Peraso Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our management concluded that as of December 31, 2023, our disclosure controls and procedures were effective. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2023. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting during the fourth fiscal quarter of 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None of the Company’s directors or officers adopted , modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended December 31, 2023, as such terms are defined under Item 408(a) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not Applicable. 40 Part III Item 10. Directors, Executive Officers and Corporate Governance. The names of our directors and certain information about each of them are set forth below. Name Age Position(s) with the Company Ronald Glibbery 62 Chief Executive Officer and Director Daniel Lewis 74 Director Ian McWalter(1)(2) 72 Director Andreas Melder(1)(2) 65 Director Robert Y. Newell(1)(2) 75 Director (1) Member of Audit Committee (2) Member of Compensation Committee The principal occupations and positions for at least the past five years of our directors are described below. There are no family relationships among any of our directors or executive officers. Ronald Glibbery. Mr. Glibbery was appointed as our chief executive officer and to our board of directors in December 2021. He founded Peraso Technologies Inc. (Peraso Tech) in 2008 and served as its chief executive officer. In June 2020, Peraso Tech applied for and obtained an order under the Companies’ Creditors Arrangement Act (the CCAA), providing certain relief. Pursuant to the Initial Order issued by the Ontario Superior Court of Justice (Commercial List) (the Court), Ernst & Young Inc. was appointed as the Monitor of Peraso Tech. In addition, the Monitor, in its capacity as Foreign Representative, filed a voluntary petition in the United States under Chapter 15 of the U.S. Bankruptcy Code, seeking recognition of the CCAA proceeding. In October 2020, the Court granted an order authorizing the termination of Peraso Tech’s CCAA proceedings upon the completion of certain defined steps. In December 2020, the United States Bankruptcy Court for the Southern District of New York issued an Order that: (i) recognized and gave full force and effect in the United States to the Court’s order approving the Settlement Agreement; and (ii) terminated the Chapter 15 Proceedings. Mr. Glibbery has over 25 years of experience in the semiconductor industry. Prior to co-founding Peraso Tech, Mr. Glibbery held executive positions at Kleer Semiconductor, a fabless semiconductor company focused on wireless audio technology and Intellon Corporation (Intellon), a pioneer and leader in the development of semiconductor devices used for powerline communications. He has held other executive roles at Cogency Semiconductor, LSI Logic Canada, Inc. and LSI Logic Corporation. Mr. Glibbery holds a B.E.Sc. in Electrical and Electronics Engineering from the University of Western Ontario. We believe that Mr. Glibbery’s qualifications to serve on the board of directors include his service as an officer of ours and his extensive general management and technical expertise in the semiconductor industry, as well as his experience as a chief executive officer. Daniel Lewis. Mr. Lewis has served as a member of the board of directors since September 2017. He served as our Vice President, General Manager of Memory Products from April 2022 until his retirement in December 2022. Mr. Lewis previously served as our President from August 2018 until April 2022 and chief executive officer from August 2018 until the business combination with Peraso Tech in December 2021. Before joining MoSys, Mr. Lewis served as the managing member and an owner of GMS Manufacturing Solution LLC, a firm focused on providing engineering services to manufacturing companies. He previously held various executive and leadership roles at View Box Group, Xicor, Integrated Device Technology, Accelerant Networks, Intel Corporation, Zilog and Digital Equipment Corporation. Mr. Lewis holds a B.S. in Electrical Engineering from the University of Michigan. We believe that Mr. Lewis’s qualifications to serve on the board of directors include his service as an officer of ours and his extensive business experience, having held senior management positions at several companies in the semiconductor, computer and networking industries, which brings strategic and operational insight to the board of directors. 41 Ian McWalter. Dr. McWalter was appointed to our board of directors in December 2021. He currently serves as a member of the board of directors for Evertz Technologies, a publicly traded manufacturer of video and audio infrastructure solutions for television, telecom and new-media industries. Dr. McWalter served as the president and chief executive officer of CMC Microsystems from 2007 until 2018. Prior to this role, Dr. McWalter was chief executive officer of Toumaz Technology. Before joining Toumaz, Dr. McWalter spent 15 years at Gennum Corporation, including five years as president and chief executive officer from 2000 to 2005. Previously, he held management and technical positions at Bell Northern Research Ltd., the research and development arm of Northern Telecom and Bell Canada, and Plessey Semiconductors. Dr. McWalter was awarded a B.Sc. in physics and a Ph.D. in Electrical Engineering from the Imperial College of Science and Technology in London, England. We believe that Dr. McWalter’s qualifications to serve on the board of directors include his extensive general management and technical expertise in the semiconductor industry, as well as his experience as a chief executive officer and his experience serving as a director on public-company boards of directors. Andreas Melder. Mr. Melder was appointed to our board of directors in December 2021. He is a veteran technology executive in the semiconductor, communications and consumer electronics industries and previously served as vice president of business development at Gigle Networks, which was acquired in 2011 by Broadcom, where he continued to serve in executive marketing roles. Prior to Broadcom, Mr. Melder served as senior vice president of sales, marketing and business development for Intellon, which was acquired by Atheros Communications, Inc., which was subsequently acquired by Qualcomm Inc. (Qualcomm), and held similar positions with Atheros and Qualcomm. Previously, he was founder and vice president of marketing and business development for Microtune, a designer of RF integrated circuits and subsystem modules, which was acquired by Zoran Semiconductor, and vice president of sales and marketing for Tripath, an audio controller company acquired by Etelos. Additionally, Mr. Melder was a senior executive for companies that were acquired by Broadcom, Cirrus Logic and RFMD. Mr. Melder earned a B.S. in Electrical Engineering/Business from Carnegie-Mellon University and a M.S. in Electrical Engineering and Operations Research from Southern Methodist University. We believe that Mr. Melder’s qualifications to serve on the board of directors include his extensive business experience, having held senior management positions at several companies in the semiconductor, computer and networking industries. Additionally, he brings additional operational, and fund-raising expertise, and business development, mergers and acquisitions and public markets experience. Robert Y. Newell. Mr. Newell has served as a member of our board of directors since October 2018 and is currently a consultant and advisor to emerging technology and healthcare companies. He has held financial management positions for companies in Silicon Valley for over 25 years. From 2003 to 2018, Mr. Newell was chief financial officer of Dextera Surgical, Inc. (Dextera) a developer of advanced surgical stapling and medical devices. In December 2017, after entering into an agreement to sell substantially all of its assets, Dextera filed a voluntary petition for reorganization under Chapter 11 of Title 11 of the United States Code in the United States Bankruptcy Court for the District of Delaware. He served on the board of directors of ARI Network Services, a leading publicly traded supplier of SaaS and data as a service solutions. Previously, Mr. Newell served as chief financial officer of Omnicell, an automated medication and hospital supply management company, and prior to 2000, he held executive positions with the Beta Group and Cardiometrics. Prior to his business career, he was a pilot in the United States Air Force. Mr. Newell holds a B.A. in mathematics from the College of William & Mary and an MBA from Harvard Business School. We believe that Mr. Newell’s qualifications to serve on the board of directors include his substantial financial and public-company experience, as he has served as chief financial officer at multiple medical device and other technology companies. He also has previous experience serving as a director on public-company boards of directors. The names of our executive officers and certain information about them are set forth either above or below, as the case may be: Name Age Position(s) with the Company Ronald Glibbery 62 Chief Executive Officer and Director James Sullivan 55 Chief Financial Officer Bradley Lynch 51 Chief Operating Officer Mark Lunsford 66 Chief Revenue Officer Alexander Tomkins 40 Chief Technology Officer 42 James Sullivan. Mr. Sullivan has served as our chief financial officer since January 2008. From July 2006 until January 2008, Mr. Sullivan served as Vice President of Finance and Chief Financial Officer at Apptera, Inc., a venture-backed company providing software for mobile advertising, search and commerce. From July 2002 until June 2006, Mr. Sullivan was the chief financial officer at 8x8, Inc., a publicly-traded SAAS provider of VoIP and unified communication solutions. Mr. Sullivan’s prior experience includes various positions at 8x8, Inc. and PricewaterhouseCoopers LLP. He received a Bachelor of Science degree in Accounting from New York University and is a certified public accountant. Bradley Lynch . Mr. Lynch has served as chief operating officer since December 2021. He co-founded Peraso Tech in 2009 and served as executive vice president of engineering and operations. In June 2020, Peraso Tech applied for and obtained an order under the Companies’ Creditors Arrangement Act (the CCAA), providing certain relief. Pursuant to the Initial Order issued by the Ontario Superior Court of Justice (Commercial List) (the Court), Ernst & Young Inc. was appointed as the Monitor of Peraso Tech. In addition, the Monitor, in its capacity as Foreign Representative, filed a voluntary petition in the United States under Chapter 15 of the U.S. Bankruptcy Code, seeking recognition of the CCAA proceeding. In October 2020, the Court granted an order authorizing the termination of Peraso Tech’s CCAA proceedings upon the completion of certain defined steps. In December 2020, the United States Bankruptcy Court for the Southern District of New York issued an Order that: (i) recognized and gave full force and effect in the United States to the Court’s order approving the Settlement Agreement; and (ii) terminated the Chapter 15 Proceedings. Prior to founding Peraso Tech, Mr. Lynch worked as a system architect at Kleer Semiconductor, a fabless company focused on wireless audio technology. Before Kleer, he was director of software engineering at Intellon Corporation, a pioneer and leader in the development of semiconductor devices used for powerline communications. Previously, Mr. Lynch held various technical roles at Cogency Semiconductor and Power Trunk. Mr. Lynch holds a B.A.Sc in Computer Engineering from the University of Waterloo. Mark Lunsford. Mr. Lunsford was appointed as our chief revenue officer in October 2022. Prior to joining Peraso, Mr. Lunsford held numerous positions of responsibility with companies in the semiconductor industry. From 1988 to 1999, he worked for Asia Pacific at Monolithic Memories, where he served in multiple roles, including vice president of sales for the Americas and director of marketing. From 1999 to 2001, Mr. Lunsford was the vice president of worldwide sales and director of business development at Pivotal Technologies. In 2001, and for a period of eight years, he served as vice president of worldwide sales at Micrel Semiconductor. From 2009 to 2013, he worked at NXP, where he served as vice president of sales and marketing for the Americas. In 2013, and for a period of six years, he served as the executive vice president of worldwide sales at SiTime Inc., a provider of MEMS-based timing devices. From January 2019 until April 2020, he provided consulting services for a range of high-technology businesses. Finally, he served as the vice president of global sales at Chasm Advanced Materials, a provider of carbon nano tube based product solutions, from November 2020 until April 2022. Mr. Lunsford holds a degree in Mechanical Engineering from the University of California at Davis. Alexander Tomkins . Mr. Tomkins has served as our chief technology officer since December 2021. He co-founded Peraso Tech in 2009 and served as its chief technology officer. In June 2020, Peraso Tech applied for and obtained an order under the Companies’ Creditors Arrangement Act (the CCAA), providing certain relief. Pursuant to the Initial Order issued by the Ontario Superior Court of Justice (Commercial List), Ernst & Young Inc. was appointed as the Monitor of Peraso Tech. In addition, the Monitor, in its capacity as Foreign Representative, filed a voluntary petition in the United States under Chapter 15 of the U.S. Bankruptcy Code, seeking recognition of the CCAA proceeding. In October 2020, the Court granted an order authorizing the termination of Peraso Tech’s CCAA proceedings upon the completion of certain defined steps. In December 2020, the United States Bankruptcy Court for the Southern District of New York issued an Order that: (i) recognized and gave full force and effect in the United States to the Court’s order approving the Settlement Agreement; and (ii) terminated the Chapter 15 Proceedings. Mr. Tomkins holds a Masters of Applied Science from the University of Toronto and a B.S. in Engineering Physics from Carleton University. He also attended the University of Toronto as a doctoral candidate in Applied Science. Audit Committee Our board of directors established the Audit Committee for the purpose of overseeing the accounting and financial reporting processes and audits of our financial statements. The Audit Committee also is charged with reviewing reports regarding violations of our code of ethics and complaints with respect thereto, and internal control violations under our whistleblower policy are directed to the members of the Audit Committee. The responsibilities of our Audit Committee are described in the Audit Committee Charter adopted by our board of directors, a current copy of which can be found on the investors section of our website, www.perasoinc.com. 43 Ian McWalter, Andreas Melder and Robert Y. Newell are the current members of the Audit Committee. All are independent, as determined in accordance with Rule 5605(a)(2) of the Nasdaq listing rules and Rule 10A-3 of the Exchange Act. Mr. Newell serves as the chair and has been designated by the board of directors as the “audit committee financial expert,” as defined by Item 407(d)(5) of Regulation S-K under the Securities Act and the Exchange Act. That status does not impose duties, liabilities or obligations that are greater than the duties, liabilities or obligations otherwise imposed on him as a member of the Audit Committee and the board of directors, however. The Audit Committee has delegated authority to Mr. Newell for review and pre-approval of services proposed to be provided by our independent registered public accounting firm. Compensation Committee Ian McWalter, Andreas Melder and Robert Y. Newell are the current members of the Compensation Committee, and Dr. McWalter serves as the chair. The Compensation Committee is responsible for reviewing, recommending and approving our compensation policies and benefits, including the compensation of all of our executive officers and directors. Our Compensation Committee also has the principal responsibility for the administration of our equity incentive and stock purchase plans. The responsibilities of our Compensation Committee are described in the Compensation Committee Charter adopted by our board of directors, a current copy of which can be found on the investors section of our website, www.perasoinc.com. Nominations Process We do not have a nominating committee, as we are a small company and currently only have five directors. Instead of having such a committee, our board of directors historically has appointed all of the independent directors on our board to search for and evaluate qualified individuals to become nominees for director and board committee members. The independent directors recommend candidates for nomination for election or reelection at each annual meeting of stockholders and, as necessary, to fill vacancies and newly created directorships, and evaluate candidates for appointment to and removal from committees. The independent directors operate in this capacity under authority granted by resolution of the board of directors, rather than by charter. When new candidates for our board of directors are sought, the independent directors evaluate each candidate for nomination as a director within the context of the needs and the composition of the board of directors as a whole. The independent directors conduct any appropriate and necessary inquiries into the backgrounds and qualifications of candidates. When evaluating director nominees, our board of directors generally seeks to identify individuals with diverse, yet complementary business backgrounds. Although we have no formal policy regarding diversity, our directors consider both the personal characteristics and experience of director nominees, including each nominee’s independence, diversity, age, skills, expertise, time availability and industry background in the context of the needs of the board of directors and the Company. The board of directors believes that director nominees should exhibit proven leadership capabilities and experience at a high level of responsibility within their chosen fields and must have the experience and ability to analyze the complex business issues facing us, and specifically, the issues inherent in the semiconductor industry. In addition to business expertise, the board of directors requires that director nominees have the highest personal and professional ethics, integrity and values and, above all, are committed to representing the long-term interests of our stockholders and other stakeholders. To date, we have not paid any fee to a third party to assist in the process of identifying or evaluating director candidates. Our independent directors will consider candidates for nomination as director who are recommended by a stockholder and will not evaluate any candidate for nomination for director differently because the candidate was recommended by a stockholder. To date, we have not received or rejected any suggestions for a director candidate recommended by any stockholder or group of stockholders owning more than 5% of our common stock. The recommendation must include the information specified in our bylaws for stockholder nominees to be considered at an annual meeting, including the following: ● The stockholder’s name and address and the beneficial owner, if any, on whose behalf the nomination is proposed; ● The stockholder’s reason for making the nomination at the annual meeting, and the signed consent of the nominee to serve if elected; 44 ● The number of shares owned by, and any material interest of, the record owner and the beneficial owner, if any, on whose behalf the record owner is proposing the nominee; ● A description of any arrangements