What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 296 added, 324 removed, 49 unchanged (93% 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 condensed

consolidated financial statements and notes included in this report.

This Form 10-Q contains forward-looking statements within the

meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as

amended, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial

performance and capital raising effort, the impacts of COVID-19 on our business, the effects of the Russia/Ukraine conflict, and inflation,

which could cause customers to delay or reduce purchases of our products or delay payments to us, which would adversely affect our financial

results, including cash flows, and other aspects of our business identified in our most recent annual report on Form 10-K filed

with the Securities and Exchange Commission on March 29, 2023 and in other reports that we file from time to time with the Securities

and Exchange Commission.

Any statements about our business, financial results, financial condition and operations contained in this Form 10-Q

that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words

“believes,” “anticipates,” “expects,” “intends,” “plans,” “projects”

or similar expressions are intended to identify forward-looking statements.

Our actual results could differ materially from those expressed

or implied by these forward-looking statements as a result of various factors, including the risk factors described under Item 1A of

our annual report on Form 10-K for the year ended December 31, 2022 and the risk factors described below under Item 1A of this

We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even

as new information becomes available or events occur in the future.

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying

condensed consolidated financial statements and notes included in this report.

This Form 10-Q contains forward-looking statements

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act

of 1934, as amended, which include, without limitation, statements about the market for our technology, our strategy, competition, expected

financial performance and capital raising effort, the impacts of COVID-19 on our business, the effects of the Russia/Ukraine conflict,

and inflation, which could cause customers to delay or reduce purchases of our products or delay payments to us, which would adversely

affect our financial results, including cash flows, and other aspects of our business identified in our most recent annual report on

Form 10-K filed with the Securities and Exchange Commission on March 29, 2023 and in other reports that we file from time to

time with the Securities and Exchange Commission.

Any statements about our business, financial results, financial condition and operations

contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements.

Without limiting

the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,”

“projects” or similar expressions are intended to identify forward-looking statements.

Our actual results could differ materially

from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described

under Item 1A of our annual report on Form 10-K for the year ended December 31, 2022 and the risk factors described below under

Item 1A of this Form 10-Q.

We undertake no obligation to update publicly any forward-looking statements for any reason, except as required

by law, even as new information becomes available or events occur in the future.

were formerly known as MoSys, Inc.

(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.

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.”

(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.

(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

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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 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.

The primary advantage

provided by an antenna module is the silicon and the antenna are integrated into a single device.

A differentiating characteristic of

mmWave technology is that the radio frequency 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.

We have pioneered a high-volume mmWave 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.

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

A differentiating characteristic of mmWave technology is that the radio frequency 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.

also acquired a memory product line marketed under the Accelerator Engine name.

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.

We incurred net

losses of approximately $3.1 million for the three months ended March 31, 2023 and $32.4 million for the year ended December 31,

2022, and we had an accumulated deficit of approximately $152.7 million as of March 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.

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.

Memory IC Product End-of-Life

Semiconductor Manufacturing Corporation, or TSMC, is the sole foundry that manufactures the wafers used to produce our memory IC products.

TSMC recently 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, we have informed our memory IC customers that we are initiating an end-of-life, or EOL, of our memory IC

We have notified our customers to provide purchase orders during 2023 that we expect to fulfill during 2024.

We are requiring

customers to pay a deposit upon purchase order placement to reserve supply and provide funding for our required inventory purchases.

Under our EOL plan, we intend to complete all shipments of our memory products during 2024, and, as a result, we do not anticipate any

shipments of our memory products after December 31, 2024.

However, the timing of EOL shipments will be dependent on deliveries from our

suppliers, as well as the delivery schedules requested by our customers.

COVID-19 and Russian Invasion

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.

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.

Taiwan Semiconductor Manufacturing

Corporation, or TSMC, is the sole foundry that manufactures the wafers used to produce our memory IC products.

TSMC recently informed

us that it would be discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory ICs.

result, we have informed our customers that we are initiating an end-of-life, or EOL, of our memory IC products.

We have notified our

customers to provide purchase orders during 2023 that we expect to fulfill during 2024 and 2025.

We are requiring customers to pay a

deposit upon purchase order placement to reserve supply and provide funding for our required inventory purchases.

