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Item 7. Management’s Discussion and Analysis

2025-03-28 compared with 2024-03-29 · 417 added, 533 removed, 34 unchanged (97% of the section changed)

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

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.

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.

We were formerly known as

(“MoSys”), and we were incorporated in California in 1991 and reincorporated in 2000 in Delaware.

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.

(“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).

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.”

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 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.

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.

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.

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.

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.

TSMC has informed us that it would be discontinuing the foundry process used to produce wafers, in turn,

necessary to manufacture our memory ICs.

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

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.

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.

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.

were formerly known as MoSys, Inc.

(“MoSys”), and we were incorporated in California in 1991 and reincorporated in 2000 in

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.

(“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).

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.”

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 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.

We have pioneered a high-volume mmWave IC production test methodology using standard, low-cost production test equipment.

us several years to refine performance of this production test methodology, and we believe this places us in a leadership position in

addressing the operational challenges of delivering mmWave products into high-volume markets.

We also produce and sell complete mmWave

antenna modules.

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.

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.

also had a memory product line comprising our Bandwidth Engine IC products.

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.

TSMC 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,

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.

In addition, we have requested customers to accelerate payments to improve our cash flows.

EOL plan, we expect shipments of our memory products to continue until at least December 31, 2024.

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.

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.

As discussed below, this raises significant

doubt about our ability to continue as a going concern.

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.

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.

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.

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.

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.

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.

All equity awards outstanding and common stock reserved for issuance under our equity incentive

plans and warrants outstanding immediately prior to the reverse stock split were appropriately adjusted by dividing the number of affected

shares of common stock by 40 and, as applicable, multiplying the exercise price by 40, as a result of the reverse stock split.

shares, which can be converted to common stock at any time by their respective holders, were also adjusted to reflect the reverse stock

Compliance with Nasdaq Minimum Bid Price Requirement

On January 18, 2024, we received

a notification letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying us that we had regained compliance

with the minimum bid price requirement set forth under Nasdaq Listing Rule 5550(a)(2).

Termination of Advisory Agreement Related to

Strategic Alternative Exploration

In August 2023, we

engaged an investment bank to assist with the exploration of strategic alternatives, including a merger, sale of assets or other similar

transaction, with the intention to maximize stockholder value and further our business operations.

In January 2024, we terminated such

advisory agreement.

We currently have no commitments or agreements and are not negotiating with any parties relating to a merger, sale

of assets or other similar transaction with us.

Public Offering

February 6, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co.

Inc., as the sole underwriter (the “Underwriter”), relating to the issuance and sale in a public offering (the “Offering”)

(i) 480,000 shares of our common stock, (ii) pre-funded warrants to purchase up to 1,424,760 shares of our common stock, (iii) Series

A warrants to purchase up to 3,809,520 shares of our common stock, (iv) Series B warrants to purchase up to 3,809,520 shares of our common

stock, and (v) up to 285,714 additional shares of our common stock, Series A warrants to purchase up to 571,428 shares of our common stock

and Series B warrants to purchase up to 571,428 shares of our common stock, which may be purchased pursuant to a 45-day option to purchase

additional securities granted to the Underwriter by the Company.

The Underwriter partially exercised this option on February 7, 2024 for

82,500 shares of common stock, Series A warrants to purchase up to 165,000 shares of common stock and Series B warrants to purchase up

to 165,000 shares of common stock.

The combined public offering price of each share of common stock, together with the accompanying Series

A warrants and Series B warrants, was $2.10, less underwriting discounts and commissions.

The combined public offering price of each pre-funded

warrant, together with the accompanying Series A warrants and Series B warrants, was $2.099, less underwriting discounts and commissions.

