What changed in Peraso Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, Peraso Inc. (PRSO) added 379 paragraphs, removed 321, and edited 213 between the 2022 and 2023 10-K filings. The biggest movers are Item 1. Business (+147/−139), Item 1A. Risk Factors (+132/−88), Item 7. Management's Discussion & Analysis (+96/−91).

Did Peraso Inc. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 132 new/edited paragraphs and 88 removed paragraphs versus the 2022 10-K.

What changed in Peraso Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 96 new/edited paragraphs and 91 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Where does this PRSO 10-K diff come from?

The source filings are Peraso Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in Peraso Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of Peraso Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+379 added−321 removedSource: 10-K (2024-03-29) vs 10-K (2023-03-29)

Top changes in Peraso Inc.'s 2023 10-K

379 paragraphs added · 321 removed · 213 edited across 5 sections

Item 1. Business+147 / −139 · 96 edited
Item 1A. Risk Factors+132 / −88 · 60 edited
Item 7. Management's Discussion & Analysis+96 / −91 · 56 edited
Item 2. Properties+2 / −2
Item 5. Market for Registrant's Common Equity+2 / −1 · 1 edited

Item 1. Business

Business — how the company describes what it does

96 edited+51 added−43 removed104 unchanged

2022 filing

2023 filing

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The Exchangeable Share Purchase Price is payable only by the Company delivering or causing to be delivered to the relevant holder one share of the Company’s common stock for each Exchangeable Share purchased plus a cash amount equal to the amount of any accrued and unpaid dividends on such Exchangeable Share.

F-18 The Exchangeable Shares are subject to redemption by the Company, Callco and Canco at the Exchangeable Share Purchase Price, on the “Redemption Date,” which date shall be no earlier than the seventh anniversary of the date on which Exchangeable Shares are first issued, unless: (a) less than 10% of the aggregate number of Exchangeable Shares issued remain outstanding; (b) there is a change in control of the Company (defined generally as (i) any merger, amalgamation, arrangement, takeover bid or tender offer, material sale of shares or rights or interests that results in the holders of outstanding voting securities of the Company directly or indirectly owning, or exercising control or direction over, voting securities representing less than 50% of the total voting power of all of the voting securities of the surviving entity; or (ii) any sale or disposition of all or substantially of the Company’s assets), and (c) upon the occurrence of certain other events.

The Exchangeable Shares are subject to redemption by the Company, Callco and Canco at the Exchangeable Share Purchase Price, on the “Redemption Date,” which date shall be no earlier than the seventh anniversary of the date on which Exchangeable Shares are first issued, unless: (a) less than 10% of the aggregate number of Exchangeable Shares issued remain outstanding; (b) there is a change in control of the Company (defined generally as (i) any merger, amalgamation, arrangement, takeover bid or tender offer, material sale of shares or rights or interests that results in the holders of outstanding voting securities of the Company directly or indirectly owning, or exercising control or direction over, voting securities representing less than 50% of the total voting power of all of the voting securities of the surviving entity; or (ii) any sale or disposition of all or substantially of the Company’s assets), and (c) upon the occurrence of certain other events.

Material estimates may include assumptions made in determining reserves for uncollectible receivables, inventory write-downs, impairment of long-term assets, purchase price allocations, valuation allowance on deferred tax assets, accruals for potential liabilities and assumptions made in valuing equity instruments. Actual results could differ from those estimates.

Material estimates may include assumptions made in determining reserves for uncollectible receivables, inventory write-downs, impairment of long-term assets, purchase price allocations, valuation allowance on deferred tax assets, accruals for potential liabilities and assumptions made in valuing equity instruments and warrant liabilities. Actual results could differ from those estimates.

License and Asset Sale Transaction and Subsequent Event On August 5, 2022, the Company entered into a Technology License and Patent Assignment Agreement (the Intel Agreement) with Intel Corporation (Intel), pursuant to which Intel: (i) licensed from the Company, on an exclusive basis, certain software and technology assets related to the Company’s Stellar packet classification intellectual property, including its graph memory engine technology, and any roadmap variant, in the form existing as of the date of the Agreement (the Licensed Technology); (ii) acquired from the Company certain patent applications and patents owned by the Company; and (iii) assumed a professional services agreement, dated March 24, 2020, between Fabulous Inventions AB (Fabulous) and the Company (the Fabulous Agreement), pursuant to which, among other things, the Company licensed from Fabulous certain technology incorporated into the Licensed Technology.

License and Asset Sale Transaction On August 5, 2022, the Company entered into a Technology License and Patent Assignment Agreement (the Intel Agreement) with Intel Corporation (Intel), pursuant to which Intel: (i) licensed from the Company, on an exclusive basis, certain software and technology assets related to the Company’s Stellar packet classification intellectual property, including its graph memory engine technology, and any roadmap variant, in the form existing as of the date of the Agreement (the Licensed Technology); (ii) acquired from the Company certain patent applications and patents owned by the Company; and (iii) assumed a professional services agreement, dated March 24, 2020, between Fabulous Inventions AB (Fabulous) and the Company, pursuant to which, among other things, the Company licensed from Fabulous certain technology incorporated into the Licensed Technology.

The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.

The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable and other payables, approximate their fair values because of the short maturity of these instruments.

This has negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place” and created significant disruption of the financial markets.

This negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in-place” and created significant disruption of the financial markets.

Customer relationships relate to the Company’s ability to sell existing and future versions of products to MoSys’ customers existing at the time of the arrangement. The fair value of the customer relationships was determined by discounting estimated net future cash flows from the customer relationships.

Customer relationships relate to the Company’s ability to sell existing and future versions of its products to MoSys’ customers existing at the time of the arrangement. The fair value of the customer relationships was determined by discounting estimated net future cash flows from the customer relationships.

COVID-19 The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020.

COVID-19 and World Unrest The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020.

F-25 Indemnification In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance.

Indemnification In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance.

As a result of the impairment test, the Company recorded a non-cash impairment charge totaling $9.9 million, and the Company’s goodwill balance was reduced to zero as of December 31, 2022. F-13 Leases ASC 842, Leases (ASC 842), requires an entity to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months.

As a result of the impairment test, the Company recorded a non-cash impairment charge totaling $9.9 million, and the Company’s goodwill balance was reduced to zero as of December 31, 2022. F-14 Leases ASC 842, Leases (ASC 842), requires an entity to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months.

F-8 Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year ends on December 31 of each calendar year. Certain prior year amounts have been reclassified for consistency with the current period presentation.

F-9 Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year ends on December 31 of each calendar year. Certain prior year amounts have been reclassified for consistency with the current period presentation.

Revenue is recognized using an output method that is consistent with the satisfaction of the performance obligation as a measure of progress. Deferred cost of net revenue During the year ended December 31, 2022, the Company had $1.1 million of product shipments for which the revenue recognition criteria under ASC 606 had not been met.

Revenue is recognized using an output method that is consistent with the satisfaction of the performance obligation as a measure of progress. F-15 Deferred cost of net revenue During the year ended December 31, 2022, the Company had $1.1 million of product shipments for which the revenue recognition criteria under ASC 606 had not been met.

F-9 Fair Value Measurements The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1 —Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Fair Value Measurements The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1 —Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s consolidated financial statements for the years ended December 31, 2022 and 2021 related to these indemnifications.

Product Warranties The Company warrants certain of its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of net revenues. Warranty costs were not material for the years ended December 31, 2022 and 2021.

Derivatives and Liability-Classified Instruments The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board (FASB) in ASC 480 , Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815) .

F-11 Derivatives and Liability-Classified Instruments The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board (FASB) in ASC 480 , Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815) .

The assumptions used in the Black Scholes model could materially affect compensation expense recorded in future periods. F-15 Foreign Currency Transactions The functional currency of the Company is the U.S dollar. All foreign currency transactions are initially measured and recorded in an entity’s functional currency using the exchange rate on the date of the transaction.

The assumptions used in the Black Scholes model could materially affect compensation expense recorded in future periods. F-16 Foreign Currency Transactions The functional currency of the Company is the U.S dollar. All foreign currency transactions are initially measured and recorded in an entity’s functional currency using the exchange rate on the date of the transaction.

F-19 In connection with the Arrangement, on December 15, 2021, the Company filed the Certificate of Designation of Series A Special Voting Preferred Stock (the Certificate) with the Secretary of State of the State of Delaware to designate Series A Special Voting Preferred Stock (the Special Voting Share) in accordance with the terms of the Arrangement Agreement in order to enable the holders of Exchangeable Shares to exercise their voting rights.

In connection with the Arrangement, on December 15, 2021, the Company filed the Certificate of Designation of Series A Special Voting Preferred Stock (the Certificate) with the Secretary of State of the State of Delaware to designate Series A Special Voting Preferred Stock (the Special Voting Share) in accordance with the terms of the Arrangement Agreement in order to enable the holders of Exchangeable Shares to exercise their voting rights.

Cost of Net Revenue Cost of net revenue consists primarily of direct and indirect costs of product sales, including amortization of intangible assets and depreciation of production-related fixed assets. Advertising Costs Advertising costs are expensed as incurred. Advertising costs were not significant for the years ended December 31, 2022 and 2021.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

F-10 Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

At December 31, 2022, the Company did not have any material unrecognized tax benefits nor expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest related to unrecognized tax benefits as income tax expense and penalties related to unrecognized tax benefits as other income and expense.

At December 31, 2023, the Company did not have any material unrecognized tax benefits nor expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest related to unrecognized tax benefits as income tax expense and penalties related to unrecognized tax benefits as other income and expense.

Callco was incorporated to exercise the call rights, while Canco was incorporated to acquire the shares of Peraso Tech from Canadian shareholders that wished to receive Exchangeable Shares as consideration, so it was a tax deferred transaction for such Canadian shareholders.

F-26 Callco was incorporated to exercise the call rights, while Canco was incorporated to acquire the shares of Peraso Tech from Canadian shareholders that wished to receive Exchangeable Shares as consideration, so it was a tax deferred transaction for such Canadian shareholders.

F-7 PERASO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. The Company and Summary of Significant Accounting Policies Peraso Inc., formerly known as MoSys, Inc. (the Company), was incorporated in California in 1991 and reincorporated in 2000 in Delaware.

F-8 PERASO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. The Company and Summary of Significant Accounting Policies Peraso Inc., formerly known as MoSys, Inc. (the Company), was incorporated in California in 1991 and reincorporated in 2000 in Delaware.

F-11 The Company regularly reviews the carrying value and estimated lives of its long-lived assets and finite-lived intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

F-12 The Company regularly reviews the carrying value and estimated lives of its long-lived assets and finite-lived intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

Such Escrow Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of: (a) any date following the first anniversary of December 17, 2021 and prior to December 17, 2024 where the volume weighted average price of the common stock for any 20 trading days within a period of 30 consecutive trading days is at least $8.57 per share, subject to adjustment for stock splits or other similar transactions; (b) the date of any sale of all or substantially all of the assets or shares of the Company; or (c) the date of any bankruptcy, insolvency, restructuring, receivership, administration, wind-up, liquidation, dissolution, or similar event involving the Company.

Such Escrow Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of: (a) any date following the first anniversary of December 17, 2021 and prior to December 17, 2024 where the volume weighted average price of the common stock for any 20 trading days within a period of 30 consecutive trading days is at least $342.80 per share, subject to further adjustment for stock splits or other similar transactions; (b) the date of any sale of all or substantially all of the assets or shares of the Company; or (c) the date of any bankruptcy, insolvency, restructuring, receivership, administration, wind-up, liquidation, dissolution, or similar event involving the Company.

Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. The allowance for doubtful accounts receivable was approximately $183,000 and $61,000 as of December 31, 2022 and December 31, 2021, respectively.

Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. The allowance for doubtful accounts receivable was approximately $30,000 and $183,000 as of December 31, 2023 and 2022, respectively.

As of December 31, 2022, the Company also had federal research and development tax credit carryforwards of approximately $8.5 million that will expire at various times through 2042, and California research and development credits of approximately $8.4 million, which do not have an expiration date.

As of December 31, 2023, the Company also had federal research and development tax credit carryforwards of approximately $8.1 million that will expire at various times through 2042, and California research and development credits of approximately $8.5 million, which do not have an expiration date.

The classification of the Purchase Warrant, including whether the Purchase Warrant should be recorded as liability or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive loss.

The classification of the Purchase Warrants, including whether the Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive loss.

The 2019 Plan authorizes the board of directors or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units. Under the 2019 Plan, 182,500 shares were initially reserved for issuance.

The valuation allowance increased by $2.0 million during the year ended December 31, 2021. Utilization of the Company’s net operating losses (NOLs) and tax credit carryforwards is subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code (IRC) and similar state provisions.

The valuation allowance increased by $4.4 million during the year ended December 31, 2022. Utilization of the Company’s net operating losses (NOLs) and tax credit carryforwards is subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code (IRC) and similar state provisions.

The unamortized compensation cost at December 31, 2022 was $2.1 million related to restricted stock units and is expected to be recognized as expense over a weighted average period of approximately two years.

The unamortized compensation cost at December 31, 2023 was $1.0 million related to restricted stock units and is expected to be recognized as expense over a weighted average period of approximately two years.

Commitments and Contingencies Leases The Company has facility leases that it accounts for under ASC 842, including the operating leases for its corporate headquarters facility in San Jose, California, and facilities in Toronto and Markham Ontario, Canada. The Toronto lease expires in December 2023.

At December 31, 2022, the unamortized compensation cost was approximately $7.7 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately two years.

At December 31, 2023, the unamortized compensation cost was approximately $3.3 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately two years.