or understandings between the stockholder, the nominee and any other person regarding the nomination; and ● Information regarding the nominee that would be required to be included in our proxy statement by the rules of the SEC, including the nominee’s age, business experience for the past five years and any other directorships held by the nominee. The information listed above is not a complete list of the information required by our bylaws. The secretary will forward any timely recommendations containing the required information to our independent directors for consideration. Board of Directors Leadership Structure Our bylaws provide the board of directors with flexibility to combine or separate the positions of chair of the board of directors and chief executive officer in accordance with its determination that utilizing one or the other structure is in the best interests of our company. Currently, the board of directors has not appointed a chair or lead independent director. From time to time, each of the independent directors works with our chief executive officer to perform a variety of functions related to our corporate governance, including coordinating activities of the board of directors, setting the agenda for meetings (in consultation with our chief executive officer, as necessary or appropriate) and ensuring adequate communication between the board of directors and management. Our Audit Committee oversees critical matters such as our relationship with our auditors, our financial reporting practices, system of disclosure controls and procedures and internal controls over financial reporting. Our Compensation Committee oversees our executive compensation program. Each of these committees consists entirely of independent directors. Risk Oversight The board of directors is actively involved in the oversight of risks — including strategic, credit, liquidity, operational and other risks — which could affect our business. The board of directors does not have a standing risk management committee and administers this oversight function directly through the board of directors as a whole and through its committees, which oversee risks relevant to their respective functions. For example, in addition to the oversight matters described in the preceding paragraph, the Audit Committee also assists the board of directors in its risk oversight function by reviewing and discussing with management our compliance with accounting principles and the treasury function, including management of our cash and investments. The Compensation Committee assists the board of directors in its risk oversight function by considering risks relating to the design of our executive compensation programs and arrangements and employee benefit plans. The full board of directors considers strategic risks and opportunities and receives reports from the committees regarding risk oversight in their areas of responsibility as necessary. The board of directors and each committee administers its respective risk oversight function by evaluating management’s monitoring, assessment and management of risks, including steps taken to limit our exposure to known risks, through regular interaction with our senior management and in board and committee deliberations that are closed to members of management. The interaction with management occurs not only at formal board and committee meetings but also periodically through other written and oral communications. Compensation Committee Interlocks and Insider Participation During 2023, none of our executive officers served as a member of the board of directors or Compensation Committee of any entity that had one or more of its executive officers serving as a member of our board of directors or Compensation Committee. Dr. McWalter and Messrs. Melder and Newell, the members of the Compensation Committee, were not officers or employees of ours during 2023 or at any other time. 45 Code of Ethics We have adopted a code of ethics that applies to all of our employees. The code of ethics is designed to deter wrongdoing and to promote, among other things, honest and ethical conduct, full, fair, accurate, timely, and understandable disclosures in reports and documents submitted to the SEC and other public communications, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code and accountability for adherence to such code. The code of ethics is available on our website, www.perasoinc.com. If we make any substantive amendments to the code of ethics or grant any waiver, including any implicit waiver, from a provision of the code to our chief executive officer or chief financial officer, or persons performing similar functions, where such amendment or waiver is required to be disclosed under applicable SEC rules, we intend to disclose the nature of such amendment or waiver on our website. Employee, Officer, and Director Hedging Our policy against insider trading prohibits all directors, officers or other employees from engaging in any short sales of our securities, transactions in puts, calls or other derivative securities on an exchange or in any other organized market and hedging transactions. Item 11. Executive Compensation. Overview of Compensation Program The Compensation Committee of the board of directors has responsibility for establishing, implementing and monitoring adherence to our compensation philosophy. The board of directors has delegated to the Compensation Committee the responsibility for determining our compensation policies and procedures for senior management, including the named executive officers, periodically reviewing these policies and procedures, and making recommendations concerning executive compensation to be considered by the full board of directors, when such approval is required under any of our plans or policies or by applicable laws. The compensation received by our named executive officers is set forth in the Summary Compensation Table, below. For 2023, our named executive officers included Ronald Glibbery, our chief executive officer, James Sullivan, our chief financial officer, and Bradley Lynch, our chief operating officer. Compensation Philosophy In general, our executive compensation policies are designed to recruit, retain and motivate qualified executives by providing them with a competitive total compensation package based in large part on the executive’s contribution to our financial and operational success, the executive’s personal performance and increases in stockholder value, as measured by the price of our common stock. We believe that the total compensation paid to our executives should be fair, reasonable and competitive. We seek to have a balanced approach to executive compensation with each primary element of compensation (base salary, variable compensation and equity incentives) designed to play a specific role. Overall, we design our compensation programs to allow for the recruitment, retention and motivation of the key executives and high-level talent required in order for us to: ● supply high-value and high-quality integrated circuit solutions to our customer base; ● achieve or exceed our annual financial plan and be profitable; ● make continuous progression towards achieving our long-term strategic objectives to be a high-growth company with growing profitability; and ● increase our share price to provide greater value to our stockholders. 46 Role of Executive Officers in Compensation Decisions The chief executive officer (the “CEO”) makes recommendations for equity and non-equity compensation for executives to be approved by the Compensation Committee. The Compensation Committee reviews these guidelines annually. The CEO annually reviews the performance of our executives (other than himself) and presents his recommendations for proposed salary adjustments, bonuses and equity awards to the Compensation Committee once a year. In its discretion, the Compensation Committee may accept, modify or reject the CEO’s recommendations. The Compensation Committee evaluates the compensation of the CEO on its own without the participation or involvement of the CEO. Only the Compensation Committee and the board of directors are authorized to approve the compensation for any named executive officer. Compensation of new executives is based on hiring negotiations between the individuals and our CEO and/or Compensation Committee. Elements of Compensation Consistent with our compensation philosophy and objectives, we offer executive compensation packages consisting of the following three components: ● base salary; ● annual incentive compensation; and ● equity awards. In each fiscal year, the Compensation Committee determines the amount and relative weighting of each component for all executives, including the named executive officers. Base salaries are paid in fixed amounts and thus do not encourage risk taking. Our widespread use of long-term compensation, consisting of stock options and restricted stock units (the “RSUs”), focuses recipients on the achievement of our longer-term goals and conserves cash for other operating expenses. For example, the RSUs granted to our executives generally vest in increments over three years, while stock options granted to our executives generally vest over 36 months from the date of grant. The Compensation Committee does not believe that these awards encourage unnecessary or excessive risk taking because the ultimate value of the awards is tied to our stock price, and the use of multi-year vesting schedules helps to align our employees’ interests even more closely with those of our long-term investors. Base Salary Because our compensation philosophy stresses performance-based awards, base salary is intended to be a smaller portion of total executive compensation relative to long-term equity. The Compensation Committee takes into account the executive’s scope of responsibility and significance to the execution of our long-term strategy, past accomplishments, experience and personal performance and compares each executive’s base salary with those of the other members of senior management. The Compensation Committee may give different weighting to each of these factors for each executive, as it deems appropriate. The Compensation Committee did not retain a compensation consultant or determine a compensation peer group for 2023. There were no changes to the annual base salaries of our executive officers in 2023. In April 2023, we entered into amendments to our employment agreements with each of our executive officers based in Canada, namely Messrs. Glibbery, Lynch and Tomkins, which provide that for purposes of calculating any cash compensation amounts payable by us under their employment agreements, each payment shall be converted into Canadian dollars at the exchange rate reported by the Bank of Canada (or such other equivalent exchange rate source, as determined by the Company) as of 5:00 p.m. Pacific Time on the first business day of each calendar quarter during which the payment is made. Annual Incentive Compensation There were no changes to the incentive compensation targets for our named executive officers in 2023. 47 Equity Awards Although we do not have a mandated policy regarding the ownership of shares of common stock by officers and directors, we believe that granting equity awards to executives and other key employees on an ongoing basis gives them a strong incentive to maximize stockholder value and aligns their interests with those of our other stockholders on a long-term basis. Our Amended and Restated Peraso Inc. 2019 Stock Incentive Plan (the “2019 Plan”), which was approved by our stockholders and became effective in August 2019, enables us to grant equity awards, as well as other types of stock-based compensation, to our executive officers and other employees. The Compensation Committee reviews and approves all equity awards granted under the 2019 Plan to the named executive officers. We grant equity awards to achieve retention and motivation: ● upon the hiring of key executives and other personnel; ● annually, when we review progress against corporate and personal goals; and ● when we believe that competitive forces or economic conditions threaten to cause our key executives to lose their motivation and/or where retention of these key executives is in jeopardy. With the Compensation Committee’s approval, we grant equity awards to acquire shares of common stock when we initially hire executives and other employees, as a long-term performance incentive. The Compensation Committee has determined the size of the initial equity awards to newly hired executives with reference to equity awards held by existing executives, the percentage that such award represents of our total shares outstanding and hiring negotiations with the individual. In addition, the Compensation Committee would consider other relevant information regarding the size and type of compensation package considered necessary to enable us to recruit, retain and motivate the executive. Typically, when we hire an executive, the equity awards vest over a three-year period. The options granted to executives in connection with annual performance reviews typically vest monthly over a three-to four-year period, and RSUs granted typically vest annually over a period of from one- to three-years, as the Compensation Committee may decide. As matters of policy and practice, we grant stock options with an exercise price equal to fair market value, although the 2019 Plan allows us to use a different exercise price. In determining fair market value, we use the closing price of the common stock on the Nasdaq on the grant date. Historically, no employee has been eligible for an annual performance grant until the employee has been employed for at least six months. Annual performance reviews are generally conducted in the first half of each fiscal year. Our CEO conducts the performance review of all other executives, and he makes his recommendations to the Compensation Committee. The Compensation Committee also reviews the CEO’s annual performance and determines whether he should receive additional equity awards. Aside from equity award grants in connection with annual performance reviews, we do not have a policy of granting additional awards to executives during the year. The board of directors and Compensation Committee have not adopted a policy with respect to setting the dates of award grants relative to the timing of the release of material non-public information. Our policy with respect to prohibiting insider trading restricts sales of shares during specified black-out periods, including at all times that our insiders are considered to possess material non-public information. In determining the size of equity awards in connection with the annual performance reviews of our executives, the Compensation Committee takes into account the executive’s current position with and responsibilities to us, and current and past equity awards to the executive. In 2023, we did not grant equity awards to any of our named executive officers. Going forward, we intend to continue to evaluate and consider equity grants to our executives on an annual basis. We expect to consider potential equity awards for executives at the same time as we annually review our employees’ performance and determine whether to award grants for all employees. 48 Accounting and Tax Considerations Our Compensation Committee has reviewed the impact of tax and accounting treatment on the various components of our executive compensation program. Section 162(m) of the Internal Revenue Code, as amended (the “Code”), generally disallows a tax deduction to publicly-held companies for compensation paid to “covered” executive officers, to the extent that compensation paid to such an officer exceeds $1 million during the taxable year. The Tax Cuts and Jobs Act repealed the performance-based exception to the deduction limit for remuneration that is deductible in tax years commencing after December 31, 2017. However, certain remuneration is specifically exempt from the deduction limit under a transition rule to the extent that it is “performance-based,” as defined in Section 162(m) of the Code, and subject to a “written binding contract” in effect as of November 2, 2017 that is not later modified in any material respect. We endeavor to award compensation that will be deductible for income tax purposes, though other factors will also be considered. None of the compensation paid to our covered executive officers for the year ended December 31, 2023 that would be taken into account for purposes of Section 162(m) exceeded the $1 million limitation. Because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) of the Code and the regulations issued thereunder, including the uncertain scope of the transition relief under the Tax Cuts and Jobs Act, no assurance can be given that compensation intended to satisfy the requirements for exemption from Section 162(m) of the Code in fact will satisfy such requirements. Our Compensation Committee may authorize compensation payments that do not comply with the exemptions to Section 162(m) when we believe that such payments are appropriate to attract and retain executive talent. Say-on-Pay and Say-on-Frequency We gave our stockholders an opportunity to provide feedback on our executive compensation through an advisory vote at our 2023 annual stockholder meeting (the “2023 Meeting”), which was held on December 15, 2023. Stockholders were asked to approve, on an advisory basis, the compensation paid to our named executive officers. A majority of stockholders indicated approval of the compensation of the named executive officers, with approximately 81% of the shares that voted on such matter voting in favor of the proposal. Additionally, at the 2023 Meeting, stockholders were asked to approve, on an advisory basis, in favor of having a stockholder vote to approve the compensation of our named executive officers every three years. A majority of stockholders indicated approval of having a stockholder vote to approve the compensation of our named executive officers every three years, with approximately 71% of the shares that voted on such matter voting in favor of the proposal. Based on these results and consistent with the previous recommendation and determination of our board of directors, we will hold non-binding advisory votes on executive compensation every three years until the next vote on the frequency of the stockholder advisory vote on executive compensation. In light of the results of the advisory vote, the Compensation Committee intends to continue to apply principles that were substantially similar to those applied historically in determining compensation policies and decisions with respect to 2024 executive compensation. SUMMARY COMPENSATION TABLE The following table sets forth compensation information for fiscal years 2023 and 2022 for each of our named executive officers. Name and principal position Year Salary ($) Stock Option Awards ($)(1) Restricted Stock Awards ($)(1) Non-Equity Incentive Plan Compensation ($) Total ($) Ronald Glibbery 2023 400,000 — — — 400,000 Chief Executive Officer 2022 400,000 — 430,000 — 830,000 James Sullivan 2023 305,000 — — — 305,000 Chief Financial Officer 2022 306,719 — 215,000 — 521,719 Bradley Lynch 2023 275,000 — — — 275,000 Chief Operating Officer 2022 279,992 — 161,250 — 441,242 (1) The dollar amounts in this column represent base salary earned during the indicated fiscal year. Pursuant to the employment agreements for Messrs. Sullivan and Lynch, each as amended in April 2022, such named executive officers received a base salary increase that was retroactive to December 17, 2021. Accordingly, the amounts in this column for fiscal year 2022 for Messrs. Sullivan and Lynch reflect retroactive salary increases for the time period from December 17, 2021 through December 31, 2021 in the aggregate amounts of $1,719 and $4,992, respectively, plus fiscal year 2022 base salary. (2) Award amounts reflect the aggregate grant date fair value with respect to awards granted during the years indicated, as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the aggregate grant date fair value of option and stock awards are set forth in the notes to the consolidated financial statements included elsewhere in this Report. These amounts do not reflect actual compensation earned or to be earned by our named executive officers. 