Offering, including the additional shares of common stock, Series A warrants and Series B warrants sold pursuant to the partial exercise

of the Underwriter’s option, closed on February 8, 2024.

net proceeds from the Offering, including the additional shares of common stock, Series A warrants and Series B warrants sold pursuant

to the partial exercise of the Underwriter’s option, after deducting underwriting discounts and commissions and other estimated

Offering expenses payable by us and excluding any net proceeds from the exercise of the Series A warrants, Series B warrants and pre-funded

warrants, were approximately $3.4 million.

Series A warrants and Series B warrants each have an exercise price of $2.25 per share and are immediately exercisable upon issuance.

The Series A warrants expire on the five-year anniversary of the date of issuance and the Series B warrants expire on the six-month anniversary

of the date of issuance.

The pre-funded warrants have an exercise price of $0.001 per share, are exercisable immediately and may be exercised

at any time until all of the pre-funded warrants are exercised in full.

Subsequent to the closing of the Offering, as of March 18, 2024,

the holders exercised pre-funded warrants for 1,001,110 shares of common stock.

On February 8, 2024, pursuant

to the Underwriting Agreement, we issued warrants to the Underwriter to purchase up to 139,108 shares of our common stock at an exercise

price of $2.625, subject to adjustments, which are exercisable at any time and from time to time, in whole or in part, until February

8, 2029, and have substantially similar terms to the Series A warrants.

All securities issued in the

Offering (including the shares of common stock issuable from time to time upon exercise of the warrants) were offered pursuant to our

registration statement on Form S-1, as amended (File No.

333-276247), which became effective on February 6, 2024, including a prospectus

contained therein.

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.

in March 2020.

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.

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.

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.

and we commenced initial EOL shipments during the quarter ended September 30, 2023.

As of December 31, 2024, we had remaining EOL purchase

orders totaling approximately $2.3 million, and we expect to ship all of these orders by March 2025.

We do not expect any further

shipments or to generate any revenue from shipments of our memory IC products after March 2025.

incurred net losses of approximately $10.7 million and $16.8 million for the years ended December 31, 2024 and 2023, respectively, and

we had an accumulated deficit of approximately $177.1 million as of December 31, 2024.

These and prior year losses have resulted in significant

negative cash flows and historically have required us to raise substantial amounts of additional capital.

As discussed below, this raises

significant doubt about our ability to continue as a going concern.

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.

August 30, 2024, we entered into an At The Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann &

(“Ladenburg”) with respect to an “at the market” offering program, under which we may, from time to

time, in our sole discretion, issue and sell through Ladenburg, acting as agent or principal, shares of our common stock initially having

an aggregate offering price of up to $1,425,000.

After selling $169,215 of shares pursuant to the Sales Agreement, on December 10, 2024,

we increased the maximum aggregate offering amount of common stock issuable pursuant to the Sales Agreement to $2,693,527.

Agreement provides that Ladenburg will be entitled to compensation for its services equal to 3.0% of the gross proceeds from sales

of any shares of common stock pursuant to the Sales Agreement in addition to the reimbursement of certain expenses.

We have no obligation

to sell any shares pursuant to the Sales Agreement and either we or Ladenburg may terminate the Sales Agreement in accordance with its

During the three months ended December 31, 2024, we sold 153,200 shares of common stock for net proceeds of approximately

$186,500 pursuant to the Sales Agreement.

shares of common stock we may issue or sell pursuant to the Sales Agreement are registered under our Registration Statement on Form S-3

333-280798), which was declared effective by the SEC on July 22, 2024.

We are currently subject to the limitations contained

in General Instruction I.B.6 of Form S-3.

As a result, we are limited to selling no more than one-third of the aggregate market value

of the equity held by non-affiliates, or the public float, during any 12-month period.

If our public float increases, we will have additional

availability under such limitations, and if our public float increases to $75 million or more, we will no longer be subject to such limitations.

There can be no assurance that our public float will increase or that we will no longer be subject to such limitations.

