato. That's why we are talking about we are talking to strategic partners to take part in some of those larger markets because we don't have that much resource to go into each market to develop the application for that, yes. So pretty much that's what we are seeing right now.

[Operator Instructions] This concludes our question-and-answer session. I'd like to turn the call over to Lee-Lean Shu for any closing remarks.

Our goals for the coming quarter -- upcoming quarter are straightforward: execute on the customer programs now underway, continue advancing GRINN development, and deliver the next milestones in the road map while pursuing the strategic partnership that can support its commercialization. We appreciate the continued support of our shareholders and look forward to reporting on our progress.

One final note, I'd like to remind listeners that Didier will attend the Roth Technology Conference on November 18. Please contact your ROTH representative to book a meeting. We are also participating in the annual Needham Growth Conference in January 2027, and we encourage you to reach out to your Needham representative to book one-on-one meetings. Thank you again for joining us today and for your continued interest in GSI Technology.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

Hello. And welcome to the Annual Meeting of Stockholders of GSI Technology, Inc. Please note that today's meeting is being recorded. [Operator Instructions]

It's now my pleasure to turn today's meeting over to Lee-Lean Shu, President, Chief Executive Officer and Chairman of the Board. The floor is yours.

Good afternoon. I'm Lee-Lean Shu, President, Chief Executive Officer and Chairman of the Board of GSI Technology Incorporated. I will act as Chairman of the Annual Meeting of Stockholders and would like to call the meeting to order.

This meeting is being held pursuant to the notice of annual meeting mailed to all of the company's stockholders. Today's virtual-only annual meeting is a live audio webcast. Please note that today's meeting is being recorded. Thank you very much to those who are participating in our virtual meeting today. Douglas Schirle, the company's Chief Financial Officer, has been appointed to act as Secretary of this meeting to record the minutes. [ Justin Nowton ] of Computershare has been appointed Inspector of Election for the meeting and is responsible for determining the exact number of shares present at the meeting.

If you need a copy of the annual report and proxy statement, the links are provided on the meeting webcast page by clicking on the Document icon. I could not introduce a member of the Board of Directors and officers of the company who are attending today's annual meeting. With us on the line is a long speaker. And with me here is Douglas Schirle and Didier Lasserre, VP of Worldwide Sales and Public Relationship. I would also like to introduce Jeremy Walton, representing BDO U.S.A. PC, the company's independent public accounting firm.

I will ask Schirle, Secretary of the meeting for his report. Mr. Schirle?

Mr. Chairman, a list of the holders of common stock of the company at the close of business on July 1, 2026, which was the record date of this meeting, is available for examination by any stockholder present, by any proxy holder representing a stockholder on the meeting webcast page by clicking on the Documents icon. I also have a copy of the notice of this meeting, together with the declaration as to the mailing of a copy of the notice to each stockholder of record at the close of business on July 1, 2026. The notice of meeting and the declaration of mailing are available for inspection by any stockholder present or by any proxy holder representing a stockholder on the meeting webcast page by clicking on the Documents icon. Only holders of common stock on the record date are entitled to vote at this meeting.

I am advised by the Inspector of Election that the holders of a total of 25,738,908 shares of the company's common stock are represented at this meeting in person or by proxy. Since there were 38,372,073 shares of common stock of the company outstanding at the close of business on July 1, 2026, record date, more than a majority of the outstanding common stock is represented here today in person or by proxy. Quorum is therefore present, and the meeting is authorized to transact business.

Thank you, Doug. At this time, we will consider the item of business on the agenda. Today's meeting agenda is posted on the meeting webcast page and can be seen by clicking on the Document icon. We will strictly follow the meeting agenda in conducting the annual meeting. After the formal business portion of the meeting has been concluded, we will adjourn and have a short question-and-answer period. I call your attention to the rules of conduct provided for the meeting. These are available to each stockholder in the file section of the meeting webcast page by clicking on the Document icon. We ask that all stockholders review and abide by the rules for the annual meeting, including the question-and-answer portion of the annual meeting.

The matters to be considered at the meeting today, which are further described in the proxy statement dated July 15, 2026, and was mailed to all stockholders of record with the notice of the meeting are: first, the election of 5 directors to hold office for the ensuing year and until their respective successors are duly elected and qualified. The Board of Directors will consist of 5 directors and the Board of Directors has nominated those persons set forth in the proxy statement for this meeting. All nominees currently serve on the Board of Directors.

The Board's 5 nominees are Elizabeth Cholawsky, Haydn Hsieh, Ruey L. Lu, Ronald R. Steger and Lee-Lean Shu. As explained in the proxy statement, stockholders wishing to make nomination of directors for election at the annual meeting must comply with the advanced notice requirements set forth in the company's bylaws. Since no notice of additional nomination was received by the deadline, the nominations are closed. The 5 nominations received the highest number of 4 will be elected.

The other 2 matters to be considered at the meeting are: a proposal to ratify the appointment of BDO U.S.A. PC as the company's independent registered public accounting firm for the fiscal year ending March 31, 2027, and a proposal to approve an advisory nonbinding resolution regarding the fiscal 2026 compensation of the executive officers named in the summary compensation table included in the proxy statement for the annual meeting. Each of these proposals is described in detail in the proxy statement. The appointment of BDO U.S.A. as our independent registered public accounting firm, proposal #2 and the approval of the advisory nonbinding vote regarding fiscal 2026 executive officer compensation, proposal #3, each require the affirmative vote of a majority of the shares represented and voted at the annual meeting. The proposal to approve the fiscal 2026 compensation of the company's named executive officers is a nonbinding advisory vote as described in the proxy statement.

Are there any questions, comments that anyone would like to make on either of these proposals?

It's 2:09 Pacific Time, and the polls are now open. Let me remind you that if you have already sent in a proxy not for you to vote. If you have not voted or wish to change your vote, you may do so now by clicking on the link provided online. Votes cast during the meeting will not be reflected in the preliminary voting results announced during the meeting, but will be reflected in the final voting results that we will report on the Form 8-K filed with the Securities and Exchange Commission within 4 business days of this meeting.

[Voting]

At 2:10 p.m. Pacific Time and the online voting will now be closed. We will now hear the report of the secretary of the meeting regarding the results of the election. Mr. Schirle?

Mr. Chairman, based on the preliminary review of the votes cast, the Inspector of Election has indicated that each of the nominees for the Board of Directors received an affirmative vote of more than a majority of the shares voted, and thus each has been elected to serve until the next Annual Meeting of Stockholders and until each of their respective successors are duly elected and qualified. Proposal to ratify the appointment of BDO U.S.A. PC as the company's independent registered public accounting firm for the fiscal year ending March 31, 2027, received an affirmative vote of more than a majority of the shares represented at this meeting, and therefore, the proposal has been ratified. The advisory resolution to approve the fiscal 2026 compensation of the executive officers has received the affirmative vote of more than a majority of the shares represented at this meeting, and therefore, the proposal has been approved. Final voting results will be reported on a Form 8-K, which we will file with the Securities and Exchange Commission within 4 days of this meeting.

I would like to thank all of you for your interest and attendance at this meeting. As there are no other matters that have properly come before this meeting for consideration, this concludes the formal business of the meeting and the formal part of this meeting is now adjourned. We will now take questions from stockholders related to annual meeting matters. And any questions, you may submit questions online by clicking on the icon on the meeting webcast page.

Okay. There are no questions from stockholders related to the matter properly brought before the meeting at this time. So this concludes our question-and-answer session. Thank you very much for joining us today. We are grateful for your interest and continued support of GSI Technology. Thank you.

This concludes the meeting. You may now disconnect.

Welcome to GSI Technology's First Quarter and Fiscal Year 2027 Results Conference Call. [Operator Instructions]

Before we begin today's call, GSI Technology has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission.

Additionally, I have also been asked to advise you that this conference call is being recorded today, July 30, 2026 at the request of GSI Technology. Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer, will be hosting the call today. With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr. Shu. Please go ahead, sir.

Hello, and thank you for joining us. I would like to begin by talking about where GSI is today and where we are heading. Didier will get into the details, but let me start with my view of the business. .

Over the past several years, we have worked hard to move GSI from SRAM chip company into an AI platform company to address a large and growing market for our technology. With the APU, we feel an important gap in the [indiscernible] market. The additional GPU delivers strong performance but consuming too much power for many edge applications. Small process offer lower power but cannot deliver the AI performance the cloud for many real time workloads. The GSI use less power than traditional GPU while delivering higher performance than to say more bold processes.

We believe that our APU delivers the performance and low power usage we sell out to achieve. Today, we have Gemini-II production chip ready for customers. We are now in the last phase of GSI trimming the APU technology into a business. The first quarter showed disciplined execution as we continue advancing our ongoing projects, while pushing ahead with the [indiscernible] development for the next 18 months, our priority are [indiscernible] , successfully completing our current proof of concept projects, extending it into adjacent applications and releasing our SDKs [indiscernible]. At the same time, we currently expect to keep [indiscernible] on schedule in March 2027.

We start, I'll turn the call over to Didier, who will provide further detail on this on [indiscernible]. Please ahead, Didier.

Thank you, Lee-Lean. As Lee-Lean said, we've reached a pivotal point in the evolution of our APU business. We have a Gemini-II solution for proof-of-concept projects across a variety of edge AI applications. Our focus has shifted from improving our technology to turning customers into proof-of-concept projects. Ultimately, our goal is to secure design wins that could lead to commercial deployments and meaningful APU revenue. Our near-term strategy is to work closely with a small number of customers and system integrators on proof-of-concept projects and applications that are well suited to the APUs advantages.

Rather than developing a unique solution for every customer, we found that we can adapt the software and development tools created from one application to an adjacent one. This will allow us to expand into new Edge AI applications more quickly and efficiently. We've already demonstrated this by applying many of the capabilities developed for the Sentinel POC to our Smart City project and we expect to build on that foundation as we pursue new opportunities and other Edge AI applications.

During the first quarter, we made successful, meaningful progress on our projects, POCs and SBIRs, each of these position Gemini-II for broader commercial adoption. I'll begin with Sentinel, which is a good example of our customer adoption strategy. GSI has successfully completed all the deliverables for the first phase, including providing both the chip and the software. A laboratory test of the Sentinel POC was recently conducted in collaboration with G2 Tech and the participating defense agencies.