Under our EOL plan,

we intend to complete all shipments of our memory products during 2025, and, as a result, we do not anticipate any shipments of our memory

products after that.

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.

incurred net losses of approximately $7.2 million for the six months ended June 30, 2023 and $32.4 million for the year ended December

31, 2022, and we had an accumulated deficit of approximately $156.8 million as of June 30, 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.

Exploring Strategic Alternatives

We recently 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.

There can be no assurance that the exploration process will result in

any strategic alternative, or as to its outcome or timing.

We have neither set a timetable for completion of this process, nor have we

made any decisions related to strategic alternatives at this time.

If a strategic process is unsuccessful and we are unable to raise additional

capital, we may be unable to continue our operations at planned levels and be forced to further reduce or terminate our operations.

factors raise substantial doubt about our ability to continue as a going concern, as discussed below.

and Russian Invasion of Ukraine

global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency

government in March 2020.

Since March 2020, from time to time, 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 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.

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and foreign government agencies to prevent disease spread, all of which are uncertain, out of our control, and cannot be predicted.

The continued spread

of COVID-19 has also led to disruption and volatility in the global capital markets.

The Russian invasion of Ukraine in February 2022

has led to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively impacted the global

continued spread of COVID-19 has also led to disruption and volatility in the global capital markets.

The Russian invasion of Ukraine

in February 2022 has led to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively

impacted the global economy.

Since mid-2022, the U.S.

Federal Reserve has addressed elevated inflation by increasing interest rates, as inflation remains

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.

For additional

information on risks that could impact our future results, please refer to “Risk Factors” in Part II, Item 1A.

of this quarterly

report on Form 10-Q.

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 antenna module products, performance of engineering services and licensing of its intellectual

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;

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

(iii) 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 the licensee’s commercial products.

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

Payments are received in the

subsequent quarter.

We also generate revenue from licensing our technology.

We recognize license fees 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 three

months ended September 30, 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 condensed consolidated balance sheets.

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

generally 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 March 31, 2023, contract liabilities were in a current

position and included in deferred revenue.

Critical Accounting Policies and

The discussion

and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

The preparation of these

condensed 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” in our annual report on Form 10-K for the year ended December 31, 2022.

31, 2023, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

(dollar amounts in thousands)

Product -three months ended

Percentage of total net revenue

The following table

details revenue by product category for the three months ended March 31, 2023 and 2022:

Federal Reserve has addressed elevated inflation by increasing interest rates,

as inflation remains elevated.

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.

additional information on risks that could impact our future results, please refer to “Risk Factors” in Part II, Item 1A.

of this quarterly report on Form 10-Q.

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP).

The preparation of

these condensed 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” in our annual report on Form 10-K for the year ended December 31,

As of June 30, 2023, there have been no material changes to our significant accounting policies and estimates.

of Operations

amounts in thousands)

Months Ended March 31,

-three months ended

of total net revenue

-six months ended

of total net revenue

following table details revenue by product category for the three and six months ended June 30, 2023 and 2022:

(amounts in thousands)

Three Months Ended

Six Months Ended

Product category

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mmWave other products

Product revenue

increased for the three months ended March 31, 2023 compared with the same period of 2022 primarily due to recognition of revenue of

approximately $1.1 million for shipments during the three months ended September 30, 2022 upon payment by the customer and satisfaction

of the revenue recognition criteria.

We initiated price increases on certain of our antenna module products in 2022, however, through

March 31, 2023, we had not realized any material increase in revenue as a result of those price increases.

The increase in memory IC

sales was mainly due to larger shipments to one customer.

In late 2022, we implemented modest price increases on our memory products,

and, during the three months ended March 31, 2023, contributed $0.1 million to the revenue increase.

sales of our mmWave products to increase from a volume and revenue perspective over the remainder of 2023, as compared with 2022, as

our primary sales focus is on obtaining new mmWave customers.

We expect sales of our memory products to decrease from a volume and

revenue perspective during the remainder of 2023, as compared with 2022, based on current customer forecasts.

