What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-08-14 · 324 added, 288 removed, 57 unchanged (91% of the section changed)

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

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.

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

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.

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.

formerly known as MoSys, Inc.

(MoSys) and were incorporated in California in 1991 and reincorporated in 2000 in Delaware.

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).

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 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

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.

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 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

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

This memory product line comprises our Bandwidth Engine 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.

As a 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 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.

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

Under our EOL plan, we expect shipments of our memory products

to continue until at least December 31, 2024.

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 $7.9

million for the nine months ended September 30, 2023 and $32.4 million for the year ended December 31, 2022, and we had an accumulated

deficit of approximately $157.5 million as of September 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

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.

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.

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

COVID-19 and World Unrest

The global outbreak of the coronavirus disease

2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S.

government in March 2020.

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 created significant disruption of the financial markets.

The full extent of the COVID-19 impact on our operational and financial

performance will depend on future developments, including the duration and spread of the pandemic and related actions taken by the U.S.

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

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.

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

Since mid-2022, the U.S.

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.

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.

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)

-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:

Critical Accounting Policies and Estimates

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.

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.

As of September 30, 2023, there have been no material changes to our

significant accounting policies and estimates.

Results of Operations

September 30,

(dollar amounts in thousands)

Product -three months ended

Percentage of total net revenue

Product -nine months ended

Percentage of total net revenue

The following table details revenue by product

category for the three and nine months ended September 30, 2023 and 2022:

(amounts in thousands)

Three Months Ended

Six Months Ended

Three Months Ended September 30,

Nine Months Ended September 30,

Product category

1 unchanged sentence

mmWave other products

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,

Product revenue increased for the three months

ended September 30, 2023 compared with the same period of 2022 primarily due to increases in shipments related to our end-of-life announcement

of our memory IC products, partially offset by a reduction in shipments of our antenna modules.

Product revenue increased for the nine months

ended September 30, 2023 compared with the same period of 2022 due to increases in shipments related to our end-of-life announcement of

our memory IC products combined with year-over year increases in shipments of our mmWave ICs, partially offset by a reduction in shipments

of our antenna modules.

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

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Royalty and other -six months ended

Royalty and other -nine 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

Royalty and other includes royalty, non-recurring

engineering, or NRE, services and license revenues.

The decrease in royalty and other revenue for the three months ended September 30,

2023 compared with the same period of 2022 was primarily due to a decrease in royalty revenues from licensees of our memory technology

due to reduced shipments by these licensees.

The decrease in royalty and other revenue for

the nine months ended September 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.

Cost of Net Revenue and Gross Profit

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Cost of net revenue -six months ended

Cost of net revenue -nine 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.

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 September 30, 2023 when compared with the same period in 2022, primarily due to the combined effect of i) increased shipment volumes

of our memory products in 2023, partially offset by decrease in sales of our mmWave product, and ii) increased amortization of developed

technology of approximately $0.2 million.

The revised remaining estimated life to 18 months of the intangible asset was a result of the

end-of-life announcement on May 1, 2023 (see Note 11).

Cost of net revenue increased for the nine months

ended September 30, 2023 when compared with the same period in 2022, due to the increase in sales of our IC products, partially offset

by decrease in sales of our mmWave product.

In addition, we incurred increased inventory write-down charges of $0.4 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.

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Gross profit -six months ended

Gross profit -nine 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

Gross profit increased for the three months ended

September 30, 2023 compared with the same period of 2022 primarily due to the increase in shipment volumes of our memory products.

increase in our gross profit margin percentage for the three months ended September 30, 2023 compared with the prior year period was primarily

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

Gross profit increased for the nine months ended

September 30, 2023 compared with the same period of 2022 due to the increased shipments of our memory and mmWave IC products partially

offset by a decrease in shipments of our mmWave antenna modules combined with the increase in cost of net revenues.

Research and Development

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Research and development -six months ended

Research and development -nine 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

Our 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.

The decrease for the three and nine months ended

September 30, 2023 compared with the same periods 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 $0.6 million and $1.2 million for the three and nine months

ended September 30, 2023, respectively.

In addition, during the nine months ended September 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.

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

Selling, General and Administrative

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

SG&A -six months ended

SG&A -nine 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 .