Sentinel is an application where Gemini-I's performance per watt provide a clear advantage and the platform's results in the lab test confirmed this with time-to-first-token, also known as TTFT of 2.4 seconds. Preparation for the fuel demonstration continues under G2 Tech's leadership. We have completed all of GSI's deliverables for this next part of the POC as well. The timing of the field demonstration is now dependent on G2 Tech.

Turning to our Smart City project in Shinshu County, Taiwan, we continue to meet our Phase I deliverables, which means we will soon be shipping the Gemini-II chips, servers and software supporting the rollout for 20 cameras. We remain on track to complete the Phase I deployment in November. If selected for Phase II, the project would expand to approximately 80 cameras and would add audio to the video from Phase I. This next phase would provide both additional hardware and software licensing revenue.

The Smart City platform now includes a smart query capability that allows users to search surveillance footage using natural language. For example, an operator can simply ask, did you see a person matching this description yesterday? The system can quickly analyze recorded video identify relevant element events and locate potential matches without requiring manual review of hours of footage.

Switching to our government-funded SBIRs. We're pleased to have launched our U.S. Army Phase II program with a formal kickoff meeting. We have begun preliminary work on developing a ruggedized Gemini-II system for Army applications. And another SBIR for the space development agency, we successfully completed radiation testing on a standard commercial Gemini-II device with no device optimization for withstanding radiation. In the test, the off-the-shelf chip continued to be operational under radiation levels found in harsh space environments.

The testing achieved the radiation tolerant threshold typically required for radiation hardened application and showed no single event latches, also known as SEL. The absent of SEL is important because that reduces technical risk for companies evaluating the device and shows that our standard chip may be suitable for some space and high altitude applications.

Before I conclude, I'd like to briefly update you on an important software milestone this fiscal year. In the past, you've heard us mention plans to release an AI compiler. We have expanded on that vision and are developing an AI-assisted SDK, as Lee-Lean mentioned. This is expected to significantly accelerate AI model development and the deployment on Gemini-II, the alpha release is currently targeted for this fall.

One big advantage found in testing shows the AI-assisted SDK significantly reduces application development time. In one representative case adapting an AI model to run on Gemini-II previously took one engineer about a year, with the AI-assisted SDK, that work was completed in less than a month.

This will help us support a broader range of customer applications while enabling us to work with more partners and system integrators. The AI-assisted SDK will also accelerate software development for [ PLAY-DOH ] by allowing algorithms and models to be ported more quickly, allowing us to bring final applications to the market sooner.

To summarize, we're pleased with the progress made in the first quarter on our POCs and SBIRs. Our focus for the remainder of this fiscal year remains on executing our Gemini-II strategy, specifically completing our current proof-of-concept projects, expanding into adjacent applications and completing the software tools needed to support broader commercialization. Together, these initiatives will make Gemini to easier to deploy, enabling us to support more customers and over time, scale our business through system integrators. In parallel, we are headed down on the PLAY-DOH design and remain on track to tape out in early calendar 2027.

With that, I'd like to hand the call over to Doug. Go ahead, Doug.

In the earnings release we issued today after the market closed, you'll find a detailed summary of our first quarter fiscal 2027 financial results. In my comments to follow, I'll focus on the key drivers behind our performance and provide some additional context around the quarter. .

Revenue in the first quarter of fiscal year 2027 was $6.3 million was at the midpoint of our guidance range, align with the prior quarter and up modestly from the first quarter of fiscal year 2026. Overall, our SRAM revenues remained stable. As is typical in our business, customer demand can vary from quarter-to-quarter, which can impact both our revenue and gross margin. In the first quarter of fiscal 2027, combined sales to KYEC, and Cadence represented approximately 23% of net revenues compared with the prior quarter in which KYEC represented 22.3% of net revenues, and there are no shipments to Cadence. We expect continued shipments to customers supporting AI chip design and semiconductor manufacturing. However, given the nature of our customer base, order patterns may continue to vary from quarter-to-quarter.

Gross margin for the quarter was 53.4%, although slightly below our guided range of 56%. Gross margin improved 100 basis points sequentially. Compared to the year ago quarter, gross margin was lower, primarily due to product mix, which could fluctuate based on the timing and composition of customer shipments.

Operating expenses for the quarter rose to $8.8 million, compared to $5.8 million in the prior year period. Our operating expenses increased year-over-year primarily due to costs related to Gemini-II software and Plato chip development. Research and development expenses were $5.9 million, increasing modestly from the prior quarter and by $2.8 million compared with the year ago period. The year-over-year increase primarily reflects our ongoing investment in the development of our next-generation Plato processor. Some of the increase in R&D also reflects lower SBIR funding recognized this quarter compared with the prior year period as well as a higher software development cost from our Israel-based team, primarily due to the strengthening of the Israeli shekel relative to the U.S. dollar. Both of these items are variable in nature.

SBIR funding is an offset to our development costs related to ongoing SBIR projects and fluctuates from quarter-to-quarter based on the timing of project milestones and related reimbursements.

Our software development costs can be affected by movements in this really shekel relative to U.S. dollar. Higher operating expenses increased the operating loss for the first quarter of fiscal 2027 to $5.4 million, compared to an operating loss of $2.2 million in the prior year quarter, while remaining relatively flat on a sequential basis. The first quarter net loss included interest and other income of $517,000 primarily from interest payments on the cash balance.

Turning to cash flows for the quarter ended June 30, 2026 in thousands of dollars. Cash and cash equivalents as of March 31, 2026, were $67.2 million. Net cash used in operating activities was $3.9 million. Net cash used in investing activities was $300,000. And net cash provided by financing activities was $14 million. Cash and cash equivalents as of June 30, 2026, were $77 million. Net cash from financing includes $9.3 million in ATM proceeds in the quarter and $4.8 million from employee stock option exercises. Many of these exercises were associated with stock options granted up to approximately 10 years ago that were nearing exploration, making this an unusually high level of option exercise activity.

We continue to expect cash usage to remain at current levels as we complete Gemini-II software development and advanced Plato toward a tape-out. Based on our current operating plan, we anticipate using approximately $4 million of cash per quarter or about $16 million annually. Although the timing may vary depending on development milestones and program activity.

We ended the quarter with $77 million in cash and no debt. This compares to $67.2 million for the fiscal 2026 year-end ended March 31, 2026. This is a notable improvement from the year ago first quarter cash balance of $22.7 million and reflects the $46.9 million net of fees from the registered direct offering proceeds that closed in October 2025.

With no debt and a strengthened cash position, we have confidence that we have the resources to continue investing in our strategic priorities while maintaining a disciplined approach to capital allocation. Based on our current operating plan, our existing cash resources provide sufficient runway to complete the Gemini-II software development, support customer evaluations and our next-generation data processor.

Before I conclude, I'd like to briefly address the housekeeping item. In the next few months, we expect to file a replacement for our universal shelf registration, the strongest capacity to $100 million. We have no current plans to raise additional capital. Maintaining an effective shelf registration is prudent corporate practice that preserves our financial and strategic flexibility should opportunities arise. As demonstrated last year, having an effective shelf in place allowed us to opportunistically strengthen our balance sheet during a strong -- during period of strong share price performance. We view maintaining that flexibility as good corporate governance and not as an indication of any change in our current capital plans.

Before I hand the call over to the operator for Q&A, I'd like to provide a second quarter fiscal 2027 outlook. For the upcoming second quarter, we expect net revenues in the range of $5.7 million to $6.5 million, with gross margin of approximately 53% to 55%.

Operator, at this point, we'll open the call to Q&A.

[Operator Instructions] The first question is from David Williams from Needham.

Congrats on the success here. it seems like you're making lots of great progress, and you touched on this a little bit during the call, but just kind of curious if you could talk maybe a little bit about how transferable some of the technical work that you've completed for these POC programs? How transferable is that maybe across some of the new applications? And what is that employment for the pace you can expand the POC pipeline without really having to drive increased engineering head count.

David, thank you for the question. Yes, so it's very transferable. One of the key elements that we always allude to with the Sentinel POC is this time-to-first-token parameter. And that is also important with the Smart City. It's also important to some of these other POCs that we're looking at as well. And so there are other features besides that, that fall under the vision language model that are also transferable. So yes, what's nice is when we went from the Sentinel drone POC to the Smart City, it wasn't a complete new hall. We were able to leverage a lot of what we've had in the past. And that will be true for some of these other POCs that we're looking to engage in.

Now that along with the AI-based SDK that will also dramatically increase the algorithms that we can deploy for these new applications. So between the leveraging from last use case to the additional tools that are coming in fall. Yes, we're looking to be able to leverage these other markets more quickly. Does that answer your question?

It does. And then maybe secondly, if you don't mind, is just on the system integrator relationships maybe the time line to formalizing some of that, how mature do you think the SDK applications maybe that framework needs to be before the system integrators can employ that Gemini-II into their environment?

Yes, it's a good question. And it's going to depend on the market and it's going to depend on the system integrator. So what our strategy has been is going into a market, a new market and doing really the work ourselves. We're doing that right now with the drone Sentinel POC. We are doing that obviously with the Smart City in Taiwan POC. And as I mentioned, we have a couple of others we're looking at. And I'm sure we'll be doing those initial ones ourselves.

And the reason for that is to show that the GSI APU solution is strong for all those markets. And once we've proven that, then it's much easier to attract these integrators because we don't have the manpower internally to go after the slew of different customers in these markets because their solution will be slightly customized, and they won't be identical for each. And so it will be critical for us to get the system integrators. And for them to be able to address all the different customers with their slight unique customization that SDK will be important or the AI SDK. So that's why we're working hard on that. And as we discussed, we anticipate having it in fall of this year.

Okay. Perfect. And just one last one here, maybe if I can. Just on the radiation hardening that you've talked about there. What do you think that, that means for the aerospace and defense sector? And does that maybe open up over time, maybe a new revenue stream? And maybe just talk about the implications or what that brings to the business?

Yes. Thanks for that question. Absolutely. It will absolutely increase the opportunity for revenue. So if you look at what's happening now, and I'm sure you've read plenty, they're trying to put more and more intelligence and AI into space itself. And historically, GPUs have not fared well under radiation testing and environments. And so there really is a need for an AI-based processor out there.