Given the planned EOL

discussed above, we do not expect revenue from these products beyond 2024.

revenue decreased for the three months ended June 30, 2023 compared with the same period of 2022 primarily due to a reduction in shipments

of our antenna modules, combined with year-over year decreases in shipments of our memory and mmWave ICs.

revenue decreased for the six months ended June 30, 2023 compared with the same period of 2022 primarily due to a reduction in shipments

of our antenna modules, partially offset by an increase in shipments of our mmWave ICs.

The increase in mmWave IC sales was mainly due

to shipments to one customer.

We initiated price increases on certain of our antenna module products in 2022, however, through June 30,

2023, we had not realized any material increase in revenue as a result of those price increases.

In late 2022, we implemented modest

price increases on our memory products, and, during the six months ended June 30, 2023, these price increases contributed approximately

$0.1 million to product revenue.

(dollar amounts in thousands)

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Percentage of total net revenue

Royalty and other

includes royalty, non-recurring engineering, services and licenses revenues.

The decrease in royalty and other revenue for the three

months ended March 31, 2023 compared with the same period of 2022 was primarily due to a decrease in non-recurring engineering services

revenue related to our mmWave technology, partially offset by royalty revenues from licensees of our memory technology.

Cost of Net Revenue and

Royalty and other -six months ended

Percentage of total net revenue

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

The increase in royalty and other revenue for

the three months ended June 30, 2023 compared with the same period of 2022 was primarily due to an increase in non-recurring engineering,

or NRE, services revenue related to our mmWave technology, offset by a decrease in our royalty revenues from licensees of our memory

technology due to reduced shipments by these licensees.

decrease in royalty and other revenue for the six months ended June 30, 2023 compared with the same period of 2022 was primarily due

to a decrease in NRE services revenue related to our mmWave technology and a decrease in royalty revenues from licensees of our memory

technology due to reduced shipments by these licensees.

of Net Revenue and Gross Profit

(dollar amounts in thousands)

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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 three months ended March 31, 2023 when compared with the same period in 2022, primarily due to increased shipment volumes

of our memory and mmWave products.

Cost of net revenue -six months ended

Percentage of total net revenue

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 decreased for the three months ended June 30, 2023

when compared with the same period in 2022, primarily due to the combined effect of i) decreased shipment volumes of our memory and mmWave

products in 2023 and ii) inventory write-down charges of approximately $0.3 million primarily for mmWave product inventory due to its

determination that it had excess and obsolete inventory.

of net revenue increased for the six months ended June 30, 2023 when compared with the same period in 2022, despite the reduction in

product revenues primarily due to a change in revenue composition, as sales of our mmWave products represented a higher percentage

of our product sales.

In addition, we incurred inventory write-down charges of $0.6 million primarily for mmWave product inventory, as we identified excess and obsolete inventory.

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.

Cost of net revenue represents a

higher percentage of revenue for our mmWave products, as compared to our memory products.

(dollar amounts in thousands)

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Percentage of total net revenue

Gross profit increased

for the three months ended March 31, 2023 compared with the same period of 2022 due to the increased product shipments.

in our gross profit margin percentage for the three months ended March 31, 2023 compared with the prior year period was primarily attributable

to the increased volume shipments of our mmWave products, which carry lower gross margins than our memory products.

Gross profit -six months ended

Percentage of total net revenue

profit decreased for the three months ended June 30, 2023 compared with the same period of 2022 primarily due to the decrease in shipment

volumes of our memory and mmWave products.

The decrease in our gross profit margin percentage for the six months ended June 30, 2023

compared with the prior year period was primarily attributable to the decreased volume shipments of our mmWave products, which carry

lower gross margins than our memory products.

profit decreased for the six months ended June 30, 2023 compared with the same period of 2022 due to the decreased shipments of our mmWave

antenna modules combined with the increase in cost of net revenues.

and Development

(dollar amounts in thousands)

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Percentage of total net revenue

Our 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 three months ended March 31, 2023 compared with the same period of 2022 was primarily due to reduced salary and consulting costs.

During the quarter ended December 31, 2022, we began implementing cost reductions including

a reduction of employees and full-time-equivalent consulting positions, 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 $1.0 million.

In addition, during the three

months ended March 31, 2022, we incurred a tape-out expense of $0.7 million for one of our mmWave ICs.