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;

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 three and nine months ended

September 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 .

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 lower headcount.

Liquidity and Capital Resources;

Changes in Financial Condition

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

and amortization, $2.9 million of stock based compensation and a $0.2 million other non-cash changes.

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 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.

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:

As of September 30, 2023, we had cash, cash equivalents

and investments of $0.7 million and working capital of $6.5 million.

Net cash used in operating activities was $5.6

million for the first nine months of 2023, which primarily resulted from our net loss of $7.9 million, as adjusted for a $4.2 million

non-cash gain on the change in fair value of warrant liability and $0.2 million in other non-cash changes, and was partially offset by

non-cash charges of $2.8 million of depreciation and amortization and $3.9 million of stock based compensation.

Net cash used in operating activities was $13.4

million for the first nine months of 2022, which primarily resulted from our net loss of $17.8 million and $3.1 million in net changes

in assets and liabilities, partially offset by non-cash charges of $2.3 million of depreciation and amortization, $4.4 million of stock

based compensation, $0.7 million of allowance for doubtful accounts and $0.1 million for other non-cash items.

The changes in assets and

liabilities 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 $1.0

million for the nine months ended September 30, 2023 represented $1.1 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 $10.4

million for the nine months ended September 30, 2022 represented $11.5 million in proceeds from maturities of short-term investments,

partially offset by $0.5 million purchases of short and long-term investments and $0.6 million of purchases of property and equipment.

Net cash provided by financing activities for

the nine months ended September 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 September 2023, partially offset by taxes paid to

net share settle equity awards and repayment of finance lease liabilities.

Net cash used financing activities for the nine

months ended September 30, 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:

timing and success of technology development efforts;

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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

established a $0.2 million allowance for doubtful accounts, and $1.1 million for shipments in September 2022 for which we had deferred

revenue recognition.

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.

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.

Subsequent to September 30, 2023, we

collected approximately $3.7 million of EOL proceeds, including $2.2 million included in accounts receivable at September 30, 2023,

$0.4 million related to October shipments and approximately $1.1 million of customer deposits to fund inventory purchases of our

memory IC products.

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.

The amounts collected included

approximately $0.9 million of accounts receivable outstanding at September 30, 2022, for which we had established a $0.2 million allowance

for doubtful accounts, and $1.1 million for shipments in September 2022 for which we had deferred revenue recognition.

Purchase Obligations

Our primary purchase obligations

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

At September 30, 2023, we 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, which extend through approximately September 2025.

Going Concern - Working Capital

We incurred net losses of approximately $7.9 million

for the nine months ended September 30, 2023 and $32.4 million for the year ended December 31, 2022, and we had an accumulated deficit

of approximately $157.5 million as of September 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.

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.

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 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.

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:

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

on an annualized basis.

Most recently, in November 2023, we initiated a temporary lay-off in Canada of 16 positions, and eliminated three

full-time equivalent positions in the U.S.

We have the ability to recall the employees subject to temporary lay-off, however

such recalls would be dependent on improvements in business conditions and our financial condition, which we are unable to predict.

we do not recall any of the affected employees in Canada, we would achieve annual total savings of approximately $2.8 million from these

reductions, excluding the impacts of any severance and related termination payments.

In June 2023, we completed a registered direct

offering of common stock and warrants for net proceeds to us of approximately $3.6 million.

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

or enhance our products;

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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 believe that our existing cash and cash equivalents

as of September 30, 2023, plus expected receipts associated with product sales, will provide us with liquidity to fund our planned operating

needs into the first quarter of 2024.

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 financial priorities and operating plans, depending on the

level of customer shipments, licensing and NRE arrangements and timing of related collections.

This could impact our ability to enter

into strategic arrangements and to access additional capital.

We will need additional funding to continue our

3 unchanged sentences

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.

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.

Indemnifications

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 six months ended June 30, 2023.

Accounting Pronouncements

Note 1 to the condensed consolidated financial statements for a discussion of recently-issued accounting pronouncements.

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.

Such indemnification clauses may

not be subject to maximum loss clauses.

We have also entered into indemnification agreements with our officers and directors.

amounts related to these indemnifications are reflected in our condensed financial statements for the nine months ended September 30,

Recent Accounting Pronouncements

See 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