F-10 Inventories The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. Costs of inventories primarily consisted of material and third party assembly costs. The Company records inventory reserves for estimated obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions.

Inventories The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. Costs of inventories primarily consisted of material and third party assembly costs. The Company records write-downs for estimated obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions.

These NOLs are available to reduce future taxable income and will expire at various times from 2025 through 2042, except federal NOLs from 2018 to 2022 which have no expiration date.

These NOLs are available to reduce future taxable income and will expire at various times from 2025 through 2037, except federal NOLs from 2018 to 2023 which have no expiration date.

The Company believes the Section 382 limitations will result in approximately 89% of the federal and state NOLs expiring before they can be utilized, and approximately 88% of the federal tax credit carryforwards expiring before they can be utilized.

The Company believes the Section 382 limitations will result in approximately 91% of the federal and state NOLs expiring before they can be utilized, and approximately 98% of the federal tax credit carryforwards expiring before they can be utilized.

The Company reflected compensation costs of $1.4 million and $0.1 million related to the vesting of restricted stock options during the years ended December 31, 2022 and 2021, respectively.

The Company recorded compensation costs of $1.0 million and $1.4 million related to the vesting of restricted stock options during the years ended December 31, 2023 and 2022, respectively.

The 2009 Plan, the Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.” F-29 Stock-Based Compensation Expense The Company reflected compensation costs of $4.3 million and $4.4 million related to the vesting of stock options during the years ended December 31, 2022 and 2021, respectively.

The 2009 Plan, the Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.” F-24 Stock-Based Compensation Expense The Company recorded compensation costs of $4.2 million and $4.3 million related to the vesting of stock options during the years ended December 31, 2023 and 2022, respectively.

In November 2021, in connection with the approval of the Arrangement, the Company’s stockholders approved an amendment increasing the number of shares reserved for issuance under the 2019 Plan by 3,106,937 shares.

F-24 The initial right-of-use assets and corresponding liabilities of approximately $1.0 million for the San Jose and Markham facility leases were measured at the present value of the future minimum lease payments. The discount rate used to measure the lease assets and liabilities were 8%. Lease expense is recognized on a straight-line basis over the lease term.

The initial right-of-use asset and corresponding liability of approximately $1.0 million for the Markham facility lease was measured at the present value of the future minimum lease payments. The discount rate used to measure the lease assets and liabilities was 8%. Lease expense is recognized on a straight-line basis over the lease term.

The Purchase Warrant was initially recorded at a fair value at $3.7 million at the grant date and is re-valued at each reporting date. As of December 31, 2022, the fair value of the warrant liability was reduced to $2.1 million.

The 2022 Purchase Warrant was initially recorded at a fair value at $3,673,368 at the grant date and is re-valued at each reporting date. As of December 31, 2022, the fair value of the warrant liability was reduced to $2,079,138.

F-17 Securities Conversion Pursuant to the completion of the Arrangement, each Peraso Share that was issued and outstanding immediately prior to December 17, 2021 was converted into the right to receive 0.045239122387267 (the Exchange Ratio) newly issued shares of common stock of the Company or shares of Canco, which are exchangeable for shares of the Company’s common stock (Exchangeable Shares), at the election of each former Peraso Tech stockholder.

Pursuant to the completion of the Arrangement, each Peraso Share that was issued and outstanding immediately prior to December 17, 2021 was converted into either newly issued shares of common stock of the Company or shares of Canco, which are exchangeable for shares of the Company’s common stock (Exchangeable Shares), at the election of each former Peraso Tech stockholder.

F-28 A reconciliation of income taxes provided at the federal statutory rate (21%) to the actual income tax provision is as follows (in thousands): Year Ended December 31, 2022 2021 Income tax benefit computed at U.S. statutory rate $ (6,804 ) $ (1,503 ) Research and development credits (38 ) (131 ) Stock-based compensation 1,033 — Amortization of intangible assets (60 ) (60 ) Goodwill impairment 2,089 — Valuation allowance changes affecting tax provision 3,774 1,693 Other 6 1 Income tax provision $ — $ — Note 9.

A reconciliation of income taxes provided at the federal statutory rate (21%) to the actual income tax provision is as follows (in thousands): Year Ended December 31, 2023 2022 Income tax benefit computed at U.S. statutory rate $ 277 $ (6,804 ) Research and development credits — (38 ) Stock-based compensation 9 1,033 Amortization of intangible assets (60 ) (60 ) Goodwill impairment — 2,089 Change in fair value of warrant liabilities (734 ) — Valuation allowance changes affecting tax provision 506 3,774 Other 2 6 Income tax provision $ — $ — Note 8.

Stock-Based Compensation The Company periodically issues stock options and restricted stock awards to employees and non-employees. The Company accounts for such grants based on ASC No. 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period.

The Company accounts for such grants based on ASC No. 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period.

Three customers accounted for 96% of accounts receivable as of December 31, 2021. Note 8. Income Tax Provision Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Four customers accounted for 79% of accounts receivable as of December 31, 2022. F-22 Note 7. Income Tax Provision Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Intangible assets subject to amortization, including those acquired in business combinations were as follows (amounts in thousands): December 31, 2022 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Developed technology $ 5,726 $ (1,491 ) $ 4,235 Customer relationships 2,556 (666 ) 1,890 Other 186 (33 ) 153 Total $ 8,468 $ (2,190 ) $ 6,278 December 31, 2021 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Developed technology $ 5,726 $ (60 ) $ 5,666 Customer relationships 2,556 (27 ) 2,529 Other 165 (5 ) 160 Total $ 8,447 $ (92 ) $ 8,355 Developed technology primarily consisted of MoSys’ products that have reached technological feasibility and primarily relate to its memory semiconductor products and technology.

Intangible assets subject to amortization, including those acquired in business combinations were as follows (amounts in thousands): December 31, 2023 Gross Net Carrying Accumulated Other Carrying Amount Amortization Impairment Amount Developed technology $ 5,726 $ (3,471 ) $ — $ 2,255 Customer relationships 2,556 (1,550 ) — 1,006 Other 186 (61 ) (106 ) 19 Total $ 8,468 $ (5,082 ) $ (106 ) $ 3,280 December 31, 2022 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Developed technology $ 5,726 $ (1,491 ) $ 4,235 Customer relationships 2,556 (666 ) 1,890 Other 186 (33 ) 153 Total $ 8,468 $ (2,190 ) $ 6,278 Developed technology primarily consisted of MoSys’ products that have reached technological feasibility and primarily relate to its memory semiconductor products and technology.

Liquidity and Going Concern The Company incurred net losses of approximately $32.4 million and $10.9 million for the years ended December 31, 2022 and December 31, 2021, respectively, and had an accumulated deficit of approximately $149.6 million as of December 31, 2022.

Liquidity and Going Concern The Company incurred net losses of approximately $16.8 million and $32.4 million for the years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of approximately $166.4 million as of December 31, 2023.

The following table sets forth securities outstanding that were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive (in thousands): December 31, 2022 2021 Escrow Shares - exchangeable shares 1,313 1,313 Escrow Shares - common stock 502 502 Options to purchase common stock 1,499 1,558 Unvested restricted common stock units 1,057 88 Common stock warrants 4,959 134 Total 9,330 3,595 Income Taxes The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income.

The following table sets forth securities outstanding that were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive (in thousands): December 31, 2023 2022 Escrow shares - exchangeable shares 33 33 Escrow shares - common stock 13 13 Options to purchase common stock 36 37 Unvested restricted common stock units 15 26 Common stock warrants 242 124 Total 339 233 Income Taxes The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income.

F-26 The Company recognized revenue from shipments of product, licensing of its technologies and performance of services to customers by geographical location as follows (in thousands): Year Ended December 31, 2022 2021 United States $ 8,932 $ 1,968 Hong Kong 2,428 2,955 Taiwan 1,205 693 Rest of world 2,303 63 Total net revenue $ 14,868 $ 5,679 The following is a breakdown of product revenue by category (in thousands): (amounts in thousands) Years Ended December 31, Product category 2022 2021 Memory ICs $ 7,722 $ 150 mmWave ICs 3,289 3,566 mmWave modules 3,170 1,101 mmWave other products 18 89 $ 14,199 $ 4,906 Customers who accounted for at least 10% of total net revenue were: Year Ended December 31, 2022 2021 Customer A 26 % * Customer B 21 % 19 % Customer C 16 % 48 % Customer D 11 % * Customer E * 11 % * Represents less than 10% As of December 31, 2022, four customers accounted for 79% of accounts receivable, and the Company had a provision for doubtful accounts of $183,000 against one of the customer’s receivables.

The Company recognized revenue from shipments of product, licensing of its technologies and performance of services to customers by geographical location as follows (in thousands): Year Ended December 31, 2023 2022 United States $ 8,786 $ 8,932 Hong Kong 689 2,428 Taiwan 2,633 1,205 Rest of world 1,641 2,303 Total net revenue $ 13,749 $ 14,868 The following is a breakdown of product revenue by category (in thousands): Years Ended December 31, Product category 2023 2022 Memory ICs $ 8,446 $ 7,722 mmWave ICs 2,726 3,289 mmWave modules 1,677 3,170 mmWave other products 4 18 $ 12,853 $ 14,199 Customers who accounted for at least 10% of total net revenue were: Year Ended December 31, 2023 2022 Customer A 35 % 26 % Customer B 22 % 11 % Customer C 18 % * Customer D * 21 % Customer E * 16 % * Represents less than 10% As of December 31, 2023, three customers accounted for 83% of accounts receivable, and the Company had a provision for doubtful accounts of $30,000 against one of the customer’s receivables.

Stockholders’ Equity Securities Purchase Agreement On November 30, 2022, the Company entered into a securities purchase agreement (the SPA) with an institutional investor, pursuant to which the Company sold to the investor, in a registered direct offering, an aggregate of 1,300,000 shares of common stock at a negotiated purchase price of $1.00 per share.

November 2022 Registered Direct Offering On November 28, 2022, the Company entered into a securities purchase agreement with the Investor, pursuant to which the Company sold to the Investor, in a registered direct offering that closed on November 30, 2022, an aggregate of 32,500 shares of common stock at a negotiated purchase price of $40.00 per share.

These reclassifications had no effect on the reported results of operations or cash flows. Risks and Uncertainties The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

Risks and Uncertainties The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets.

The Company also offered and sold to the investor pre-funded warrants to purchase up to 1,150,000 shares of common stock. Each pre-funded warrant is exercisable for one share of common stock. The purchase price of each pre-funded warrant was $0.99, and the exercise price of each pre-funded warrant is $0.01 per share.

The Company also offered and sold to the investor pre-funded warrants to purchase up to 28,750 shares of common stock. Each pre-funded warrant was exercisable for one share of common stock. The purchase price of each pre-funded warrant was $39.60, and the exercise price of each pre-funded warrant was $0.40 per share.

Related Party Transactions A family member of one of the Company’s executive officers serves as a consultant to the Company. During the years ended December 31, 2022 and 2021, the Company paid approximately $162,000 and $208,000, respectively, to the consultant. Additionally, a family member of one of the Company’s executive officers is an employee of the Company.

Related Party Transactions A family member of one of the Company’s executive officers is an employee of the Company. During the years ended December 31, 2023 and 2022, the Company paid approximately $111,400 and $101,000, respectively, to the employee.

During the year ended December 31, 2022, the Company recognized approximately $243,000 of revenue that had been included in deferred revenue as of December 31, 2021. See Note 7 for disaggregation of revenue by geography.

As of December 31, 2023 and 2022, contract liabilities were in a current position and included in deferred revenue. During the year ended December 31, 2023, the Company recognized approximately $332,000 of revenue that had been included in deferred revenue as of December 31, 2022. See Note 7 for disaggregation of revenue by geography.

Business Segments, Concentration of Credit Risk and Significant Customers The Company determined its reporting units in accordance with ASC No. 280, Segment Reporting (ASC 280). Management evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business.

Management evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business.

F-27 Significant components of the Company’s deferred tax assets and liabilities were (in thousands): Year Ended December 31, 2022 2021 Deferred tax assets: Federal and state loss carryforwards $ 9,017 $ 5,409 Reserves, accruals and other 344 198 Depreciation and amortization 611 917 Deferred stock-based compensation 2,682 2,691 Capitalized research and development costs 965 — Research and development credit carryforwards 6,655 6,675 Total deferred tax assets 20,274 15,890 Less: Valuation allowance (20,274 ) (15,890 ) Net deferred tax assets, net $ — $ — The $4.4 million increase in the valuation allowance during 2022 was primarily the result of an increase to the net operating loss carryforwards for the current year.

Significant components of the Company’s deferred tax assets and liabilities were (in thousands): Year Ended December 31, 2023 2022 Deferred tax assets: Federal and state loss carryforwards $ 4,847 $ 9,017 Reserves, accruals and other 328 344 Depreciation and amortization 1,329 611 Deferred stock-based compensation 2,429 2,682 Capitalized research and development costs 660 965 Research and development credit carryforwards 6,744 6,655 Total deferred tax assets 16,337 20,274 Less: Valuation allowance (16,337 ) (20,274 ) Net deferred tax assets, net $ — $ — The $3.9 million decrease in the valuation allowance during 2023 was primarily the result of a decrease to the net operating loss carryforwards for the current year.

F-12 As of December 31, 2022, estimated future amortization expense related to intangible assets was (in thousands): Year ending December 31, 2023 $ 2,099 2024 2,099 2025 2,011 2026 28 2027 10 Thereafter 31 $ 6,278 Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.

F-13 As of December 31, 2023, estimated future amortization expense related to intangible assets is expected to be (in thousands): Year ending December 31, 2024 $ 3,267 2025 6 2026 6 2027 1 $ 3,280 Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.