Inducement Offering

On August 6, 2024, we extended

the expiration date of our outstanding Series B warrants, which were issued in a public offering completed in February 2024, to October

7, 2024, by entering into an amendment to the Warrant Agency Agreement dated as of February 8, 2024 by and between us and the warrant

agent, Equiniti Trust Company, LLC (the Warrant Agency Agreement).

On October 3, 2024, we extended the expiration date of the Series B

warrants to November 8, 2024, by entering into a second amendment to the Warrant Agency Agreement.

The Series B warrants would otherwise

have expired on October 7, 2024.

See Note 10 of the consolidated financial statements for additional information about the Series B warrants

and the offering.

On November 5, 2024, we entered into inducement offer letter agreements (the “Inducement Letters”)

with certain holders (the “Holders”) of existing Series B warrants (the “Existing Warrants”) to purchase up to

an aggregate of 2,246,030 shares of the Company’s common stock, having an original exercise price of $2.25 per share, issued to

the Holders on February 8, 2024 in the offering (see Note 10 of the consolidated financial statements).

Pursuant to the Inducement Letters,

the Holders agreed to exercise for cash their Existing Warrants at a reduced exercise price of $1.30 per share (the “Reduced Exercised

Price”) for gross proceeds of approximately $2.92 million in consideration for the Company’s agreement to issue in a private

placement (i) new Series C common stock purchase warrants (the “Series C Warrants”) to purchase an aggregate of 2,246,030

shares of common stock, and (ii) new Series D common stock purchase warrants (the “Series D Warrants,” and collectively with

the Series C Warrants, the “New Warrants”) to purchase an aggregate of 2,246,030 shares of common stock.

Each New Warrant

has an exercise price equal to $1.61 per share, subject to adjustment as provided in the New Warrants.

The Series C Warrants were exercisable

upon issuance and expire on the six-month anniversary of the date of issuance.

The Series D Warrants were exercisable upon issuance and

expire on the five-year anniversary of the date of issuance.

During the quarter ended December 31, 2024, we received net proceeds of approximately

$2.6 million from the warrant inducement offering.

unrest due to wars and terrorist attacks have led to 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

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.

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).

The preparation of these consolidated financial

statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

On an ongoing basis we make these estimates based on our historical experience and on assumptions that we consider reasonable under the

circumstances.

Actual results may differ from these estimates and reported results could differ under different assumptions or conditions.

Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes to Consolidated Financial Statements”

as of and for the years ended December 31, 2023 and 2022 included elsewhere in this Report.

As of December 31, 2023, there have been no

material changes to our significant accounting policies and estimates.

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

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities

is recorded as goodwill to reporting units based on the expected benefit from the business combination.

Allocation of purchase consideration

to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over

the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized.

During the measurement period,

which is not to exceed one year from the acquisition date, our records adjustments to the assets acquired and liabilities assumed, with

the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.

Acquired Intangibles

Acquired intangible assets

consist of developed technology and customer relationships that are measured at fair value at date of acquisition.

In valuing acquired

intangible assets, we make assumptions and estimates based in part on projected financial information, which makes assumptions and estimates

inherently uncertain, particularly for early-stage technology companies.

The significant estimates and assumptions used by us in the determination

of the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate and the discount rate.

significant estimates and assumptions used by us in the determination of the fair value of acquired customer contract intangible assets

include the revenue growth rate and the discount rate.

As a result of the judgments

that need to be made, we obtain the assistance of independent valuation firms.

We complete these assessments as soon as practical after

the closing dates.

Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded

Revenue Recognition

We recognize revenue in accordance

with FASB ASC Topic 606, Revenue from Contracts with Customers, and its amendments (ASC 606).

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.

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.

Federal Reserve has addressed elevated inflation by increasing

interest rates.

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.

Accounting Policies and Estimates

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”).

The preparation

of these consolidated financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets,

liabilities, revenues and expenses.

On an ongoing basis we make these estimates based on our historical experience and on assumptions

that we consider reasonable under the circumstances.