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 reductions in R&D expense in 2023 will primarily result from our cost reduction initiatives.

Selling, General and Administrative

Research and development -six months ended

Percentage of total net revenue

research and development, or R&D, expenses include costs related to the development of our products.

We expense R&D costs as

they are incurred.

decrease for the three and six months ended June 30, 2023 compared with the same periods of 2022 was primarily due to reduced salary

and consulting costs.

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.

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

$0.6 million and $1.2 million for the three and six months ended June 30, 2023, respectively.

In addition, during the six months ended

June 30, 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.

expect that total R&D expenses will decrease in 2023 compared with 2022, as a result of our cost reduction initiatives.

General and Administrative

(dollar amounts in thousands)

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Percentage of total net revenue

SG&A expenses

consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management and amortization

of intangible assets.

The decrease for

the three months ended March 31, 2023 compared with the same period of 2022 was primarily related to cost

SG&A -six months ended

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.

decrease for the three and six months ended June 30, 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 .

that total SG&A expense will decrease for the remainder of 2023 compared with 2022 due to our cost reductions.

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.

Liquidity and Capital Resources;

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 cost reduction initiatives, including lower headcount.

and Capital Resources;

Changes in Financial Condition

of March 31, 2023, we had cash, cash equivalents and investments of $1.4 million and working capital of $6.3 million.

cash used in operating activities was $1.4 million for the first three months of 2023, which primarily resulted from our net loss of

$3.1 million, as adjusted for a $0.7 million non-cash gain on the change in fair value of warrant liability and $0.2 million of other

non-cash changes, and partially offset by non-cash charges of $0.8 million of depreciation and amortization, $1.3 million of stock based

compensation, and $0.5 million in net changes in assets and liabilities.

The changes in assets and liabilities primarily related to the

timing of accounts receivable collections, purchases of inventory and other vendor payables and prepayments.

cash used in operating activities was $5.7 million for the first three months of 2022, which primarily resulted from our net loss of

of June 30, 2023, we had cash, cash equivalents and investments of $2.7 million and working capital of $8.0 million.

cash used in operating activities was $3.6 million for the first six months of 2023, which primarily resulted from our net loss of $7.2

million, as adjusted for a $1.6 million non-cash gain on the change in fair value of warrant liability and $0.2 million of other non-cash

changes, and was partially offset by non-cash charges of $1.7 million of depreciation and amortization, $2.6 million of stock based compensation,

and $1.1 million in net changes in assets and liabilities.

The changes in assets and liabilities primarily related to the timing of accounts

receivable collections, purchases of inventory and other vendor payables and prepayments.

cash used in operating activities was $11.6 million for the first six months of 2022, which primarily resulted from our net loss of $13.8

million and $2.4 million in net changes in assets and liabilities, partially offset by non-cash charges of $1.5 million of depreciation

2 unchanged sentences

primarily related to the timing of accounts receivable collections, purchases of inventory and other vendor payables and prepayments.

Net cash provided

by investing activities of $0.4 million for the three months ended March 31, 2023 represented $0.5 million in proceeds from maturities

of short-term investments, partially offset by $0.1 million of purchases of property and equipment.

Net cash provided

by investing activities of $3.6 million for the three months ended March 31, 2022 represented $4.2 million in proceeds from maturities

of short-term investments, partially offset by $0.5 million of purchases of short and long-term investments and $0.1 million of purchases

cash provided by investing activities of $0.4 million for the six months ended June 30, 2023 represented $0.5 million in proceeds from

maturities of short-term investments, partially offset by $0.1 million of purchases of property and equipment.

cash provided by investing activities of $8.6 million for the six months ended June 30, 2022 represented $9.4 million in proceeds from

maturities of short-term investments, partially offset by $0.5 million of purchases of long-term investments and $0.3 million of purchases

of property and equipment.

Net cash used in

financing activities for the three months ended March 31, 2023 consisted of repayment of financing lease liabilities.

Net cash provided

by financing activities for the three months ended March 31, 2022 consisted of taxes paid to net share settle equity awards.

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

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;

profitability of our business.