49 GRANTS OF PLAN-BASED AWARDS We did not grant plan-based awards in 2023 to any of our named executive officers. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table and accompanying footnotes set forth information regarding the outstanding equity awards held by our named executive officers as of December 31, 2023. Option Awards Stock Awards Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) Option Exercise Price($) Option Expiration Date(1) Number of Units That Have Not Vested (#) Market Value of Units That Have Not Vested ($) Ron Glibbery 566 (2) — — 69.20 11/17/2024 — — 453 (2) — — 103.60 12/29/2025 — — 6,973 (2) — — 103.60 9/17/2030 — — 2,740 (2) — — 103.60 12/16/2031 — — 1,667 (7) 18,670 (8) James Sullivan 8 (3) — — 16,400.00 3/30/2025 — — 20 (4) — — 5,760.00 8/23/2026 — — 138 (5) — — 156.80 2/6/2029 — — 500 (6) — — 62.80 11/20/2029 — — 834 (7) 9,341 (8) Bradley Lynch 227 (2) — — 103.60 9/17/2030 — — 4,365 (2) — — 103.60 9/17/2030 — — 1,644 (2) — — 103.60 12/16/2031 — — 625 (7) 7,000 (8) (1) The standard option term is generally ten years, but all of the options expire automatically unless exercised within 90 days after the cessation of service as an employee, director or consultant. (2) The stock options were acquired on December 17, 2021 as consideration for the person’s securities of Peraso Technologies Inc., which we acquired by way of a reverse takeover. (3) The stock option was granted on March 30, 2015, and the shares subject to this option vested monthly over 48 months subject to continued employment (or service as a director or consultant). (4) In August 2016, officers tendered their eligible options and received new options at a rate of 1 replacement option share for each 1.75 option shares tendered. The stock option was granted on August 23, 2016, and the shares subject to this option vested monthly over 48 months subject to continued employment (or service as a director or consultant). 50 (5) The stock option was granted on February 6, 2019, and the shares subject to this option vest monthly over three years subject to continued service as an employee, director or consultant). (6) The stock option was granted on November 20, 2019, and the shares subject to this option vested monthly over three years subject to continued service as an employee, director or consultant. (7) The shares subject to each restricted stock unit grant vest on each semi-annual anniversary over a three-year period commencing on December 17, 2021 subject to continued employment (or service as a director or consultant). (8) The amount is calculated using the Company’s closing price on the Nasdaq of $11.20 per share of common stock on December 29, 2023. OPTION EXERCISES AND STOCK VESTED The following table sets forth the number of shares acquired and aggregate dollar amount realized pursuant to the exercise of options and vesting of stock awards by our named executive officers during the year ended December 31, 2023. Option Awards Stock Awards Name Number of Shares Acquired on Exercise(#) Value Realized on Exercise($) Number of Shares Acquired on Vesting(#) Value Realized on Vesting($)(1) Ronald Glibbery — — 1,668 29,514 James Sullivan — — 626 11,076 Bradley Lynch — — 834 14,757 (1) The aggregate dollar value realized upon vesting represents the closing price of a share of common stock on the Nasdaq at the date of vesting, multiplied by the total number of shares vested. Employment and Change-in-Control Arrangements and Agreements Our Executive Change-in-Control and Severance Policy (the “Policy”) provides benefits that are intended to encourage the continued dedication of our executive officers and to mitigate potential disincentives to the consideration of a transaction that would result in a change in control, particularly where the services of our named executive officers may not be required by a potential acquirer. The Policy provides for benefits for our named executive officers in the event of a “Change-in-Control,” which is generally defined as: ● an acquisition of 45% or more of our common stock or voting securities by any “person,” as defined under the Exchange Act; or ● consummation of a complete liquidation or dissolution of the Company or a merger, consolidation, reorganization or sale of all or substantially all of our assets (collectively, a “Business Combination”) other than a Business Combination in which (A) our stockholders receive 50% or more of the stock of the corporation resulting from the Business Combination and (B) at least a majority of the board of directors of such resulting corporation were our incumbent directors immediately prior to the consummation of the Business Combination, and (C) after which no individual, entity or group (excluding any corporation or other entity resulting from the Business Combination or any employee benefit plan of such corporation or of ours) who did not own 45% or more of the stock of the resulting corporation or other entity immediately before the Business Combination owns 45% or more of the stock of such resulting corporation or other entity. 51 Under the Policy, the following compensation and benefits are to be provided to our chief executive officer upon the occurrence of a Change-in-Control, and in the case of our other named executive officers, upon a Change-in-Control combined with a termination of the named executive officer’s employment without cause, or due to disability or resignation for good reason (as defined in the Policy) in connection with the Change-in-Control or within 24 months after it: ● any base salary earned but not yet paid through the date of termination; ● any annual or discretionary bonus earned but not yet paid to him for any calendar year prior to the year in which his termination occurs; ● any compensation under any deferred compensation plan of ours or deferred compensation agreement with us then in effect; ● a single lump sum payment equal to the sum of (a) one year of his or her then-current base salary plus (b) the average of his or her annual bonus payments in the preceding three years or such shorter time as he or she has been employed by us (with prorated weighting assigned to any bonus earned for a partial year of employment), which payment will be made within 60 days following the Change-in-Control (in the case of the chief executive officer), or 60 days following the date of employment termination (in the case of all other named executive officers). ● vesting in 100% of all outstanding equity awards as of the date of the Change-in-Control for the chief executive officer, or as of the date of termination of employment for all other named executive officers; ● reimbursement of any business expenses incurred by him through the date of termination but not yet paid; ● reimbursement of the cost of continuation of medical benefits for a period of 12 months; and ● outstanding equity awards that are structured as stock options, stock appreciation rights or similar awards shall be amended effective as of the date of termination to provide that such awards will remain outstanding and exercisable until the earlier of (a) 12 months following the date of the Change-in-Control for the chief executive officer, or the termination of employment for the other named executive officers, and (b) the expiration of the award’s initial term. Under the Policy, “cause” means the executive’s: ● willful failure to attend to the executive’s duties that is not cured by the executive within 30 days of receiving written notice from the CEO (or, in the case of the CEO, from the board of directors) specifying such failure; ● material breach of the executive’s then-current employment agreement (if any) that is not cured by the executive within 30 days of receiving written notice from the CEO (or, in the case of the CEO, from the board of directors) specifying such breach; ● conviction of (or plea of guilty or nolo contendere to) any felony or any misdemeanor involving theft or embezzlement; or ● misconduct resulting in material harm to our business or reputation, including fraud, embezzlement, misappropriation of funds or a material violation of the executive’s employment, confidential information, non-disclosure, invention assignment and arbitration agreement. 52 Under the Policy, “good reason” means the occurrence of any of the following conditions without the executive’s consent, but only if such condition is reported by the executive within 90 days of the executive’s knowledge of such condition and remains uncured 30 days after written notice from the executive to the board of directors of said condition: ● a material reduction in the executive’s then-current base salary or annual target bonus (expressed as a percentage of Executive’s then-current base salary), except for a reduction proportionate to reductions concurrently imposed on all other members of the Company’s executive management; ● a material reduction in the executive’s then-current employee benefits package, taken as a whole, except for a reduction proportionate to reductions concurrently imposed on all other members of executive management; ● a material reduction in the executive’s responsibilities with respect to our overall operations, such that continuity of responsibilities with respect to business operations existing prior to a corporate transaction will serve as a material reduction in responsibilities if such business operations represent only a subsidiary or business unit of the larger enterprise after the corporate transaction; ● a material reduction in the responsibilities of the executive’s direct reports, including a requirement for the chief executive officer to report to another officer as opposed to our board of directors or a requirement for any other executive to report to any officer other than our chief executive officer; ● a material breach by us of any material provision of the executive’s then-current employment agreement (if any); ● a requirement that the executive relocate to a location more than 35 miles from the executive’s then-current office location, unless such office relocation results in the distance between the new office and Executive’s home being closer or equal to the distance between the prior office and the executive’s home; ● a failure of a successor or transferee to assume our obligations under this Policy; or ● a failure to nominate the executive for election as a board of directors director, if, at the proper time for nomination, the executive is a member of the board of directors. Notwithstanding the above, in lieu of the payments and benefits payable under the Policy to Mr. Glibbery as the Company’s chief executive officer, Mr. Glibbery will receive change-in control payments and benefits in accordance with the terms and conditions of his employment agreement. The table below summarizes the payments Mr. Glibbery would be entitled to depending on the respective type of termination of his employment. Termination Type Payments and Benefits Termination for Cause or Voluntary Resignation (i) accrued and unpaid base salary and any other payments required by law, including those in connection with accrued vacation; and (ii) reimbursement for business expenses. Termination Without Cause, for Good Reason, upon Change of Control, Death or Disability (i) accrued and unpaid base salary and any other payments required by law including those in connection with accrued vacation; (ii) reimbursement for business expenses; (iii) the payment of the greater of (A) the sum of: (x) pay in lieu of notice of termination, in the amount required pursuant to the ESA (as defined in Mr. Glibbery’s employment agreement), and (y) statutory severance pay (if applicable) in the amount required to be provided pursuant to the ESA; or (B) twenty-four (24) months of base salary in lieu of notice, calculated solely by reference to the base salary except and only to the extent as otherwise minimally required by the ESA, to be paid in the form of a lump sum; (iv) any bonus awarded but not yet paid in respect of the fiscal year preceding the termination date; (v) bonus for the year in which the employment terminates, prorated pursuant to the employment agreement; (vi) all benefits (as existed on the date notice of termination is provided) for the duration of the Severance Period (as defined in the employment agreement); (vii) any unvested equity and equity-related compensation that has been issued pursuant to the Plan will be immediately accelerated and vested as of the termination date; (viii) any vested equity and equity-related compensation that has been issued under the Plan will remain exercisable until 24 months following such termination; and (ix) any other benefits and/or perquisites shall continue until the end of the ESA Notice Period (as defined in the employment agreement). 53 The information below describes the severance benefits payable to (i) Mr. Glibbery under his employment agreement and (ii) Messrs. Lynch and Sullivan under the Policy, as if such arrangements had been in effect and a Change-in-Control occurred on December 31, 2023, and the employment of each of our named executive officers was terminated without cause immediately following the Change-in-Control. Name Base Salary ($)(1) Incentive Plans ($)(2) Continuation of Benefits($)(3) Stock Option Vesting($)(4) Stock Award Vesting($)(5) Total($) Ronald Glibbery 800,000 300,000 11,004 17,237 18,670 1,146,911 James Sullivan 305,000 183,000 12,743 — 9,341 510,084 Bradley Lynch 275,000 137,500 5,502 22,545 7,000 447,547 (1) Represents cash severance payments based on the executive’s salary at December 31, 2023, in an amount equal to two years of base salary for Mr. Glibbery and one year of base salary for each of Messrs. Sullivan and Lynch. (2) For Mr. Glibbery, the amount represents payment of his annual target bonus amount. For Messrs. Sullivan and Lynch, the amounts represent the average of each executive’s annual performance incentive payments in the preceding three years. (3) Represents the aggregate amount of all premiums payable for the continuation of the executive’s health benefits for one or two years, as applicable, based on the amounts of such premiums at December 31, 2023. (4) The value is calculated as the intrinsic value per share, multiplied by the number of shares that would become fully vested upon the Change-in-Control. The intrinsic value per share would be calculated as the excess of the closing price of the common stock on the Nasdaq of $11.20 on December 29, 2023 over the exercise price of the option. If the value is less than zero, it is deemed to be zero for the purposes of these calculations. (5) The value is calculated as the intrinsic value per share, multiplied by the number of shares that would become fully vested upon the Change-in-Control. The intrinsic value per share is considered as the closing price of our common stock on the Nasdaq of $11.20 on December 29, 2023. If a Change-in-Control occurred on December 31, 2023, under the Policy, the following numbers of option and award shares would have vested immediately as a result of acceleration on December 31, 2023: Name Number of Accelerated Option and Award Shares Ronald Glibbery 3,208 James Sullivan 834 Bradley Lynch 2,641 Employment Agreements In addition to the agreements containing the Change-in-Control provisions summarized above, we have entered into our standard form of employment, confidential information, invention assignment and arbitration agreement with each of the named executive officers. We also have entered into agreements to indemnify our current and former directors and certain executive officers, in addition to the indemnification provided for in our certificate of incorporation and bylaws. These agreements, among other things, provide for indemnification of our directors and certain executive officers for many expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director or executive officer of the Company, any subsidiary of the Company or any other company or enterprise to which the person provided services at our request. 54 Director Compensation The following table summarizes the compensation we paid to our non-employee directors in the year ended December 31, 2023: Name Fee Compensation ($) Restricted Stock Awards ($)(1) All Other Compensation ($) Total ($) Robert Y. Newell 56,250 (1) 19,876 — 76,126 Ian McWalter 55,000 (2) 19,876 — 74,876 Andreas Melder 50,000 (3) 19,876 — 69,876 Daniel Lewis 35,000 (4) 19,876 105,000 (5) 159,876 (1) Consists of (i) $45,000 of fees earned in 2023, of which $22,500 was not paid in 2023, and (ii) $11,250 of fees earned in 2022 and paid in 2023. (2) Consists of (i) $44,000 of fees earned in 2023, of which $22,000 was not paid in 2023, and (ii) $11,000 of fees earned in 2022 and paid in 2023. (3) Consists of (i) $40,000 of fees earned in 2023, of which $20,000 was not paid in 2023, and (ii) $10,000 of fees earned in 2022 and paid in 2023 (4) Includes $17,500 of fees earned but not paid in 2023. (5) Represents a cash bonus paid to Mr. Lewis in January 2023 equal to 3% of the gross proceeds we received from the sale of our Virtual Accelerator Engine intellectual property, pursuant to the terms of his offer of employment, dated August 8, 2018, as amended on April 15, 2022. Mr. Lewis resigned as our Vice President, General Manager of Memory Products in December 2022. Director Fee Compensation As a small company, it can be challenging for us to attract new non-employee directors. Nasdaq and SEC regulations require that a majority of the directors on our board of directors and its committees be independent, non-employee directors, as defined by each entity. In December 2021, we amended our director compensation structure and adopted our Outside Director Compensation Plan (the “Director Plan”). Under the Director Plan, we pay the following annual cash retainer fees, payable in quarterly installments, to our non-employee directors for their service on our board of directors and, as applicable, for service on committees of our board of directors: ● $35,000 for service on the board of directors; ● $8,000 for service as chairperson of the Audit Committee; ● $3,000 for service as a member of the Audit Committee; ● $6,000 for service as chairperson of the Compensation Committee; and ● $2,000 for service as a member of the Compensation Committee. Director Equity Compensation Under the Director Plan, upon initial appointment to our board of directors, each non-employee director will receive a stock option with a value of $100,000, calculated by dividing the $100,000 by the closing trading price of our common stock on the date of grant. The initial stock option will have an exercise price equal to the closing price of our common stock on the date of grant and will vest as to one-third of the shares on the first annual anniversary of the grant and the remaining shares quarterly over the subsequent two years, provided the non-employee director continues to serve on the board of directors. In the event of a merger, sale of substantially all of our assets or similar transaction, vesting of all director options would accelerate as to 100% of the unvested shares subject to the award. Non-employee directors will also receive an annual equity award of restricted stock units of common stock equal to $50,000 of value per non-employee director. The restricted stock unit award will be made upon initial appointment to our board of directors and then subsequently at the first scheduled meeting of the board of directors following our annual meeting of stockholders. The number of restricted stock units will be calculated by dividing $50,000 by the closing trading price of our common stock on the date of the award, provided, however, that such annual equity award for each non-employee director cannot exceed 500 shares per year in accordance with the 2019 Plan. The restricted stock unit award will vest in full on the earlier to occur of the next annual meeting of stockholders or the one-year anniversary of the award. All equity awards granted under the Director Plan will be made from the 2019 Plan. 55 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The table below sets forth certain information as of March 1, 2024 concerning the ownership of our common stock by: ● each stockholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock (currently our only class of voting securities); ● each of our directors; ● each of our executive officers; and ● all directors and executive officers as a group. Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act and includes all shares over which the beneficial owner exercises voting or investment power. Shares that are issuable upon the exercise of options, warrants and other rights to acquire common stock that are presently exercisable or exercisable within 60 days of March 1, 2024 are reflected in a separate column in the table below. These shares are taken into account in the calculation of the total number of shares beneficially owned by a particular holder and the total number of shares outstanding for the purpose of calculating percentage ownership of the particular holder. We have relied on information supplied by our officers, directors and certain stockholders and on information contained in filings with the SEC. Except as otherwise indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 2,256,253 shares of our common stock and exchangeable shares outstanding as of March 1, 2024. Unless otherwise stated, the business address of each of our directors and executive officers listed in the table is 2309 Bering Drive, San Jose, California 95131. Amount and Nature of Beneficial Ownership Name and Principal Position Number of Shares Beneficially Owned (Excluding Outstanding Options)(1) Number of Shares Issuable on Exercise of Outstanding Options or Convertible Securities(2) Percent of Class Iroquois Capital Management, LLC 120,000 (3) 117,000 (3) 9.99 % Ionic Ventures, LLC 120,000 (4) 117,000 (4) 9.99 % Brio Capital, LLC 120,000 (5) — 5.32 % Directors and Officers: Ronald Glibbery 3,534 9,361 * Daniel Lewis 2,667 1,875 * Robert Y. Newell 2,947 454 * Ian McWalter 3,997 329 * Andreas Melder 851 329 * James Sullivan 1,379 665 * Bradley Lynch 1,283 4,595 * Alexander Tomkins 993 4,886 * Mark Lunsford 627 — * All current directors and executive officers as a group (9 persons) 18,278 22,494 1.8 % * Represents holdings of less than one percent. 56 (1) Excludes shares subject to outstanding options, warrants, convertible securities or other rights to acquire common stock that are exercisable within 60 days of March 1, 2024. (2) Represents the number of shares subject to outstanding options, restricted stock units, convertible securities or other rights to acquire common stock that are exercisable within 60 days of March 1, 2024. (3) Based on information reported on a Schedule 13G filed with the SEC on February 15, 2024 by Iroquois Capital Management L.L.C. (“Iroquois Capital”), Richard Abbe and Kimberly Page. The filing reflects that (i) Iroquois Capital, Mr. Abbe and Ms. Page share voting and dispositive power over 31,200 shares of common stock and 587,840 shares of common stock issuable upon exercise of pre-funded warrants, Series A warrants and Series B warrants (collectively, the “Warrants”), which securities are directly held by Iroquois Master Fund Ltd. (“Iroquois Master Fund”), and (ii) Mr. Abbe has sole voting and dispositive power over 88,800 shares of common stock and 1,673,110 shares of common stock issuable upon exercise of the Warrants, which securities are directly held by Iroquois Capital Investment Group LLC (“ICIG”). The table above excludes 2,143,950 shares of common stock issuable upon exercise of the Warrants because the warrants are subject to a 9.99% beneficial ownership blocker. Mr. Abbe shares authority and responsibility for the investments made on behalf of Iroquois Master Fund with Ms. Kimberly Page, each of whom is a director of the Iroquois Master Fund. As such, Mr. Abbe and Ms. Page may each be deemed to be the beneficial owner of all shares of common stock held by and underlying the Warrants held by, Iroquois Master Fund. Iroquois Capital is the investment advisor for Iroquois Master Fund and Mr. Abbe is the President of Iroquois Capital. Mr. Abbe has the sole authority and responsibility for the investments made on behalf of ICIG. As such, Mr. Abbe may be deemed to be the beneficial owner of all shares of Common Stock held by and underlying the Warrants held by, Iroquois Master Fund and ICIG. Iroquois Capital, Mr. Abbe and Ms. Page each disclaims any beneficial ownership of any such shares of common stock except to the extent of their pecuniary interest therein. (4) Based on information reported on a Schedule 13G filed with the SEC on February 12, 2024 by Ionic Ventures, LLC (“Ionic”), Ionic Management, LLC (“Ionic Management”), Brendan O’Neil and Keith Coulston, which each report shared voting and dispositive power with respect to the shares. The table above excludes 2,143,950 shares of common stock issuable upon exercise of the Series A warrants, Series B warrants and pre-funded warrants because the warrants are subject to a 9.99% beneficial ownership blocker. Ionic has the power to dispose of and the power to vote the shares beneficially owned by it, which power may be exercised by its manager, Ionic Management. Each of the managers of Ionic Management, Mr. O’Neil and Mr. Coulston, has shared power to vote and/or dispose of the shares beneficially owned by Ionic and Ionic Management. (5) Based on information reported on a Schedule 13G filed with the SEC on February 7, 2024 by Brio Capital Master Fund Ltd. and Brio Capital Management LLC. Brio Capital Management LLC, is the investment manager of Brio Capital Master Fund Ltd. and has the voting and investment discretion over securities held by Brio Capital Master Fund Ltd. Shaye Hirsch, in his capacity as Managing Member of Brio Capital Management LLC, makes voting and investment decisions on behalf of Brio Capital Management LLC in its capacity as the investment manager of Brio Capital Master Fund Ltd. The amount of shares in the table above excludes 2,260,950 shares of common stock issuable upon exercise of pre-funded warrants, Series A warrants and Series B warrants which are subject to a 4.99% ownership blocker. 57 Securities Authorized for Issuance under Equity Compensation Plans The following table provides information as of December 31, 2023 regarding equity compensation plans approved by our security holders. As of December 31, 2023, we had no awards outstanding under equity compensation plans that have not been approved by our security holders. Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities reflected in Column (a))(1) (a) (b) (c) Equity compensation plans approved by security holders 50,960 (2) $ 122.80 39,268 (1) Consists of shares of common stock available for future issuance under the 2019 Plan. (2) Consists of 1,031 shares of common stock subject to outstanding equity awards under the 2010 Plan, 18,694 shares of common stock subject to outstanding equity awards under the 2019 Plan and 31,235 of common stock subject to outstanding options assumed by us in connection with the business combination with Peraso Technologies Inc. that was completed in December 2021. Item 13. Certain Relationships and Related Transactions and Director Independence. Related Party Transactions Below we describe any transactions to which we have been a participant, in which the amount involved in the transaction exceeds or will exceed the lesser of $120,000 or one percent of the average of our total assets at year end for each of the last two completed fiscal years and in which any of our directors, director nominees, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest since January 1, 2022. A family member of one of our executive officers is employed by us. During the years ended December 31, 2023 and 2022, we paid approximately $111,400 and $101,000, respectively, to the employee. The amount paid in 2022 includes the aggregate grant date fair value, as determined pursuant to FASB ASC Topic 718, of an RSU awarded in April 2022. Additionally, a family member of one of our executive officers previously served as a consultant to the Company. During the year ended December 31, 2022, we paid approximately $162,000 to the consultant family member. 58 Director Independence Our board of directors has determined that each of the current directors, with the exception of Daniel Lewis and Ronald Glibbery, is “independent,” as defined by the listing rules of the NASDAQ Stock Market, or Nasdaq, and the rules and regulations of the SEC. Our board of directors has standing Audit and Compensation Committees, each of which is comprised solely of independent directors in accordance with the Nasdaq listing rules. No director qualifies as independent unless the board of directors affirmatively determines that he has no direct or indirect relationship with us that would impair his independence. We independently review the relationship of the Company to any entity employing a director or on whose board of directors he is serving currently. Item 14. Principal Accountant Fees and Services. Weinberg & Co., P.A. (“Weinberg”) was our independent registered public accounting firm for the years ended December 31, 2023 and 2022. The following table shows the fees billed (in thousands of dollars) to us by Weinberg for the financial statement audits and other services provided for fiscal 2023 and 2022. 2023 2022 Audit Fees(1) $ 224 $ 223 Audit-Related Fees(2) 12 13 Total(3) $ 236 $ 236 (1) Audit fees consisted of fees for professional services rendered for the audit of our annual consolidated financial statements, review of our quarterly financial statements and services normally provided in connection with statutory and regulatory filings. (2) Audit-related fees consisted of fees related to the issuance of SEC registration statements. (3) Weinberg did not provide any non-audit or other services other than those reported under “Audit Fees” and “Audit-Related Fees.” The Audit Committee meets with our independent registered public accounting firm at least four times a year. At such times, the Audit Committee reviews both audit and non-audit services performed by the independent registered public accounting firm, as well as the fees charged for such services. The Audit Committee is responsible for pre-approving all auditing services and non-auditing services (other than non-audit services falling within the de minimis exception set forth in Section 10A(i)(1)(B) of the Exchange Act and non-audit services that independent auditors are prohibited from providing to us) in accordance with the following guidelines: (1) pre-approval policies and procedures must be detailed as to the particular services provided; (2) the Audit Committee must be informed about each service; and (3) the Audit Committee may delegate pre-approval authority to one or more of its members, who shall report to the full committee, but shall not delegate its pre-approval authority to management. Among other things, the Audit Committee examines the effect that performance of non-audit services may have upon the independence of the auditors. 59 Part IV Item 15. Exhibits. (a) (1) Consolidated Financial Statements: The following documents are filed as part of this Report: Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm, all of which are set forth on pages F-1 through F-32 of this Report. (2) Financial Statement Schedules: Financial statement schedules are omitted because they are not required, not applicable or because the required information is shown in the consolidated financial statements or notes thereto. (3) Exhibits: Required exhibits are incorporated by reference or are filed with this Report. Reference Exhibit No. Exhibit Description Form File No. Form Exhibit Filing Date Filed or Furnished Herewith 2.1** Arrangement Agreement with Peraso Technologies Inc. 8-K 000-32929 2.1 September 15, 2021 2.2 First Amending Agreement dated October 21, 2021 8-K 000-32929 2.1 October 22, 2021 3.1 Restated Certificate of Incorporation of the Company 8-K 000-32929 3.6 November 12, 2010 3.1.1 Certificate of Amendment to Restated Certificate of Incorporation of the Company 8-K 000-32929 3.1 February 14, 2017 3.1.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on August 27, 2019 8-K 000-32929 3.1 August 27, 2019 3.1.3 Certificate of Amendment to Articles of Incorporation (Name Change) 8-K 000-32929 3.1 December 20, 2021 3.1.4 Certificate of Designation of Series A Special Voting Preferred Stock 8-K 000-32929 3.2 December 20, 2021 3.1.5 Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on December 15, 2023 8-K 000-32929 3.1 December 19, 2023 3.2 Amended and Restated Bylaws of the Company 8-K 000-32929 3.1 November 23, 2021 4.1 Specimen Common Stock Certificate S-1/A 333-43122 4.1 September 14, 2000 4.2 Form of Common Stock Purchase Warrant 8-K 000-32929 4.1 June 30, 2017 4.3 Form of Securities Purchase Agreement 8-K 000-32929 10.1 June 30, 2017 4.4 Form of Common Stock Purchase Warrant 8-K 000-32929 4.6 October 3, 2018 4.5 Description of the Registrant's Securities 10-K 000-32929 4.6 March 29, 2023 4.6.1* Amended and Restated Peraso Inc. 2010 Equity Incentive Plan S-8 333-229728 4.8 February 15, 2019 4.6.2* Amended and Restated Peraso Inc. 2019 Stock Incentive Plan S-8 333-262062 4.2 January 7, 2022 4.7.1* Form of Agreement for Stock Option Grant pursuant to the Peraso Inc. Amended and Restated 2010 Equity Incentive Plan S-8 333-168358 4.10 July 28, 2010 4.7.2* Form of Notice of Grant of Stock Option Award and Agreement pursuant to the Peraso Inc. 2019 Stock Incentive Plan S-8 333-234675 4.10 November 13, 2019 60 4.8.1* Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the Peraso Inc. Amended and Restated 2010 Equity Incentive Plan 10-Q 000-32929 10.23 August 8, 2013 4.8.2* Form of Notice of Grant of Restricted Stock Unit Award and Agreement under the Peraso Inc. 2019 Stock Incentive Plan S-8 333-234675 4.13 November 13, 2019 4.9* Amended Peraso Technologies Inc. 2009 Share Option Plan S-8 333-262062 4.5 January 7, 2022 4.10 Form of Pre-Funded Common Stock Purchase Warrant 8-K 000-32929 4.1 November 30, 2022 4.11 Form of Common Stock Purchase Warrant 8-K 000-32929 4.2 November 30, 2022 4.12 Form of Pre-Funded Warrant 8-K 000-32929 4.1 June 2, 2023 4.13 Form of Purchase Warrant 8-K 000-32929 4.2 June 2, 2023 4.14 Form of Placement Agent Warrant 8-K 000-32929 4.3 June 2, 2023 4.15 Form of Series A Warrant S-1/A 333-276247 4.15 February 5, 2024 4.16 Form of Series B Warrant S-1/A 333-276247 4.16 February 5, 2024 4.17 Form of Pre-Funded Warrant S-1/A 333-276247 4.16 January 23, 2024 4.18 Form of Representative Warrant S-1/A 333-276247 4.17 January 23, 2024 10.1* Employment Offer Letter Agreement between the Company and James Sullivan dated December 21, 2007 10-K 000-32929 10.26 March 17, 2008 10.2* Change-in-control Agreement between the Company and James Sullivan dated January 18, 2008 10-K 000-32929 10.27 March 17, 2008 10.3* Form of Option Agreement for Stock Option Grant pursuant to Amended and Restated 2010 Equity Incentive Plan S-8 333-168358 4.10 July 28, 2010 10.4* Form of Notice of Restricted Stock Unit Award and Agreement under the Amended and Restated Peraso Inc. 2010 Equity Incentive Plan S-8 333-159753 4.8 June 5, 2009 10.5* Form of New Employee Inducement Grant Stock Option Agreement (revised February 2012) 10-K 000-32929 10.19 March 15, 2012 10.6 Form of Indemnification Agreement used from June 2012 to present 10-Q 000-32929 10.22 August 9, 2012 10.7* Executive Change-in-Control and Severance Policy SC TO-I 005-78033 99.(D)(7) July 26, 2016 10.8* Employment offer letter agreement between the Company and Daniel Lewis dated August 8, 2018 S-1/A 333-225193 10.28 September 17, 2018 10.9 Securities Purchase Agreement 8-K 000-32929 10.26 October 3, 2018 10.10 Securities Purchase Agreement 8-K 000-32929 10.1 April 17, 2020 10.11 Form of Lock-Up Agreement 8-K 000-32929 10.1 December 20, 2021 10.12 Intercompany Services Agreement 8-K 000-32929 10.2 December 20, 2021 10.13* Employment Agreement (Ronald Glibbery) 8-K 000-32929 10.3 December 20, 2021 10.14* Employment offer letter agreement between the Company and Mark Lunsford dated October 4, 2022 10-K 000-32929 10.17 March 29, 2023 10.15* Employment Agreement (Brad Lynch) 10-K 000-32929 10.18 March 29, 2023 10.16* Employment Agreement (Alexander Tomkins) 10-K 000-32929 10.19 March 29, 2023 10.17* Amendment to offer of employment between the Company and Daniel Lewis dated April 15, 2022 10-Q 000-32929 10.1 August 15, 2022 61 10.18* Amendment to offer of employment between the Company and James Sullivan dated April 15, 2022 10-Q 000-32929 10.2 August 15, 2022 10.19* Amendment to employment agreement between Peraso Technologies Inc. and Brad Lynch dated April 15, 2022 10-Q 000-32929 10.3 August 15, 2022 10.20* Amendment to offer of employment between the Company and Alex Tomkins dated April 19, 2023 S-1 333-272729 10.21 June 16, 2023 10.21* Amendment to offer of employment between the Company and Ronald Glibbery dated April 19, 2023 S-1 333-272729 10.22 June 16, 2023 10.22* Second Amendment to offer of employment between the Company and Brad Lynch dated April 19, 2023 S-1 333-272729 10.23 June 16, 2023 10.23** Technology License and Patent Assignment Agreement By and Between Intel Corporation and the Company dated August 5, 2022 10-Q 000-32929 10.1 November 14, 2022 10.24** Form of Securities Purchase Agreement 8-K 000-32929 10.1 November 30, 2022 10.25 Form of Registration Rights Agreement 8-K 000-32929 10.2 November 30, 2022 10.26** Form of Securities Purchase Agreement 8-K 000-32929 10.1 June 2, 2023 10.27 Form of Registration Rights Agreement 8-K 000-32929 10.2 June 2, 2023 10.28* First Amendment to Executive Change-in-Control and Severance Policy 10-Q 000-32929 10.23 May 13, 2021 10.29 Amendment No. 1 to Peraso Inc. Common Stock Purchase Warrant 8-K 000-32929 10.3 June 2, 2023 10.30 Underwriting Agreement, dated February 6, 2024, by and between the Company and Ladenburg Thalmann & Co. Inc. 8-K 000-32929 1.1 February 9, 2024 10.31 Form of Lock-Up Agreement S-1/A 333-276247 10.30 January 23, 2024 10.32 Warrant Agency Agreement, dated February 8, 2024, by and between the Company and Equiniti Trust Company, LLC 8-K 000-32929 10.2 February 9, 2024 21.1 List of Subsidiaries 10-K 000-32929 21.1 March 29, 2023 23.1 Consent of Independent Registered Public Accounting Firm-Weinberg & Co., P.A. X 24.1 Power of Attorney (see signature page) X 31.1 Rule 13a-14 Certification X 31.2 Rule 13a-14 Certification X 32 Section 1350 Certification X 97.1 Company Clawback Policy X 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Taxonomy Extension Schema Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) X * Management contract, compensatory plan or arrangement. ** Certain schedules, exhibits and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC. Item 16. Form 10-K Summary Not applicable. 