Actual results may differ from these estimates and reported results could differ

under different assumptions or conditions.

Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes

to Consolidated Financial Statements” as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report.

As of December 31, 2024, there have been no material changes to our significant accounting policies and estimates.

recognize revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers, and its amendments (ASC 606).

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.

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.

Revenue recognition is evaluated through the following five steps:

(i) identification of the contract,

or contracts, with a customer;

identification of the contract, or contracts, with a customer;

(ii) identification of the performance obligations in the contract;

(iii) determination of the transaction

determination of the transaction price;

(iv) allocation of the transaction price to the performance obligations in the contract;

and (v) recognition of revenue when or

as a performance obligation is satisfied.

Product revenue

Revenue is recognized when

performance obligations under the terms of a contract with a customer are satisfied.

The majority of our contracts have a single performance

obligation to transfer products.

Accordingly, we recognize revenue when title and risk of loss have been transferred to the customer,

generally at the time of shipment of products.

Revenue is measured as the amount of consideration we expect to receive in exchange for

transferring products and is generally based upon a negotiated, formula, list or fixed price.

We sell our products both directly to customers

and through distributors generally under agreements with payment terms typically 60 days or less.

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.

its royalty revenue in the calendar quarter in which the licensee uses the licensed technology.

Payments are received in the subsequent

(v) recognition of revenue when or as a performance obligation is satisfied.

is recognized when performance obligations under the terms of a contract with a customer are satisfied.

The majority of our contracts

have a single performance obligation to transfer products.

Accordingly, we recognize revenue when title and risk of loss have been transferred

to the customer, generally at the time of shipment of products.

Revenue is measured as the amount of consideration we expect to receive

in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price.

We sell our products both

directly to customers and through distributors generally under agreements with payment terms typically 60 days or less.

may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the

terms of sale.

licensing contracts typically provide for royalties based on the licensee’s use of our memory technology in its currently shipping

commercial products.

We estimate its royalty revenue in the calendar quarter in which the licensee uses the licensed technology.

are received in the subsequent quarter.

We also generate revenue from licensing its technology.

We recognize License fee as revenue at the point of time when the control

of the license has been transferred and we have no continuing performance obligations to the customer.

Engineering services revenue

Engineering and development

contracts with customers generally contain a single performance obligation that is delivered over time.

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.

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.

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.

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:

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.

2-Pricing is provided by third party sources of market information obtained from investment advisors rather than models.

We do not adjust

for or apply any additional assumptions or estimates to the pricing information we receive from advisors.

Our Level 2 securities include

cash equivalents and available-for-sale securities, which consisted primarily of corporate debt, and government agency and municipal

debt securities from issuers with high quality credit ratings.

Our investment advisors obtain pricing data from independent sources,

such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because

the Level 2 securities we hold are not actively traded and have fewer observable transactions.

We consider this the most reliable information

available for the valuation of the securities.

3-Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used

to measure fair value.

These values are generally determined using pricing models for which the assumptions utilize management’s

estimates of market participant assumptions.

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 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.

measure the fair value of our warrant liabilities using Level 3 inputs.

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.

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 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.

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.

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.

We must make significant judgments to determine

our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred

We believe that utilization of our net operating loss and tax credit carryforwards, which comprise the majority of our deferred

tax assets, may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue

Code and similar state provisions.

See Note 4 to the consolidated financial statements in Item 15 of this report for an additional

description of these limitations.

Derivatives and liability-classified instruments

We account 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 FASB ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition

of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants

are indexed to our stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside

of our control, among other conditions for equity classification.

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

We estimate the value of employee stock options on the date of grant using the Black-Scholes option pricing model.

The determination

of fair value of share-based payment awards on the date of grant using an option pricing model is affected by our stock price, as well

as assumptions regarding a number of highly complex and subjective variables.

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.

volatility is based on the historical volatility of our stock price.