With that said, whether you're talking about a satellite or some kind of vehicle in space, power is also a real issue. And as we've been discussing, low power is really one of our huge advantages with the Gemini-II and PLAY-DOH will take that to even an extreme case with 10 watts or less per device. And so having a part that can withstand that radiation will certainly open up a market and -- because there's certainly a need for it now.

So we've already had discussions with some of our SBIR partners mainly, this is why we got the extension on one of the SBIR to do this testing because they certainly see a need for a device in space that does well in those harsh environments.

There are no further questions at this time. I would like to turn the floor back over to Lee-Lean Shu for closing comments.

Thank you again for joining us today and for your continued interest in GSI Technology. As a remainder, Didier and I will be attending Chemical Genuity Growth Conference in Boston on August 12 and the Medical Semiconductor Conference on August 19 to book a meeting, please contact your counter call or [indiscernible] representative. Our presentation will also be webcast live and available for replay on our website. .

We appreciate your continued support and look forward to updating you on our progress this quarter. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Welcome to GSI Technologies Fourth Quarter and Fiscal Year 2026 Results Conference Call. [Operator Instructions]

Before we begin today's call, the company has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission.

Additionally, I have also been asked to advise you that this conference call is being recorded today, May 7, 2026, at the request of GSI Technology. Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer, will be hosting the call today. With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr. Shu. Please go ahead, sir.

Good afternoon, and thank you for joining us to review our fourth quarter and fiscal year 2026 financial results. Fiscal 2026 was a year of meaningful progress for GSI, marked by strong performance in our SRAM business, continued advancement of Gemini-II toward commercialization and the initiation of the Plato design. I am pleased with the progress we have made on several fronts, significant work remains. Our team is executing our key milestones and advancing business development for the APU and I have had several encouraging conversations on numerous fronts in recent months. We ended fiscal [ 2027 ] with continuous momentum, promoting the APU and building on our customer traction. With that, I will now hand the call over to Didier Lasserre.

Thank you, Lean. Let me start by stepping back and framing where we are today because I think the context is important. Our SRAM business performed well in fiscal 2026 and remains the revenue foundation of the company, providing cash for APU development.

For the full year, the SRAM business grew 22% year-over-year and gross margins rose to 55% from 49%. The SRAM business has benefited from increased demand from our customers that support high-performance AI chip development and manufacturing. We recently announced that we concluded our strategic review and determined that continuing to execute our stand-alone strategy is the best path forward for delivering long-term shareholder value. The stronger SRAM business and a strengthened balance sheet, along with nondilutive R&D funding are providing the resources to support our go-forward plan.

With this financial foundation in place, we are now seeing real progress with Gemini-II and Plato. Over the past several months, we've reached a point where we are seeing both technical validation and early program level engagement of Gemini-II, including the Sentinel drone surveillance POC, the U.S. Army SBIR award and a new Phase 1 smart city project, which I'll discuss in a minute.

On the technical side, in a bake-off for the Sentinel POC, Gemini-II's performance contributed to winning the contract award by achieving a time to first token of roughly 3 seconds at 30 watts of system power on Gemini-312B multimodal workloads at the edge. In this use case, time to first token is a critical metric for a drone surveillance system because it reflects how quickly a system can respond in real-world applications where response time directly affects critical decision-making.

We are working closely with the GSI tech team on the Sentinel program. We have completed the software deliverables and continue to target a June demonstration of the Gemini-II powered drone. This demonstration is planned for the Department of Defense and an International Defense Agency. In mid-April, we were notified that we had been awarded Phase 1 of a Smart City project. The project leverages our work done for the drone-based surveillance POC and marks an important step forward towards commercial deployment. In this application, Gemini-II will process inputs from distributed camera systems to provide near real-time detection of events such as fires and other public safety risks.

This project demonstrates how our platform can scale across real-world infrastructure. We expect to share additional details on the Smart City program around the time of a planned media event in late May hosted by the municipality.

Currently, we are working on several projects in tandem. What matters most for GSI at this time is not just the number of early-stage trials and demonstrations we have, but also how these early-stage engagements are helping us identify where our APU architecture provides a clear advantage, particularly in delivering low latency performance with a constrained power envelope. We are also leveraging our deployment work in 2 ways. First, we are applying what we have developed for a drone security application to a smart city application. While the end markets are different, the underlying development carries over, giving us meaningful head start in each new case rather than starting from scratch.

Secondly, as we complete the Sentinel POC and Phase 1 of the Smart City program, we can build on those results to pursue additional opportunities with new customers in those markets. We view this as a repeatable model where each engagement helps accelerate the next. What's exciting for us is that we see the end markets for low-latency, low-power AI edge is expanding as AI workloads continue to move closer to where the data is generated. These applications favor the APU architecture that can deliver higher compute per watt.

Gemini-II is ideal for these power latency constrained edge deployments where real-time response and energy efficiency are critical. Where we are winning is where Gemini-II is tested against conventional architectures requiring significantly higher power -- excuse me, higher system power for similar or slower responsiveness. We believe Gemini-II best addresses this gap and positions us well to win as more AI loads shift towards distributed power-constrained environments.

Consistent with this, we are encouraged by our progress within defense agency programs as evidenced by our recent U.S. Army SBIR, progressing from Phase 1 into Phase 2. This project is about enabling real-time infield AI deployment on small, low-power systems typically operating in challenging conditions. As part of this program, we will build and test a ruggedized node containing the Gemini-II for real-world mission-critical environments.

This SBIR positions us within a broader shift in defense spending with approximately $13 billion proposed in fiscal 2026 budgeted for AI and autonomous systems and creates a potential pathway to follow-on programs and future opportunities to supply Gemini-II-based systems.

So how do we move from where we are today to design wins and ultimately revenue? From a commercial standpoint, we are still in the early stages. Our focus is on advancing our current engagements and working closely with partners to integrate Gemini-II into their systems with the goal of moving into design level discussions. Given the complexity of these deployments, we are focusing our resources on a small number of high-value opportunities where we believe we have a clear advantage.

Although the number of engagements remains limited, we are seeing a meaningful increase in the depth of these engagements and our ability to leverage our prior Gemini-II deployment work for new related applications.

Looking ahead, our priorities are to advance current POCs and awarded programs and to leverage what we've learned from each of these engagements to drive additional design opportunities. At the edge, performance matters most when it can be delivered within real-world power and latency constraints. That is where we believe Gemini's II advantages lies.

With that, I'd like to hand the call over to Doug. Go ahead, Doug.

In the earnings release issued today after the close of the market, you'll find a detailed summary of our financial results for the fourth quarter and full fiscal year 2026. Rather than walking through the numbers again, I'll focus my comments on the key drivers behind the results and provide more context and explanation to help you better understand the business.

Let me start with the results for the fiscal year 2026 ended March 31, 2026. As Didier mentioned, fiscal 2026 revenue increased 22.4% to $25.1 million, reflecting continued strength in our SRAM business, particularly with customers supporting chip design and simulation for AI applications. We experienced solid growth in this customer segment throughout fiscal year 2026. We do see variability in customer orders and sales can fluctuate from quarter-to-quarter. However, barring any significant change in underlying AI chip demand that would affect SRAM orders from these customers, we expect this business to remain relatively stable in fiscal year 2027.

The higher level of revenue and product mix helped to lift fiscal year 2026 gross margin to 54.5%, a notable gain from the prior year gross margin of 49.4% Operating expenses in fiscal 2026 rose to $31.2 million compared to $21 million in fiscal 2025. Operating expenses increased year-over-year, primarily driven by higher R&D spending on the Plato chip design. It's also important to note that the prior year included a $5.8 million gain from the sale of assets, which makes year-to-year -- year-over-year comparison appear more pronounced.

We also continue to offset a portion of our R&D expenses through nondilutive funding, SBIR contract funds and POC-related funding. The majority of our R&D is dedicated to the APU. The R&D offset in fiscal 2026 and fiscal 2025 was $1 million and $1.2 million, respectively. Higher operating expenses increased the total operating loss for fiscal 2026 to $17.5 million compared to an operating loss of $10.8 million in the prior year. The fiscal 2026 net loss included interest and other income of $4.1 million, primarily from interest payments on the increased cash balance from the capital raise completed in October 2025 and $3.4 million of other income, consisting of a $6.2 million noncash gain from the change in the fair value of prefunded warrants, partially offset by $2.8 million in issuance costs associated with the registered direct offering in October 2025.

Looking now to the fourth quarter. Revenue was $6.3 million with a gross margin of 52.4%. As we've seen in prior periods, quarterly gross margin can fluctuate with the product mix and revenue levels. The fourth quarter gross margin reflects slightly lower SigmaQuad sales sequentially compared with the prior year quarter. From a customer perspective, we did see some variability across accounts during the quarter, including lower shipments to certain customers and higher shipments to others. At the same time, defense-related sales increased to approximately 46% of total shipments, reflecting continued demand in that segment.

Again, you'll find a full breakdown of sales in today's earnings release. Operating expenses increased from the prior year, primarily due to continued investment in our Gemini-II and Plato development programs. These investments align with our strategy to advance our APU road map while maintaining disciplined cost management. Last quarter, we expanded quarterly earnings disclosures to help investors better understand the company's cash consumption and cash generation. This information will complement the condensed consolidated statement of cash flows included in our Forms 10-K and 10-Q.

Cash flows for the quarter ended March 31, 2026, were cash and cash equivalents as of December 31 were $70.7 million. Net cash used in operating activities in the quarter was $5.5 million. Net cash used in investing activities was approximately $100,000 and net cash provided by financing activities was $2.1 million. Cash and cash equivalents as of March 31, 2026, were $67.2 million.

From a cash flow standpoint, spending in the quarter continued to reflect our investment in Gemini-II and Plato development. We expect cash usage to remain elevated as we progress through this development phase. As a general reference point, we expect the cash usage to be approximately $4 million per quarter or about $16 million annually, although this may vary depending on development timing and program activity. We ended the quarter with $67.2 million in cash and no debt. This is a notable improvement from the prior year-end cash balance of $13.4 million. and is associated with the $46.9 million net of fees registered direct offering proceeds that closed in October 2025.

The absence of debt and the improved cash balance provide us with the flexibility to continue investing in APU while maintaining a disciplined approach to capital allocation. We believe our current cash position provides sufficient runway to support the initial commercialization of Gemini-II and the completion of the Plato tape-out, both expected in late fiscal 2027.