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of March 2024. PERASO INC. By: /s/ Ronald Glibbery Ronald Glibbery Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Ronald Glibbery and James Sullivan as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in- fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Ronald Glibbery Chief Executive Officer and Director March 29, 2024 Ronald Glibbery (principal executive officer) /s/ James Sullivan Chief Financial Officer James Sullivan (principal financial and accounting officer) March 29, 2024 /s/ Daniel Lewis Director March 29, 2024 Daniel Lewis /s/ Ian McWalter Director March 29, 2024 Ian McWalter /s/ Andreas Melder Director March 29, 2024 Andreas Melder /s/ Robert Y. Newell Director March 29, 2024 Robert Y. Newell 63 PERASO INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm (PCAOB ID 572 ) F-2 Consolidated Balance Sheets F-5 Consolidated Statements of Operations and Comprehensive Loss F-6 Consolidated Statements of Stockholders’ Equity F-7 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-9 - F-32 F- 1 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Peraso Inc. San Jose, California Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Peraso Inc. (the “Company”) and subsidiaries as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and its subsidiaries as of December 31, 2023 and 2022, and the results of their operations and their cash flows for the years then ended , in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, during the year ended December 31, 2023, the Company incurred a net loss and utilized cash in operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans to alleviate these conditions are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F- 2 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Amortizable intangible assets impairment assessment As described in Notes 1 and 2 to the consolidated financial statements, the Company’s amortizable definite-lived intangible assets consisting of acquired technology and customer relationships had a carrying value of $3.3 million as of December 31, 2023. Management conducts an impairment assessment annually on December 31, or more frequently if impairment indicators exist. An impairment exists when the carrying value of the long-lived group containing acquired technology and customer relationships exceeds its fair value. The Company’s evaluation of the recoverability of acquired technology and customer relationships intangible assets first involves the comparison of undiscounted future cash flows expected to be generated by the acquired technology and customer lists over the remaining useful life of the assets to their respective carrying amounts. The Company’s recoverability analysis requires management to make significant estimates and assumptions related to forecasted sales growth rates and cash flows over the remaining useful life of the assets. Based on the results of the impairment assessment, management determined that its amortizable definite-lived intangible assets were not impaired. We identifie d the evaluation of acquired technology and customer relationships intangible assets for potential impairment as a critical audit matter because of the significant estimates and assumptions management makes related to future cash flows expected to be generated over the intangible assets’ lives. Auditing the impairment evaluation required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s future cash flows over the remaining useful life of the long-lived asset group. The primary procedures we performed to address this critical audit matter included: ● obtained an understanding of management’s processes related to its impairment assessment of intangibles; ● evaluated the reasonableness of management’s forecasts of undiscounted future cash flows by comparing management’s projections to the Company’s historical results and evaluating the appropriateness of projected revenue growth, margin and cost rates; ● tested the completeness and accuracy of underlying data used in the projections, and; ● evaluated whether the estimated future cash flows over the remaining useful life were consistent with evidence obtained in other areas of the audit. F- 3 Inventory Valuation As discussed in Note 1 to the financial statements, the Company’s inventories are stated at the lower of cost or net realizable value, with cost determined on first-in, first-out (“FIFO”) basis. As of December 31, 2023, the Company held inventories of $2.6 million. In determining net realizable value, management considers historical usage, forecasted demand in relation to inventory on hand, market conditions, and other factors. We identified the evaluation of management’s estimate of the net realizable value of certain inventory as a critical audit matter, because of the significant judgments made by management in estimating future demand and market conditions which are used to arrive at the net realizable value. This required a high degree of auditor judgment and increased auditor effort in auditing such assumptions. The primary procedures we performed to address this critical audit matter included: ● evaluated management’s product demand forecast for reasonableness considering historical sales by product, and whether they were consistent with the historical data and evidence obtained in other areas of the audit, and; ● we developed an independent expectation of the net realizable value of inventory using historic inventory activity and compared our independent expectation to the amount recorded in the financial statements. Valuation of warrant liability As described in Note 5 to the financial statements, during the year ended December 31, 2023, the Company issued certain warrants to acquire its common stock and such warrants contained provisions and terms that resulted in the warrants requiring recognition as fair value liabilities. The warrant liabilities are required to be measured at fair value initially at issuance, and subseque ntly thereafter at each reporting date including December 31, 2023. We identified auditing the valuation of the warrant liabilities as a critical audit matter due to the complexity of the accounting for the transaction and the significant judgements used by the Company in determining the fair value of the warrant liabilities. This required a high degree of auditor judgment and increased auditor effort in auditing the determination and valuation of the warrant liabilities. The primary procedures we performed to address this critical audit matter included: ● We obtained and examined the warrant liability agreement, including assessing the reasonableness of its presentation as a liability in the financial statements. ● We evaluated the appropriateness of the model used to value the warrant liability and tested the reasonableness of the assumptions used by the Company in determined the fair value of the warrant liability. ● We developed an independent expectation of the warrant liability and compared our independent expectation to the Company calculated value. We have served as the Company’s auditor since 2020. /s/ Weinberg & Company Los Angeles, California March 29, 2024 F- 4 PART I—FINANCIAL INFORMATION Item 1. Financial Statements PERASO INC. CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2023 2022 ASSETS Current assets Cash and cash equivalents $ 1,583 $ 1,828 Short-term investments — 1,078 Accounts receivable, net 731 3,244 Inventories, net 2,606 5,348 Tax credits and receivables 36 41 Deferred cost of net revenue — 600 Prepaid expenses and other 584 574 Total current assets 5,540 12,713 Property and equipment, net 1,156 2,225 Right-of-use lease assets 615 1,147 Intangible assets, net 3,280 6,278 Other 123 123 Total assets $ 10,714 $ 22,486 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable $ 2,448 $ 1,844 Accrued expenses and other 611 1,817 Deferred revenue 1,105 332 Short-term lease liabilities 370 687 Total current liabilities 4,534 4,680 Long-term lease liabilities 349 470 Warrant liabilities 1,748 2,079 Total liabilities 6,631 7,229 Commitments and contingencies (Note 4) Stockholders’ equity Preferred stock, $ 0.01 par value; 20,000 shares authorized; none issued and outstanding — — Series A, special voting preferred stock, $ 0.01 par value; one share authorized; and one share issued and outstanding at December 31, 2023 and 2022 — — Common stock, $ 0.001 par value; 120,000 shares authorized; 673 shares and 357 shares issued and outstanding at December 31, 2023 and 2022, respectively 1 — Exchangeable shares, no par value; unlimited shares authorized; 95 shares and 228 shares outstanding at December 31, 2023 and 2022, respectively — — Additional paid-in capital 170,474 164,879 Accumulated other comprehensive loss — ( 25 ) Accumulated deficit ( 166,392 ) ( 149,597 ) Total stockholders’ equity 4,083 15,257 Total liabilities and stockholders’ equity $ 10,714 $ 22,486 Note: Share amounts as of December 31, 2023 and 2022 have been adjusted to reflect the impact of a 1-for-40 reverse stock split of the Company’s common stock and exchangeable shares effected in January 2024, as discussed in Note 1. The accompanying notes are an integral part of these consolidated financial statements. F- 5 PERASO INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except per share data) Year Ended December 31, 2023 2022 Net revenue Product $ 12,853 $ 14,199 Royalty and other 896 669 Total net revenue 13,749 14,868 Cost of net revenue 11,877 8,915 Gross profit 1,872 5,953 Operating expenses Research and development 14,398 19,768 Selling, general and administrative 8,505 11,108 Gain on license and asset sale ( 406 ) ( 2,557 ) Impairment of goodwill — 9,946 Total operating expenses 22,497 38,265 Loss from operations ( 20,625 ) ( 32,312 ) Interest expense ( 21 ) ( 16 ) Change in fair value of warrant liabilities 3,493 1,595 Financing cost - warrant issuance — ( 1,576 ) Other income (expense), net 358 ( 89 ) Net loss $ ( 16,795 ) $ ( 32,398 ) Other comprehensive loss, net of tax: Net unrealized loss on available-for-sale-securities — ( 25 ) Comprehensive loss $ ( 16,795 ) $ ( 32,423 ) Net loss per share Basic and diluted $ ( 26.00 ) $ ( 64.41 ) Shares used in computing net loss per share Basic and diluted 646 503 Note: Share and per share amounts for the years ended December 31, 2023 and 2022 have been adjusted to reflect the impact of a 1-for-40 reverse stock split effected in January 2024, as discussed in Note 1. The accompanying notes are an integral part of these consolidated financial statements. F- 6 PERASO INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ( In thousands ) Series A Special Voting Additional Accumulated Other Total Preferred Stock Common Stock Exchangeable Shares Paid-In Comprehensive Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Capital Loss Deficit Equity Balance as of December 31, 2021 — $ — 307 $ — 233 $ — $ 159,268 $ — $ ( 117,199 ) $ 42,069 Exchange of exchangeable shares — — 5 — ( 5 ) — — — — — Issuance of common stock under stock plans, net of taxes paid related to net share settlements of restricted stock units — — 12 — — — ( 119 ) — — ( 119 ) Sale of common stock and warrants — — 33 — — — 2,099 — — 2,099 Initial recognition of fair value of warrant liability — — — — — — ( 2,099 ) — — ( 2,099 ) Unrealized loss on available-for-sale securities — — — — — — — ( 25 ) — ( 25 ) Stock-based compensation — — — — — — 5,730 — — 5,730 Net loss — — — — — — — — ( 32,398 ) ( 32,398 ) Balance as of December 31, 2022 — — 357 — 228 — 164,879 ( 25 ) ( 149,597 ) 15,257 Exchange of exchangeable shares — — 133 1 ( 133 ) — ( 1 ) — — — Issuance of common stock under stock plans, net of taxes paid related to net share settlements of restricted stock units — — 12 — — — ( 49 ) — — ( 49 ) Sale of common stock and warrants — — 56 — — — 3,548 — — 3,548 Issuance of common stock upon exercise of warrants — — 115 — — — 46 — — 46 Initial recognition of fair value of warrant liability — — — — — — ( 3,162 ) — — ( 3,162 ) Unrealized gain on available-for-sale securities — — — — — — — 25 — 25 Stock-based compensation — — — — — — 5,213 — — 5,213 Net loss — — — — — — — — ( 16,795 ) ( 16,795 ) Balance as of December 31, 2023 — $ — 673 $ 1 95 $ — $ 170,474 $ — $ ( 166,392 ) $ 4,083 Note: Share amounts for the year ended December 31, 2023 and 2022 have been adjusted to reflect the impact of a 1-for-40 reverse stock split of the Company’s common stock and exchangeable shares effected in January 2024, as discussed in Note 1. The accompanying notes are an integral part of these consolidated financial statements. F- 7 PERASO INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net loss $ ( 16,795 ) $ ( 32,398 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,811 3,057 Stock-based compensation 5,213 5,730 Change in fair value of warrant liabilities ( 3,493 ) ( 1,595 ) Inventory write-down 3,558 — Financing costs - warrant issuances — 1,576 Impairment of goodwill — 9,946 Allowance for bad debt ( 154 ) — Accrued interest on debt obligation ( 22 ) 9 Interest portion of financing lease repayment — ( 16 ) Impairment of intangible assets and property and equipment 349 — Other 3 89 Changes in assets and liabilities Accounts receivable 2,667 ( 808 ) Inventories ( 816 ) ( 1,525 ) Prepaid expenses and other assets 590 ( 59 ) Tax credits and receivables 5 1,160 Accounts payable 604 ( 94 ) Right-of-use assets 670 578 Lease liabilities - operating ( 447 ) ( 542 ) Deferred revenue and other liabilities ( 433 ) ( 1,128 ) Net cash used in operating activities ( 4,690 ) ( 16,020 ) Cash flows from investing activities: Purchases of property and equipment ( 94 ) ( 988 ) Purchases of intangible assets — ( 21 ) Proceeds from maturities of marketable securities 1,100 11,534 Purchases of marketable securities — ( 488 ) Net cash provided by investing activities 1,006 10,037 Cash flows from financing activities: Proceeds from sale of common stock, net 3,595 2,099 Repayment of financing lease ( 107 ) ( 61 ) Taxes paid to net share settle equity awards ( 49 ) ( 120 ) Net cash provided by financing activities 3,439 1,918 Net decrease in cash and cash equivalents ( 245 ) ( 4,065 ) Cash and cash equivalents at beginning of year 1,828 5,893 Cash and cash equivalents at end of year $ 1,583 $ 1,828 Supplemental disclosure: Noncash investing and financing activities: Initial recognition of warrant liability $ 3,162 $ 3,673 Recognition of right-of-use assets and lease liabilities $ 138 $ 1,003 Unrealized gain (loss) on available-for-sale securities $ ( 26 ) $ 26 The accompanying notes are an integral part of these consolidated financial statements. F- 8 PERASO INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. The Company and Summary of Significant Accounting Policies Peraso Inc., formerly known as MoSys, Inc. (the Company), was incorporated in California in 1991 and reincorporated in 2000 in Delaware. The Company is a fabless semiconductor company specializing in the development of millimeter wave (mmWave), which is generally described as the frequency band from 24 Gigahertz (GHz) to 300GHz, wireless technology. The Company derives revenue from selling its semiconductor devices and modules and performance of non-recurring engineering services. The Company also manufactures and sells high-performance memory semiconductor devices for a wide range of markets and receives royalties from licensees of its memory technology. On September 14, 2021, the Company and its subsidiaries, 2864552 Ontario Inc. (Callco) and 2864555 Ontario Inc. (Canco), 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 , the Company changed its name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the Nasdaq) under the symbol “PRSO.” For accounting purposes, Peraso Tech, the legal subsidiary, was treated as the accounting acquirer and the Company, the legal parent, was treated as the accounting acquiree. The transaction was accounted for as a reverse acquisition in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805) . Accordingly, these consolidated financial statements are a continuation of Peraso Tech’s consolidated financial statements prior to December 17, 2021 and exclude the statements of operations and comprehensive loss, statement of stockholders’ equity and statements of cash flows of the Company prior to December 17, 2021. See Note 2 for additional disclosure . Liquidity and Going Concern The Company incurred net losses of approximately $ 16.8 million and $ 32.4 million for the years ended December 31, 2023 and 2022, respectively, and had an accumulated deficit of approximately $ 166.4 million as of December 31, 2023. These and prior year losses have resulted in significant negative cash flows and have required the Company to raise substantial amounts of additional capital. To date, the Company has primarily financed its operations through multiple offerings of common stock and issuance of convertible notes and loans to investors and affiliates. As disclosed in Note 13, in February 2024, the Company completed a public offering of its common stock and warrants for net proceeds of $ 3.3 million. The Company expects to continue to incur operating losses for the foreseeable future as it secures additional customers and continues to invest in the commercialization of its products. The Company will need to increase revenues substantially beyond levels that it has 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 the Company’s expected operating losses and cash burn for the foreseeable future, as well as recurring losses from operations, if the Company is unable to raise sufficient capital through additional debt or equity arrangements, there will be uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern within one year from the date of issuance of these consolidated financial statements. These consolidated financial statements do not include any adjustments that might result from this uncertainty. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to the Company. The Company’s primary focus is producing and selling its products. 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. F- 9 Basis of Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. The Company’s fiscal year ends on December 31 of each calendar year. Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations or cash flows. Reverse Stock Split On December 15, 2023, the Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-40 reverse stock split of the Company’s shares of common stock. Further, on January 2, 2024, Canco filed a certificate of amendment to its amended and restated certificate of incorporation under the Ontario Business Corporations Act to effect a 1-for-40 reverse stock split of the outstanding exchangeable shares. Such amendments and ratio were previously approved by the Company’s stockholders and board of directors. As a result of the reverse stock split, which was effective for trading purposes on January 3, 2024, every 40 shares of the Company’s pre-reverse split outstanding common stock and exchangeable shares were combined and reclassified into one share of common stock. Proportionate voting rights and other rights of holders of common stock and exchangeable shares were not affected by the reverse stock split. Any fractional shares of common stock and exchangeable shares resulting from the reverse stock split were rounded up to the nearest whole share. All stock options and restricted stock units outstanding and common stock reserved for issuance under the Company’s equity incentive plans and warrants outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of common stock by 40 and, as applicable, multiplying the exercise price by 40, as a result of the reverse stock split. All share and per-share amounts in these consolidated financial statements have been restated to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented . Risks and Uncertainties The Company is subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history and the volatility of public markets. 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. 