Results of Operations

We recognize License fee as revenue at

the point of time when the control of the license has been transferred and we have no continuing performance obligations to the customer.

services revenue

and development contracts with customers generally contain a single performance obligation that is delivered over time.

Revenue is recognized

using an output method that is consistent with the satisfaction of the performance obligation as a measure of progress.

liabilities - deferred revenue

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, 2024 and 2023, contract liabilities

were in a current position and included in deferred revenue.

tax valuation allowance

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.

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.

We must make significant

judgments to determine our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded

against our net deferred tax asset.

We believe that utilization of our net operating loss and tax credit carryforwards, which comprise

the majority of our deferred tax assets, may be subject to a substantial annual limitation due to the ownership change limitations provided

by the Internal Revenue Code and similar state provisions.

See Note 8 to the consolidated financial statements in Item 15 of this

report for an additional description of these limitations.

and liability-classified instruments

account 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 FASB ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815,

Derivatives and Hedging (ASC 815).

The assessment considers whether the warrants are freestanding financial instruments pursuant

to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under

ASC 815, including whether the warrants are indexed to our stock and whether the holders of the warrants could potentially require net

cash settlement in a circumstance outside of our control, among other conditions for equity classification.

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.

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 estimate the value of employee stock options on the date of grant using the Black-Scholes

option pricing model.

The determination of fair value of share-based payment awards on the date of grant using an option pricing model

is affected by our stock price, as well as assumptions regarding a number of highly complex and subjective variables.

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.

The fair value of

restricted stock awards, restricted stock units, and performance-based restricted stock units is based on the closing price of the Company’s

common stock on the date of grant.

of Operations

Years Ended December 31,

2 unchanged sentences

Percentage of total net revenue

The following table details revenue by product

(amounts in thousands)

Years Ended December 31,

following table details revenue by product category:

in thousands)

Ended December 31,

Year-Over-Year

Product category

mmWave modules

mmWave other products

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.

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.

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.

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.

Years Ended December 31,

revenue increased for 2024 compared with 2023 primarily due to the increase in shipments of our memory IC products due to the EOL we

initiated in 2023.

The increase in memory shipments was partially offset by a decrease in shipments of our mmWave products.

expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as we expect i) an increase

in orders from existing customers, which appear to have reduced inventory levels that had increased due to the worldwide inventory correction

and ii) new customers to commence production during 2025.

Ended December 31,

Year-Over-Year Change

(dollar amounts in thousands)

(dollar amounts

in thousands)

Royalty and other

Percentage of total net revenue

Royalty and other includes

royalty, non-recurring engineering services and license revenues.

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.

Cost of Net Revenue and Gross Profit

and other revenue includes royalty, non-recurring engineering services and license revenues.

The decrease in royalty and other revenue

for 2024 compared with 2023 was due to a decrease in non-recurring engineering services revenue related to our mmWave technology combined

with a decrease in royalties from licensees of our memory technology, which were impacted by the same factors that produced our EOL.

Net Revenue and Gross Profit

Years Ended December 31,

3 unchanged sentences

Percentage of total net revenue

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 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.

The inventory write-down

charges recorded during 2023 totaled approximately $3.5 million and comprised approximately $0.5 million related to memory IC product

inventory and $3.0 million related to mmWave product inventory.

The write-downs were primarily attributable to inventory identified as

excess and obsolete based on inventory expiration and customer purchase orders received to date and current customer forecasts.

utilization of inventory is, or if our estimates of our inventory’s potential utility become, less favorable than currently expected,

additional inventory write-downs may be required.

Years Ended December 31,

of net revenue is primarily comprised of direct and indirect costs related to the sale of our products, including amortization of certain

intangible assets and depreciation of production-related fixed assets.

Cost of net revenue decreased for 2024 compared with 2023, primarily

due to product mix, as sales of our memory IC products increased, and a reduction in inventory write-down charges.

Our memory products

generate higher margins than our mmWave products, for which we experienced reduced sales during 2024.