Before I hand the call over to the operator for Q&A, I'd like to provide the first quarter fiscal 2027 outlook. For the upcoming quarter, we expect net revenues in the range of $5.9 million to $6.7 million with gross margin of approximately 54% to 56%. Overall, our strong cash position and continued support from nondilutive funding give us a runway to advance Gemini-II into early commercialization and the completion of the Plato chip design.

Operator, at this point, we will open the call to Q&A.

[Operator Instructions] The first question is from Tony Brainord, retail investor.

Yes. Can you share some color on the size, like if you do get the design wins, the size of the market we're looking at?

On which market?

On the Gemini-II?

Okay. That's a pretty broad question. So the markets we're going after initially, some of them are government military based, specifically these drone programs. And as we talked about, we're limited detail now. We'll give you more detail on the smart city at the end of May. But both of those markets are multibillion-dollar markets.

[Operator Instructions] The next question comes from Robert Christian, private investor.

Yes. I'd like to know why the Plato project has moved up from the first half of 2027 to late fiscal 2027?

So it actually hasn't been pushed out. So it might have been a mixture of calendars and fiscal quarters. So when we had first talked about it, we were targeting the beginning of calendar 2027 to have the part taped out, and we're still on schedule for that. So the tape-out means that the design will be done in the first quarter, and that would give us silicon because we have to make the assets that are used from the wafer fabs at TSMC. So we'll see our first wafers in hand in the summertime of calendar 2027. And I believe that has been always our schedule.

Yes. I think we mentioned the fiscal year 2027, that's the beginning of the 2027 calendar year.

Right. That's a good point. So the end of fiscal 2027 is March of calendar '27.

Okay. That would be great. And the second question I have is Gemini-II taped out over 2.5 years ago. Is it going to take that long to see expected sales, say, of Plato?

So that's a great question. So you have 2 components to sales. You have the hardware component, which is the chip and any kind of a board and you have the other software side. The software side actually lagged the hardware on Gemini-II. With Plato, we're trying to align the 2 of those more closely. The good news is some of the software work that's being done for Gemini-II can be used for Plato, while with Gemini-I, it was a completely new effort. And so in that respect, we can leverage some of the work from Gemini-II for Plato, and then we're also lining up the resources to be able to bring in the software with Plato.

Well, the chip is genius, and I wish you guys Godspeed.

At this time, we show no further questions, and this concludes our question-and-answer session. I would like to turn the conference back over to Mr. Lee-Lean Shu for closing statements.

Thank you again for joining today's call. As a reminder, Didier will be at the LD Micro Conference on May 19. Contact LD Micro if you would like to attend this presentation or take a one-on-one meeting. We are encouraged by the progress we are making the Gemini-II, and we remain focused on successful executing against the opportunities in front of us. We look forward to speaking with you again on our fiscal 2027 first quarter earnings call. Thank you.

This concludes today's conference. Thank you for attending. You may now disconnect.

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2026. Our next presenting company is GSI Technologies, Incorporate. [Operator Instructions]

I'd now like to turn the floor over to today's host, Mr. Didier Lasserre, Vice President of Sales and Investor Relations for GSI Technologies, Incorporated. Sir, please go ahead.

Thank you, and thank you for joining us. As the moderator mentioned, my name is Didier Lasserre. I'm Vice President of Sales and Investor Relations here at GSI. GSI has been a semiconductor company for over 30 years, known for our high-performance SRAM products that are used in networking, defense and other demanding applications. That business remains an important financial foundation for GSI being it generates revenue and cash that support the development of our next-generation technology, the Associative Processing Unit. We are excited about our APU due to our proprietary compute and memory architecture.

Our current product, the Gemini-II is designed for power and low latency constrained edge environments such as drones, satellites and any other autonomous systems where minimizing data movements enables significantly higher performance per watt than traditional architectures. Gemini-II is already being evaluated in defense and other edge applications as we work towards initial design wins.

Today, I'll briefly walk through one of the -- I'm sorry, the technology behind the compute and memory architecture, the edge AI market opportunities we're targeting and how we plan to bring the APU platform into commercial deployments in the upcoming years. The key takeaway I want to leave you with is that edge AI favors architectures that deliver the most compute per watt, and that's exactly what the APU compute and memory is designed for.

I will be making some forward-looking statements, so we have included the safe harbor statement here. A quick overview. As we mentioned, we are a leader in the high-density, high-performance memory market. We've been partnered with TSMC for our wafer fabs for over 30 years, and this will be the same partnership that we'll be using for the APU as well. We've developed and invented the APU chip, which is, as I mentioned, a compute in memory CIM technology. We are targeting the edge. We are not looking at the data centers at the moment. And so the APU is really manufactured and designed for edge applications. To date, we spent over $175 million on the APU R&D, which has been funded using our SRAM product line. This past October, we raised net $47 million through an equity raise.

If you look at our trailing 12-month revenues, we're just under $25 million. In fact, this month, at the end of this month, we'll finish our fiscal 2026. If you compare what we're running at for this year versus last quarter -- or I'm sorry, last year, fiscal 2025, it will be about a 25% increase in revenue. We outsource the labor-intensive portions of our business, the fab, assembly, day-to-day sales. And so we're able to keep our headcount down to a very efficient 122 employees. So the majority of the employees are either hardware or software engineers.

We have a very unique architecture, which I'll be talking about extensively today, and we want to protect that. So we've been aggressive with filing patents. So we now have 87 patents, specifically for the APU. The balance sheet is strong. We have just over $70 million in cash and cash equivalents, market cap over $300 million. I want to say this morning, we're about $320 million in market cap and a high insider ownership of 20%.

So just looking at a high level, what's the -- what are really the challenges in the AI market space? What's the bottleneck? And really, the bottleneck is the fact that data needs to be moved and transferred constantly within the system. And when you're moving data from memory to where the compute elements are, it takes time. It takes latency and it also takes a lot of power.

For edge environments, which is what we're focused on, really, the compute is constrained because you have a very limited power budget. And this is where the APU fits in perfect because we do the compute or the processing where the data resides, and I'll explain how that works.

If you look on the right, that's essentially what a GPU or CPU looks like. You can see that you have the DRAM, which is the memory, which is where all the data is stored. And so if for some reason, a GPU needs to do a compute, it needs to grab the data from DRAM, has to transition and be transferred through L2 cache to L1 cache before it gets to the compute elements. And once that data is used in the compute elements, it has to be written back all the way through the same cycle back through L1 through L2 back to memory. So this constant transfer of data, besides taking time takes a tremendous amount of power.

If you look on the left, that's our architecture, very simple. We actually do the compute or the processing in the memory array itself. And so the compute bits or the compute elements, processor bits are physically in the memory array. And so we are -- the memory or the processing is actually where the data resides. So we're not having to go fetch it and then we don't have to write it back. And once we're through using it, it remains in place. So this really significantly increases the performance and lowers the power. Also in our architecture, we have over 1 million bit processors that can work simultaneously. So we have massive parallel processing with our technology.

And then lastly, our resolution or our bit width is not predetermined like GPUs. It's not predetermined to be an 8-bit or 16-bit. It's -- we're a bit engine and you can configure it any way you want, and it can change from cycle to cycle. So if this cycle, you want to do some processing at 8-bit, that's fine. Next cycle, let's say, you have a model that's most efficient at 3-bit, you can go ahead 3-bit, no problem.

So what's interesting is a lot of the AI workloads are moving to the edge for several reasons. Mainly, what you're finding is that it's real-time responses are required. And so you need to start doing the processing where the data is collected. And so that transition is happening. Now the other reasons for that transition is the fact that cloud compute besides becoming expensive, it also takes time and it's also not private. Some of the military and defense applications are working on the data that is not allowed to leave the device for security reasons. And so therefore, there's really a huge demand now at the edge for this real-time inference.

So why does AI at the edge require a new architecture? If you look at the traditional methods, again, as we talked about, the data is separated from the compute. And so you have to go get the data. Again, this constant transferring of data requires time and power. So if you look at the GSI APU, with the data in the memory array where the processing is happening, we're able to, again, lower the latency and lower the power at the same time. So GPUs are good for data centers. I mean they're great for training, and they're very good for large data centers. But when you get to the edge, power, the performance per watt is critical. And that's where the APU really shines.

So this is a true case POC. In fact, this is the POC that we announced last quarter. And this is for a drone perimeter security program. And so at the time, the drone manufacturer needed specific parameters. They needed the time-to-first-token to be no more than 3 seconds, and they needed at the time a system power to be no more than 50 watts, preferably 30 watts. And so this drone manufacturer went to NVIDIA first and we looked at the Jetson and the Jetson gave them the time-to-first-token that they're required, but it was significantly over 100 watts for that performance, and that did not work for this drone power budget.

So then they looked at a Snapdragon from Qualcomm, and they were able to achieve the power requirements, but it took 12 seconds to get the first token out. That's 4x slower than they could afford. And at that point, they looked at the Gemini-II from GSI, GSI was able to give them the performance of 3 seconds on the time-to-first-token, along with the 30 watts on the power budget. And so this was a critical win for us, and we were chosen as the hardware solution for this program.

If you look at the market sizes, a lot of folks are really concentrated on the data center. Everything is about the data center. But if you look at the edge AI market, it's going to be exploding in the future. Right now, it's estimated to be about $20 billion, growing to $120 billion by 2030. If you look at the markets that we want to address, we're about $7 billion right now, and it will be more than doubling in the next 5 years. And these markets include drones, SAR satellites, in autonomous systems, smart cities, automated warehouses, anything in that category.

So we've talked about Plato in the past. So Plato is our next-generation part. It's going to be designed specifically for LLMs at the edge. And I want to emphasize at the edge. So certainly, there are GPUs today that are working on LLMs for the data center. Those require over a kilowatt of power consumption. If you look at the Plato, Plato is going to be designed to be around 10 watts and in a lot of cases, less than 10 watts to deliver an LLM. So it's really designed again for the edge. We started the design this past quarter, and we're anticipating having the design done about a year from now. So we'll be taping out in the first half of 2027.

If you look at our strategy on how we want to monetize the APU family, we're going to be starting with the Gemini-II. And we're starting with applications like drones and smart cities and anything basically physical AI at the edge. We're doing this through POCs and through some of our government contacts, which I'll talk about how we're doing that. But really, it's these advantages with the CIM architecture for things like time-to-first-token and other surrounding awareness that are really going to be leveraged for all these different applications. And again, the APU gives you that unique architecture for that low power. We anticipate Plato to kick in sometime in 2028. And then we're already having discussions with partners on what the generation after Plato looks like.

Some of our successes have come from the mill defense areas. We've been very successful with SBIRs, which are essentially grants from the government. To date, we've been awarded $4.4 million worth of SBIRs. I kind of -- I'll start at the bottom about these SBIRs. We had our first Phase 1 win with the U.S. Army second half of last year for $250,000. We also had a win with both the U.S. Air Force Research Labs and the Space Development Agency. Both were worth over $1 million. The Space Defense Agency SBIR was extended for another $751,000. And the purpose for that extension is SDA wanted to see what our commercial chip look like on a robust level. So we're taking this grant to put our commercial Gemini-II under radiation beam and other ionization type testing to see what it can do.

And then another grant, which will be coming in is the POC that we discussed with our partner, G2 Tech in Israel for a program called Sentinel that is for DoD or DoW and another foreign defense agency. And this is for a drone camera perimeter security environment. And this is something that we'll be together with G2 Tech demoing to these agencies in the summertime.

As far as future opportunities for SBIRs, we have a pipeline somewhere between $6 million and $10 million that we have submitted. We feel especially good about one of the submissions that we've done for the U.S. Army on the Phase 2. It's for a ruggedized edge node that can be used for a lot of different applications from SAAR to object detection to drones. We are hoping to hear back on that one shortly.

And then we're also going after other funding sources are a little larger than SBIRs. We're looking at ones like STRATFI and TACFI and other ones like BAA, which will give tens of millions of dollars of grant money. And of course, we're also looking at partnerships with potential customers to have some other strategic funding as well.

As far as the financial overview, the revenues have been growing nicely over the last 1.5 years or so. We dropped off a little bit last quarter, but we're running over $6 million. Operating expenses have been running about $7 million a quarter. You could see a bump up there in our December quarter. That was with the purchase of the IP required for the Plato design to start. That was just over $3 million worth of IP that we purchased that quarter. And as far as the cash and cash equivalents between the $47 million raise that we did in October and some of the ATM purchases during that quarter, our cash went up significantly to just over $70 million.

Just on a quick overview of the legacy product line of the SRAMs. We do have the highest density, highest performance memories in the market space. We are at least 1 to 2 generations ahead of our nearest competitor. And good news is all of our competitors have frozen their road maps. So we'll continue to enjoy that leadership position for the future. The SigmaRAM, SigmaQuad family have really been driving the gross margins and the revenue because they attribute over 50% of our revenues from those families. We're taking that legacy SRAM and we're hardening it. We have hardened it. We've made Rad-Hard and Rad-Tolerant products. These are for satellites anywhere from the LEO satellites to the GEO satellites.

What's unique about this market is it's very high ASPs and gross margins. If you look at the kind of the range of ASPs, a lower density Rad-Tolerant might be a few thousand dollars and a high-density Rad-Tolerant could be as high as $30,000. And again, with gross margins north of 90%. So this is a market that we've talked about in the past. We've sent out lots of different samples and prototypes for several programs, and we're just waiting for those to go into production. It's a long design-in cycle for these markets.

So in summary, again, this computer memory device we have, this architecture really is unique in the fact that it allows us to really decrease latency, decrease power consumption makes us a perfect use case for edge applications. And again, anything from drones to satellites, any autonomous systems, smart cities, anything like that is a perfect market to address. We have proven advantages. The SBIR wins, the Cornell paper that went out last quarter that showed -- compared us to a GPU for RAG application, and it showed that we were more than 95% less power for the same performance. And then also the POC, the drone surveillance POC program I mentioned, that was a bake-off between us, Qualcomm and NVIDIA that we won. So it's certainly proven advantages. So we like to refer to ourselves as kind of an AI start-up.

But in a lot of cases, I mean, in a lot of cases, we're really not a semiconductor start-up. So remember, we've been in the business for 30 years selling and shipping SRAMs. And during that time, we shipped over 100 million SRAMs. The manufacturing process we're using for SRAMs will be the same for our APU. I mean we'll be using the same wafer foundry. We'll be using the same assembly house. We'll be using the same testing. And so we have a proven model, 30 years' experience for when we ramp the APU. And again, those SRAMs have been funding nondilutive the APU R&D. And lastly, we have a strong balance sheet with, again, over $70 million in cash with no debt.

At this point, I'll open it up to questions and -- or Q&A.

Okay. So the first question, given Gemini-II's ultra low power, low latency performance, where do you see the strongest initial deployment verticals across drones and surveillance?

So yes, certainly, drones, we've done a significant amount of software work on SAAR, object detection and now time-to-first-token. And then again, this POC that we're doing, it's with the demo going in the summer, it's with the intent to sell these to the DoD and other government agencies. So certainly, that will be the first area.

What portion of future revenues do you expect to come from defense versus commercial edge applications over the next 2 to 3 years?

That's a good question. It's going to start -- it's going to be leaning more towards the defense versus commercial. That's because that's where we've seen our early successes between the interest from the DoD, SBIRs that we've won along with this POC, we certainly see that, that's going to be the first entry into revenue. But again, we're trying to follow that up quickly with other applications like smart cities. But for the next 2 to 3 years, it will be leaning much more towards the defense side.

You see here what is the size of the Gemini-II cache?

Right now, it's 96 megabyte of memory on the Gemini-II. That's 8x more than Gemini-I. So candidly, on the Plato, it will be less on the internal cache. But as you recall, with Plato, it's going to be a different application. It's going to be LLMs. So LLMs, by definition, Large Language Models, won't fit on inside of a chip. And so what we've done is we've actually lowered the cache on that one in order to be able to really increase the pipeline, the bandwidth to be able to get extra data in the chip. But 96 megabyte for Gemini-II.

Did you publish the details for where the 3-second figure for the Jetson Thor came from?

That came from the drone manufacturer who did the bake-off. The numbers that we presented were the numbers that they did in a benchmark program that they did.

So -- I'm sorry, are you going to move from DDR4 to HBM2 to avoid external memory bottlenecks?

No. So we're actually going to be going to GDDR5 for Plato. So we -- again, these are edge applications. And so we need to keep them low power and lower cost as well. So it's prohibitive of moving to HBM for that. So we'll be going with the GDDR5.

Comment -- please comment on the ATM. So right now, the ATM is not active. I think there is a couple of million dollars that were left on it. But at this point, it's not active.

Let me see. Okay. So are potential partners already driving decisions making the Plato road map? Yes. And again, the current Plato program as well as, we'll call it, Plato 2, a future Plato. So yes, those are definitely with partners.

Okay. So we hear, okay. So is the 98% power savings reported by Cornell based on simulated HBM external memory interface? Candidly, I don't believe it was simulated. I think that they actually did a program, but the Cornell Paper is out there for you to be able to read it and go through that. But candidly, I don't remember what the memory interface was.

Is manufacturing in Taiwan? Yes. So we use, as I mentioned, TSMC as our fab. We use a company called ASEK to do our assembly, and we do our own testing. We have a facility in Sunnyvale, California, which we do all the R&D testing. And then when it goes into mass production, it goes to our Taiwan facility for the testing.

Okay. Let me see here. Okay. You received a reported 3-second time-to-first-token for Gemma-3 12B on Gemini-II. Can you confirm that the benchmark was achieved on the final product silicon? And are there plans to release a live demo for third-party audit? So yes, the 3-second time-to-first-token was done on the current production -- I'm sorry, current silicon, which is going to be our production silicon. And as I mentioned, the demo right now is going to be done in -- sometime in the summer is when it's scheduled to be.

Let me see here. Do you expect to raise more money anytime soon? And are you looking -- are you talking to any strategic investors? Also, is the SRAM business potentially up for sale?

So certainly, to scale, we're not actively looking to raise more money, but more money will be needed, I'm sure, in the future. Is the SRAM business potentially up for sale? Well, that's a good question. Certainly, if the right opportunity came, we would certainly entertain that.

At this point, I am actually out of time. Operator?

Thank you, sir. Ladies and gentlemen, that concludes GSI Technologies, Incorporated's presentation. You may now disconnect, and please consult the conference agenda for the next presenting company.

Welcome to GSI Technology's Third Quarter Fiscal 2026 Results Conference Call. [Operator Instructions]

Before we begin today's call, the company has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission.

Additionally, I have also been asked to advise you that this conference call is being recorded today, January 29, 2026, at the request of GSI Technology. Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer, will be hosting the call today; with him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the conference over to Mr. Shu. Please go ahead, sir.

Good afternoon, and thank you for joining us to review our third quarter fiscal 2026 results. I am encouraged by our overall progress this quarter. Revenue in the third quarter increased by 12% year-over-year and 28.5% on a fiscal year-to-date basis. Demand for SRAM products remains solid. And we expect strong sales from our largest customers in the first half of calendar 2026.

After completing our financing in 2025, will [indiscernible] our APU road map. We began play to hardware development after purchasing the required IP. We have also added counter-engineers to support our hardware design team, keeping us on track to tape-out Plato in early 2027. We finalized the agreement with G2 Tech that is a base AI company for our recently announced proof of concept. We are partnering with G2 Tech on [ Sentinel ] program for autonomous [indiscernible] security using drones and cameras.

The project is [indiscernible] by the U.S. Department of War and foreign government agencies. This government funding will offset our cost to build a software stack and the liabilities needed for this project. Didier will share more details shortly. Another [indiscernible] milestones is Gemini-II time-to-first-token benchmark around in the press release earlier today. For those who have not reviewed it please see today's press release for the full detail on the benchmark result and the methodology.

Accordingly, we reported [indiscernible] time-to-first-token TTFT performance for [indiscernible] with tax and video input, consuming approximately 30 watts of system power. Compared to third-party testing of competitive graph, Gemini-II TTFT delivered up to 3x faster first token at lower power than the competitive chip on the same workload. We believe these test results validate Gemini-II [indiscernible] each use cases that need low power and low latency.