During the three

months ended March 31, 2023, we collected approximately $2.0 million of amounts past due from a large customer of our mmWave products.

cash provided by financing activities for the six months ended June 30, 2023 consisted of $3.5 million, primarily comprised $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.

cash provided by financing activities for the six months ended June 30, 2022 consisted of taxes paid to net share settle equity awards.

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.

the six months ended June 30, 2023, we collected approximately $2.0 million of amounts past due from a large customer of our mmWave products.

The amounts collected included approximately $0.9 million of accounts receivable outstanding at September 30, 2022, for which we had

1 unchanged sentence

revenue recognition.

Going Concern - Working Capital

We incurred net

losses of approximately $3.1 million for the three months ended March 31, 2023 and $32.4 million for the year ended December 31, 2022,

and we had an accumulated deficit of approximately $152.7 million as of March 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 offerings of equity and equity-linked securities, issuance of convertible notes and loans.

We expect to continue

to incur operating losses for the foreseeable future 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 the foreseeable future, as our revenues will

not be sufficient to offset our operating expenses.

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.

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

2023, we had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately

$2.2 million and non-cancelable purchase orders for CAD software of $2.9 million.

Concern - Working Capital

incurred net losses of approximately $7.2 million for the six months ended June 30, 2023 and $32.4 million for the year ended December

31, 2022, and we had an accumulated deficit of approximately $156.8 million as of June 30, 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 offerings of equity and equity-linked securities, issuance of convertible notes and loans.

expect to continue to incur operating losses for the foreseeable future 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 the foreseeable future, as

our revenues will not be sufficient to offset our operating expenses.

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

equity or debt 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 condensed consolidated financial statements.

The condensed consolidated financial statements presented in Part

I, Item 1 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 equity or debt 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 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.

In August 2022, we entered into an exclusive technology license and patent assignment

agreement with Intel Corporation, under which we collected $3.1 million in August 2022 and $0.4 million in January 2023.

this transaction to result in a reduction of operating expenses of approximately $2.7 million on annual basis.

In November 2022, we

completed a registered direct offering of common stock and warrants for net proceeds to us of approximately $2.1 million.

in February 2023, we announced that we had implemented cost-reduction initiatives to reduce operating expenses by approximately $5

million on an annualized basis.

If we were to raise

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

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 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;

respond 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.

equity or debt 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 condensed consolidated financial statements.

The condensed consolidated financial statements presented in Part I, Item 1 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 equity or debt financing,

will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us.

currently seeking additional financing in order to meet our cash requirements for the foreseeable future.

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.

2023, we announced that we had implemented cost-reduction initiatives to reduce operating expenses by approximately $5 million on an

annualized basis.

In June 2023, we completed a registered direct offering of common stock and warrants for net proceeds to us of approximately

$3.6 million.

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.

Discontinuing the above-mentioned activities could

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

We believe that our existing cash, cash equivalents

and short-term investments as of June 30, 2023, plus expected receipts associated with product sales, will provide us with liquidity to

fund our planned operating needs into the fourth quarter of 2023.

Variability in our operating forecast, driven primarily by (i) product

sales and collections, (ii) potential customer licensing and NRE transactions, (iii) timing of operating expenditures, and (iv) unanticipated

changes in net working capital, will impact our cash runway.

Likewise, we may decide to revise our operating plans, depending on the level

of customer shipments, licensing and NRE arrangements and timing of related collections, our ability to enter into strategic arrangements

and to access additional capital, as well as our financial priorities.

We will need additional funding to continue our

operating activities beyond those activities currently included in our operating forecast and related cash projection.

Therefore, we will

need to secure additional capital or financing and/or significantly delay, defer or reduce our cash expenditures before the end of 2023.

There can be no assurance that we will be able to obtain additional capital or financing on terms acceptable to us, on a timely basis

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.

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 condensed financial statements for

the three months ended March 31, 2023.

Recent Accounting Pronouncements

See Note 1 to the

condensed consolidated financial statements for a discussion of recently-issued accounting pronouncements.

We have also entered into indemnification

agreements with our officers and directors.

No material amounts related to these indemnifications are reflected in our condensed financial

statements for the six months ended June 30, 2023.

Accounting Pronouncements

Note 1 to the condensed consolidated financial statements for a discussion of recently-issued 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-Q

Item 2. Management’s Discussion and Analysis