Inventory write-down charges declined

by $3.1 million from $3.5 million recorded in 2023 to $0.4 million recorded in 2024.

The write-downs were primarily attributable to inventory

identified as excess and obsolete based on inventory expiration and customer forecasts.

If our utilization of inventory is, or if our

estimates of our inventory’s potential utility become, less favorable than currently expected, additional inventory write-downs

may be required.

Ended December 31,

Year-Over-Year Change

1 unchanged sentence

Percentage of total net revenue

Gross profit decreased for

the year ended December 31, 2023 compared with the same period in 2022 due to inventory write-down charges and decreased mmWave product

shipments, partially offset by increases in memory IC product shipments.

The decrease in our gross profit margin for the year ended December

31, 2023 compared with the prior year periods was primarily attributable to the inventory write-down charges incurred during 2023.

Research and Development (R&D)

Years Ended December 31,

Gross profit increased for 2024 compared with 2023 primarily due to

product mix, specifically the increase in memory IC shipments and reduction in mmWave product shipments combined with a $3.1 million decrease

in inventory write-down charges in 2024 compared with 2023.

During the year ended December 31, 2024, we recorded revenue of approximately

$139,000 from inventory that had been written down in prior periods.

and Development (R&D)

Ended December 31,

Year-Over-Year Change

(dollar amounts in thousands)

amounts in thousands)

Research and development

Percentage of total net revenue

Our R&D expenses include

costs related to the development of our products.

R&D expenses include costs related to the development of our products.

We expense R&D costs as they are incurred.

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.

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.

In August 2022, we entered into a Technology License and Patent Assignment Agreement, or the Agreement, with Intel

Corporation, or Intel, and as a result we transferred certain employees and consultants to Intel.

As a result of the Agreement and other

cost reductions, our memory-related R&D expenses declined by approximately $1.2 million for the year ended December 31, 2023.

during the year ended December 31, 2022, we incurred mask fabrication (i.e., tape-out) expenses of $0.7 million for one of our mmWave

ICs, and we incurred no mask fabrication costs in 2023.

decrease for 2024 compared with 2023 was primarily due to reduced salary and consulting costs.

2023 and 2024 we implemented workforce reductions, as well as targeted reductions in certain longer-term research and development

expect that total R&D expenses will increase during 2025 compared with 2024, as a result of continued development of our mmWave products

and headcount additions to support anticipated increased customer activity.

General and Administrative (SG&A)

Ended December 31,

Year-Over-Year Change

(dollar amounts

in thousands)

Percentage of total net revenue

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.

increase for 2024 compared with 2023 was primarily attributable to increased consulting and professional services costs and increased

amortization of purchased intangible assets for customer relationships, as we reduced the estimated life of these intangibles during

These increases were partially offset by the impact of headcount reductions initiated in 2023, including the elimination of certain

employee and consulting positions and reductions of other discretionary operating expenses during 2023.

expect that total SG&A expense will remain flat or slightly increase during 2025 compared with 2024 as we continue to secure new

customers for and continue to invest in the development of our products.

and Software License Obligations

Ended December 31,

Year-Over-Year Change

amounts in thousands)

Severance and software license

Percentage of total net revenue

In November 2023, we implemented

a reduction in our workforce and eliminated three full-time equivalent positions, which included one employee and two consultants.

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.

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

Selling, General and Administrative (SG&A)

Years Ended December 31,

an employee lay-off and terminated certain consulting positions (the “Reductions”) to reduce operating expenses and cash burn,

as we prioritized business activities and projects that we believe will have a higher return on investment.

As part of the Reductions,

we implemented a temporary lay-off that impacted 16 employees (the “Employees”) of Peraso Tech.

During the six months ended

June 30, 2024, we determined that we would not recall any of the 11 Employees that remained on our payroll and commenced notifying the

remaining Employees that their employment would be terminated.