As of December 31, 2022, the Company had NOLs of approximately $228.2 million for federal income tax purposes and approximately $143.6 million for state income tax purposes. Only approximately $34.3 million of the federal NOLs and $25.2 million of the state NOLs are expected to be available before expiration due to the Section 382 limitation.

F-23 As of December 31, 2023, the Company had NOLs of approximately $212.7 million for federal income tax purposes and approximately $131.2 million for state income tax purposes. Only approximately $18.7 million of the federal NOLs and $13.3 million of the state NOLs are expected to be available before expiration due to the Section 382 limitation.

Upon the closing of the Arrangement, an aggregate of 9,295,097 Exchangeable Shares and 3,558,151 shares of common stock were issued to the holders of Peraso Shares. Of such shares, pursuant to the terms of the Agreement, the Company held in escrow an aggregate of 1,312,878 Exchangeable Shares and 502,567 shares of common stock (collectively, the Escrow Shares).

Of the shares issued to the holders of Peraso Tech Shares, pursuant to the terms of the Agreement, the Company held in escrow an aggregate of 1,312,878 Exchangeable Shares and 502,567 shares of common stock (collectively, the Escrow Shares).

The Company classifies advance customer payments and deferred revenue as current or non-current based on the timing of when the Company expects to recognize revenue. As of December 31, 2022 and December 31, 2021, contract liabilities were in a current position and included in deferred revenue.

Contract liabilities – deferred revenue The Company’s contract liabilities consist of advance customer payments and deferred revenue. The Company classifies advance customer payments and deferred revenue as current or non-current based on the timing of when the Company expects to recognize revenue.

The following table provides the details of right-of-use assets and lease liabilities as of December 31, 2022 (in thousands): Year Ended December 31, 2022 Right-of-use assets: Operating leases $ 826 Finance lease 321 Total right-of-use assets $ 1,147 Lease liabilities: Operating leases $ 834 Finance lease 323 Total lease liabilities $ 1,157 Future minimum payments under the leases at December 31, 2022 are listed in the table below (in thousands): Year ending December 31, 2023 $ 688 2024 263 2025 164 2026 107 2027 81 Total future lease payments 1,303 Less: imputed interest (146 ) Present value of lease liabilities $ 1,157 The following table provides the details of supplemental cash flow information (in thousands): Year Ended December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for leases $ 704 $ 248 Rent expense was approximately $0.7 million and $0.6 million for the years ended December 31, 2022 and December 31, 2021, respectively.

The following table provides the details of right-of-use assets and lease liabilities as of December 31, 2023 (in thousands): Year Ended December 31, 2023 Right-of-use assets: Operating leases $ 422 Finance lease 193 Total right-of-use assets $ 615 Lease liabilities: Operating leases $ 525 Finance lease 194 Total lease liabilities $ 719 F-20 Future minimum payments under the leases at December 31, 2023 are listed in the table below (in thousands): Year ending December 31, 2024 $ 413 2025 166 2026 110 2027 108 Total future lease payments 797 Less: imputed interest (78 ) Present value of lease liabilities $ 719 The following table provides the details of supplemental cash flow information (in thousands): Year Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for leases $ 674 $ 704 Rent expense was approximately $0.6 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively.

During the year ended December 31, 2022, the Company recognized a $2.6 million gain on this transaction, net of transaction costs, which was recorded as a reduction of operating expenses in the consolidated statements of operations and comprehensive loss. Any gain related to the Holdback will be recorded when the Release Criteria have been satisfied.

During the year ended December 31, 2022, the Company recognized a gain of approximately $2,600,000 on this transaction, net of transaction costs, which was recorded as a reduction of operating expenses in the consolidated statements of operations and comprehensive loss.

Under the Certificate, when all of the Exchangeable shares have been converted into shares of the Company’s common stock, the Special Voting Share shall be automatically cancelled and shall not be reissued. During the years ended December 31, 2023 and 2022, 133 and 5 exchangeable shares were exchanged into an equivalent number of shares of common stock.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ (32,398 ) $ (10,911 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,057 1,116 Stock-based compensation 5,730 4,484 Change in fair value of warrant liability (1,595 ) (8,102 ) Financing costs - warrant issuances 1,576 — Impairment of goodwill 9,946 — Accrued interest on debt obligation 9 721 Interest portion of financing lease repayment (16 ) — Amortization of debt discount — 2,091 Other 89 27 Changes in assets and liabilities Accounts receivable (808 ) (848 ) Inventories (1,525 ) (1,418 ) Prepaid expenses and other assets (59 ) 560 Tax credits and receivables 1,160 (484 ) Accounts payable (94 ) 804 Right-of-use assets 578 252 Lease liabilities - operating (542 ) (236 ) Deferred revenue and other liabilities (1,128 ) (72 ) Net cash used in operating activities (16,020 ) (12,016 ) Cash flows from investing activities: Purchases of property and equipment (988 ) (71 ) Purchases of intangible assets (21 ) (165 ) Proceeds from maturities of marketable securities 11,534 400 Purchases of marketable securities (488 ) — Cash acquired in business combination — 6,464 Net cash provided by investing activities 10,037 6,628 Cash flows from financing activities: Proceeds from sale of common stock, net 2,099 — Repayment of financing lease (61 ) — Repayment of loans — (785 ) Proceeds from exercise of stock options — 37 Net proceeds from loan facility — 1,262 Net proceeds from convertible debentures — 9,055 Taxes paid to net share settle equity awards (120 ) — Net cash provided by financing activities 1,918 9,569 Net increase (decrease) in cash and cash equivalents (4,065 ) 4,181 Cash and cash equivalents at beginning of year 5,893 1,712 Cash and cash equivalents at end of year $ 1,828 $ 5,893 Supplemental disclosure: Noncash investing and financing activities: Initial recognition of warrant liability $ 3,673 $ — Recognition of right-of-use assets and lease liabilities $ 1,003 $ — Unrealized loss on available-for-sale securities $ 26 $ — Fair value of new warrant liability issued recognized as debt discount $ — $ 2,604 Settlement of loan facility against tax receivables $ — $ 1,097 Effect of business combination $ — $ 37,627 Settlement of warrants to common stock $ — $ 1,208 Conversion of convertible debentures into common stock $ — $ 13,545 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ (16,795 ) $ (32,398 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,811 3,057 Stock-based compensation 5,213 5,730 Change in fair value of warrant liabilities (3,493 ) (1,595 ) Inventory write-down 3,558 — Financing costs - warrant issuances — 1,576 Impairment of goodwill — 9,946 Allowance for bad debt (154 ) — Accrued interest on debt obligation (22 ) 9 Interest portion of financing lease repayment — (16 ) Impairment of intangible assets and property and equipment 349 — Other 3 89 Changes in assets and liabilities Accounts receivable 2,667 (808 ) Inventories (816 ) (1,525 ) Prepaid expenses and other assets 590 (59 ) Tax credits and receivables 5 1,160 Accounts payable 604 (94 ) Right-of-use assets 670 578 Lease liabilities - operating (447 ) (542 ) Deferred revenue and other liabilities (433 ) (1,128 ) Net cash used in operating activities (4,690 ) (16,020 ) Cash flows from investing activities: Purchases of property and equipment (94 ) (988 ) Purchases of intangible assets — (21 ) Proceeds from maturities of marketable securities 1,100 11,534 Purchases of marketable securities — (488 ) Net cash provided by investing activities 1,006 10,037 Cash flows from financing activities: Proceeds from sale of common stock, net 3,595 2,099 Repayment of financing lease (107 ) (61 ) Taxes paid to net share settle equity awards (49 ) (120 ) Net cash provided by financing activities 3,439 1,918 Net decrease in cash and cash equivalents (245 ) (4,065 ) Cash and cash equivalents at beginning of year 1,828 5,893 Cash and cash equivalents at end of year $ 1,583 $ 1,828 Supplemental disclosure: Noncash investing and financing activities: Initial recognition of warrant liability $ 3,162 $ 3,673 Recognition of right-of-use assets and lease liabilities $ 138 $ 1,003 Unrealized gain (loss) on available-for-sale securities $ (26 ) $ 26 The accompanying notes are an integral part of these consolidated financial statements.

Callco discharges this obligation by arranging for the Company to issue and deliver those shares to the holders on behalf of Callco. As consideration for satisfying the delivery obligation, Callco would issue its own shares to the Company. There are no cash redemption features, as all redemption and exchange scenarios are payable in a share of the Company’s common stock.

As consideration for the Company to enter into the Agreement, Intel agreed to pay the Company $3,062,500 at the closing of the transaction (the Closing) and $437,500 (the Holdback) upon the satisfaction by the Company, as mutually agreed upon by the parties in good faith, of certain release criteria set forth in the Agreement relating to various due diligence activities of Intel regarding the Licensed Technology (the Release Criteria).

As consideration for the Company to enter into the Agreement, Intel paid the Company $3,062,500 in August 2022 and $437,500 (the Holdback) in January 2023 upon the satisfaction by the Company of certain release criteria set forth in the Intel Agreement regarding the Licensed Technology.

The Company expects to continue to incur operating losses for the foreseeable future as it secures additional customers and continues to invest in the commercialization of its products.

As disclosed in Note 13, in February 2024, the Company completed a public offering of its common stock and warrants for net proceeds of $3.3 million. The Company expects to continue to incur operating losses for the foreseeable future as it secures additional customers and continues to invest in the commercialization of its products.

The Company has determined this provision introduces leverage to the holders of the Purchase Warrant that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrant as a liability in its consolidated balance sheet.

The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Purchase Warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares.

Year ended December 31, 2021 Revenue $ 10,670 Net loss (19,977 ) add back: acquisition costs 1,628 Adjusted net loss $ (18,349 ) F-22 Note 3: Fair Value of Financial Instruments The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021 and the basis for that measurement (in thousands): December 31, 2022 Fair Value Level 1 Level 2 Level 3 Assets: Money market funds (1) $ 73 $ — $ — $ — Corporate notes and commercial paper $ 1,078 $ — $ 1,078 $ — Liabilities: Warrant liability $ 2,079 $ — $ — $ 2,079 December 31, 2021 Fair Value Level 1 Level 2 Level 3 Money market funds (1) $ 1,159 $ 1,159 $ — $ — Corporate notes and commercial paper $ 12,195 $ — $ 12,195 $ — (1) Included in cash and cash equivalents The following table represents the Company’s determination of fair value for its financial assets (cash equivalents and investments) (in thousands): December 31, 2022 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 1,828 $ — $ — $ 1,828 Short-term investments 1,103 — (25 ) 1,078 $ 2,931 $ — $ (25 ) $ 2,906 December 31, 2021 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 5,893 $ — $ — $ 5,893 Short-term investments 9,276 — (9 ) 9,267 Long-term investments 2,935 — (7 ) 2,928 $ 18,104 $ — $ (16 ) $ 18,088 There were no transfers in or out of Level 1 and Level 2 securities during the years ended December 31, 2022 or December 31, 2021.

Note 2: Fair Value of Financial Instruments The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 and the basis for that measurement (in thousands): December 31, 2023 Fair Value Level 1 Level 2 Level 3 Assets: Money market funds (1) $ 1 $ — $ — $ — Liabilities: Warrant liability $ 1,748 $ — $ — $ 1,748 December 31, 2022 Fair Value Level 1 Level 2 Level 3 Assets: Money market funds (1) $ 73 $ — $ — $ — Corporate notes and commercial paper $ 1,078 $ — $ 1,078 $ — Liabilities: Warrant liability $ 2,079 $ — $ — $ 2,079 (1) Included in cash and cash equivalents The following table represents the Company’s determination of fair value for its financial assets (cash equivalents and investments) (in thousands): December 31, 2023 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 1,583 $ — $ — $ 1,583 December 31, 2022 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 1,828 $ — $ — $ 1,828 Short-term investments 1,103 — (25 ) 1,078 $ 2,931 $ — $ (25 ) $ 2,906 F-18 Note 3.

The pre-funded warrants were immediately exercisable and may be exercised at any time until all of the pre-funded warrants are exercised in full. Net proceeds to the Company, after offering costs, were $2.1 million. In a concurrent private placement, the Company also sold to the investor a warrant to purchase up to 3,675,000 shares of common stock (the Purchase Warrant).

The pre-funded warrants were exercised in full by the Investor in April 2023. Net proceeds to the Company from the registered direct offering, after offering costs, were approximately $2.1 million. In a concurrent private placement, the Company also sold to the Investor a warrant to purchase up to 91,875 shares of common stock (the 2022 Purchase Warrant).

CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 1,828 $ 5,893 Short-term investments 1,078 9,267 Accounts receivable, net 3,244 2,436 Inventories 5,348 3,824 Tax credits and receivables 41 1,099 Deferred cost of net revenue 600 — Prepaid expenses and other 574 1,159 Total current assets 12,713 23,678 Long-term investments - 2,928 Property and equipment, net 2,225 2,349 Right-of-use lease assets 1,147 617 Intangible assets, net 6,278 8,355 Goodwill — 9,946 Other 123 78 Total assets $ 22,486 $ 47,951 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 1,844 $ 1,937 Accrued expenses and other 1,817 2,903 Deferred revenue 332 375 Short-term lease liabilities 687 379 Total current liabilities 4,680 5,594 Long-term lease liabilities 470 288 Warrant liability 2,079 — Total liabilities 7,229 5,882 Commitments and contingencies (Note 5) Stockholders’ equity Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and outstanding — — Series A, special voting preferred stock, $0.01 par value; one share authorized; and one share issued and outstanding at December 31, 2022 and 2021 — — Common stock, $0.001 par value; 120,000 shares authorized; 14,270 shares and 12,284 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively 14 12 Exchangeable shares, no par value; unlimited shares authorized; 9,107 shares and 9,295 shares outstanding at December 31, 2022 and December 31, 2021, respectively — — Additional paid-in capital 164,865 159,256 Accumulated other comprehensive loss (25 ) — Accumulated deficit (149,597 ) (117,199 ) Total stockholders’ equity 15,257 42,069 Total liabilities and stockholders’ equity $ 22,486 $ 47,951 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 1,583 $ 1,828 Short-term investments — 1,078 Accounts receivable, net 731 3,244 Inventories, net 2,606 5,348 Tax credits and receivables 36 41 Deferred cost of net revenue — 600 Prepaid expenses and other 584 574 Total current assets 5,540 12,713 Property and equipment, net 1,156 2,225 Right-of-use lease assets 615 1,147 Intangible assets, net 3,280 6,278 Other 123 123 Total assets $ 10,714 $ 22,486 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 2,448 $ 1,844 Accrued expenses and other 611 1,817 Deferred revenue 1,105 332 Short-term lease liabilities 370 687 Total current liabilities 4,534 4,680 Long-term lease liabilities 349 470 Warrant liabilities 1,748 2,079 Total liabilities 6,631 7,229 Commitments and contingencies (Note 4) Stockholders’ equity Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and outstanding — — Series A, special voting preferred stock, $0.01 par value; one share authorized; and one share issued and outstanding at December 31, 2023 and 2022 — — Common stock, $0.001 par value; 120,000 shares authorized; 673 shares and 357 shares issued and outstanding at December 31, 2023 and 2022, respectively 1 — Exchangeable shares, no par value; unlimited shares authorized; 95 shares and 228 shares outstanding at December 31, 2023 and 2022, respectively — — Additional paid-in capital 170,474 164,879 Accumulated other comprehensive loss — (25 ) Accumulated deficit (166,392 ) (149,597 ) Total stockholders’ equity 4,083 15,257 Total liabilities and stockholders’ equity $ 10,714 $ 22,486 Note: Share amounts as of December 31, 2023 and 2022 have been adjusted to reflect the impact of a 1-for-40 reverse stock split of the Company’s common stock and exchangeable shares effected in January 2024, as discussed in Note 1.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share data) Year Ended December 31, 2022 2021 Net revenue Product $ 14,199 $ 4,906 Royalty and other 669 773 Total net revenue 14,868 5,679 Cost of net revenue 8,915 3,270 Gross profit 5,953 2,409 Operating expenses Research and development 19,768 11,471 Selling, general and administrative 11,108 7,016 Gain on license and asset sale (2,557 ) — Impairment of goodwill 9,946 — Total operating expenses 38,265 18,487 Loss from operations (32,312 ) (16,078 ) Interest expense (16 ) (2,979 ) Change in fair value of warrant liability 1,595 8,102 Financing cost - warrant issuance (1,576 ) — Other income (expense), net (89 ) 44 Net loss $ (32,398 ) $ (10,911 ) Other comprehensive loss, net of tax: Net unrealized loss on available-for-sale-securities (25 ) — Comprehensive loss $ (32,423 ) $ (10,911 ) Net loss per share Basic and diluted $ (1.61 ) $ (1.86 ) Shares used in computing net loss per share Basic and diluted 20,100 5,869 The accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share data) Year Ended December 31, 2023 2022 Net revenue Product $ 12,853 $ 14,199 Royalty and other 896 669 Total net revenue 13,749 14,868 Cost of net revenue 11,877 8,915 Gross profit 1,872 5,953 Operating expenses Research and development 14,398 19,768 Selling, general and administrative 8,505 11,108 Gain on license and asset sale (406 ) (2,557 ) Impairment of goodwill — 9,946 Total operating expenses 22,497 38,265 Loss from operations (20,625 ) (32,312 ) Interest expense (21 ) (16 ) Change in fair value of warrant liabilities 3,493 1,595 Financing cost - warrant issuance — (1,576 ) Other income (expense), net 358 (89 ) Net loss $ (16,795 ) $ (32,398 ) Other comprehensive loss, net of tax: Net unrealized loss on available-for-sale-securities — (25 ) Comprehensive loss $ (16,795 ) $ (32,423 ) Net loss per share Basic and diluted $ (26.00 ) $ (64.41 ) Shares used in computing net loss per share Basic and diluted 646 503 Note: Share and per share amounts for the years ended December 31, 2023 and 2022 have been adjusted to reflect the impact of a 1-for-40 reverse stock split effected in January 2024, as discussed in Note 1.

Neither Canco, Callco, or the Company assume any tax liabilities of a former Peraso Tech shareholder who acquired Exchangeable Shares under the plan of arrangement.

F-27 There are no cash redemption features, as all redemption and exchange scenarios are payable in a share of the Company’s common stock. Neither Canco, Callco, or the Company assume any tax liabilities of a former Peraso Tech shareholder who acquired Exchangeable Shares under the plan of arrangement.

As of December 31, 2022, the Company had the following liability-classified warrants outstanding (share amounts in thousands): Number of warrants on common shares Amount Balance as of December 31, 2021 — $ — Recognition of warrant liabilities 3,675 3,674 Change in fair value of warrants — (1,595 ) Balance as of December 31, 2022 3,675 $ 2,079 Peraso Tech Warrants As of January 1, 2021, the Company had warrants outstanding to purchase 375,000 shares of its common stock.

F-29 As of December 31, 2023, the Company had the following liability-classified warrants outstanding (amounts in thousands): Number of warrants on common shares Amount Balance as of December 31, 2021 — $ — Recognition of warrant liabilities 92 3,674 Change in fair value of warrants — (1,595 ) Balance as of December 31, 2022 92 2,079 Recognition of warrant liabilities 143 3,162 Change in fair value of warrants — (3,493 ) Balance as of December 31, 2023 235 $ 1,748 The initial fair value of each of the Purchase Warrants was determined using the Black Scholes model with the assumptions in the following table.

Balance Sheet Detail December 31, 2022 2021 (in thousands) Inventories: Raw materials $ 1,279 $ 879 Work-in-process 2,595 2,170 Finished goods 1,474 775 $ 5,348 $ 3,824 Prepaid expenses and other: Prepaid inventory and production costs $ 186 $ 671 Prepaid insurance 47 44 Prepaid software 173 277 Other 168 167 $ 574 $ 1,159 Property and equipment, net: Machinery and equipment $ 4,630 $ 8,944 Computer equipment and software 342 2,200 Furniture and fixtures 93 323 Leasehold improvements 555 354 Total property and equipment 5,620 11,821 Less: Accumulated depreciation and amortization (3,395 ) (9,472 ) $ 2,225 $ 2,349 During the year ended December 31, 2022, the Company wrote-off fully depreciated assets, or assets that were no longer in service, costing approximately $6,380,000 with corresponding accumulated depreciation of approximately $6,227,000, or a remaining net book value of approximately $153,000.

Balance Sheet Detail December 31, 2023 2022 (in thousands) Inventories: Raw materials $ 209 $ 1,279 Work-in-process 1,517 2,595 Finished goods 880 1,474 $ 2,606 $ 5,348 Prepaid expenses and other: Prepaid inventory and production costs $ 452 $ 186 Prepaid insurance 37 77 Prepaid software 67 173 Other 28 138 $ 584 $ 574 Property and equipment, net: Machinery and equipment $ 4,848 $ 4,630 Computer equipment and software 377 342 Furniture and fixtures 93 93 Leasehold improvements 428 555 Total property and equipment 5,746 5,620 Less: Accumulated depreciation and amortization (4,590 ) (3,395 ) $ 1,156 $ 2,225 During the year ended December 31, 2023, the Company wrote off assets with a book value of approximately $243,000 to depreciation expense as a loss on disposal.

Amortization related to developed technology of approximately $1,431,000 and $60,000 for the years ended December 31, 2022 and 2021, respectively, has been included in cost of net revenue in the consolidated statements of operations and comprehensive loss.

The value of the developed technology was determined by discounting estimated net future cash flows of these products. Amortization related to developed technology of $2.0 million and $1.4 million for the years ended December 31, 2023 and 2022, respectively, was included in cost of net revenue in the consolidated statements of operations and comprehensive loss.

On December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, including approvals from the stockholders of the Company and Peraso Tech, the Arrangement was completed.

Stockholders’ Equity Exchangeable Shares and Preferred Stock As discussed in Note 1, on December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed.

The full extent of the COVID-19 impact on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease spread, all of which are uncertain, out of the Company’s control, and cannot be predicted.

While the U.S. national emergency expired in May 2023 and substantially all closures and “shelter-in-place” orders have ended, there can be no assurance that COVID-19 will not impact the Company’s operational and financial performance in the future, as actions taken by U.S. and foreign government agencies to prevent disease spread are uncertain, out of the Company’s control, and cannot be predicted.

Unused SRED tax credits can be carried back three years or forward for 20 years. Property and Equipment Property and equipment are originally recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to six years.

The Company recorded write-downs of inventory of approximately $3,558,000 and $420,000 during the years ended December 31, 2023 and 2022, respectively. Property and Equipment Property and equipment are originally recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to six years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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2022 filing

2023 filing

Biggest changeFrom time to time, we may enter into negotiations for acquisitions or investments that are not ultimately consummated. These negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs, any of which could have a material adverse effect on our business, operating results and financial condition.

Biggest changeThese negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs, any of which could have a material adverse effect on our business, operating results and financial condition. 22 Holders of exchangeable shares are expected to experience a delay in receiving shares of our common stock from the date they request an exchange, which may affect the value of the shares the holder receives in an exchange.

Acquisitions may involve additional risks, including: ● the acquired product lines, technologies or businesses may not improve our financial and strategic position as planned; ● we may determine we have overpaid for the product lines, technologies or businesses, or that the economic conditions underlying our acquisition have changed; 18 ● we may have difficulty integrating the operations and personnel of the acquired company; ● we may have difficulty retaining the employees with the technical skills needed to enhance and provide services with respect to the acquired product lines or technologies; ● the acquisition may be viewed negatively by customers, employees, suppliers, financial markets or investors; ● we may have difficulty incorporating the acquired product lines or technologies with our existing technologies; ● we may encounter a competitive response, including price competition or IP litigation; ● we may become a party to product liability or IP infringement claims as a result of our sale of the acquired company’s products; ● we may incur one-time charges, such as for acquired in-process research and development costs, and restructuring charges; ● we may acquire goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges; ● our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; and ● our due diligence process may fail to identify significant existing issues with the target business.

Acquisitions may involve additional risks, including: ● the acquired product lines, technologies or businesses may not improve our financial and strategic position as planned; ● we may determine we have overpaid for the product lines, technologies or businesses, or that the economic conditions underlying our acquisition have changed; ● we may have difficulty integrating the operations and personnel of the acquired company; ● we may have difficulty retaining the employees with the technical skills needed to enhance and provide services with respect to the acquired product lines or technologies; ● the acquisition may be viewed negatively by customers, employees, suppliers, financial markets or investors; ● we may have difficulty incorporating the acquired product lines or technologies with our existing technologies; ● we may encounter a competitive response, including price competition or IP litigation; ● we may become a party to product liability or IP infringement claims as a result of our sale of the acquired company’s products; ● we may incur one-time charges, such as for acquired in-process research and development costs, and restructuring charges; ● we may acquire goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges; ● our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; and ● our due diligence process may fail to identify significant existing issues with the target business.

Our efforts to increase our revenue and expand our markets have been subject to various risks and uncertainties, including, but not limited to: ● a lack of working capital; 12 ● customer acceptance; ● difficulties and delays in our product development, manufacturing, testing and marketing activities; ● timeliness of new product introductions; ● the anticipated costs and technological risks of developing and bringing our products to market; ● the willingness of our manufacturing partners to assist successfully with fabrication; ● our ability to qualify our products for mass production and achieve wafer yield levels and the final test results necessary to be price competitive; ● the availability of quantities of our products supplied by our manufacturing partners at a competitive cost; ● our ability to generate the desired gross margin percentages and return on our product development investment; ● competition from established competitors; ● the adequacy of our IP protection for our proprietary IC designs and technologies; ● customer concerns over our financial condition and viability to be a long-term profitable supplier; and ● the vigor and growth of markets served by our current and prospective customers.

Our efforts to increase our revenue and expand our markets have been subject to various risks and uncertainties, including, but not limited to: ● a lack of working capital; ● customer acceptance; ● difficulties and delays in our product development, manufacturing, testing and marketing activities; ● timeliness of new product introductions; ● the anticipated costs and technological risks of developing and bringing our products to market; ● the willingness of our manufacturing partners to assist successfully with fabrication; ● our ability to qualify our products for mass production and achieve wafer yield levels and the final test results necessary to be price competitive; ● the availability of quantities of our products supplied by our manufacturing partners at a competitive cost; ● our ability to generate the desired gross margin percentages and return on our product development investment; ● competition from established competitors; ● the adequacy of our IP protection for our proprietary IC designs and technologies; ● customer concerns over our financial condition and viability to be a long-term profitable supplier; and ● the vigor and growth of markets served by our current and prospective customers.

A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend. We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.

A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend. 14 We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.

In addition, the product design cycle for our customers can be lengthy and it may be difficult for us to accurately anticipate when they will commence commercial shipments of products that include our ICs or modules. Furthermore, if we experience substantial warranty claims, our customers may cancel existing orders or cease to place future orders.