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 COVID-19 will not impact the Company’s operational and financial performance in the future, as actions taken by U.S. and foreign government agencies to prevent disease spread are uncertain, out of the Company’s control, and cannot be predicted. World unrest due to wars and terrorist attacks have led to further economic disruptions. Mounting inflationary cost pressures and recessionary fears have negatively impacted the global economy. Since mid-2022, at times, the U.S. Federal Reserve has addressed elevated inflation by increasing interest rates. Given current market conditions, the Company may be unable to access the capital markets, and additional capital may only be available to the Company on terms that could be significantly detrimental to the Company’s current stockholders and to the Company’s business. F- 10 Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period. Material estimates may include assumptions made in determining reserves for uncollectible receivables, inventory write-downs, impairment of long-term assets, purchase price allocations, valuation allowance on deferred tax assets, accruals for potential liabilities and assumptions made in valuing equity instruments and warrant liabilities. Actual results could differ from those estimates. Cash Equivalents and Investments The Company has invested its excess cash in money market accounts, certificates of deposit, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income (loss). Realized gains and losses and declines in the value judged to be other-than-temporary are included in the other income, net line item in the consolidated statements of operations. The cost of securities sold is based on the specific identification method. Fair Value Measurements The Company measures the fair value of financial instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: Level 1 —Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date. Level 2 —Pricing is provided by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities. Level 3 —Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity. The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates. The Company measures the fair value of its warrant liabilities using Level 3 inputs. F- 11 Derivatives and Liability-Classified Instruments The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board (FASB) in ASC 480 , Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815) . The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. Allowance for Doubtful Accounts The Company establishes an allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of up to 100 % of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment of management. The allowance for doubtful accounts receivable was approximately $ 30,000 and $ 183,000 as of December 31, 2023 and 2022, respectively. Inventories The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. Costs of inventories primarily consisted of material and third party assembly costs. The Company records write-downs for estimated obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those expected by management, additional adjustments to inventory valuation may be required. Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and quantification of slow moving inventory items. The Company recorded write-downs of inventory of approximately $ 3,558,000 and $ 420,000 during the years ended December 31, 2023 and 2022, respectively. Property and Equipment Property and equipment are originally recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to six years . Depreciation is recorded in cost of sales and operating expenses in the consolidated statements of operations and comprehensive loss. Leasehold improvements and assets acquired through capital leases are amortized over the shorter of their estimated useful life or the lease term, and related amortization is recorded in operating expenses in the consolidated statements of operations. Intangible and Long-lived Assets Intangible assets are recorded at cost and amortized on a straight-line method over their estimated useful lives of three to ten years . Amortization of developed technology and other intangibles directly related to the Company’s products is included in cost of net revenue, while amortization of customer relationships and other intangibles not associated with the Company’s products is included in selling, general and administrative expenses in the consolidated statements of operations and comprehensive loss. F- 12 The Company regularly reviews the carrying value and estimated lives of its long-lived assets and finite-lived intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the long-lived asset group over the asset’s fair value. Purchased Intangible Assets Intangible assets acquired in business combinations are accounted for based on the fair value of assets purchased and are amortized over the period in which economic benefit is estimated to be received. Intangible assets subject to amortization, including those acquired in business combinations were as follows (amounts in thousands): December 31, 2023 Gross Net Carrying Accumulated Other Carrying Amount Amortization Impairment Amount Developed technology $ 5,726 $ ( 3,471 ) $ — $ 2,255 Customer relationships 2,556 ( 1,550 ) — 1,006 Other 186 ( 61 ) ( 106 ) 19 Total $ 8,468 $ ( 5,082 ) $ ( 106 ) $ 3,280 December 31, 2022 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Developed technology $ 5,726 $ ( 1,491 ) $ 4,235 Customer relationships 2,556 ( 666 ) 1,890 Other 186 ( 33 ) 153 Total $ 8,468 $ ( 2,190 ) $ 6,278 Developed technology primarily consisted of MoSys’ products that have reached technological feasibility and primarily relate to its memory semiconductor products and technology. The value of the developed technology was determined by discounting estimated net future cash flows of these products. Amortization related to developed technology of $ 2.0 million and $ 1.4 million for the years ended December 31, 2023 and 2022, respectively, was included in cost of net revenue in the consolidated statements of operations and comprehensive loss. Customer relationships relate to the Company’s ability to sell existing and future versions of its products to MoSys’ customers existing at the time of the arrangement. The fair value of the customer relationships was determined by discounting estimated net future cash flows from the customer relationships. Amortization related to customer relationships of $ 0.9 million and $ 0.6 million for the years ended December 31, 2023 and 2022, respectively, was included in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss. During 2023, the Company revised the remaining estimated life for its developed technology and customer relationship intangible assets to 18 months as a result of the end-of-life of its memory products (see Note 12). Other amortization expense was approximately $ 28,000 and $ 27,000 for the years ended December 31, 2023 and 2022, respectively. F- 13 As of December 31, 2023, estimated future amortization expense related to intangible assets is expected to be (in thousands): Year ending December 31, 2024 $ 3,267 2025 6 2026 6 2027 1 $ 3,280 Business Combinations The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination. Allocation of purchase consideration to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred. Goodwill The Company determines the amount of a potential goodwill impairment by comparing the fair value of the reporting unit with its carrying amount. To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized. The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test. As the Company uses the market approach to determine the step one fair value of the reporting unit, the price of its common stock is an important component of the fair value calculation. If the Company’s stock price experiences significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods. The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment test. If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value. The fair value of the reporting unit is determined using the market approach. If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired. If the carrying value of the reporting unit’s goodwill exceeds its fair value, then the Company must record an impairment charge equal to the difference. During the three months ended December 31, 2022, the Company concluded a triggering event had occurred due to the sustained decrease in the price per share of its common stock and related reduced market capitalization. The Company performed a test for goodwill impairment, and, due to the decrease in the price per share of its common stock, the test results indicated the goodwill carrying value was greater than its implied fair value. As a result of the impairment test, the Company recorded a non-cash impairment charge totaling $ 9.9 million, and the Company’s goodwill balance was reduced to zero as of December 31, 2022. F- 14 Leases ASC 842, Leases (ASC 842), requires an entity to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months. The Company adopted ASC 842 utilizing the modified retrospective transition method. The Company elected the practical expedient afforded in ASC 842 in which the Company did not reassess whether any contracts that existed prior to adoption have or contain leases or the classification of its existing leases. Revenue Recognition The Company recognizes revenue in accordance with 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 the Company’s historical practice of recognizing product revenue when title and risk of loss pass to the customer. The Company generates revenue primarily from sales of integrated circuits and module products, performance of engineering services and licensing of its intellectual property. Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects 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 the Company’s contracts have a single performance obligation to transfer products. Accordingly, the Company recognizes 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 the Company expects to receive in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price. The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically 60 days or less. The Company 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 The Company’s licensing contracts typically provide for royalties based on the licensee’s use of the Company’s memory technology in its currently shipping commercial products. The Company estimates its royalty revenue in the calendar quarter in which the licensee uses the licensed technology. Payments are received in the subsequent quarter. The Company also generates revenue from licensing its technology. The Company recognizes license fees as revenue at the point of time when the control of the license has been transferred and the Company has 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. F- 15 Deferred cost of net revenue During the year ended December 31, 2022, the Company had $ 1.1 million of product shipments for which the revenue recognition criteria under ASC 606 had not been met. Accordingly, the cost of net revenue of approximately $ 0.6 million associated with these shipments was deferred and presented as deferred cost of net revenue in the consolidated balance sheets as of December 31, 2022. During the three months ended March 31, 2023, the Company recognized the associated revenue and cost of net revenue. Contract liabilities – deferred revenue The Company’s contract liabilities consist of advance customer payments and deferred revenue. The Company classifies advance customer payments and deferred revenue as current or non-current based on the timing of when the Company expects to recognize revenue. As of December 31, 2023 and 2022, contract liabilities were in a current position and included in deferred revenue. During the year ended December 31, 2023, the Company recognized approximately $ 332,000 of revenue that had been included in deferred revenue as of December 31, 2022. See Note 7 for disaggregation of revenue by geography. The Company does not have significant financing components, as payments from customers are typically due within 60 days of invoicing, and the Company has elected the practical expedient to not value financing components that are less than one year. Shipping and handling costs are generally incurred by the customer, and, therefore, are not recorded as revenue. Cost of Net Revenue Cost of net revenue consists primarily of direct and indirect costs of product sales, including amortization of intangible assets and depreciation of production-related fixed assets. Advertising Costs Advertising costs are expensed as incurred. Advertising costs were not significant for the years ended December 31, 2023 and 2022. Research and Development Engineering costs are recorded as research and development expense in the period incurred. Stock-Based Compensation The Company periodically issues stock options and restricted stock awards to employees and non-employees. The Company accounts for such grants based on ASC No. 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on a straight-line basis over the vesting period. The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing (Black Scholes) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options, and future dividends. Compensation expense is recorded based upon the value derived from the Black Scholes model. The assumptions used in the Black Scholes model could materially affect compensation expense recorded in future periods. F- 16 Foreign Currency Transactions The functional currency of the Company is the U.S dollar. All foreign currency transactions are initially measured and recorded in an entity’s functional currency using the exchange rate on the date of the transaction. All monetary assets and liabilities are remeasured at the end of each reporting period using the exchange rate at that date. All non-monetary assets and related expense, depreciation or amortization are not subsequently remeasured and are measured using the historical exchange rate. An average exchange rate may be used to recognize income and expense items earned or incurred evenly over a period. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the statement of operations, except for the gains and losses arising from the conversion of the carrying amount of the foreign currency denominated convertible preferred shares into the functional currency that are presented as adjustment to the net loss to arrive at net loss attributable to common stockholders. Per-Share Amounts Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of exchangeable shares and shares of common stock outstanding during the period. Diluted net loss per share gives effect to all potentially dilutive exchangeable and common shares outstanding during the period. Potentially dilutive common shares consist of incremental exchangeable shares and shares of common stock issuable upon the achievement of escrow terms, exercise of stock options, vesting of stock awards and exercise of warrants. The following table sets forth securities outstanding that were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive (in thousands): December 31, 2023 2022 Escrow shares - exchangeable shares 33 33 Escrow shares - common stock 13 13 Options to purchase common stock 36 37 Unvested restricted common stock units 15 26 Common stock warrants 242 124 Total 339 233 Income Taxes The Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2015 through 2020 tax years generally remain subject to examination by U.S. federal and state tax authorities, and the 2011 through 2020 tax years generally remain subject to examination by foreign tax authorities. At December 31, 2023, the Company did not have any material unrecognized tax benefits nor expect its unrecognized tax benefits to change significantly over the next 12 months. The Company recognizes interest related to unrecognized tax benefits as income tax expense and penalties related to unrecognized tax benefits as other income and expense. During the years ended December 31, 2023 and 2022, the Company did not recognize any interest or penalties related to unrecognized tax benefits. F- 17 Recently Issued Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires disclosure of incremental segment information on an annual and interim basis. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and it requires retrospective application to all prior periods presented in the financial statements. The Company is currently evaluating the impact that this ASU will have on the presentation of its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this ASU will have on the presentation of its consolidated financial statements. Other recent authoritative guidance issued by the FASB (including technical corrections to the ASC), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the SEC) did not, or is not expected to, have a material impact on the Company’s consolidated financial statements and related disclosures. Note 2: Fair Value of Financial Instruments The following table represents the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 and the basis for that measurement (in thousands): December 31, 2023 Fair Value Level 1 Level 2 Level 3 Assets: Money market funds (1) $ 1 $ — $ — $ — Liabilities: Warrant liability $ 1,748 $ — $ — $ 1,748 December 31, 2022 Fair Value Level 1 Level 2 Level 3 Assets: Money market funds (1) $ 73 $ — $ — $ — Corporate notes and commercial paper $ 1,078 $ — $ 1,078 $ — Liabilities: Warrant liability $ 2,079 $ — $ — $ 2,079 (1) Included in cash and cash equivalents The following table represents the Company’s determination of fair value for its financial assets (cash equivalents and investments) (in thousands): December 31, 2023 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 1,583 $ — $ — $ 1,583 December 31, 2022 Unrealized Unrealized Fair Cost Gains Losses Value Cash and cash equivalents $ 1,828 $ — $ — $ 1,828 Short-term investments 1,103 — ( 25 ) 1,078 $ 2,931 $ — $ ( 25 ) $ 2,906 F- 18 Note 3. Balance Sheet Detail December 31, 2023 2022 (in thousands) Inventories: Raw materials $ 209 $ 1,279 Work-in-process 1,517 2,595 Finished goods 880 1,474 $ 2,606 $ 5,348 Prepaid expenses and other: Prepaid inventory and production costs $ 452 $ 186 Prepaid insurance 37 77 Prepaid software 67 173 Other 28 138 $ 584 $ 574 Property and equipment, net: Machinery and equipment $ 4,848 $ 4,630 Computer equipment and software 377 342 Furniture and fixtures 93 93 Leasehold improvements 428 555 Total property and equipment 5,746 5,620 Less: Accumulated depreciation and amortization ( 4,590 ) ( 3,395 ) $ 1,156 $ 2,225 During the year ended December 31, 2023, the Company wrote off assets with a book value of approximately $ 243,000 to depreciation expense as a loss on disposal. The net book value of assets written off was allocated between cost of net revenue of $ 116,000 and the remaining book value of $ 127,000 was charged to operating expenses. During the year ended December 31, 2022, the Company wrote-off fully depreciated assets, or assets that were no longer in service, with a historical cost of approximately $ 6,380,000 with corresponding accumulated depreciation of approximately $ 6,227,000 . Depreciation expense of approximately $ 535,000 and approximately $ 384,000 was charged to cost of net revenue and operating expenses, respectively, for the year ended December 31, 2023. The Company wrote off the remaining book value of approximately $ 153,000 to depreciation expense as a loss on disposal during the year ended December 31, 2022. December 31, 2023 2022 (in thousands) Accrued Expenses & Other: Accrued wages and employee benefits $ 405 $ 469 Professional fees, legal and consulting 158 514 Financing liability — 330 Warranty accrual 37 39 Other 11 465 $ 611 $ 1,817 F- 19 Note 4. Commitments and Contingencies Leases The Company has facility leases that it accounts for under ASC 842, including the operating leases for its corporate headquarters facility in San Jose, California, and facilities in Toronto and Markham Ontario, Canada. In November 2023, the Company renewed the San Jose facility lease for a one-year term commencing January 15, 2024 (the Renewal Term), and effective with the commencement of the Renewal term the Company ceased accounting for the lease under ASC 842. In December 2023, the Company renewed the Toronto office lease for a one-year term commencing January 1, 2024. In May 2022, the Company entered into a lease for the facility in Markham with a 60-month term, which commenced June 21, 2022. The Markham landlord also provided a lease incentive of approximately $ 286,200 (the Incentive). In 