As a result, we recorded severance charges of approximately $0.4 million

for the year ended December 31, 2024.

As a result of the decision to not recall the Employees, we determined

that it was probable that a number of our non-cancelable licenses for computer-aided design software would not be utilized during the

remaining license terms.

During the year ended December 31, 2024, we expensed $1.6 million for the value of the remaining contractual

license and asset sale

Ended December 31,

Year-Over-Year Change

(dollar amounts in thousands)

Gain on license and asset sale

Percentage of total net revenue

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 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

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.

Liquidity and Capital Resources;

August 5, 2022, we entered into a Technology License and Patent Assignment Agreement (the Intel Agreement) with Intel Corporation (Intel).

As consideration, Intel paid us $3,062,500 in August 2022 and $437,500 (the Holdback) in January 2023 upon the satisfaction by us of

certain release criteria set forth in the Intel Agreement regarding the Licensed Technology.

We determined that the license and

asset sale did not qualify as a sale of a business, but as a sale of a non-financial asset, with the resultant gain recorded as income

from operations.

In January 2023, upon receipt of the Holdback, we recognized a gain, net of transaction costs, which was recorded

as a reduction of operating expenses in the consolidated statements of operations.

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,

In 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.

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 2022, we used $16.0 million

in cash from operating activities, which primarily resulted from the net loss of $32.4 million and changes to operating assets and liabilities

of approximately $2.4 million, adjusted for non-cash charges and gains, including stock-based compensation expenses of $5.7 million, depreciation

and amortization expenses of $3.1 million, a $9.9 million goodwill impairment charge and $0.1 million of other changes.

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.

In 2022, net cash provided

from investing activities of $10.0 million represented $11.5 million of proceeds from maturities and sales of short-term investments,

partially offset by $0.5 million purchases of short and long-term investments and $1.0 million of purchases of fixed assets and intangible

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.

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.

Our future liquidity and capital

requirements are expected to vary from quarter-to-quarter, depending on numerous factors, including:

timing and success of technology development efforts;

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;

of product shipments, which may be impacted by supply chain disruptions;

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;

in manufacturing yields, material lead time and costs and other manufacturing risks;

of acquiring other businesses and integrating the acquired operations;

● profitability

of our business.

Purchase Obligations

The Company’s primary

purchase obligations include non-cancelable purchase orders for inventory and computer-aided-design (CAD) software.

At December 31, 2023,

the Company had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of

approximately $2.3 million and non-cancelable purchase orders for CAD software of $3.1 million over 24 months.

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.

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.

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.

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 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.

As a result of our expected operating losses and cash burn and recurring

losses from operations, if we are unable to raise sufficient capital through additional debt or equity arrangements, there will be uncertainty

regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt as to our ability

to continue as a going concern within one year from the date of issuance of these consolidated financial statements.

The consolidated

financial statements presented in Item 8 of this Report have been prepared assuming that we will continue as a going concern, and do not

include any adjustments that might result from the outcome of this uncertainty.

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.

We are currently seeking additional financing in order to meet our cash requirements for the

foreseeable future.

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.

As further discussed in Note 13 to the consolidated financial statements, in February 2024, we completed a public

offering of our common stock and warrants for net proceeds of approximately $3.3 million.

Further, in November 2023, we implemented a

reduction in our workforce and eliminated three full-time equivalent positions, which included one employee and two consultants.

we initiated a temporary lay-off in Canada of 16 positions.

The initial cost reduction benefits from the November 2023 actions began to

be realized during the three months ended December 31, 2023, and we expect annualized savings of up to approximately $2.2 million dollars,

if we do not recall the impacted employees.

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.

If we engage in debt

financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends,

repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios, any of which could harm our

business, operating results and financial condition.