In his comments, Didier will expand on the benchmark results. We are making steady [indiscernible] continue to improve Gemini-II performance and completing the[indiscernible]. We are also pursuing early proof of concept and prototype opportunities for Gemini-II in system in the different programs, including [indiscernible] systems, a in selected commercial age deployment. In parallel, we continue to pursue non-diluted R&D funding through government defense forwards and the strategic partners.

With that, I hand the call over to Didier.

Thank you, Lee-Lean. I'll start by expanding on some of the Lee-Lean comments. On the [ Sentinel ] POC, we expect to receive more than $1 million in government funding. We will record this as an offset to R&D expenses. We plan to use it to complete key software milestones for the projects, including software development for [ GEMA312B ] on our Gemini-II ahead of the planned demonstration to the government agencies later this year. Our POC partner, G2 Tech, is receiving additional funds to develop the drone platform for this demo.

I'm pleased to share that G2 Tech conducted a competitive evaluation, and GSI was selected based on Gemini-II's performance, delivering the lowest TTFT at 30 watts. If the government evaluation later this year is successful, it could lead to a potential Gemini-II design win with G2 Tech, and we would move to pursue additional opportunities to other drone and unmanned system customers beyond the POC sponsors.

Turning to today's press release. Our Gemini-II TTFT benchmarks, we discussed preliminary results showing a 3-second time-to-first-token for a multimodal model at the edge using video and text inputs at approximately 30 watts of power -- of system power. TTFT is how long it takes the system to produce the first response, which is critical for drones and unmanned systems. The threshold for a useful TTFT in video surveillance to ensure nothing is missed is 3 seconds. That means we are sampling the video image every 3 seconds. If the TTFT is 10 seconds, it takes too long, so the surveillance video could miss something.

In preparation for the Sentinel demo, we will continue improving TTFT over the next 5 months to further reduce Gemini-II's first time to response. What's exciting for GSI about these Gemini-II preliminary benchmark results is that they demonstrate what compute and memory can provide for physical AI, faster time-to-first-token and materially lower chip power. This will help enable a broader set of viable cost-effective deployments.

For added color, at CES 2026 there was a clear shift towards edge AI and physical AI systems that must make real-time decisions under tight power constraints. In that context, Intel noted that tops the number of operations per second doesn't tell the whole story. What matters more than edge AI and physical AI is real-world load -- workload performance and efficiency. That is the takeaway for us as well.

For edge inference performance per watt and responsiveness matter more than peak training metrics. We are confident that our computer memory APU architecture designed to reduce data movement is well suited for power-constrained edge inference. Our near focus is to continue validating this with additional benchmarks and customer proof of concepts and convert that progress into design wins for Gemini-II. And to be clear, we are not trying to compete with folks at training and data centers. Our goal is to be a strong option for fast low-power edge AI applications.

Switching to the customer and product sales breakdown in the third quarter of fiscal 2026. Sales to KYEC were $1.1 million or 17.9% of net revenues compared to $1.2 million or 22.7% of net revenues in the same period a year ago and $802,000 or 12.5% of net revenues in the prior quarter. Sales to Nokia were $675,000 or 11.1% of net revenues compared to $239,000 or 4.4% of net revenues in the same period a year ago, and $200,000 or 3.1% of net revenues in the prior quarter.

Sales to Cadence Design Systems were $233,000 or 3.8% of net revenues compared to $971,000 or 17.9% of net revenues in the same period a year ago and $1.4 million or 21.6% of net revenues in the prior quarter. Military Defense sales were 28.5% of third quarter shipments compared to 30% of shipments in the comparable quarter a year ago and 28.9% of shipments in the prior quarter. SigmaQuad sales were 41.7% of third quarter shipments in fiscal 2026 compared to 39.1% in the third quarter of fiscal 2025 and 50.1% in the prior quarter.

I'd now like to hand the call over to Doug. Go ahead, please.

We reported net revenues of $6.1 million for the third quarter of fiscal 2026, compared to $5.4 million for the third quarter of fiscal 2025 at $6.4 million for the second quarter of fiscal 2026. Gross margin was 52.7% in the third quarter of fiscal 2026, compared to 54% in the third quarter of fiscal 2025 and 54.8% in the preceding second quarter of fiscal 2026. The decrease in gross margin in the third quarter of 2026 was primarily due to product mix.

Total operating expenses in the third quarter of fiscal 2026 were $10.1 million, compared to $7 million in the third quarter fiscal 2025 and $6.7 million in the prior quarter. Research and development expenses were $7.5 million, compared to $4 million in the prior year period and $3.8 million in the prior quarter. The increase in research and development spending compared to the prior quarter is primarily due to the purchase of IP for the development of Plato and associated consulting expenses. Selling, general and administrative expenses were $2.6 million in the quarter ended December 31, 2025, compared to $3 million in the prior year quarter and $3 million in the previous quarter.

Third quarter fiscal 2026 operating loss was $6.9 million compared to an operating loss of $4.1 million in the prior year period and an operating loss of $3.2 million in the prior quarter. Third quarter fiscal 2026 net loss included interest and other income of $3.6 million, reflecting a noncash accounting adjustment of $6.2 million for the change in fair value of the prefunded warrants and issuance costs of $2.8 million for the recent registered direct offering and a tax benefit of $251,000 compared to $70,000 in interest and other income and a tax provision of $44,000 for the same period a year ago.

In the preceding second quarter, net loss included interest and other income of $43,000 and a tax revision of $41,000. Net loss in the third quarter of fiscal 2026 was $3 million or $0.09 per diluted share compared to a net loss of $3.2 million or $0.11 per diluted share for the second quarter of fiscal 2026. For the prior year fiscal quarter of 2025, net loss was $4 million or $0.16 per diluted share. Total third quarter pretax stock-based compensation expense was $783,000 compared to $429,000 in the comparable quarter a year ago and $856,000 in the prior quarter.

Beginning this quarter, GSI is expanding the cash disclosures in its quarterly earnings release process to help investors understand the company's cash consumption and cash generation. Going forward, we will disclose the beginning cash balance net cash used by operating activities, net cash used by investing activities and net cash provided by financing activities. This will complement the condensed consolidated statement of cash flows included in our Forms 10-K and 10-Q.

Cash flows for the quarter ended December 31, 2025, and thousands of dollars. Cash and cash equivalents as of September 30, 2025 were $25.3 million, Net cash used in operating activities was $7.9 million. Net cash used in investing activities was $296,000, and net cash provided by financing activities were $53.5 million. Cash and cash equivalents as of December 31, 2025, for $70.7 million. The increase in cash and cash equivalents as of December 31, 2025, primarily reflects $46.9 million in net proceeds from the company's October 22, 2025 registered direct offering.

Cash used in operation activities include spending for the development and commercialization of Gemini-II and Plato. December 31, 2025, we had $70.7 million in cash, cash equivalents compared to $13.4 million at March 31, 2025. Working capital was $71.7 million as of December 31, 2025, versus $16.4 million at March 31, 2025. Stockholders' equity as of December 31, 2025, was $83.6 million compared to $28.2 million as of the fiscal year ended March 31, 2025.

Before I hand the call over to the operator for Q&A, I'd like to provide the fourth quarter fiscal 2026 outlook. Current expectations for the upcoming fiscal fourth quarter of net revenues in the range of $5.7 million to $6.5 million with gross margin of approximately 54% to 56%.

Operator, at this point, we will open the call to Q&A.

[Operator Instructions] And our first question comes from the line of Quinn Bolton with Needham & Company.

This is Robert [indiscernible] on for Quinn here. Congrats on all of the progress on Gemini-II. I just wanted to ask, you also announced during the quarter a partnership with G2 Tech as well. And that application for defense. Maybe how important is kind of the defense applications for Gemini-II? How does that establish the capabilities of Gemini in sort of real-world applications? And can you speak to potential commercial uses beyond kind of drones and defense and how this may impact the business going forward?

Sure. Sure. So certainly, the mil and defense area have been the sectors that we've had our early successes in. We've talked about it in the past. We've had some of the SBIR wins with entities under the DoD or DoW as it's called today, specifically with the Air Force Space Development Agency and U.S. Army. So we certainly have had some successes there. And in getting the message out.

We've also talked about a SAR application, a Board that we sent out to an offshore defense contractor for [ LEO satellite ] for SAR in which they're doing their evaluation now. So certainly, this is the area that has adopted our technology most quickly. And as you mentioned, with G2 Tech, it's really -- it's a nice partnership because they're able to actually bring a product using our subsystem APU to create a true product. In this case, like you said, a drone and camera surveillance system.

Can you repeat the last part of the sentence -- of the question though.

[indiscernible]

So a good point. So the effort we're doing right now with this POC, this time-to-first-token and the whole [indiscernible] lends itself to other applications outside of drones and unmanned vehicles, things like smart cities, things like robotics. And so certainly, we will be able to leverage all the work we're doing now for this current POC with G2 Tech for these other markets as well.

For sure. And just one more on -- you mentioned the government funding as a catalyst for 2026. Can you talk through maybe potential time lines? When do you expect this funding to come in? And any other details that you have on that front would be great.

Yes. So for SBIR, we have a continuous pipeline of submittal. So we have a handful right now that have already been submitted, and we're waiting for word on whether we've been awarded or not, and we have others that we are putting together. This is an ongoing process. And there are different levels. They fall under the classic SBIRs. There's also other areas like BAA, which stands for a broad agency announcement, I believe, [indiscernible]. There are other programs where other fundings are involved. And we're active in all those areas. Again, the benefit of this funding is first. And secondly, it allows us to get more exposure within the DoD elements for future business.

[Operator Instructions]

[Audio Gap]

Since there are no more questions from the investor. So thank you all for joining us. We look forward to speaking with you again before our fourth quarter and the full year fiscal 2026 results. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and thank you for your participation.

Ladies and gentlemen, thank you for standing by. Welcome to GSI Technologies Second Quarter Fiscal 2026 Results Conference Call. [Operator Instructions]

Before we begin today's call, the company has requested that I read the following safe harbor statement. The matters discussed in this conference may include forward-looking statements regarding future events and the future performance of GSI Technology that involve risks and uncertainties that could cause actual results to differ materially from those anticipated.

These risks and uncertainties are described in the company's Form 10-K filed with the Securities and Exchange Commission. Additionally, I have also been asked to advise you that this conference is being recorded today, October 30, 2025, as the request of GSI Technology. Hosting the call today is Lee-Lean Shu, the company's Chairman, President and Chief Executive Officer. With him are Douglas Schirle, Chief Financial Officer; and Didier Lasserre, Vice President of Sales.