In addition, the product design cycle for our customers can be lengthy and it may be difficult for us to accurately anticipate when they will commence commercial shipments of products that include our ICs or modules. 17 Furthermore, if we experience substantial warranty claims, our customers may cancel existing orders or cease to place future orders.

As a result of these supply chain disruptions, we have had to increase customer order lead times, and we may be required some products on allocation. We may be unable to satisfy all of the demand for our products, which may adversely affect customer relationships and impact revenue.

As a result of these supply chain disruptions, we have had to increase customer order lead times, and we may be required to purchase some products on allocation. We may be unable to satisfy all of the demand for our products, which may adversely affect customer relationships and impact revenue.

We would be required to record an impairment charge in our financial statements during the period in which any impairment of our intangible assets is determined, which would negatively affect our results of operations. 17 If we fail to retain key personnel, our business and growth could be negatively affected.

We would be required to record an impairment charge in our financial statements during the period in which any impairment of our intangible assets is determined, which would negatively affect our results of operations. If we fail to retain key personnel, our business and growth could be negatively affected.

If we are unable to satisfy the continued listing requirements of The Nasdaq Stock Market, our common stock could be delisted and the price and liquidity of our common stock may be adversely affected. Our common stock may lose value and our common stock could be delisted from Nasdaq due to several factors or a combination of such factors.

If we are unable to satisfy the continued listing requirements of the Nasdaq, our common stock could be delisted and the price and liquidity of our common stock may be adversely affected. Our common stock may lose value and could be delisted from Nasdaq due to several factors or a combination of such factors.

Thus, currently, we do not know whether we will be able to generate adequate profit from making and selling our products and licensing our technologies. An important part of our strategy to gain market acceptance is to penetrate new markets by targeting market leaders to accept our technology solutions.

Thus, currently, we do not know whether we will be able to generate adequate profit from making and selling our products and licensing our technologies to sustain our operations. An important part of our strategy to gain market acceptance is to penetrate new markets by targeting market leaders to accept our technology solutions.

Any such event could reduce the amount of future sales of our products. 10 Future revenue growth depends on our winning designs with existing and new customers, retaining current customers, and having those customers design our solutions into their product offerings and successfully selling and marketing such products.

Any such event could reduce the amount of future sales of our products. 13 Future revenue growth depends on our winning designs with existing and new customers, retaining current customers, and having those customers design our solutions into their product offerings and successfully selling and marketing such products.

Item 1A. Risk Factors The following risks could materially and adversely affect our business, financial condition, cash flows, and results of operations, and the trading price of our common stock could decline. These risk factors do not identify all of the risks that we face.

Item 1A. Risk Factors. The following risks could materially and adversely affect our business, financial condition, cash flows, and results of operations, and could cause the trading price of our common stock to decline. These risk factors do not identify all of the risks that we face.

In accordance with generally accepted accounting principles in the United States (“GAAP”), we are required to evaluate our common stock warrants to determine whether they should be accounted for as a warrant liability or as equity.

In accordance with generally accepted accounting principles in the United States, we are required to evaluate our outstanding common stock warrants to determine whether they should be accounted for as a warrant liability or as equity.

Additionally, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our common stock; ● a reduced amount of analyst coverage; ● a decreased ability to issue additional securities or obtain additional financing in the future; ● reduced liquidity for our stockholders; ● potential loss of confidence by customers, collaboration partners and employees; and ● loss of institutional investor interest.

Additionally, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our common stock; ● a decreased ability to issue additional securities or obtain additional financing in the future; 25 ● reduced liquidity for our stockholders; ● potential loss of confidence by customers, collaboration partners and employees; and ● loss of institutional investor interest.

Under our certificate of incorporation, our board of directors may issue up to 20,000,000 shares of preferred stock, potentially without stockholder approval on such terms as the board might determine.

Under our certificate of incorporation, our board of directors may issue up to a maximum of 20,000,000 shares of preferred stock without stockholder approval on such terms as the board might determine.

At each reporting period (1) the warrants will be reevaluated for proper accounting treatment as a liability or equity and (2) the fair value of the liability of the warrants will be re-measured. The change in the fair value of the liability will be recorded as other income (expense) in our statement of operations and comprehensive loss.

At each reporting period (i) the warrants will be reevaluated for proper accounting treatment as a liability or equity and (ii) the fair value of the liability of the warrants will be re-measured. The change in the fair value of the liability will be recorded as other income (expense) in our consolidated statement of operations and comprehensive loss.

Our ability to utilize our net operating loss carryforwards is limited as a result of an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended. As of December 31, 2022, we had over $238 million of net operating loss, or NOL, carryforwards for U.S. federal tax purposes.

Our ability to utilize our net operating loss carryforwards is limited as a result of an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986, as amended. As of December 31, 2023, we had approximately $212.7 million of net operating loss, or NOL, carryforwards for U.S. federal tax purposes.

The Company believes this Section 382 limitation will result in substantially all of our federal and state NOLs federal tax credit carryforwards incurred prior to December 2021 expiring before they can be utilized.

We believe this Section 382 limitation will result in substantially all of our federal and state NOLs and federal tax credit carryforwards incurred prior to December 2021 expiring before they can be utilized.

Any problems with our manufacturing supply chain, including disruptions due to the COVID-19 global pandemic, could adversely impact our ability to ship our products to our customers on time and in the quantity required which in turn could damage our customer relationships and impede market acceptance of our IC products.

Any problems with our manufacturing supply chain could adversely impact our ability to ship our products to our customers on time and in the quantity required which in turn could damage our customer relationships and impede market acceptance of our IC products.

In addition, we may incur substantial litigation expense which would adversely affect our profitability. The semiconductor industry is characterized by vigorous protection and pursuit of IP rights or positions which has resulted in often protracted and expensive litigation. We are not aware of any third party IP that our products or technology would infringe.

The semiconductor industry is characterized by vigorous protection and pursuit of IP rights or positions which has resulted in often protracted and expensive litigation. We are not aware of any third party IP that our products or technology would infringe.

Our prospective customers may be unwilling to adopt and design-in our products due to the uncertainties and risks surrounding designing a new IC or module and/or incorporating new IP into their systems and relying on a small, sole-sourced supplier.

Our prospective customers, which include original equipment manufacturers, or OEMs, and service providers, may be unwilling to adopt and design-in our products due to the uncertainties and risks surrounding designing a new IC or module and/or incorporating new IP into their systems and relying on a small, sole-sourced supplier.

Our consolidated financial statements as of December 31, 2022 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2022, we had cash, cash equivalents and investments of $2.9 million and an accumulated deficit of $149.6 million.

Our consolidated financial statements as of December 31, 2023 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of December 31, 2023, we had cash and cash equivalents of $1.6 million and an accumulated deficit of $166.0 million.

For the year ended December 31, 2022, our three largest customers represented approximately 74% of total revenue. We expect that a relatively small number of customers will continue to account for a substantial portion of our revenue for the foreseeable future.

For the years ended December 31, 2023 and 2022, our three largest customers represented approximately 75% and 63% of total revenue, respectively. We expect that a relatively small number of customers will continue to account for a substantial portion of our revenue for the foreseeable future.

If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things: ● develop or enhance our products; ● continue to expand our product development and sales and marketing organizations; ● acquire complementary technologies, products or businesses; ● expand operations, in the United States or internationally; ● hire, train and retain employees; or ● respond to competitive pressures or unanticipated working capital requirements.

If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current product development programs, cut operating costs, forego future development and other opportunities or even terminate our operations. We have a history of losses, and we will need to raise additional capital.

As a result of this revenue concentration, our results of operations could be adversely affected by the decision of a single key customer to cease using our technology or products or by a decline in the number of products that incorporate our technology that are sold by a single licensee or customer or by a small group of licensees or customers. 14 Our revenue concentration may also pose credit risks which could negatively affect our cash flow and financial condition.

We might also face credit risks associated with the concentration of our revenue among a small number of licensees and customers. At December 31, 2022, four customers represented approximately 79% of total trade receivables.

Our revenue concentration may also pose credit risks which could negatively affect our cash flow and financial condition. We might also face credit risks associated with the concentration of our revenue among a small number of licensees and customers. At December 31, 2023 and 2022, four customers represented approximately 83% and 79% of total trade receivables, respectively.

The rights of the holders of common stock will be subject to, and might be adversely affected by, the rights of the holders of any preferred stock that might be issued in the future. Potential volatility of the price of our common stock could negatively affect your investment.

The rights of the holders of common stock will be subject to, and might be adversely affected by, the rights of the holders of any preferred stock that might be issued in the future.

We may not be able to obtain alternate capacity on favorable terms, if at all. The COVID-19 global pandemic, along with outbreaks of new contagious diseases or the resurgence of existing diseases that significantly affect the Asia-Pacific region could disrupt the operations of our key suppliers and manufacturing partners.

We may not be able to obtain alternate capacity on favorable terms, if at all. 18 Global pandemics, such as the COVID-19 pandemic, which was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020, along with outbreaks of new contagious diseases or the resurgence of existing diseases that significantly affect the Asia-Pacific region could disrupt the operations of our key suppliers and manufacturing partners.

If we are unable to persuade contract manufacturers to purchase our products, or if the contract manufacturers are unable to deliver systems with our products to OEMs on a timely basis, our business would be adversely affected. 15 We rely on independent foundries and contractors for the manufacture, assembly, testing and packaging of our integrated circuits and modules, and the failure of any of these third parties to deliver products or otherwise perform as requested could damage our relationships with our customers and harm our sales and financial results.

We rely on independent foundries and contractors for the manufacture, assembly, testing and packaging of our integrated circuits and modules, and the failure of any of these third parties to deliver products or otherwise perform as requested could damage our relationships with our customers and harm our sales and financial results.

In order to attain and maintain a significant position in the market, we will need to continue to enhance and evolve our products and the underlying proprietary technologies in anticipation of these market trends although we do not have a large engineering staff. 13 Our future performance depends on a number of factors, including our ability to: ● identify target markets and relevant emerging technological trends; ● develop and maintain competitive technology by improving performance and adding innovative features that differentiate our products from alternative technologies; ● enable the incorporation of our products into customers’ products on a timely basis and at competitive prices; and ● respond effectively to new technological developments or new product introductions by others.

Our future performance depends on a number of factors, including our ability to: ● identify target markets and relevant emerging technological trends; ● develop and maintain competitive technology by improving performance and adding innovative features that differentiate our products from alternative technologies; ● enable the incorporation of our products into customers’ products on a timely basis and at competitive prices; and ● respond effectively to new technological developments or new product introductions by others.

There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us. 9 If we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership.

To respond to any downturn, many semiconductor manufacturers and their customers will slow their research and development activities, cancel or delay new product developments, reduce their workforces and inventories and take a cautious approach to acquiring new equipment and technologies.

The semiconductor industry is cyclical and has experienced pronounced downturns for sustained periods of up to several years. To respond to any downturn, many semiconductor manufacturers and their customers will slow their research and development activities, cancel or delay new product developments, reduce their workforces and inventories and take a cautious approach to acquiring new equipment and technologies.

Finding and qualifying alternate or additional suppliers in response to increased pricing from suppliers can be a lengthy process and can lead to production delays or additional costs, and such alternatives are sometimes not available. If we are unable to increase the price of our products to our customers in response to increased costs, we would face reduced margins.

We recorded net losses of approximately $32.4 million and $10.9 million for the years ended December 31, 2022 and December 31, 2021, and we ended the period with an accumulated deficit of approximately $149.6 million. These and prior-year losses have resulted in significant negative cash flows.

We incurred net losses of approximately $16.8 million and $32.4 million for the years ended December 31, 2023 and 2022, respectively, and we had an accumulated deficit of approximately $166.4 million as of December 31, 2023. These and prior-year losses have resulted in significant negative cash flows.

Such production may require changes to the foundry’s existing process technology. If the foundry elects to not alter their process technology to support future versions of our ICs, we would need to identify a new foundry. For example, our 1T-SRAM technology used in our Accelerator Engine products is not available at process nodes below 40 nanometers.

Market prices of securities of technology companies have been highly volatile and frequently reach levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations.

Historically, the stock market, as well as our common stock, has experienced significant price and volume fluctuations. Market prices of securities of technology companies can be highly volatile and frequently reach levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations.

Refer also to the other information set forth in this Annual Report on Form 10-K, including in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as our Consolidated Financial Statements and the related notes in Part II, Item 15. 8 We might not be able to continue as a going concern.

Refer also to the other information set forth in this Report, including in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , as well as our Consolidated Financial Statements and the related notes in Part II, Item 15.

If we experience significant delays in bringing our products to market, if customer adoption of our products is delayed or if our customers’ products that include our products are not successful, this could have a material adverse effect on our anticipated revenues in upcoming years due to the potential loss of design wins and future revenues. 15 Our main objective is the development and sale of our technologies to service providers, cloud networking, security, test and video system providers and their subsystem and component vendors and, if demand for these products does not grow, we may not achieve revenue growth and our strategic objectives.

The delays inherent in our protracted sales cycle increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated revenue.

The delays inherent in our protracted sales cycle increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated revenue. In addition, any change, delay or cancellation of a customer’s plans could harm our financial results, as we may have incurred significant expense while generating no revenue.

If we are unable to increase the price of our products to our customers in response to increased costs, we would face reduced margins. 16 Any claim that our products or technology infringe third party IP rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings.

Any claim that our products or technology infringe third party IP rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings. In addition, we may incur substantial litigation expense which would adversely affect our profitability.

Certain of these provisions eliminate cumulative voting in the election of directors, limit the right of stockholders to call special meetings and establish specific procedures for director nominations by stockholders and the submission of other proposals for consideration at stockholder meetings. 24 We are also subject to provisions of Delaware law which could delay or make more difficult a merger, tender offer or proxy contest involving our company.

Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our operating results and financial prospects. War, terrorism, other acts of violence, natural disasters and global pandemics, such as the COVID-19 pandemic and associated macroeconomic pressures in the markets in could adversely impact our business.

Litigation by us could result in significant expense and divert the efforts of our technical and management personnel whether or not such litigation results in a determination favorable to us.

Litigation by us could result in significant expense and divert the efforts of our technical and management personnel whether or not such litigation results in a determination favorable to us. 19 Our existing patents might not provide us with sufficient protection of our IP, and our patent applications might not result in the issuance of patents, either of which could reduce the value of our core technology and harm our business.

Securities litigation could cause us to incur substantial costs, divert management’s attention and resources, harm our reputation in the industry and the securities markets and negatively impact our operating results. 19 Certain of our common stock warrants are accounted for as a warrant liability and recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.

Our common stock warrants outstanding at December 31, 2023 are accounted for as a warrant liability and recorded at fair value with changes in fair value each period reported in earnings, which may have an adverse effect on the market price of our common stock.

Any such increase or decrease would affect the value of the consideration to be received by such holder of exchangeable shares upon a subsequent sale of the common stock received in the exchange 20 We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors.

Any such increase or decrease would affect the value of the consideration to be received by such holder of exchangeable shares upon a subsequent sale of the common stock received in the exchange.

Our primary goal has been to increase our total available market by creating high-performance ICs and modules for mmWave applications using our proprietary technology and design expertise. Historically, this development effort required that we add headcount and design resources, such as expensive software tools, which increased our losses from, and cash used in, operations.

Historically, this development effort required that we add headcount and design resources, such as expensive software tools, which increased our losses from, and cash used in, operations.

In addition, any change, delay or cancellation of a customer’s plans could harm our financial results, as we may have incurred significant expense while generating no revenue. 11 If our foundries do not achieve satisfactory yields or quality, our cost of net revenue will increase, our operating margins will decline and our reputation and customer relationships could be harmed.

If our foundries do not achieve satisfactory yields or quality, our cost of net revenue will increase, our operating margins will decline and our reputation and customer relationships could be harmed.

We are a “smaller reporting company,” and are subject to lesser disclosure obligations in our SEC filings compared to other issuers.

We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors. We are a “smaller reporting company,” and are subject to lesser disclosure obligations in our SEC filings compared to other issuers.

We cannot provide any assurances that our efforts to build a strong and profitable business based on the sale of ICs will succeed. If these efforts are not successful, in light of the substantial resources that we have invested, our future operating results and cash flows could be materially and adversely affected.

We cannot provide any assurances that our efforts to build a strong and profitable business based on the sale of ICs will succeed.

On February 1, 2023, we received a notice from Nasdaq, indicating that, based upon the closing bid price of our common stock for the previous 30 business days, we no longer meet the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Notice”).

On February 1, 2023, we received a deficiency letter from the Nasdaq Listing Qualifications Department of Nasdaq notifying us that, for 30 consecutive business days, the closing bid price of our common stock was below the minimum $1.00 per share required for continued listing pursuant to Nasdaq Listing Rule 5550(a)(2).

While our common stock is currently listed on Nasdaq, there can be no assurance that we will be able to maintain such listing. To maintain the listing of our common stock on Nasdaq, we are required to meet certain listing requirements, including, among others, a requirement to maintain a minimum closing bid price of $1.00 per share.

While our common stock is currently listed on Nasdaq, we can give no assurance that we will be able to satisfy the continued listing requirements of Nasdaq in the future, including, but not limited to, the corporate governance requirements and the minimum closing bid price requirement or the minimum equity requirement.

There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or maintain compliance with the other listing requirements. As of the date of this Report, we have not regained compliance.

There can be no assurance that we will be able to maintain compliance with the continued listing requirements for Nasdaq.

While we were able to access the capital markets in November 2022, we may be unable to access the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business. Item 1B. Unresolved Staff Comments None.

Since mid-2022, the U.S. Federal Reserve has addressed elevated inflation by periodically increasing interest rates. Given current market conditions, we may be unable to access the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

Our existing patents might not provide us with sufficient protection of our IP, and our patent applications might not result in the issuance of patents, either of which could reduce the value of our core technology and harm our business. We rely on a combination of patents, trademarks, trade secret laws and confidentiality procedures to protect our IP rights.

We rely on a combination of patents, trademarks, trade secret laws and confidentiality procedures to protect our IP rights.

If our common stock trades to unsustainably high levels, it is likely that the market price of our common stock will thereafter experience a material decline. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities.

If our common stock trades to unsustainably high levels, it is likely that the market price of our common stock will thereafter experience a material decline. As a result of fluctuations in the price of our common stock, you may be unable to sell your shares at or above the price you paid for them.

Our failure to successfully market our products could seriously harm our ability to execute our business strategy and may force us to curtail our research and development plans or existing operations. Our success depends upon the acceptance by our target markets of our products and technologies by original equipment manufacturers or OEMs and service providers.

In addition, responding to any such proceeding may result in a significant diversion of management’s attention and resources, significant defense costs, and other professional fees. Our failure to successfully market our products could seriously harm our ability to execute our business strategy and may force us to curtail our research and development plans or existing operations.

We cannot assure you that there will continue to be an active trading market for our common stock. Historically, the stock market, as well as our common stock, has experienced significant price and volume fluctuations.

Accordingly, our stockholders bear the risk that our future offerings will reduce the market price of our common stock and dilute their stock holdings in us. 23 Potential volatility of the price of our common stock could negatively affect your investment. We cannot assure you that there will continue to be an active trading market for our common stock.

We have recorded a full valuation allowance for our deferred tax assets. Acquisitions or other business combinations that we pursue in the future, whether or not consummated, could result in other operating and financial difficulties.

The successful assertion of claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation. 21 Acquisitions or other business combinations that we pursue in the future, whether or not consummated, could result in other operating and financial difficulties.

This would require us to discontinue production of these products and would negatively impact our future revenues, results of operations and cash flows. To date, we have not achieved the anticipated benefits of a fabless semiconductor company.

We are not in a position to transition wafer production to a new foundry and continue to manufacture these products. As a result, we initiated an EOL of our memory IC products. The discontinuation of the production and sale of our memory IC products will negatively impact our future revenues, results of operations and cash flows.

The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue. The semiconductor industry is cyclical and has experienced pronounced downturns for sustained periods of up to several years.

If these efforts are not successful, in light of the substantial resources that we have invested, our future operating results and cash flows could be materially and adversely affected. 16 The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue.

Removed

We do not believe that our cash, cash equivalents and investments are sufficient to fund our operations for the next 12 months.

Added

Summary of Risk Factors The following summarizes the risks and uncertainties that could materially adversely affect our business, financial condition, results of operation and stock price.

Removed

We are seeking additional financing and evaluating financing alternatives in order to meet our cash requirements for the next 12 months.

Added

You should read this summary together with the more detailed description of each risk factor contained below. ● We intend to discontinue the production of our memory products. ● We have a history of losses, and we will need to raise additional capital. ● Our failure to generate the significant capital necessary or raise additional capital to expand our operations and invest in new products could reduce our ability to compete and could harm our business. ● We may fail to achieve the intended cost savings and related benefits from our reduction in workforce and temporary lay-offs. ● Our failure to successfully market our products could seriously harm our ability to execute our business strategy and may force us to curtail our research and development plans or existing operations. 9 ● Future revenue growth depends on our winning designs with existing and new customers, retaining current customers, and having those customers design our solutions into their product offerings and successfully selling and marketing such products.

Removed

To date, we have not developed any memory products below the 40-nanometer process node and have no plans to continue the product roadmap for our Accelerator Engine products.

Added

If we do not continue to win designs in the short term, our product revenue in the following years will not grow. ● To date, we have not achieved the anticipated benefits of a fabless semiconductor company. ● Our main objective is the development and sale of our technologies to service providers, cloud networking, security, test and video system providers and their subsystem and component vendors and, if demand for these products does not grow, we may not achieve revenue growth and our strategic objectives. ● Our failure to continue to develop new products and enhance our products on a timely basis could diminish our ability to attract and retain customers. ● Our products have a lengthy sales cycle, which makes it difficult to predict success in this market and the timing of future revenue. ● The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue. ● Our revenue has been highly concentrated among a small number of customers, and our results of operations could be harmed if we lose a key revenue source and fail to replace it. ● Our revenue concentration may also pose credit risks which could negatively affect our cash flow and financial condition. ● Our products must meet exact specifications and defects and failures may occur, which may cause customers to return or stop buying our products. ● Because we sell our products on a purchase order basis and rely on estimated forecasts of our customers’ needs, inaccurate forecasts could adversely affect our business. ● We rely on independent foundries and contractors for the manufacture, assembly, testing and packaging of our integrated circuits and modules, and the failure of any of these third parties to deliver products or otherwise perform as requested could damage our relationships with our customers and harm our sales and financial results. ● Disruptions in our supply chain due to shortages in the global semiconductor supply chain could cause delays for customers and impact revenue. ● Any claim that our products or technology infringe third party IP rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings.

Removed

We do not consider this to adversely affect our current product offerings, but our inability to continue our product roadmap can adversely affect, and has in the past affected, our efforts to win new customers for these products, secure additional design wins and grow our future revenues.

Added

In addition, we may incur substantial litigation expense which would adversely affect our profitability. ● The discovery of defects in our technology and products could expose us to liability for damages. ● We might not be able to protect and enforce our IP rights which could impair our ability to compete and reduce the value of our technology. ● Third parties might attempt to gain unauthorized access to our network or seek to compromise our products and services. ● There may be future sales of our common stock, which could adversely affect the market price of our common stock and dilute a stockholder’s ownership of common stock. ● Provisions of our certificate of incorporation and bylaws or Delaware law might delay or prevent a change-of-control transaction and depress the market price of our stock. ● If we are unable to satisfy the continued listing requirements of the Nasdaq, our common stock could be delisted and the price and liquidity of our common stock may be adversely affected. 10 We might not be able to continue as a going concern.

Removed

If Taiwan Semiconductor Manufacturing, or TSMC, which is the sole foundry for producing our memory ICs were to discontinue the foundry process used to produce our Accelerator Engine products, we would not be in a position to transition production of these products to a new foundry and continue to manufacture our products.

Added

In February 2024, we completed a public offering of our common stock and warrants for net proceeds of approximately $3.4 million. We believe that the net proceeds that we received from our February 2024 offering, together with our existing cash and cash equivalents, will enable us to meet our capital needs through at least the fourth quarter of 2024.

Removed

Our main objective is the development and sale of our technologies to service providers, cloud networking, security, test and video system providers and their subsystem and component vendors and, if demand for these products does not grow, we may not achieve revenue growth and our strategic objectives.

Added

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to achieve sustainable revenues and profitable operations.

Removed

We are also subject to provisions of Delaware law that could delay or make more difficult a merger, tender offer or proxy contest involving our company.

Added

Our forecast of the period of time through which our financial resources will be adequate to support our operating requirements is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “ Risk Factors ” section.

Removed

We could be the target of similar litigation in the future.

Added

We have based this estimate on a number of assumptions that may prove to be wrong and changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. Our inability to obtain additional funding when we need it could seriously harm our business. We intend to discontinue the production of our memory products.

Removed

If our common stock trades below the $1.00 minimum closing bid price requirement for 30 consecutive business days or if we do not meet other listing requirements, we may be notified by Nasdaq of non-compliance.

Added

Taiwan Semiconductor Manufacturing Corporation, or TSMC, is the sole foundry that manufactures the wafers used to produce our memory IC products. TSMC has informed us that it will be discontinuing the foundry process used to produce the wafers necessary to produce our memory ICs.

Removed

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have been provided a period of 180 calendar days, or until July 31, 2023, in which to regain compliance.

Added

We are not in a position to transition wafer production to a new foundry and continue to manufacture these products. As a result, we have informed our customers that we have initiated an end-of-life, or EOL, of our memory IC products. We expect to fulfill product EOL orders through at least December 31, 2024.

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Item 2. Properties

Properties — owned and leased real estate

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2022 filing

2023 filing

Removed

Item 2. Properties We currently maintain leased facilities in San Jose, California and Toronto and Markham, Ontario, Canada. Our administrative, sales, marketing, support and research and development functions are located in these leased facilities. We occupy approximately 10,000 square feet of space in the San Jose facility, and the lease extends until January 2024.

Added

Item 2. Properties. We currently maintain leased facilities for our administrative, sales, marketing, support and research and development functions. We believe that our existing facilities are adequate to meet our current needs. The table below summarizes our leased facilities.

Removed

We occupy approximately 12,700 square feet of space in the Toronto, Ontario facility, and the lease extends until December 2023. We also occupy approximately 9,500 square feet of space in the Markham facility for research and development functions, and the lease extends until September 2027. We believe that our existing facilities are adequate to meet our current needs.

Added

Location Square Footage (approximate) Lease Expiration Markham, Ontario, Canada 9,500 September 2027 Toronto, Ontario, Canada 12,700 December 2024 San Jose, California 10,000 January 2025

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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2022 filing

2023 filing

Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock is currently listed on the Nasdaq Stock Market under the symbol “PRSO.” Holders of Record As of December 31, 2022, there were 49 holders of record of our common stock and18 holders of record of our exchangeable shares.

Biggest changeMarket Information for Common Stock Our common stock is currently listed on the Nasdaq Stock Market under the symbol “PRSO.” Holders of Record As of December 31, 2023, there were 67 holders of record of our common stock and 58 holders of record of our exchangeable shares.