If we need additional capital and cannot raise it on acceptable terms, we may not

be able to, among other things:

or enhance our products;

to expand our product development and sales and marketing organizations;

complementary technologies, products or businesses;

operations, in the United States or internationally;

train and retain employees;

to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these

things could seriously harm our ability to execute our business strategy and may force us to curtail our existing operations.

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.

December 31, 2024, we had cash and cash equivalents totaling $3.3 million compared with cash, cash equivalents and investments of $1.6

million as of December 31, 2023.

2024, we used $4.6 million in cash from operating activities, which primarily resulted from our net loss of $10.7 million, adjusted for

non-cash charges and gains, including stock-based compensation expenses of $3.6 million, depreciation and amortization expenses of $3.9

million and $0.4 million in inventory write-downs, partially offset by a $1.7 million non-cash gain on the change in fair value of warrant

liabilities and $0.1 million of changes to operating assets and liabilities.

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, 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.

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.

2024, no cash was provided by or used in investing activities.

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.

2024, net cash provided by financing activities of $6.3 million primarily comprised $3.5 million in net proceeds from a public offering

of our common stock and common stock purchase warrants in February 2024, $2.6 million in net proceeds from a warrant inducement offering

in November 2024, a $0.1 million sale of unregistered stock, and $0.3 million of net proceeds from sales under our at-the market offering

The proceeds were partially offset by $0.1 million of repayments of finance lease liabilities.

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.

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 any new ICs that we develop;

variations in manufacturing

yields, material lead time and costs and other manufacturing risks;

costs of acquiring other

businesses and integrating the acquired operations;

profitability of our business.

primary purchase obligations include non-cancelable purchase orders for inventory.

At December 31, 2024, the Company had outstanding

non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $3.1 million.

Concern - Working Capital

incurred net losses of approximately $10.7 million and $16.8 million for the years ended December 31, 2024 and 2023, respectively, and

we had an accumulated deficit of approximately $177.1 million as of December 31, 2024.

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.

expect to continue to incur operating losses during 2025, as we will cease shipments of our memory products after March 2025 and continue

to secure new customers for and continue to invest in the development of our products.

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.

that our existing cash and cash equivalents as of December 31, 2024 will enable us to meet our capital needs through at least the second

quarter of 2025.

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.

As a result of our expected

operating losses and cash burn and recurring losses from operations, if we are unable to raise sufficient capital through additional

debt or equity arrangements, there will be uncertainty regarding our ability to maintain liquidity sufficient to operate our business

effectively, which raises substantial doubt as to our ability to continue as a going concern within one year from the date of issuance

of these consolidated financial statements.

The consolidated financial statements presented in Item 8 of this Report have been prepared

assuming that we will continue as a going concern, and do not include any adjustments that might result from the outcome of this uncertainty.

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.

We are currently seeking additional financing

in order to meet our cash requirements for the foreseeable future.

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.

As further discussed in Note 10 to the consolidated financial

statements, in November 2024, we entered into a warrant inducement offering for net proceeds of approximately $2.6 million.

Additionally,

on August 30, 2024, we entered into the Sales Agreement with Ladenburg, pursuant to which we may offer and sell, from time to time at

our sole discretion, shares of our common stock through Ladenburg as agent and/or principal (subject to the limitations of General Instruction

I.B.6 of Form S-3) through an at-the-market program.

Further, during 2023 and 2024, we implemented reductions in our workforce and eliminated

19 full-time equivalent positions.

These cost reduction actions were intended to preserve cash, as we kept capital expenditures to minimum

levels in order to reduce operating costs and our short-term cash needs.

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

If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit

us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios,

any of which could harm our business, operating results and financial condition.

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

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

respond to competitive

pressures or unanticipated working capital requirements.

failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our existing

Sheet Arrangements

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.

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.

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, 2023 or 2022.

Recent Accounting Pronouncements

See Note 1 to the consolidated

financial statements in Item 15 of this Report for a description of recent accounting pronouncements.

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.

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, 2024 or 2023.

Accounting Pronouncements

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

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis