What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-13 · 306 added, 319 removed, 62 unchanged (91% of the section changed)

1 unchanged sentence

Condition and Results of Operations

This Management’s Discussion and Analysis

of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial

statements and notes included in this report.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A

of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include, without

limitation, statements about the market for our technology, our strategy, competition, expected financial performance and capital raising

effort, the impacts of COVID-19 on our business, the effects of the Russia/Ukraine conflict, and inflation, which could cause customers

to delay or reduce purchases of our products or delay payments to us, which would adversely affect our financial results, including cash

flows, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange

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

statements about our business, financial results, financial condition and operations contained in this Form 10-Q that are not statements

of historical fact may be deemed to be forward-looking statements.

This Management’s

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

consolidated financial statements and notes included in this report.

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

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

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

performance and capital raising effort, the impacts of COVID-19 on our business, and inflation, which could cause customers to delay or

reduce purchases of our products or delay payments to us, which would adversely affect our financial results, including cash flows, and

other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission

on March 29, 2024 and in other reports that we file from time to time with the Securities and Exchange Commission.

Any statements

about our business, financial results, financial condition and operations contained in this Form 10-Q that are not statements of

historical fact may be deemed to be forward-looking statements.

Without limiting the foregoing, the words “believes,” “anticipates,”

7 unchanged sentences

occur in the future.

formerly known as MoSys, Inc.

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

September 14, 2021, we and our subsidiaries, 2864552 Ontario Inc.

and 2864555 Ontario Inc., entered into an Arrangement Agreement (the

Arrangement Agreement) with Peraso Technologies Inc.

(Peraso Tech), a corporation existing under the laws of the province of Ontario,

to acquire all of the issued and outstanding common shares of Peraso Tech (the Peraso Shares), including those Peraso Shares to be issued

in connection with the conversion or exchange of secured convertible debentures and common share purchase warrants of Peraso Tech, as

applicable, by way of a statutory plan of arrangement (the Arrangement) under the Business Corporations Act (Ontario).

17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed and

we changed our name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the Nasdaq) under the symbol “PRSO.”

and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or ICs, antenna

modules and related non-recurring engineering services.

We specialize in the development of mmWave semiconductors, primarily in the unlicensed

60 GHz spectrum band for 802.11ad/ay compliant devices and in the 28/39 GHz spectrum bands for 5G-compliant devices.

We derive our revenue

from selling semiconductor devices, as well as antenna modules based on using those mmWave semiconductor devices.

We have pioneered

a high-volume mmWave production test methodology using standard low cost production test equipment.

It has taken us several years to refine

performance of this production test methodology, and we believe this places us in a leadership position in addressing operational challenges

of delivering mmWave products into high-volume markets.

The primary advantage provided by an antenna module is the silicon and the antenna

are integrated into a single device.

A differentiating characteristic of mmWave technology is that the radio frequency amplifiers must

be as close as possible to the antenna to minimize loss, and by providing a module, we can guarantee the performance of the amplifier/antenna

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

This memory product line comprises our Bandwidth Engine products,

which integrate our proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a

monolithic memory IC solution optimized for memory bandwidth and transaction access performance.

Taiwan Semiconductor Manufacturing Corporation,

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

TSMC recently informed us that it would

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

As a result, we have informed

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

We have notified our customers to provide purchase

orders by December 22, 2023, and we commenced initial EOL shipments during the quarter ended September 30, 2023.

We have requested customers

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

were formerly known as MoSys, Inc.

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

On September 14, 2021, we and our subsidiaries, 2864552 Ontario Inc.

and 2864555 Ontario

Inc., entered into an Arrangement Agreement (the “Arrangement Agreement”) with Peraso Technologies Inc.

(“Peraso Tech”),

a corporation existing under the laws of the province of Ontario, to acquire all of the issued and outstanding common shares of Peraso

Tech (the “Peraso Shares”), including those Peraso Shares to be issued in connection with the conversion or exchange of secured

convertible debentures and common share purchase warrants of Peraso Tech, as applicable, by way of a statutory plan of arrangement (the

“Arrangement”) under the Business Corporations Act (Ontario).

On December 17, 2021, following the satisfaction of the

closing conditions set forth in the Arrangement Agreement, the Arrangement was completed and we

changed our name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the “Nasdaq”) under the symbol

strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or

ICs, antenna modules and related non-recurring engineering services.

We specialize in the development of mmWave semiconductors, primarily

in the unlicensed 60 GHz spectrum band for 802.11ad/ay- compliant devices and in the 28/39 GHz spectrum bands for 5G-compliant devices.

We derive our revenue from selling semiconductor devices, as well as antenna modules based on using those mmWave semiconductor devices.

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

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

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

We also produce and sell complete mmWave

antenna modules.

The primary advantage provided by our antenna modules is that our proprietary mmWave ICs and the antenna are integrated

into a single device.

A differentiating characteristic of mmWave technology is that the RF amplifiers must be as close as possible to

the antenna to minimize loss.

With our module, we can guarantee the performance of the amplifier/antenna interface and simplify customers’

radio frequency (“RF”) engineering, facilitating more opportunities for customer prospects that have not provided RF-type

systems, as well as shortening the time to market for new products.

We also acquired a memory

product line comprising our Bandwidth Engine IC products.

These products integrate our proprietary, 1T-SRAM high-density embedded memory

and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction

access performance.

Taiwan Semiconductor Manufacturing Corporation, or TSMC, is the sole foundry that manufactures the wafers used to

produce our memory IC products.

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

necessary to manufacture our memory ICs.

As a result, in May 2023, we initiated an end-of-life, or EOL, of our memory IC products, and

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

We have requested customers to pay a deposit upon purchase

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

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

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

to continue until at least December 31, 2024.

However, the timing of EOL shipments will be dependent on receipt of purchase orders from

customers, deliveries from our suppliers, and the delivery schedules requested by our customers.

to continue through March 31, 2025.

However, the timing of EOL shipments will be dependent on receipt of purchase orders from customers,

deliveries from our suppliers, and the delivery schedules requested by our customers.

We incurred net losses of approximately

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

deficit of approximately $157.5 million as of September 30, 2023.

$2.0 million for the three months ended March 31, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated

deficit of approximately $168.4 million as of March 31, 2024.

These and prior year losses have resulted in significant negative

5 unchanged sentences

capital from time to time.

Exploring Strategic Alternatives

In August 2023, we engaged an investment bank

to assist with the exploration of strategic alternatives, including a merger, sale of assets or other similar transaction, with the intention

to maximize stockholder value and further our business operations.

There can be no assurance that the exploration process will result

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

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

we made any decisions related to strategic alternatives at this time.

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

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

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

Reverse Stock Split

On December 15, 2023, at our

annual meeting of stockholders, our stockholders approved a certificate of amendment to our Second Amended and Restated Certificate of

Incorporation (the “Charter Amendment”) to effect a reverse stock split of our outstanding shares of common stock at a ratio

to be determined by our board of directors.

On December 15, 2023, we filed the Charter Amendment with the Secretary of State of Delaware

which effected a 1-for-40 reverse stock split of our outstanding shares of common stock as of 4:01 p.m.

Eastern Time on January 2, 2024.

As a result of the reverse stock split, every forty shares of common stock were combined into one issued and outstanding share of common

stock, with no change in the $0.001 par value per share.

Holders of fractional shares received, in lieu of any fractional share, the number

of shares rounded up to the next whole number.

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

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

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

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

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.

The global outbreak of the

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

in March 2020.

This negatively affected the U.S.

and global economy, disrupted global supply chains, significantly restricted travel and transportation,

resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the financial markets.

and global economy, disrupted global supply chains, significantly restricted travel and

transportation, resulted in mandated closures and orders to “shelter-in- place” and created significant disruption of the

financial markets.

While the U.S.

national emergency expired in May 2023 and substantially all closures and “shelter-in-place” orders have ended,

there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance in the future, as the duration

and spread of the pandemic and related actions taken by U.S.

and foreign government agencies to prevent disease spread are uncertain,

out of our control, and cannot be predicted.

World unrest due to wars and terrorist attacks

have led to further economic disruptions.

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

Since mid-2022, the U.S.

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

Given current market conditions, we may be unable to access the capital markets, and additional capital may only be available

to us on terms that could be significantly detrimental to our existing stockholders and to our business.