I would now like to turn the call over to Mr. Shu. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining us today. Let me start by highlighting two recent and important events for GSI. First, we announced a research paper published by Cornell University in mid-October. The paper verified that our Gemini-I chip performed on par with NVIDIA's A6000 on certain AI tasks, while consuming roughly 98% less energy.

This paper validates the disruptive potential of our compute in memory design, particularly for the near-term commercialization of Gemini-II with 8x the memory and 10x the performance of Gemini-I. Gemini-II is positioned to deliver superior processing at a fraction of the power when compared to existing solutions.

This brings me to my second point. The market quickly recognized the significance of our compute-in memory validation with the Cornell paper. Building on the momentum from the papers funding, we closed a $50 million equity financing. We are now deploying the capital to accelerate execution across our hardware and the software build-out, making this a pivotal period for GSS growth.

Post funding, we are working on the initiative in parallel. First, we have begun the work to acquire the necessary IP for Plato, which will allow us to start hardware development. This IP provides crucial connection to support broader system interface and prototyping for future customer applications.

To accelerate Plato's time to market and capture market opportunity sooner, we are building additional software team to support Plato. Second, to expedite the build-out of our Gemini-II software solutions and applications, we are investing in all the layers that make the platform more accessible and flexible for developers.

These software tools are essential for customers integrating Gemini-II hardware into AI and signal processing workflows, particularly in edge and the defense applications, where efficiency and the low power provide a competitive advantage.

Looking ahead, our initiatives for calendar year 2026 are centered on converting proof-of-concept projects into commercial customers and expanding those relationships into large production programs. Didier will provide an update on where those efforts stand today.

To sum up, our post-funding initiative was target and discipline -- will be targeted and disciplined. We are rapidly moving forward with the Plato hardware design and the software development, ramping up our Gemini software ecosystem and strengthening ties with key defense and government partners in our POC and Small Business Innovation Research or SBIR programs.

This action position GSI to turn technical progress into commercial success in the high-value edge and defense applications such as drone military vehicles, satellite and other use cases and ride the wave of AI compute innovation.

Now I hand the call over to Didi, who will provide more details on this topic and discuss our business development and the sales activities. Please go ahead, Didi.

Thank you, Lee-Lean. Let me expand on the topics that Lee-Lean just highlighted. We continue to advance our ongoing projects, including our SBIR and POC engagements with potential customers. Recently, Gemini-II has been approved for prototyping by the offshore defense contractor to whom we shipped a board and software to a few months back.

This POC focuses on synthetic aperture radar or SAR applications for drones and other edge systems. What's exciting here is that our solution delivers the required performance while maintaining an extremely low power profile around 15 watts, making it ideal for compact energy-constrained environments.

For added context on just how competitive the solution is, an incandescent light bulb uses about 4x more wattage than our solution. We are also involved in a joint POC involving two defense organizations and a drone integration partner. This Gemini-II project combines YOLO model, we developed with multimodal large language model processing at the edge, specifically targeting time to first token, a key performance metric for drones. Along with our partner, we successfully demonstrated the end-to-end application to one of the potential end customers.

Gemini-II outperformed the competing solution, particularly in how quickly the model produces its first response. We are now optimizing the algorithm and expect to publish initial benchmark results before year-end with a fully optimized version available in the first half of calendar 2026. This algorithm would be for defense applications such as drones, satellites and other military vehicles.

Gemini-II is a central part of the near-term commercialization road map, and we are encouraged by the customer engagement and technical validation that is being received. Turning to our Plato program.

We are embarking on the journey towards a major milestone, the tape-out of Plato chip in early calendar 2027. Over the next year or so, we plan to actively engage several strategic partners for Plato who could provide funding and collaborate on testing and prototyping early versions of the chip.

Their involvement would also support the development of software libraries and APIs, ensuring that Plato becomes a versatile, scalable solution across multiple markets, starting with defense.

In military and defense applications, the APU's high-performance and low-power capabilities provide unique advantages. And Plato will further enhance critical functions such as SAR imaging, object recognition, GPS-denied navigation and data fusion for drones and military vehicles, delivering real-time tactical capabilities in compact mobile systems.

Plato's design builds directly on the foundation of Gemini-II. To accelerate time to market, we are acquiring building block IP that allows us to focus on differentiation rather than reinventing core components.

Strategic partners would play a critical role, not just in meeting our ambitious time line, but in shaping the chip's capabilities, validating its performance in real-world applications and guiding future enhancements.

Their technical collaboration and early adoption would position us to deliver a highly optimized field-tested solution, strengthening our long-term leadership in specialized AI compute architectures well beyond the immediate financial support.

And lastly, a comment on our SBIR work. We recently received a $751,000 extension of one of our Space Development Agency contracts, which includes additional funding for radiation hardened beam testing of Gemini-II. The goal of this testing is to evaluate the robustness of the current Gemini-II commercial chip for possible use in satellite and other aerospace applications.

While it's too early to confirm specific designations, we see this as a significant opportunity. Let me now switch to the second quarter's commercial -- I'm sorry, customer and product breakdown. By revenue, I am referring to net revenue in the following comments.

In the second quarter of fiscal 2026, sales to KYEC were $802,000 or 12.5% of revenues compared to $650,000 or 14.3% of revenues in the same period a year ago and $267,000 or 4.3% of revenues in the prior quarter. Sales to Nokia were $200,000 or 3.1% of revenues compared to $812,000 or 17.8% in the same period a year ago and $536,000 or 8.5% of revenues in the prior quarter. Sales to Cadence Design Systems were $1.4 million or 21.6% of net revenues compared to 0 in the same period last year and $1.5 million or 23.9% of revenues in the prior quarter.

Military defense sales were 28.9% of second quarter shipments compared to 40.2% of shipments in the comparable period a year ago and 19.1% of shipments in the prior quarter. SigmaQuad sales were 50.1% of second quarter shipments in fiscal 2026 compared to 38.6% in second quarter fiscal 2025 and 62.5% in the prior quarter.

I'd now like to hand the call over to Doug. Please go ahead, Doug.

Thank you, Didier. The company reported net revenues of $6.4 million for the second quarter of fiscal 2026 compared to $4.6 million for the second quarter of fiscal 2025 and $6.3 million for the first quarter of fiscal 2026.

Revenue growth in the quarter was driven by strong market momentum for leading SRAM solutions. Gross margin was 54.8% in the second quarter of fiscal 2026 compared to 38.6% in the year ago quarter and 58.1% in the preceding first quarter of fiscal 2026.

The decrease in gross margin for the second quarter of 2026 was primarily due to a change in the product mix. Total operating expenses in the second quarter of fiscal 2026 were $6.7 million compared to $7.3 million in the second quarter of fiscal 2025 and $5.8 million in the prior quarter.

Research and development expenses were $3.8 million compared to $4.8 million in the prior year period and $3.1 million in the prior quarter. The increase in research and development spending compared to the prior quarter is primarily due to changes in the level of stock-based compensation expense and amounts of government funding received under SBIRs in each quarter recorded as an offset to research and development expense.

Selling, general and administrative expenses were $3 million in the quarter ended September 30, 2025, compared to $2.6 million in the prior year quarter and $2.7 million in the previous quarter. The second quarter fiscal 2026 operating loss was $3.2 million compared to an operating loss of $5.6 million in the prior year period and an operating loss of $2.2 million in the prior quarter.

Second quarter fiscal 2026 net loss included interest and other income of $43,000 and a tax provision of $41,000 compared to $149,000 in interest and other income and a tax provision of $23,000 for the same period a year ago. In the preceding first quarter, net loss included interest and other income of $13,000 and a tax provision of $54,000.

Net loss in the second quarter of fiscal 2026 was $3.2 million or $0.11 per diluted share compared to a net loss of $2.2 million or $0.08 per diluted share for the first quarter of fiscal 2026. For the prior year second fiscal quarter of 2025, net loss was $5.5 million or $0.21 per diluted share.

Total second quarter pretax stock-based compensation expense was $856,000 compared to $663,000 in the comparable quarter a year ago and $341,000 in the prior quarter. At September 30, 2025, the company had $25.3 million in cash and cash equivalents compared to $13.4 million at March 31, 2025. Working capital was $26.8 million as of September 30, 2025, versus $16.4 million at March 31, 2025.

Stockholders' equity as of September 30, 2025, was $38.6 million compared to $28.2 million as of the fiscal year ended March 31, 2025.

Lastly, for the third quarter of fiscal 2026, we expect net revenues in the range of $6.0 million to $6.8 million with gross margin of approximately 54% to 56%.

We remain focused on disciplined execution to bring Gemini-II to market, advance our road map for Plato and drive long-term shareholder value. Operator, at this point, we'll open the call to Q&A.

[Operator Instructions] Our first question comes from Robert Christian, private investor.

I'd like to congratulate you on the Cornell verification. But I'd also like to know, have you done any work with the auto industry on autonomous vehicles?

We have not yet. So as we've talked about in past calls, we've certainly have limited resources, and that takes a tremendous effort for that market space. So we're currently starting in the military defense arena, but we certainly believe our technology will adapt well in those areas. And so that's certainly a focus for us in the future, but not yet.

Our next question comes from Mark [indiscernible] private investor.

I had a question on the $50 million placement you recently did, was that with a strategic investor? What sort of investor? And was there a holding period to that stock?

No, it was just someone that was interested in the company, wasn't strategic in any way. And there is no required holding period for the shares.

Got it. Okay. And then just a follow-up to that. Were there -- have there been any strategic circling at all now post the Cornell report?

Can you repeat the question, please?

Have there been any inquiries from more strategic investors since the report came out from Cornell?

There are things that we're looking at and parties that we're talking to. But I wouldn't say that there's anything that anyone that we haven't already considered working with at this time. As Didier said, we have limited resources, and I think we have some very significant opportunities that he's already mentioned.

Our next question comes from David Zalkowitz with ISQ.

Yes. Is there any plan to have Cornell or another third party validate the Gemini-II information, a different technology? I know the Cornell report was Gemini-I. So is there a plan to do that similar type of analysis for Gemini-II?