2023, the Company received payment of $ 143,100 from the Markham landlord of the first installment of the Incentive. The remaining balance of the Incentive is paid to the Company in the form of an adjustment to rent during the last three months of each year during the remaining lease term. During 2023, a credit of $ 35,775 was made against the rent during the three months ended December 31, 2023. As of December 31, 2023, the pending Lease Incentive to be received was $ 107,325 . Upon the renewal of the Toronto lease in 2023, the Company recognized a right-of-use asset of approximately $ 137,700 . The discount rate used to measure the lease assets and liabilities for the renewal was 8 %. The initial right-of-use asset and corresponding liability of approximately $ 1.0 million for the Markham facility lease was measured at the present value of the future minimum lease payments. The discount rate used to measure the lease assets and liabilities was 8 %. Lease expense is recognized on a straight-line basis over the lease term. On March 1, 2022, the Company entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset and lease liability of approximately $ 274,000 . On November 1, 2022, the Company entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset of approximately $ 124,000 and lease liability of approximately $ 117,000 . The following table provides the details of right-of-use assets and lease liabilities as of December 31, 2023 (in thousands): Year Ended December 31, 2023 Right-of-use assets: Operating leases $ 422 Finance lease 193 Total right-of-use assets $ 615 Lease liabilities: Operating leases $ 525 Finance lease 194 Total lease liabilities $ 719 F- 20 Future minimum payments under the leases at December 31, 2023 are listed in the table below (in thousands): Year ending December 31, 2024 $ 413 2025 166 2026 110 2027 108 Total future lease payments 797 Less: imputed interest ( 78 ) Present value of lease liabilities $ 719 The following table provides the details of supplemental cash flow information (in thousands): Year Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for leases $ 674 $ 704 Rent expense was approximately $ 0.6 million and $ 0.7 million for the years ended December 31, 2023 and 2022, respectively. In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and certain other operating costs related to the leased facilities and equipment. Indemnification In the ordinary course of business, the Company enters into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. The Company has also entered into indemnification agreements with its officers and directors. No material amounts were reflected in the Company’s consolidated financial statements for the years ended December 31, 2023 and 2022 related to these indemnifications. The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any payments related to these indemnification agreements. Product Warranties The Company warrants certain of its products to be free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of net revenues. Warranty costs were not material for the years ended December 31, 2023 and 2022. Legal Matters The Company is not a party to any legal proceeding that the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts. Purchase Obligations The Company’s primary purchase obligations include non-cancelable purchase orders for inventory and computer-aided-design (CAD) software. At December 31, 2023, the Company had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $ 2.3 million and non-cancelable purchase orders for CAD software of $ 3.1 million over 24 months. F- 21 Note 5: Retirement Savings Plan Effective January 1997, the Company adopted the Peraso 401(k) Plan (the Savings Plan), which qualifies as a thrift plan under Section 401(k) of the Internal Revenue Code. Full-time and part-time employees who are at least 21 years of age are eligible to participate in the Savings Plan at the time of hire. Participants may contribute up to 15 % of their earnings to the Savings Plan. No matching contributions were made by the Company during the years ended December 31, 2023 and 2022. Note 6. Business Segments, Concentration of Credit Risk and Significant Customers The Company determines its reporting units in accordance with ASC No. 280, Segment Reporting (ASC 280). Management evaluates a reporting unit by first identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated. Management has determined that the Company has one consolidated operating segment. The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources. The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. The Company recognized revenue from shipments of product, licensing of its technologies and performance of services to customers by geographical location as follows (in thousands): Year Ended December 31, 2023 2022 United States $ 8,786 $ 8,932 Hong Kong 689 2,428 Taiwan 2,633 1,205 Rest of world 1,641 2,303 Total net revenue $ 13,749 $ 14,868 The following is a breakdown of product revenue by category (in thousands): Years Ended December 31, Product category 2023 2022 Memory ICs $ 8,446 $ 7,722 mmWave ICs 2,726 3,289 mmWave modules 1,677 3,170 mmWave other products 4 18 $ 12,853 $ 14,199 Customers who accounted for at least 10 % of total net revenue were: Year Ended December 31, 2023 2022 Customer A 35 % 26 % Customer B 22 % 11 % Customer C 18 % * Customer D * 21 % Customer E * 16 % * Represents less than 10 % As of December 31, 2023, three customers accounted for 83 % of accounts receivable, and the Company had a provision for doubtful accounts of $ 30,000 against one of the customer’s receivables. Four customers accounted for 79 % of accounts receivable as of December 31, 2022. F- 22 Note 7. Income Tax Provision Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities were (in thousands): Year Ended December 31, 2023 2022 Deferred tax assets: Federal and state loss carryforwards $ 4,847 $ 9,017 Reserves, accruals and other 328 344 Depreciation and amortization 1,329 611 Deferred stock-based compensation 2,429 2,682 Capitalized research and development costs 660 965 Research and development credit carryforwards 6,744 6,655 Total deferred tax assets 16,337 20,274 Less: Valuation allowance ( 16,337 ) ( 20,274 ) Net deferred tax assets, net $ — $ — The $ 3.9 million decrease in the valuation allowance during 2023 was primarily the result of a decrease to the net operating loss carryforwards for the current year. The valuation allowance increased by $ 4.4 million during the year ended December 31, 2022. Utilization of the Company’s net operating losses (NOLs) and tax credit carryforwards is subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code (IRC) and similar state provisions. Section 382 of the IRC (Section 382) imposes limitations on a corporation’s ability to utilize its NOL and tax credit carryforwards, if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership percentage of certain stockholders in the stock of the corporation by more than 50 % over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate. While a formal study has not been performed, the Company believes that Section 382 ownership changes occurred as a result of financing transaction in 2018 and the Arrangement. The Company believes the Section 382 limitations will result in approximately 91 % of the federal and state NOLs expiring before they can be utilized, and approximately 98 % of the federal tax credit carryforwards expiring before they can be utilized. F- 23 As of December 31, 2023, the Company had NOLs of approximately $ 212.7 million for federal income tax purposes and approximately $ 131.2 million for state income tax purposes. Only approximately $ 18.7 million of the federal NOLs and $ 13.3 million of the state NOLs are expected to be available before expiration due to the Section 382 limitation. These NOLs are available to reduce future taxable income and will expire at various times from 2025 through 2037, except federal NOLs from 2018 to 2023 which have no expiration date. As of December 31, 2023, the Company also had federal research and development tax credit carryforwards of approximately $ 8.1 million that will expire at various times through 2042, and California research and development credits of approximately $ 8.5 million, which do not have an expiration date. A reconciliation of income taxes provided at the federal statutory rate ( 21 %) to the actual income tax provision is as follows (in thousands): Year Ended December 31, 2023 2022 Income tax benefit computed at U.S. statutory rate $ 277 $ ( 6,804 ) Research and development credits — ( 38 ) Stock-based compensation 9 1,033 Amortization of intangible assets ( 60 ) ( 60 ) Goodwill impairment — 2,089 Change in fair value of warrant liabilities ( 734 ) — Valuation allowance changes affecting tax provision 506 3,774 Other 2 6 Income tax provision $ — $ — Note 8. Stock-Based Compensation Common Stock Equity Plans In 2010, the Company adopted the 2010 Equity Incentive Plan and later amended it in 2014, 2017 and 2018 (the Amended 2010 Plan). The Amended 2010 Plan was terminated in August 2019 and remains in effect as to outstanding equity awards granted prior to the date of expiration. No new awards may be made under the Amended 2010 Plan. In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan) to replace the Amended 2010 Plan. The 2019 Plan authorizes the board of directors or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units. Under the 2019 Plan, 4,563 shares were initially reserved for issuance. In November 2021, in connection with the approval of the Arrangement, the Company’s stockholders approved an amendment increasing the number of shares reserved for issuance under the 2019 Plan by 77,674 shares. Under the 2019 Plan, the term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10 % of the voting power of all classes of the Company’s stock may not exceed five years . The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market value of the shares on the date of grant. Generally, awards under the 2019 Plan will vest over a three to four-year period, and options will have a term of 10 years from the date of grant. In addition, the 2019 Plan provides for automatic acceleration of vesting for options granted to non-employee directors upon a change of control of the Company. In connection with the Arrangement, the Company assumed the Peraso Technologies Inc. 2009 Share Option Plan (the 2009 Plan) and all outstanding options granted pursuant to the terms of the 2009 Plan. Each outstanding, unexercised and unexpired option under the 2009 Plan, whether vested or unvested, was assumed by the Company and converted into options to purchase shares of the Company’s common stock and became exercisable by the holder of such option in accordance with its terms, with (i) the number of shares of common stock subject to each option multiplied by the Exchange Ratio and (ii) the per share exercise price upon the exercise of each option divided by the Exchange Ratio. In connection with the Arrangement, no further awards will be made under the 2009 Plan. The 2009 Plan, the Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.” F- 24 Stock-Based Compensation Expense The Company recorded compensation costs of $ 4.2 million and $ 4.3 million related to the vesting of stock options during the years ended December 31, 2023 and 2022, respectively. At December 31, 2023, the unamortized compensation cost was approximately $ 3.3 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately two years . The Company recorded compensation costs of $ 1.0 million and $ 1.4 million related to the vesting of restricted stock options during the years ended December 31, 2023 and 2022, respectively. The unamortized compensation cost at December 31, 2023 was $ 1.0 million related to restricted stock units and is expected to be recognized as expense over a weighted average period of approximately two years . Common Stock Options and Restricted Stock The term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10 % of the voting power of all classes of the Company’s stock may not exceed five years. The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market value of the shares on the date of grant. Generally, options granted under the 2019 Plan will vest over a three to four-year period and have a term of 10 years from the date of grant. In addition, the 2019 Plan provides for automatic acceleration of vesting for options granted to non-employee directors upon a change of control (as defined in the 2019 Plan) of the Company. The following table summarizes the activity in the shares available for grant under the Plans during the years ended December 31, 2023 and 2022 and options outstanding as of December 31, 2023 and 2022. (in thousands, except exercise price): Options Outstanding Weighted Shares Average Available Number of Exercise for Grant Shares Prices Balance as of December 31, 2021 76 39 $ 139.60 RSUs granted ( 44 ) — — RSUs cancelled and returned to the Plans 7 — — Options cancelled — ( 2 ) $ 250.80 Balance as of December 31, 2022 39 37 $ 132.80 RSUs granted ( 5 ) — — RSUs cancelled and returned to the 2019 Plan 5 — — Options cancelled — ( 1 ) $ 321.30 Balance as of December 31, 2023 39 36 $ 127.00 The following table summarizes significant ranges of outstanding and exercisable options as of December 31, 2023 (in thousands, except contractual life and exercise price): Options Outstanding Options Exercisable Weighted Average Remaining Weighted Weighted Contractual Average Average Aggregate Number Life Exercise Number Exercise Intrinsic Range of Exercise Price Outstanding (in Years) Price Exercisable Price value $ 62.80 - $ 599.60 36 6.77 $ 105.20 26 $ 103.60 $ — $ 1,024.00 - $ 5,759.60 — 2.73 $ 4,050.80 — $ 4,050.80 $ — $ 5,760.00 - $ 16,399.60 — 2.73 $ 5,760.00 — $ 5,760.00 $ — $ 16,400.00 - $ 36,960.00 — 1.33 $ 16,400.00 — $ 16,400.00 $ — $ 62.80 - $ 36,960.00 36 6.76 $ 122.80 26 $ 127.00 $ — F- 25 A summary of RSU activity under the Plans is presented below (in thousands, except for fair value): Weighted Average Number of Grant-Date Shares Fair Value Non-vested shares as of December 31, 2021 2 $ 180.00 Granted 44 $ 84.00 Vested ( 15 ) $ 91.60 Effect of business combination ( 4 ) $ 87.61 Non-vested shares as of December 31, 2022 27 $ 82.46 Granted 4 $ 24.62 Vested ( 14 ) $ 75.72 Cancelled ( 2 ) $ 82.90 Non-vested shares as of December 31, 2023 15 $ 69.63 Note 9. Stockholders’ Equity Exchangeable Shares and Preferred Stock As discussed in Note 1, on December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed. Pursuant to the completion of the Arrangement, each Peraso Share that was issued and outstanding immediately prior to December 17, 2021 was converted into either newly issued shares of common stock of the Company or shares of Canco, which are exchangeable for shares of the Company’s common stock (Exchangeable Shares), at the election of each former Peraso Tech stockholder. Of the shares issued to the holders of Peraso Tech Shares, pursuant to the terms of the Agreement, the Company held in escrow an aggregate of 1,312,878 Exchangeable Shares and 502,567 shares of common stock (collectively, the Escrow Shares). The Escrow Shares are escrowed pursuant to the terms of an escrow agreement on a pro rata basis from the aggregate consideration received by the holders of Peraso Shares, subject to the offset by the Company for any losses in accordance with the Agreement. Such Escrow Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of: (a) any date following the first anniversary of December 17, 2021 and prior to December 17, 2024 where the volume weighted average price of the common stock for any 20 trading days within a period of 30 consecutive trading days is at least $ 342.80 per share, subject to further adjustment for stock splits or other similar transactions; (b) the date of any sale of all or substantially all of the assets or shares of the Company; or (c) the date of any bankruptcy, insolvency, restructuring, receivership, administration, wind-up, liquidation, dissolution, or similar event involving the Company. All and any voting rights and other stockholder rights, other than with respect to dividends and distributions, with respect to the Escrow Shares are suspended until the Escrow Shares are released from escrow. The Exchangeable Share structure is commonly used for cross-border transactions of this nature so as to provide non-tax-exempt Canadian shareholders with the same economic rights and benefits as holders of the Company’s shares into which the Exchangeable Shares are exchangeable, while allowing those Canadian shareholders to benefit from the tax-rollover available on the issuance of the Exchangeable Shares. In general terms, by choosing to acquire Exchangeable Shares from Canco, such a former Peraso Tech shareholder was able to rely on a rollover rule in the Income Tax Act (Canada) in order to defer any capital gain that he/she/it would have otherwise realized. F- 26 Callco was incorporated to exercise the call rights, while Canco was incorporated to acquire the shares of Peraso Tech from Canadian shareholders that wished to receive Exchangeable Shares as consideration, so it was a tax deferred transaction for such Canadian shareholders. The use of a separate entity, Callco, helps maximize cross border paid-up capital, which represents the amount that can generally be distributed free of Canadian withholding tax. The call rights also allow Callco to “purchase” the Exchangeable Shares rather than having them redeemed by Canco on a redemption or retraction or in connection with a liquidity event, thus avoiding the adverse deemed dividend tax consequences to shareholders that may arise from a redemption or retraction of Exchangeable Shares. Holders of Exchangeable Shares have the right at any time (the Retraction Right) to retract or redeem any or all of the Exchangeable Shares owned by them for an amount per share equal to the market price of a share of the Company’s common stock plus the full amount of all declared and unpaid dividends on such Exchangeable Share (the Exchangeable Share Purchase Price). The Exchangeable Share Purchase Price is payable only by the Company delivering or causing to be delivered to the relevant holder one share of the Company’s common stock for each Exchangeable Share purchased plus a cash amount equal to the amount of any accrued and unpaid dividends on such Exchangeable Share. The Company and Callco each have an overriding right, in the event that a holder of Exchangeable Shares exercises its Retraction Right, to redeem from such holder all, but not less than all, of the Exchangeable Shares tendered for redemption. The Exchangeable Shares are subject to redemption by the Company, Callco and Canco at the Exchangeable Share Purchase Price, on the “Redemption Date,” which date shall be no earlier than the seventh anniversary of the date on which Exchangeable Shares are first issued, unless: (a) less than 10 % of the aggregate number of Exchangeable Shares issued remain outstanding; (b) there is a change in control of the Company (defined generally as (i) any merger, amalgamation, arrangement, takeover bid or tender offer, material sale of shares or rights or interests that results in the holders of outstanding voting securities of the Company directly or indirectly owning, or exercising control or direction over, voting securities representing less than 50 % of the total voting power of all of the voting securities of the surviving entity; or (ii) any sale or disposition of all or substantially of the Company’s assets), and (c) upon the occurrence of certain other events. The Exchangeable Share Purchase Price is payable only by the Company delivering or causing to be delivered to the relevant holder one share of the Company’s common stock for each Exchangeable Share purchased plus a cash amount equal to the amount of any accrued and unpaid dividends on such Exchangeable Share. In the event of the liquidation, dissolution or winding-up of Canco, holders