For additional information on risks that could

impact our future results, please refer to “Risk Factors” in Part II, Item 1A.

of this quarterly report on Form 10-Q.

national emergency expired in May 2023 and substantially all closures and “shelter-in-place”

orders have ended, there can be no assurance that the COVID-19 pandemic will not impact our operational and financial performance in the

future, as the duration and spread of the pandemic and related actions taken by U.S.

and foreign government agencies to prevent disease

spread are uncertain, out of our control, and cannot be predicted.

World unrest due to wars and

terrorist attacks have led to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively

impacted the global economy.

Since mid-2022, at times, the U.S.

Federal Reserve has addressed elevated inflation by increasing interest

rates, as inflation remains elevated.

Given current market conditions, we may be unable to access the capital markets, and additional

capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business.

For additional information

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

of this quarterly

report on Form 10-Q.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition

and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with

accounting principles generally accepted in the United States (GAAP).

The preparation of these condensed consolidated financial statements

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

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

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

Our significant

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

report on Form 10-K for the year ended December 31, 2022.

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

significant accounting policies and estimates.

The discussion and analysis

of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared

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

The preparation of these condensed consolidated

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

and expenses.

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

under the circumstances.

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

or conditions.

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

Financial Statements” included in Part I, Item 1 of this report and Note 1 of the “Notes to Consolidated Financial

Statements” in our annual report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, there have been

no material changes to our significant accounting policies and estimates.

Results of Operations

September 30,

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Product -nine months ended

Percentage of total net revenue

The following table details revenue by product

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

The following table details

revenue by product category for the three months ended March 31, 2024 and 2023:

(amounts in thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended

Product category

mmWave antenna modules

mmWave modules

mmWave other products

Product revenue increased for the three months

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

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

Product revenue increased for the nine months

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

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

of our antenna modules.

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

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

September 30,

Product revenue decreased

for the three months ended March 31, 2024 compared with the same period of 2023 primarily due to the decrease in shipments of our mmWave

ICs and antenna modules, which was partially offset by increases in EOL shipments of our memory IC products.

We initiated price increases

on certain of our antenna module products in 2022, however, through March 31, 2024, we had not realized any material increase in revenue

as a result of those price increases.

Taiwan Semiconductor Manufacturing

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

TSMC has informed us that

TSMC is discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory ICs.

As a result, in May

2023, we informed our customers that we would be initiating an end-of-life (EOL) of our memory IC products.

As of March 31, 2024, we had

a non-cancelable purchase order backlog for our memory IC products of approximately $12.6 million.

We expect to fulfill this backlog and

complete final shipments of our memory IC products by March 31, 2025.

We expect revenues to increase

in 2024 as compared with 2023, as we anticipate increased sales of our memory IC products, based on EOL purchase orders received from

In addition, we expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months,

as we expect new customers to commence production during 2024.

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Royalty and other -nine months ended

Percentage of total net revenue

Royalty and other includes royalty, non-recurring

engineering, or NRE, services and license revenues.

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

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

due to reduced shipments by these licensees.

The decrease in royalty and other revenue for

the nine months ended September 30, 2023 compared with the same period of 2022 was primarily due to a decrease in NRE services revenue

related to our mmWave technology and a decrease in royalty revenues from licensees of our memory technology due to reduced shipments by

these licensees.

Royalty and other includes

royalty, non-recurring engineering services and license revenues.

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

March 31, 2024 compared with the same period of 2023 was primarily due to a decrease in royalty revenues from licensees of our memory

technology due to reduced shipments by these licensees and partially offset by an increase in non-recurring engineering services revenue

related to our mmWave technology.

Cost of Net Revenue and Gross Profit

September 30,

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Cost of net revenue -nine months ended

Percentage of total net revenue

Cost of net revenue is primarily comprised of

direct and indirect costs related to the sale of our products, including amortization of intangible assets and depreciation of production-related

fixed assets.

Cost of net revenue increased for the three months

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

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

technology of approximately $0.2 million.

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

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

Cost of net revenue increased for the nine months

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

by decrease in sales of our mmWave product.

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

for mmWave product inventory, as we identified excess and obsolete inventory.