Added

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

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

56 edited+40 added−35 removed32 unchanged

2022 filing

2023 filing

Biggest changeThe changes in assets and liabilities primarily related to the timing of the collection of receivables from customers, payments to vendors and increases in inventory balances. 29 In 2021, we used $12.0 million in cash from operating activities, which primarily resulted from the net loss of $10.9 million, changes to operating assets and liabilities of approximately $1.4 million, and an adjustment for a non-cash gain on the change in fair value of warrant liability of $8.1 million, adjusted for non-cash charges, including stock-based compensation expenses of $4.5 million, depreciation and amortization expenses of $1.1 million, accrued interest of $0.7 million and amortization of debt discount of $2.1 million.

Biggest changeIn 2023, we used $4.7 million in cash from operating activities, which primarily resulted from our net loss of $16.8 million and changes to operating assets and liabilities of approximately $2.8 million, adjusted for non-cash charges and gains, including stock-based compensation expenses of $5.2 million, and depreciation and amortization expenses of $3.8 million, $3.6 million in inventory write-downs and $0.3 million of asset impairment charges, partially offset by a $3.5 million non-cash gain on the change in fair value of warrant liability and $0.1 million of other changes.

Fair Value Measurements of Financial Instruments We measure the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows: ● Level 1-Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. 25 ● Level 2-Pricing is provided by third party sources of market information obtained from investment advisors rather than models.

Fair Value Measurements of Financial Instruments We measure the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, as follows: ● Level 1-Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. ● Level 2-Pricing is provided by third party sources of market information obtained from investment advisors rather than models.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. 26 Stock-based compensation We recognize stock-based compensation for equity awards on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Stock-based compensation We recognize stock-based compensation for equity awards on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value.

We may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale. Royalty and other Our licensing contracts typically provide for royalties based on the licensee’s use of our memory technology in its currently shipping commercial products.

We may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the terms of sale. 32 Royalty and other Our licensing contracts typically provide for royalties based on the licensee’s use of our memory technology in its currently shipping commercial products.

This negatively affected the U.S. and global economy, disrupted global supply chains, significantly restricted travel and transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the financial markets.

Such indemnification clauses may not be subject to maximum loss clauses. We have also entered into indemnification agreements with our officers and directors. No material amounts related to these indemnifications are reflected in our consolidated financial statements for the years ended December 31, 2022 or 2021.

Recent Accounting Pronouncements See Note 1 to the consolidated financial statements in Item 15 of this Report for a description of recent accounting pronouncements.

Recent Accounting Pronouncements See Note 1 to the consolidated financial statements in Item 15 of this Report for a description of recent accounting pronouncements. 39

These variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The expected volatility is based on the historical volatility of our stock price.

We initiated price increases on certain of our module products in 2022, however, through December 31, 2022, we had not realized any material increase in revenue as a result of those price increases.

We initiated price increases on certain of our antenna module products in 2022, however, through December 31, 2023, we had not realized any material increase in revenue as a result of those price increases.

(Peraso Tech), a corporation existing under the laws of the province of Ontario, to acquire all of the issued and outstanding common shares of Peraso Tech (the Peraso Shares), including those Peraso Shares to be issued in connection with the conversion or exchange of secured convertible debentures and common share purchase warrants of Peraso Tech, as applicable, by way of a statutory plan of arrangement (the Arrangement) under the Business Corporations Act (Ontario).

(“Peraso Tech”), a corporation existing under the laws of the province of Ontario, to acquire all of the issued and outstanding common shares of Peraso Tech (the “Peraso Shares”), including those Peraso Shares to be issued in connection with the conversion or exchange of secured convertible debentures and common share purchase warrants of Peraso Tech, as applicable, by way of a statutory plan of arrangement (the “Arrangement”) under the Business Corporations Act (Ontario).

We classify advance customer payments and deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. As of December 31, 2022, contract liabilities were in a current position and included in deferred revenue.

Contract liabilities - deferred revenue Our contract liabilities consist of advance customer payments and deferred revenue. We classify advance customer payments and deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. As of December 31, 2023 and 2022, contract liabilities were in a current position and included in deferred revenue.

(MoSys) and were incorporated in California in 1991 and reincorporated in 2000 in Delaware. On September 14, 2021, we and our subsidiaries, 2864552 Ontario Inc. and 2864555 Ontario Inc., entered into an Arrangement Agreement (the Arrangement Agreement) with Peraso Technologies Inc.

(“MoSys”), and we were incorporated in California in 1991 and reincorporated in 2000 in Delaware. On September 14, 2021, we and our subsidiaries, 2864552 Ontario Inc. and 2864555 Ontario Inc., entered into an Arrangement Agreement (the “Arrangement Agreement”) with Peraso Technologies Inc.

If the Company is unsuccessful in these efforts, it will need to implement additional cost reduction strategies, which could further affect its near- and long-term business plan. These efforts may include, but are not limited to, reducing headcount and curtailing business activities.

If we are unsuccessful in these efforts, we will need to implement additional cost reduction strategies, which could further affect its near- and long-term business plan. These efforts may include, but are not limited to, reducing headcount and curtailing business activities.

COVID-19 and Russian Invasion of Ukraine The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S. government in March 2020.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying consolidated financial statements and notes included in this Report. Overview We were formerly known as MoSys, Inc.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying consolidated financial statements and notes included in this Report.

In 2023, net cash provided by financing activities was $3.4 million and consisted of $3.6 million in net proceeds from a registered direct offering of our common stock and common stock purchase warrants completed in June 2023, partially offset by taxes paid to net share settle equity awards and repayment of finance lease liabilities.

Going Concern - Working Capital We incurred net losses of approximately $32.4 million and $10.9 million for the years ended December 31, 2022 and 2021, respectively, and we had an accumulated deficit of approximately $149.6 million as of December 31, 2022.

Going Concern - Working Capital We incurred net losses of approximately $16.8 million and $32.4 million for the years ended December 31, 2023 and 2022, respectively, and we had an accumulated deficit of approximately $166.4 million as of December 31, 2023.

Given current market conditions, we may be unable to access the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

Market conditions may prevent us from accessing the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

Our future liquidity and capital requirements are expected to vary from quarter-to-quarter, depending on numerous factors, including: ● level of revenue; ● cost, timing and success of technology development efforts; ● inventory levels, as supply chain disruption has required us to maintain higher inventory levels and place purchase orders with our suppliers longer into the future, which exposes us to additional inventory risk; ● timing of product shipments, which may be impacted by supply chain disruptions; ● length of billing and collection cycles, which may be impacted in the event of a global recession or economic downturn; ● fabrication costs, including mask costs, of our ICs, currently under development; ● variations in manufacturing yields, material lead time and costs and other manufacturing risks; ● costs of acquiring other businesses and integrating the acquired operations; and ● profitability of our business.

In 2022, net cash provided by financing activities was $1.9 million and consisted of $2.1 million in net proceeds from a registered direct offering of our common stock and common stock purchase warrants completed in November 2022, partially offset by $0.1 million of taxes paid to net share settle equity awards and $0.1 million of repayment of finance lease. 37 Our future liquidity and capital requirements are expected to vary from quarter-to-quarter, depending on numerous factors, including: ● level of revenue; ● cost, timing and success of technology development efforts; ● inventory levels, as supply chain disruption has required us to maintain higher inventory levels and place purchase orders with our suppliers longer into the future, which exposes us to additional inventory risk; ● timing of product shipments, which may be impacted by supply chain disruptions; ● length of billing and collection cycles, which may be impacted in the event of a global recession or economic downturn; ● fabrication costs, including mask costs, of our ICs, currently under development; ● variations in manufacturing yields, material lead time and costs and other manufacturing risks; ● costs of acquiring other businesses and integrating the acquired operations; and ● profitability of our business.

Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) Royalty and other $ 669 $ 773 $ (104 ) (13 )% Percentage of total net revenue 4 % 14 % Royalty and other includes royalty, non-recurring engineering services and licenses revenues.

Years Ended December 31, Year-Over-Year Change 2023 2022 2022 to 2023 (dollar amounts in thousands) Royalty and other $ 896 $ 669 $ 227 34 % Percentage of total net revenue 7 % 4 % Royalty and other includes royalty, non-recurring engineering services and license revenues.

As described below, the analysis of contracts under ASC 606 supports the recognition of revenue at a point in time, resulting in revenue recognition timing that is materially consistent with our historical practice of recognizing product revenue when title and risk of loss pass to the customer. 24 We generate revenue primarily from sales of integrated circuits and module products, performance of engineering services and licensing of its intellectual property.

The carrying values of lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates. We measure the fair value of our warrant liabilities using Level 3 inputs.

The carrying values of lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

The net deferred tax assets are reduced by a valuation allowance if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

These differences result in deferred tax assets, which we show on our consolidated balance sheet under the category of other assets. The net deferred tax assets are reduced by a valuation allowance if, based upon weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The decrease in royalty and other revenue for the year ended December 31, 2022 compared with the same period of 2021 was primarily due to a decrease in non-recurring engineering services revenue related to our mmWave technology. Such decrease was partially offset by a full twelve-month contribution of royalty revenues from licensees of our memory technology.

The increase in royalty and other revenue for the year ended December 31, 2023 compared with the same period of 2022 was due to an increase in non-recurring engineering services revenue related to our mmWave technology combined with a modest increase in royalties from licensees of our memory technology.

We will need to increase revenues beyond the levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time.

Further, we expect our cash expenditures to continue to exceed receipts for at least the next 12 months, as our revenues will not be sufficient to offset our operating expenses. 38 We will need to increase revenues beyond the levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time.

Off-Balance Sheet Arrangements We do not maintain any off-balance sheet arrangements or obligations that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources. 31 Indemnifications In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance.

Indemnifications In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance.

It has taken us several years to refine performance of this production test methodology, and we believe this places us in a leadership position in addressing operational challenges of delivering mmWave products into high-volume markets. During 2021, we augmented our business model by selling complete mmWave modules.

We have pioneered a high-volume mmWave IC production test methodology using standard, low-cost production test equipment. It has taken us several years to refine performance of this production test methodology, and we believe this places us in a leadership position in addressing operational challenges of delivering mmWave products into high-volume markets. We also produce and sell complete mmWave antenna modules.

Business Combination We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.

As of December 31, 2023, there have been no material changes to our significant accounting policies and estimates. 31 Business Combination We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.

See Note 11 to the consolidated financial statements in Item 15 of this Report for additional disclosure. Liquidity and Capital Resources; Changes in Financial Condition At December 31, 2022, we had cash, cash equivalents and investments totaling $2.9 million compared with cash, cash equivalents and investments of $18.1 million as of December 31, 2021.

Liquidity and Capital Resources; Changes in Financial Condition At December 31, 2023, we had cash and cash equivalents totaling $1.6 million compared with cash, cash equivalents and investments of $2.9 million as of December 31, 2022.

We will need to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time. 29 Recent Developments Cost Reductions In November 2023, we implemented a reduction in our workforce and eliminated three full-time equivalent positions, which included one employee and two consultants.

These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital.

These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital. To date, we have primarily financed our operations through loans, offerings of common stock and warrants and issuances of convertible notes.

Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods.

We generate revenue primarily from sales of integrated circuits and module products, performance of engineering services and licensing of its intellectual property. Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods.

Selling, General and Administrative (SG&A) Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) SG&A $ 11,108 $ 7,016 $ 4,092 58 % Percentage of total net revenue 75 % 124 % SG&A expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management and amortization of certain intangible assets.

We expect that total R&D expenses will decrease during 2024 compared with 2023, as a result of our cost reduction initiatives initiated during 2022 and 2023. 36 Selling, General and Administrative (SG&A) Years Ended December 31, Year-Over-Year Change 2023 2022 2022 to 2023 (dollar amounts in thousands) SG&A $ 8,505 $ 11,108 $ (2,603 ) (23 )% Percentage of total net revenue 62 % 75 % Selling, general and administrative, or SG&A, expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management and amortization of certain intangible assets.

The full extent of the COVID-19 impact on our operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S. and foreign government agencies to prevent disease spread, all of which are uncertain, out of our control, and cannot be predicted.

While the U.S. national emergency expired in May 2023 and substantially all closures and “shelter-in-place” orders have ended, there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance in the future, as the duration and spread of the pandemic and related actions taken by U.S. and foreign government agencies to prevent disease spread are uncertain, out of our control, and cannot be predicted.

If our estimates and assumptions change in the future, it could result in a material write-down of long-lived assets. We amortize our finite-lived intangible assets, such as developed technology and patent license, on a straight-line basis over their estimated useful lives of three to seven years.

We amortize our finite-lived intangible assets, such as developed technology and patent license, on a straight-line basis over their estimated useful lives of three to seven years. We recognize an impairment charge as the difference between the net book value of such assets and the fair value of the assets on the measurement date.

This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets, which we show on our consolidated balance sheet under the category of other assets.

Deferred tax valuation allowance When we prepare our consolidated financial statements, we estimate our income tax liability for each of the various jurisdictions where we conduct business. This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting purposes.

This memory product line comprises our Bandwidth Engine and Quad Partition Rate IC products, which integrate our proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance.

These products integrate our proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance. Taiwan Semiconductor Manufacturing Corporation, or TSMC, is the sole foundry that manufactures the wafers used to produce our memory IC products.

Valuation of long-lived assets We evaluate our long-lived assets for impairment at least annually, or more frequently when a triggering event is deemed to have occurred. This assessment is subjective in nature and requires significant management judgment to forecast future operating results, projected cash flows and current period market capitalization levels.