of Exchangeable Shares have the right to receive in respect of each Exchangeable Share held by such holder, an amount per share equal to the Exchangeable Share Purchase Price, which shall be satisfied in full by Canco by delivering to such holder one Company Share, plus an amount equal to the Dividend Amount. The Company and Callco each have an overriding right to purchase from all holders all but not less than all of the Exchangeable Shares upon the occurrence of such events. In addition, the Company and Callco have the right to purchase all outstanding Exchangeable Shares at the Exchangeable Share Purchase Price if there is a change of law that permits holders of Exchangeable Shares to exchange their Exchangeable Shares for shares of common stock on a basis that will not require holders to recognize any gain or loss or any actual or deemed dividend for Canadian tax purposes. The holders of Exchangeable Shares have an “automatic exchange right” in the event of any insolvency, liquidation, dissolution or winding-up or in general, related proceedings, of the Company for an amount per share equal to the Exchangeable Share Purchase Price. It is expected that Callco will exercise its call rights, as that is more beneficial to the holders of the Exchangeable Shares. Once Callco acquires the Exchangeable Shares from a holder, it (Callco and the Company) is obligated to deliver the Company shares to the holder. Callco discharges this obligation by arranging for the Company to issue and deliver those shares to the holders on behalf of Callco. As consideration for satisfying the delivery obligation, Callco would issue its own shares to the Company. F- 27 There are no cash redemption features, as all redemption and exchange scenarios are payable in a share of the Company’s common stock. Neither Canco, Callco, or the Company assume any tax liabilities of a former Peraso Tech shareholder who acquired Exchangeable Shares under the plan of arrangement. The purchase price computed upon the exercise of rights pertaining to retraction, redemption, or liquidation, or otherwise giving rise to a purchase or cancellation of an Exchangeable Share, will, in all cases, consist of a 1:1 exchange involving the Company’s common stock, regardless of the market price of a share of the Company’s common stock. In connection with the Arrangement, on December 15, 2021, the Company filed the Certificate of Designation of Series A Special Voting Preferred Stock (the Certificate) with the Secretary of State of the State of Delaware to designate Series A Special Voting Preferred Stock (the Special Voting Share) in accordance with the terms of the Arrangement Agreement in order to enable the holders of Exchangeable Shares to exercise their voting rights. The Special Voting Share was issued to a third-party administrative agent (the Agent) solely to facilitate the exercise of rights by holders of Exchangeable Shares. The rights of the Agent, as holder of the Special Voting Share, are limited to effecting the rights of the holders of the Exchangeable Shares; the Special Voting Share does not confer any independent rights to the Agent. Under the Certificate, when all of the Exchangeable shares have been converted into shares of the Company’s common stock, the Special Voting Share shall be automatically cancelled and shall not be reissued. Each Exchangeable Share is exchangeable for one share of common stock of the Company and while outstanding, the Special Voting Share enables holders of Exchangeable Shares to cast votes on matters for which holders of the common stock are entitled to vote, and by virtue of the share terms relating to the Exchangeable Shares, enable the Exchangeable Shares to receive dividends that are economically equivalent to any dividends declared with respect to the shares of common stock. As the Special Voting Share does not participate in dividends (only the Exchangeable Shares participate in dividends) and is not entitled to participate in the residual interest of the Company, it is not classified as an equity instrument in the Company’s financial statements. The Exchangeable Shares, which can be converted into common stock at the option of the holder and have the same voting and dividend rights as common stock, are similar in substance to shares of common stock. Further, Canco and Callco are non-substantive entities, which are looked through with the Exchangeable Shares being, in substance, common stock of the Company. Therefore, the Exchangeable Shares have been included in the determination of outstanding common stock. The Special Voting Share was issued to a third-party administrative agent (the Agent) solely to facilitate the exercise of rights by holders of Exchangeable Shares, The rights of the Agent, as holder of the Special Voting Share, are limited to effecting the rights of the holders of the Exchangeable Shares; the Special Voting Share does not confer any independent rights to the Agent. Under the Certificate, when all of the Exchangeable shares have been converted into shares of the Company’s common stock, the Special Voting Share shall be automatically cancelled and shall not be reissued. During the years ended December 31, 2023 and 2022, 133 and 5 exchangeable shares were exchanged into an equivalent number of shares of common stock. June 2023 Registered Direct Offering On May 31, 2023, the Company entered into a securities purchase agreement (the SPA) with an institutional investor (the Investor), pursuant to which the Company sold to the Investor, in a registered direct offering that closed on June 2, 2023, an aggregate of 56,250 shares of common stock at a purchase price of $ 28.00 per share. Net proceeds to the Company from the registered direct offering, after offering costs, were approximately $ 3.4 million. The Company also offered and sold to the Investor pre-funded warrants to purchase up to 86,608 shares of common stock (the 2023 PF Warrants). Each pre-funded warrant is exercisable for one share of common stock. The purchase price of each pre-funded warrant was $ 27.60 , and the exercise price of each pre-funded warrant is $ 0.40 per share. The 2023 PF Warrants were immediately exercisable and may be exercised at any time until all of such pre-funded warrants are exercised in full. In June 2023, the Investor exercised 24,183 of the 2023 PF Warrants, and in September 2023, the remaining 62,425 of the 2023 PF Warrants were exercised by the Investor . In connection with the execution of the SPA, the Company and the Investor entered into an amendment (the Amendment) to the 2022 Purchase Warrant. Pursuant to the terms of the Amendment, the 2022 Purchase Warrant (as defined below) was amended to reduce the exercise price per share from $ 54.40 to $ 40.00 , effective as of June 2, 2023. F- 28 In a concurrent private placement that closed on June 2, 2023, the Company also sold to the Investor a warrant to purchase up to 142,858 shares of common stock (the 2023 Purchase Warrant). The 2023 Purchase Warrant was immediately exercisable at an exercise price of $ 28.00 per share with a five-year term. As discussed below, the 2023 Purchase Warrant is accounted for as a liability. The fair value of the warrant at the date of issuance of approximately $ 3,162,000 was accounted for as a cost of the offering. November 2022 Registered Direct Offering On November 28, 2022, the Company entered into a securities purchase agreement with the Investor, pursuant to which the Company sold to the Investor, in a registered direct offering that closed on November 30, 2022, an aggregate of 32,500 shares of common stock at a negotiated purchase price of $ 40.00 per share. The Company also offered and sold to the investor pre-funded warrants to purchase up to 28,750 shares of common stock. Each pre-funded warrant was exercisable for one share of common stock. The purchase price of each pre-funded warrant was $ 39.60 , and the exercise price of each pre-funded warrant was $ 0.40 per share. The pre-funded warrants were exercised in full by the Investor in April 2023. Net proceeds to the Company from the registered direct offering, after offering costs, were approximately $ 2.1 million. In a concurrent private placement, the Company also sold to the Investor a warrant to purchase up to 91,875 shares of common stock (the 2022 Purchase Warrant). The 2022 Purchase Warrant became exercisable on May 29, 2023 at an initial exercise price of $ 54.40 per share, which was subsequently reduced to $ 40.00 per share per the Amendment, and expires on May 29, 2028. As discussed below, the 2022 Purchase Warrant is accounted for as a liability. Warrants Classified as Liability Purchase Warrants The securities purchase agreements governing the 2023 Purchase Warrant and the 2022 Purchase Warrant (collectively, the “Purchase Warrants”) provide for a value calculation for such warrants using the Black Scholes model in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100 % or greater. The Company has determined this provision introduces leverage to the holders of the Purchase Warrants that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrants as liabilities in its consolidated balance sheet. The classification of the Purchase Warrants, including whether the Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the consolidated statements of operations and comprehensive loss. The 2022 Purchase Warrant was initially recorded at a fair value at $ 3,673,368 at the grant date and is re-valued at each reporting date. As of December 31, 2022, the fair value of the warrant liability was reduced to $ 2,079,138 . Upon the closing of the registered direct offering, the fair value of the Purchase Warrant liability, up to the net amounts of the funds received of approximately $ 2,099,000 , was recorded as a financing cost, and the excess of $ 1,576,000 was recorded as a financing cost in the statement of operations. As a result of the change in fair value the Company recognized a gain for the reduction in the warrant liability for the year ended December 31, 2023 On June 2, 2023, the 2023 Purchase Warrant was initially recorded at a fair value at $ 3,162,401 , and, as of December 31, 2023, the fair value of the warrant liability was reduced to $ 1,095,287 . As a result, the Company recorded a gain for the twelve months ended December 31, 2023 for the change in fair value of the 2023 Purchase Warrant. The Company also recorded a gain of $ 1,426,050 for the twelve months ended December 31, 2023 for the change in the fair value of the warrant liability for the 2022 Purchase Warrant. F- 29 As of December 31, 2023, the Company had the following liability-classified warrants outstanding (amounts in thousands): Number of warrants on common shares Amount Balance as of December 31, 2021 — $ — Recognition of warrant liabilities 92 3,674 Change in fair value of warrants — ( 1,595 ) Balance as of December 31, 2022 92 2,079 Recognition of warrant liabilities 143 3,162 Change in fair value of warrants — ( 3,493 ) Balance as of December 31, 2023 235 $ 1,748 The initial fair value of each of the Purchase Warrants was determined using the Black Scholes model with the assumptions in the following table. The table also includes the total fair value determined at valuation date based on these assumptions. 2022 Purchase Warrant 2023 Purchase Warrant Expected term based on contractual term 5.5 years 5.0 years Interest rate (risk-free rate): 3.75 % 4.16 % Expected volatility 123 % 118 % Expected dividend — — Fair value of warrants (in thousands) $ 3,674 $ 3,162 The fair value of the Purchase Warrants at December 31, 2023 was determined using the Black Scholes model with the assumptions in the following table. The table also includes the total fair value determined at valuation date based on these assumptions. 2022 Purchase Warrant 2023 Purchase Warrant Expected term based on contractual term 4.4 years 4.2 years Interest rate (risk-free rate): 3.84 % 3.84 % Expected volatility 116 % 116 % Expected dividend — — Fair value of warrants (in thousands) $ 653 $ 1,095 Warrants Classified as Equity As of December 31, 2023, the Company had the following equity-classified warrants outstanding (share amounts in thousands): Warrant Type Number of Shares Exercise Price Expiration Balance as of December 31, 2022 33 Warrants expired ( 1 ) $ 47.00 January 2023 Warrants expired ( 3 ) $ 96.00 October 2023 Pre-funded warrants issued 86 $ 0.40 — Pre-funded warrants exercised ( 115 ) $ 0.40 — Balance as of December 31, 2023 - F- 30 As of December 31, 2022, the Company had the following equity-classified warrants outstanding (share amounts in thousands): Warrant Type Number of Shares Exercise Price Expiration Common stock 1 $ 1,880.00 January 2023 Common stock 3 $ 96.00 October 2023 Common stock 29 $ 0.40 — 33 Note 10. Related Party Transactions A family member of one of the Company’s executive officers is an employee of the Company. During the years ended December 31, 2023 and 2022, the Company paid approximately $ 111,400 and $ 101,000 , respectively, to the employee. The employee’s 2022 compensation included the aggregate grant date fair value, as determined pursuant to FASB ASC Topic 718, of an RSU awarded in April 2022. Additionally, a family member of one of the Company’s executive officers previously served as a consultant to the Company. During the year ended December 31, 2022, the Company paid approximately $ 162,000 to the consultant family member . Note 11. License and Asset Sale Transaction On August 5, 2022, the Company entered into a Technology License and Patent Assignment Agreement (the Intel Agreement) with Intel Corporation (Intel), pursuant to which Intel: (i) licensed from the Company, on an exclusive basis, certain software and technology assets related to the Company’s Stellar packet classification intellectual property, including its graph memory engine technology, and any roadmap variant, in the form existing as of the date of the Agreement (the Licensed Technology); (ii) acquired from the Company certain patent applications and patents owned by the Company; and (iii) assumed a professional services agreement, dated March 24, 2020, between Fabulous Inventions AB (Fabulous) and the Company, pursuant to which, among other things, the Company licensed from Fabulous certain technology incorporated into the Licensed Technology. As consideration for the Company to enter into the Agreement, Intel paid the Company $ 3,062,500 in August 2022 and $ 437,500 (the Holdback) in January 2023 upon the satisfaction by the Company of certain release criteria set forth in the Intel Agreement regarding the Licensed Technology. The Company determined that the license and asset sale did not qualify as a sale of a business, but as a sale of a non-financial asset, with the resultant gain recorded as income from operations in accordance with ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets . During the year ended December 31, 2022, the Company recognized a gain of approximately $ 2,600,000 on this transaction, net of transaction costs, which was recorded as a reduction of operating expenses in the consolidated statements of operations and comprehensive loss. In January 2023, upon receipt of the Holdback, the Company recognized a gain, net of transaction costs, which was also recorded as a reduction of operating expenses in the consolidated statements of operations and comprehensive loss. F- 31 Note 12. Memory IC Product End-of-Life Taiwan Semiconductor Manufacturing Corporation (TSMC) is the sole foundry that manufactures the wafers used to produce the Company’s memory IC products. TSMC informed the Company that TSMC is discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture the Company’s memory ICs. As a result, in May 2023, the Company informed its customers that the Company would be initiating an end-of-life (EOL) of its memory IC products. Through December 31, 2023, the Company had received non-cancelable purchase orders from customers totaling approximately $ 14,000,000 . During the period from July 1, 2023 to December 31, 2023 the Company commenced initial shipments of EOL orders and fulfilled approximately $ 3,700,000 of these initial purchase orders. Based on customer purchase orders in the Company’s backlog, the Company expects to ship additional EOL orders of approximately $ 10,300,000 over the 12 to 15 month period commencing January 1, 2024. Note 13. Subsequent Events Reverse Stock Split As disclosed in Note 1, effective January 2, 2024, the Company effected a 1-for-40 reverse stock split of its outstanding common stock. Public Offering On February 6, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc., as the sole underwriter (the “Underwriter”), relating to the issuance and sale in a public offering (the “Offering”) of: (i) 480,000 shares of the Company’s common stock, (ii) pre-funded warrants to purchase up to 1,424,760 shares of common stock, (iii) Series A warrants to purchase up to 3,809,520 shares of common stock, (iv) Series B warrants to purchase up to 3,809,520 shares of common stock, and (v) up to 285,714 additional shares of common stock, Series A warrants to purchase up to 571,428 shares of common stock and Series B warrants to purchase up to 571,428 shares of common stock that may be purchased pursuant to a 45-day option to purchase additional securities granted to the Underwriter by the Company. The Underwriter partially exercised this option on February 7, 2024 for 82,500 shares of common stock, Series A warrants to purchase up to 165,000 shares of common stock and Series B warrants to purchase up to 165,000 shares of common stock. The combined public offering price of each share of common stock, together with the accompanying Series A warrants and Series B warrants, was $ 2.10 , less underwriting discounts and commissions. The combined public offering price of each pre-funded warrant, together with the accompanying Series A warrants and Series B warrants, was $ 2.099 , less underwriting discounts and commissions. The Offering, including the additional shares of common stock, Series A warrants and Series B warrants sold pursuant to the partial exercise of the Underwriter’s option, closed on February 8, 2024. The net proceeds from the Offering, including the additional shares of common stock, Series A warrants and Series B warrants sold pursuant to the partial exercise of the Underwriter’s option, after deducting underwriting discounts and commissions and other estimated Offering expenses payable by the Company and excluding any net proceeds from the exercise of the Series A warrants, Series B warrants and pre-funded warrants, were approximately $ 3.3 million. The Series A warrants and Series B warrants each have an exercise price of $ 2.25 per share and are immediately exercisable upon issuance. The Series A warrants expire on the five-year anniversary of the date of issuance and the Series B warrants expire on the six-month anniversary of the date of issuance. The pre-funded warrants have an exercise price of $ 0.001 per share, are exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. Subsequent to the closing of the Offering, as of March 18, 2024, the holders exercised pre-funded warrants for 1,001,110 shares of common stock. The exercise price and number of shares of common stock issuable upon exercise of the warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common stock and the exercise price. Subject to limited exceptions, a holder may not exercise any portion of its warrants to the extent that the holder would beneficially own more than 9.99 % or 4.99 % (at the election of the holder) of the Company’s outstanding common stock after exercise. On February 8, 2024, pursuant to the Underwriting Agreement, the Company issued warrants to the Underwriter to purchase up to 139,108 shares of common stock at an exercise price of $ 2.625 , subject to adjustments, which are exercisable at any time and from time to time, in whole or in part, until February 8, 2029, and have substantially similar terms to the Series A warrants. F- 32