If our utilization of inventory is, or if our estimates

of our inventory’s potential utility become, less favorable than currently expected, additional inventory write-downs may be required.

Cost of net revenue represents a higher percentage of revenue for our mmWave products, as compared to our memory products.

September 30,

Cost of net revenue is primarily

comprised of direct and indirect costs related to the sale of our products, including amortization of intangible assets and depreciation

of production-related fixed assets.

Cost of net revenue decreased

for the three months ended March 31, 2024 when compared with the same period in 2023, primarily due to the combined effect of i) a decrease

in sales of our mmWave IC and module products, partially offset by an increase in shipments of our memory IC products in 2024, and ii)

increased amortization of developed technology of approximately $0.2 million.

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Gross profit -nine months ended

Percentage of total net revenue

Gross profit increased for the three months ended

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

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

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

Gross profit increased for the nine months ended

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

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

Gross profit decreased for

the three months ended March 31, 2024 compared with the same period of 2023 primarily due to the decrease in shipment volumes of our mmWave

The increase in our gross profit margin percentage for the three months ended March 31, 2024 compared with the prior year period

was primarily attributable to the increase in shipments of our memory products, which carry higher gross margins than our mmWave products.

Research and Development

September 30,

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Research and development -nine months ended

Percentage of total net revenue

Our research and development, or R&D, expenses

include costs related to the development of our products.

Our research and development,

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

We expense R&D costs as they are incurred.

The decrease for the three and nine months ended

September 30, 2023 compared with the same periods of 2022 was primarily due to reduced salary and consulting costs.

the quarter ended December 31, 2022, we began implementing cost reductions, which included a reduction of consulting positions

and the elimination of certain employee positions in February 2023, as well as targeted reductions in certain longer-term research and

development projects.

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

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

As a result of the Agreement and other

cost reductions, our memory-related R&D expenses declined by approximately $0.6 million and $1.2 million for the three and nine months

ended September 30, 2023, respectively.

In addition, during the nine months ended September 30, 2022, we incurred mask fabrication (i.e.,

tape-out) expenses of $0.7 million for one of our mmWave ICs, and we incurred no mask fabrication costs in 2023.

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

The decrease for the three

months ended March 31, 2024 compared with the same period of 2023 was primarily due to reduced salary and consulting costs, as we implemented

reductions on force in February and November 2023 and terminated consultant contracts.

Most recently, in November 2023, we implemented

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

addition, we initiated a temporary lay-off in Canada of 16 positions, all intended to preserve cash while keeping capital expenditures

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

expect that total R&D expenses will decrease during 2024 compared with 2023, as a result of our cost reduction initiatives initiated

during 2023 .

Selling, General and Administrative

September 30,

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

SG&A -nine months ended

Percentage of total net revenue

Selling, general and administrative, or SG&A,

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

and amortization of certain intangible assets.

The decrease for the three and nine months ended

September 30, 2023 compared with the same period of 2022 was primarily related to cost reductions,

which we initiated during the three months ended December 31, 2022 .

The reductions in SG&A

expense in 2023 primarily resulted from lower headcount, including the elimination of certain employee and consulting positions and reductions

of other discretionary operating expenses.

We expect that total SG&A expense will decrease for the remainder of 2023 compared with

2022 due to our continued cost reduction initiatives, including lower headcount.

Selling, general and administrative,

or SG&A, expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general

management and amortization of certain intangible assets.

The decrease for the three

months ended March 31, 2024 compared with the same period of 2023 was primarily attributable to lower

headcount, including the elimination of certain employee and consulting positions and reductions of other discretionary operating expenses

We expect that total SG&A expense will remain flat or slightly decrease for the remainder of 2024 compared with 2023

due to our continued cost reduction initiatives.

Liquidity and Capital Resources;

Changes in Financial Condition

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

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

Net cash used in operating activities was $5.6

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

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

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

Net cash used in operating activities was $13.4

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

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

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

The changes in assets and

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

Net cash provided by investing activities of $1.0

million for the nine months ended September 30, 2023 represented $1.1 million in proceeds from maturities of short-term investments, partially

offset by $0.1 million of purchases of property and equipment.