Yes. So you're absolutely correct. So Cornell actually received this Gemini-I board many years ago, and they've actually written a few other papers. And so they -- this was a continuation of that original board. And we are talking to them about getting a Gemini-II board to them and also other researchers as well.

Okay. And then I guess you're talking -- you're working with the military. I guess, I didn't see anybody on the Board or senior management team that has real military defense experience. Is there any plans to beef up that area of the management or the Board of Directors in order to target those applications?

Yes. No, that hasn't come up as a discussion or topic on the Board. At this point, there are no plans to revise the Board. It doesn't mean that we won't in the future, if it makes sense, though.

Okay. And then I saw you're developing your own large language model, which you're going to release some information on at the end of the year. Just curious why you wouldn't just use the plethora of large language models that are already out in the market and why spend resources developing your own?

No, we are not developing our own large language model. We are working on the open source large language model like Gemma III. So...

I'm just reading a press release, the press release says currently developing a multi-modal LLM that targets edge applications.

Correct. Yes. For 12b -- so Gemma-312B that's the model, and we're developing our algorithms to work with that model.

Okay. And why would you do that as opposed to utilizing other LLMs are already developed?

In this case, it was the definition from the POC that we're working on. So as we talked about, there are 2 government entities that have approached us and a partner to do a POC, and that is the model that they requested.

Yes. Also, there are certain aspects of the model, which support multi-modal well, okay? So they can support the image very well and in addition to the text. That's why they pick on this one.

Our next question comes from [ Christian Rug from CER Holdings. ]

I was wondering, how are you differentiating your APU versus GPU competitors in terms of power, latency and cost efficiency?

That's a pretty broad question. And so if you look at the Cornell paper, that certainly hits on the power. The comparison was to an NVIDIA GPU and the use case they use, the performances were on par, but we were 98% less power. So that certainly shows that. With the SAR algorithm that we've been talking about, certainly, our image creation time is faster at a lower power footprint as well.

So what we've done is we've done benchmarking on certain use cases based off of input from customers on what they'd like to see. So there are times where we beat them strictly on power. There's times we beat them strictly on performance. Well, I shouldn't say that, we've never lost to them on power. But there certainly are times that we have the advantage on both performance and lower power.

Okay. And then my second question is, given the performance claims and potential of Gemini-II APU, have you had any engagement or partnership discussions with larger semiconductor or AI-focused companies?

So right now, we're focused on the customers at this point. We haven't had any discussions at least recently with other semiconductor companies.

Okay. And then my last question is, how does the power factors play into building AI data centers at a large scale?

So we're focused on the edge right now. And so everything we've talked about right now is the edge. And so certainly, the data centers have a real power issue as well. There's no secret there. But what we've been focused on right now with Gemini-II and certainly with the next-generation chip Plato will be at the edge.

And so if you look at -- as we discussed with Gemini-II, this project we did with this offshore defense contractor, we limited -- we limited our chip to 1 of the 4 cores that are there to get it down to 15 watts. If you look at Plato, depending on how it's used, can be as little as 4 watts and maximum 12 to 15 watts. So we're really focused at the edge, not in the data center.

Our next question comes from Michael Roberts from Roberts Capital. It seems Michael has gone silent. We will move on to the next question. Michael Cooper, private investor. You may proceed with your question.

Can you talk about the total addressable market that you're looking at over the next 5 years? And then how you expect that to ramp? I'm guessing you have a number of different scenarios, maybe a range of scenarios. You could give us a sense for how large this market is for these markets? I'm sure you're looking at various markets. And then what kind of price points your boards or chips go into products?

Sure. It's a good question. So Michael, I don't have the numbers in front of me. But certainly, there was a report very recently that was issued by one of the researcher analysts at Needham & Company that discussed the drone market specifically.

And I don't have it in front of me, but I want to say it was either -- it was tens of billions at least market size. I want to say it might be larger than that. And so certainly, it's a very, very large market. And as we've discussed, we certainly feel with the power profile of our chips, along with some of the algorithm work that we're doing for, like Lee-Lean mentioned, the multimodal inputs, whether we take an image or text or voice in the future, along with the time to first token advantage that we have. We certainly think that we're well positioned to address that market.

That was question one. The second question was -- I think it was a two-part question you had. Pricing. Yes. So pricing, I mean, we'll give you generalities. But certainly, it's going to be priced differently by market, but it could be a few thousand dollars a board to $10,000 a board that contains the chip. And then the chip will sell -- again, based on the market, but the chip could be $1,000 or more depending on the market and the volume.

And you're working in gross margins in the 80-ish percent range?

Yes, it will be above where we are corporately today. And again, it really depends on the market and how it's sold. It could be 60% to 80%. It really depends on how it's sold, whether it's in a board, in a server, whether it comes with software or not. I mean there's a lot of different aspects that would move that margin needle.

Our next question comes from Michael Roberts with Roberts Capital, who is rejoining us.

On capital deployment on the $50 million raise, can you give an idea of how that plans to be allocated, whether it's percentage or dollar amount, amongst the Gemini-II completion, software development and the new Plato chip that you referenced?

Yes. On the Plato because there's some fixed costs that we have to spend like IP costs and the mass tape-out costs. So those are fixed $15 million, $60 million, $70 million kind of range, okay? And the rest of them, I think they're probably pretty even between the Gemini-II and the Plato, that's mostly engineering costs, the internal cost, and it will be distributed even inside the company.

Evenly across. Okay. And in terms of then based on your cash runway now, what revenue or gross margin level do you expect to reach operating breakeven then?

If you can assume I don't know, 65% to 70% gross margin once we get into this. It's something that I need to take a look at. We're still putting our plans together in terms of hiring levels and so on. SoC teams or whoever we need for the chip development, additional software teams that we need for the software development. I don't have all those numbers yet to do a calculation.

Understood. But are there concrete milestones and dates then for the Gemini-II in terms of expectation of pilot shipments or expected initial production orders?

Yes. So we will be doing some pilot shipments. We've done a couple already or we plan on doing more in the first half of 2026 calendar. This POC that hopefully, we'll be able to discuss a lot more in the upcoming months, depending on the schedules on that could give more substantial revenues in the back half of calendar 2026.

Noted. And from the current evaluation customers now, has any purchase orders or letters of intent been provided yet?

I'm sorry, could you repeat the question?

Yes. Have any of the evaluation customers provided any purchase orders or letters of intent yet against that production?

They're still in their evaluation at this point. So as we talked about, the Board that we sent along with the software to this offshore defense contractor, they have done a review and they've put us as what's called good acceptance in their system, which means it's passed and been accepted. And so now we're going through the possible use cases.

They have a couple of different divisions. Two of them, we think will be a good fit. One obviously is the SAR division. The other one is what they call their AI division. And so we're looking for practical applications that can then, like you say, turn into design wins and revenue. So that's -- we're doing that with the customer today.

All right. Very helpful. And one last question, then I'll let others proceed. Can you elaborate on that software stack maturity then, the compiler SDK model porting tools and when developers outside of GSI will have access? Going towards the ecosystem adoption of what we have?

No, for the Gemini-II, we -- right now, we are developing the library and algorithm. Now after that, we will move on to the tool and the compiler work, okay? And we are developing this with the customer -- the partner and the customer we have.

Our next question comes from Robert Christian, private investor.

Yes. Can you help me understand why the company is not going after data centers in view of the environment impact with energy consumption and cooling? It seems like we're leaving a lot of money on the table, even if it was just licensed so others could use the technology.

So I'm not sure how long you've been following the company, but we had talked about another potential road map product at the time we were calling it Gemini-III, and that was going to be geared towards the data center.

And that one needed a different kind of partner and it needed a lot more funding. It would have required a very aggressive process node and would have been much more expensive. And so we are going down that road.

And again, that was -- it was targeted for the data center. In the meantime, we were getting way too much positive feedback and interest on the edge, and we were getting SBIR dollars, and there are other dollars, research dollars that we've submitted for to try and get, and it's all for the edge.

And so the decision was made. We couldn't do both. It was one or the other at this point. And so we remain focused on the edge. Not to say with more influx of cash, we can't beef up the team and go after the data center, but it strategically made sense for us to remain at the edge for now.

Okay. But there's not a possibility, say, of NVIDIA or a Micron to come in and develop the chip and we get a percentage of it?

Yes. I mean that's certainly very possible. I can't say those discussions are happening, but we had some discussions in the past where that was kind of the model we were looking at. So the answer is yes, we could do that. It's just -- there's nothing in the hopper right now.

Our next question comes from [ Marco Petroni with MG Capital. ]

Yes. You guys just recently raised $47 million net, and you had $13 million last quarter, and the balance sheet shows only $25 million now. So I was wondering where that money went, number one. And number two, going forward, what type of capital allocations do you need for -- to build out the software team to do all this other stuff that we've been talking about?

Well, the first answer is that, that transaction closed after the balance sheet date. It was an October transaction and the $27 million that you see is as of September 30. And then in terms of capital allocation, I think we answered a previous question where we're looking at some IP and other stuff that we need to purchase for Plato, and then we expect to split funding between software development and the Plato development.

So how much cash do you have on hand currently?

Well, take $27 million or $23 million -- I'm sorry, $25 million balance sheet date plus we got another $47 million. So that should give you a reasonable estimate.

Our next question comes from [ Mohammed Alsousi from Scale. ]

I just want to know if you have attracted any interest from any potential new customers after the Cornell study on APU performance.

I'm sorry, just to be clear, you're asking if we've gotten any more customer traction because of the Cornell paper? Is that the question?

No, I want to know if you attract more interest or potential new customers after the new Cornell study on APU performance.

Okay. I think that's what I just said. Okay. So the answer is the customers we've been talking to, we've been talking about this low-power advantage for some time, and we've done benchmarks on several applications with some of our customers. And so they're aware of that. And so in that respect, it's not a surprise to our customers we've been talking to that we have this low-power advantage. This just illustrated it for the rest of the public as a third-party validation of what we've been saying.

This now concludes our question-and-answer session. I would like to turn the floor back over to Mr. Lee-Lean Shu for closing comments.

We look forward to seeing you at this event and -- and your participation in the third quarter fiscal 2026 earnings call. Thank you.

Ladies and gentlemen, this concludes our conference for today. Thank you for your participation. You may disconnect your lines and have a wonderful day.