This assessment is subjective in nature and requires significant management judgment to forecast future operating results, projected cash flows and current period market capitalization levels. If our estimates and assumptions change in the future, it could result in a material write-down of long-lived assets.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. During the third and fourth quarters of 2022, the U.S. Federal Reserve continued to aggressively address elevated inflation by increasing interest rates. The U.S.

World unrest due to wars and terrorist attacks have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. Since mid-2022, at times, the U.S. Federal Reserve has addressed elevated inflation by increasing interest rates.

Accordingly, the Company deferred the cost of net revenue associated with these shipments, and the amount deferred has been presented as deferred cost of net revenue in the consolidated balance sheets. Contract liabilities - deferred revenue Our contract liabilities consist of advance customer payments and deferred revenue.

Accordingly, the Company deferred the cost of net revenue associated with these shipments, and the amount deferred was presented as deferred cost of net revenue in the consolidated balance sheets as of December 31, 2022. During the three months ended March 31, 2023, the Company recognized the associated revenue and cost of net revenue.

Cost of Net Revenue and Gross Profit Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) Cost of net revenue $ 8,915 $ 3,270 $ 5,645 173 % Percentage of total net revenue 60 % 58 % Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) Gross profit $ 5,953 $ 2,409 $ 3,544 147 % Percentage of total net revenue 40 % 42 % Cost of net revenue is primarily comprised of direct and indirect costs related to the sale of our products, including amortization of intangible assets and depreciation of production-related fixed assets.

Cost of Net Revenue and Gross Profit Years Ended December 31, Year-Over-Year Change 2023 2022 2022 to 2023 (dollar amounts in thousands) Cost of net revenue $ 11,877 $ 8,915 $ 2,962 33 % Percentage of total net revenue 86 % 60 % Cost of net revenue is primarily comprised of direct and indirect costs related to the sale of our products, including amortization of intangible assets and depreciation of production-related fixed assets. 35 Cost of net revenue increased for the year ended December 31, 2023 when compared with the same period in 2022, due to the increase in sales of our memory IC products and inventory write-down charges, as partially offset by a decrease in sales of our mmWave IC and module products.

In 2021, net cash provided from investing activities of $6.6 million represented $6.5 million of proceeds from the Arrangement, $0.4 million of proceeds from maturities of short-term investments, partially offset by $0.2 million of purchases of fixed assets and intangible assets.

The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers, payments to vendors and increases in inventory balances. In 2023, net cash provided from investing activities of $1.0 million represented $1.1 million of proceeds from maturities and sales of short-term investments, partially offset by $0.1 million of purchases of fixed assets.

Results of Operations Net Revenue Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) Product $ 14,199 $ 4,906 $ 9,293 189 % Percentage of total net revenue 96 % 86 % The following table details revenue by product category: (amounts in thousands) Years Ended December 31, Product category 2022 2021 change Memory ICs $ 7,722 $ 150 7,572 mmWave ICs 3,289 3,566 (277 ) mmWave modules 3,170 1,101 2,069 mmWave other products 18 89 (71 ) $ 14,199 $ 4,906 $ 9,293 Product revenue increased for the year ended December 31, 2022 compared with the same period of 2021 primarily due to the increase in both memory IC and mmWave module sales volumes as a result of the acquisition of the memory IC product line in December 2021 and the roll-out of the mmWave antenna module product line in the second half of 2021.

The expected volatility is based on the historical volatility of our stock price. 34 Results of Operations Net Revenue Years Ended December 31, Year-Over-Year Change 2023 2022 2022 to 2023 (dollar amounts in thousands) Product $ 12,853 $ 14,199 $ (1,346 ) (9 )% Percentage of total net revenue 93 % 96 % The following table details revenue by product category: (amounts in thousands) Years Ended December 31, Year-Over-Year Product category 2023 2022 change Memory ICs $ 8,446 $ 7,722 724 mmWave ICs 2,726 3,289 (563 ) mmWave modules 1,677 3,170 (1,493 ) mmWave other products 4 18 (14 ) $ 12,853 $ 14,199 $ (1,346 ) Product revenue decreased for the year ended December 31, 2023 compared with the same period of 2022 primarily due to the decrease in shipments of our mmWave ICs and antenna modules, which was partially offset by increases in EOL shipments of our memory IC products.

Gross profit increased for the year ended December 31, 2022 compared with the same period of 2021 due to the increased product shipments.

The decrease for the year ended December 31, 2023 compared with the same period of 2022 was primarily due to reduced salary and consulting costs.

If we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership.

These cost reduction actions are intended to preserve cash while keeping capital expenditures to minimum levels in order to reduce operating costs and our short-term cash needs. If we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership.

On December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed and we changed our name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the Nasdaq) under the symbol “PRSO.” For accounting purposes, the legal subsidiary, Peraso Tech, was treated as the accounting acquirer and we, the legal parent, have been treated as the accounting acquiree.

On December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed and we changed our name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the “Nasdaq”) under the symbol “PRSO.” 28 Our strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or ICs, antenna modules and related non-recurring engineering services.

We incurred net losses of approximately $32.4 million and $10.9 million for the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of approximately $149.6 million as of December 31, 2022.

We incurred net losses of approximately $16.8 million and $32.4 million for the years ended December 31, 2023 and 2022, respectively, and we had an accumulated deficit of approximately $166.4 million as of December 31, 2023. These and prior year losses have resulted in significant negative cash flows and historically have required us to raise substantial amounts of additional capital.

We have implemented modest price increases on our memory products that we expect to begin taking effect in the first half of 2023. We expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as our primary sales focus is on obtaining new customers for our mmWave products.

We expect revenues to increase in 2024, as we anticipate increased sales of our memory IC products, based on EOL purchase orders received from customers to date. In addition, we expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as we expect new customers to commence production during 2024.

Our strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or ICs, modules and related non-recurring engineering services. We specialize in the development of mmWave semiconductors, primarily in the 60 GHz spectrum band for 802.11ad/ay compliant devices and in the 28/39 GHz spectrum bands for 5G-compliant devices.

We specialize in the development of mmWave semiconductors, primarily in the unlicensed 60 GHz spectrum band for 802.11ad/ay-compliant devices and in the 28/39 GHz spectrum bands for 5G-compliant devices. We derive our revenue from selling semiconductor devices, as well as antenna modules based on using those mmWave semiconductor devices.

The decrease in our gross profit margin for the year ended December 31, 2022 compared with the prior year periods was primarily attributable to the increased volume shipments of our mmWave modules, which carry lower gross margins than our IC products. 28 Research and Development (R&D) Years Ended December 31, Year-Over-Year Change 2022 2021 2021 to 2022 (dollar amounts in thousands) Research and development $ 19,768 $ 11,471 $ 8,297 72 % Percentage of total net revenue 133 % 202 % Our R&D expenses include costs related to the development of our products.

Research and Development (R&D) Years Ended December 31, Year-Over-Year Change 2023 2022 2022 to 2023 (dollar amounts in thousands) Research and development $ 14,398 $ 19,768 $ (5,370 ) (27 )% Percentage of total net revenue 105 % 133 % Our R&D expenses include costs related to the development of our products. We expense R&D costs as they are incurred.

Critical Accounting Policies and Use of Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. Note 1 to the consolidated financial statements included in Item 15 of this Report describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

A differentiating characteristic of mmWave technology is that the RF amplifiers must be as close as possible to the antenna to minimize loss, and by providing a module, we can guarantee the performance of the amplifier/antenna interface. 22 We also acquired a memory product line marketed under the Accelerator Engine name.

The primary advantage provided by our antenna modules is that our proprietary mmWave ICs and the antenna are integrated into a single device. A differentiating characteristic of mmWave technology is that the RF amplifiers must be as close as possible to the antenna to minimize loss.

We expect that total R&D expenses will decrease in 2023 compared with 2022, as we began implementing cost reductions during the three months ended December 31, 2022.

The decrease for the year ended December 31, 2023 compared with the same period of 2022 was primarily related to cost reductions, which we initiated during the three months ended December 31, 2022.

The reductions in R&D expense in 2023 will primarily result from lower headcount, including a reduction of employees and consulting positions, as well as targeted reductions in expenditures for certain longer-term research and development projects.

During the quarter ended December 31, 2022, we began implementing cost reductions, which included a reduction of consulting positions and the elimination of certain employee positions in February 2023, as well as targeted reductions in certain longer-term research and development projects.

To date, we have primarily financed our operations through loans, offerings of common stock and issuance of convertible notes. 30 We expect to continue to incur operating losses during 2023 as we continue to secure new customers for and continue to invest in the development of our products, and we expect our cash expenditures to continue to exceed receipts for at least the next 12 months, as our revenues will not be sufficient to offset our operating expenses.

We expect to continue to incur operating losses during 2024, as we continue to secure new customers for and continue to invest in the development of our products.

The reductions in SG&A expense in 2023 will primarily result from lower headcount, including a reduction of employees and reductions of other discretionary operating expenses. Interest expense Interest expense was primarily incurred on our loans payable and convertible debentures, which were retired during 2021.

The reductions in SG&A expense in 2023 primarily resulted from lower headcount, including the elimination of certain employee and consulting positions and reductions of other discretionary operating expenses. We expect that total SG&A expense will decrease for the remainder of 2023 compared with 2022 due to our continued cost reduction initiatives, including headcount reductions.

Removed

The transaction was accounted for as a reverse acquisition in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805).

Added

Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and uncertainties.

Removed

Accordingly, the financial condition and results of operations discussed herein are a continuation of Peraso Tech’s financial results prior to December 17, 2021 and exclude the financial results of us prior to December 17, 2021. See Note 2 to the consolidated financial statements for additional disclosure .

Added

You should review “Risk Factors” for a discussion of important factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We were formerly known as MoSys, Inc.

Removed

We derive our revenue from selling semiconductor devices, as well as modules based on using those mmWave semiconductor devices. We have pioneered a high-volume mmWave production test methodology using standard low cost production test equipment.

Added

With our module, we can guarantee the performance of the amplifier/antenna interface and simplify customers’ radio frequency (“RF”) engineering, facilitating more opportunities for customer prospects that have not provided RF-type systems, as well as shortening the time to market for new products. We also acquired a memory product line comprising our Bandwidth Engine IC products.

Removed

The primary advantage provided by a module is the silicon and the antenna are integrated into a single device.

Added

TSMC has informed us that it would be discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory ICs. As a result, in May 2023, we initiated an end-of-life, or EOL, of our memory IC products.

Removed

These and prior year losses have resulted in significant negative cash flows for almost a decade and have necessitated that we raise substantial amounts of additional capital during this period.

Added

We notified our customers to provide purchase orders by December 22, 2023, and we commenced initial EOL shipments during the quarter ended September 30, 2023. We have requested customers to pay a deposit upon purchase order placement to reserve supply and provide funding for our required inventory purchases.

Removed

Since March 2020, certain jurisdictions in which we operate have from time to time issued “shelter-in-place” orders. As required, we have complied with these orders and, when such orders were in place, minimized business activities at our facilities. We have implemented a teleworking policy for our employees and contractors to comply with such orders.

Added

In addition, we have requested customers to accelerate payments to improve our cash flows. Under our EOL plan, we expect shipments of our memory products to continue until at least December 31, 2024.

Removed

As the COVID-19 pandemic evolves, we continue to closely monitor impacts, especially to customer programs and our supply chain. We are working internally and with suppliers on programs (i.e., new production flows, etc.) to allow us to increase our peak throughput to better handle unplanned disruptions to our supply chain.

Added

However, the timing of EOL shipments will be dependent on receipt of purchase orders from customers, deliveries from our suppliers, and the delivery schedules requested by our customers.

Removed

To date, we have not experienced a material impact on our cash flows, liquidity, capital resources, cash requirements, financial position, or results of operations, attributable to the global semiconductor supply chain disruption and inflation.

Added

As discussed below, this raises significant doubt about our ability to continue as a going concern.

Removed

We have experienced increased prices from our suppliers, and, for certain products, we have increased prices to our customers to mitigate the impacts, although during 2022 the impacts of these price increases were minimal.

Added

In addition, we initiated a temporary lay-off in Canada of 16 positions, all intended to preserve cash while keeping capital expenditures to minimum levels in order to reduce operating costs and our short-term cash needs.

Removed

We have and continue to experience longer lead times for certain components used to manufacture our products, and, therefore, and, in response, we have identified second and third sources for certain components used in our module products. Also, we have increased lead times for our customers.

Added

Reverse Stock Split On December 15, 2023, at our annual meeting of stockholders, our stockholders approved a certificate of amendment to our Second Amended and Restated Certificate of Incorporation (the “Charter Amendment”) to effect a reverse stock split of our outstanding shares of common stock at a ratio to be determined by our board of directors.

Removed

We have not experienced any issues over our product quality and product development activities, as we do not rely significantly on outside vendors to manage and perform these activities for us.

Added

On December 15, 2023, we filed the Charter Amendment with the Secretary of State of Delaware which effected a 1-for-40 reverse stock split of our outstanding shares of common stock as of 4:01 p.m. Eastern Time on January 2, 2024.

Removed

We currently have not identified any current impacts of the supply chain disruption and inflation that will affect our future results, and it is difficult to differentiate whether higher prices are due to supply chain disruption, inflation or a mix of both.

Added

As a result of the reverse stock split, every forty shares of common stock were combined into one issued and outstanding share of common stock, with no change in the $0.001 par value per share. Holders of fractional shares received, in lieu of any fractional share, the number of shares rounded up to the next whole number.

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Top changes in Peraso Inc.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Other PRSO 10-K year-over-year comparisons