Net cash provided by investing activities of $10.4

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

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

Net cash provided by financing activities for

the nine months ended September 30, 2023 consisted of $3.5 million, primarily comprised $3.6 million in net proceeds from a registered

direct offering of our common stock and common stock purchase warrants completed in September 2023, partially offset by taxes paid to

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

Net cash used financing activities for the nine

months ended September 30, 2022 consisted of taxes paid to net share settle equity awards.

Our future liquidity and capital requirements

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

timing and success of technology development efforts;

levels, as supply chain disruption has required us to maintain higher inventory levels and place purchase orders with our suppliers longer

into the future, which exposes us to additional inventory risk;

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

of billing and collection cycles, which may be impacted in the event of a global recession or economic downturn;

● fabrication

costs, including mask costs, of our ICs, currently under development;

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

of acquiring other businesses and integrating the acquired operations;

● profitability

of our business.

Subsequent to September 30, 2023, we

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

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

memory IC products.

During the three months ended March 31, 2023,

we collected approximately $2.0 million of amounts past due from a large customer of our mmWave products.

The amounts collected included

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

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

As of March 31, 2024, we had

cash and cash equivalents of $2.4 million and working capital of $3.1 million.

Net cash used in operating

activities was $2.6 million for the first three months of 2024, which primarily resulted from our net loss of $2.0 million, as adjusted

for a $1.6 million non-cash gain on the change in fair value of warrant liability, $1.0 million in net changes in assets and liabilities

and $0.2 million in other non-cash changes, as partially offset by non-cash charges of $1.0 million of depreciation and amortization and

$1.2 million of stock based compensation.

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

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

Net cash used in operating

activities was $1.4 million for the first three months of 2023, which primarily resulted from our net loss of $3.1 million, as adjusted

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

offset by non-cash charges of $0.8 million of depreciation and amortization, $1.3 million of stock based compensation, and $0.5 million

in net changes in assets and liabilities.

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

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

Net cash provided by investing

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

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

For the three months ended March 31, 2024, no cash

was provided by or used in investing activities.

Net cash provided by financing

activities for the three months ended March 31, 2024 comprised $3.4 million in net proceeds from a public offering of our common stock

and common stock purchase warrants completed in February 2024, partially offset by repayment of financing lease liabilities.

Net cash used in financing

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

Our future liquidity and capital

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

level of revenue;

cost, timing and success of technology development efforts;

inventory levels, as supply chain disruption has required us to maintain higher inventory levels and place purchase orders with our suppliers longer into the future, which exposes us to additional inventory risk;

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

length of billing and collection cycles, which may be impacted in the event of a global recession or economic downturn;

fabrication costs, including mask costs, of our ICs, currently under development;

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

costs of acquiring other businesses and integrating the acquired operations;

profitability of our business.

Purchase Obligations

1 unchanged sentence

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

At September 30, 2023, we had outstanding

non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $2.3 million

and non-cancelable purchase orders for CAD software of $3.1 million, which extend through approximately September 2025.

At March 31, 2024, we had outstanding non-cancelable

purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $3.2 million and non-cancelable

purchase orders for CAD software of $2.2 million, which extend through approximately September 2025.

Going Concern - Working Capital

We incurred net losses of approximately $7.9 million

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

of approximately $157.5 million as of September 30, 2023.

These and prior year losses have resulted in significant negative cash flows

and have required us to raise substantial amounts of additional capital.

To date, we have primarily financed our operations through offerings

of equity and equity-linked securities, issuance of convertible notes and loans.

We expect to continue to incur operating losses

for the foreseeable future as we continue to secure new customers for and continue to invest in the development of our products, and we

expect our cash expenditures to continue to exceed receipts for the foreseeable future, as our revenues will not be sufficient to offset

our operating expenses.

We will need to increase revenues beyond the levels

that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business

without raising additional capital from time to time.

As a result of our expected operating losses and cash burn and recurring losses from operations, if we are unable to raise sufficient

capital through additional equity or debt arrangements, there will be uncertainty regarding our ability to maintain liquidity sufficient

to operate our business effectively, which raises substantial doubt as to our ability to continue as a going concern within one year from

the date of issuance of these condensed consolidated financial statements.

The condensed consolidated financial statements presented in

Part I, Item 1 of this Report have been prepared assuming that we will continue as a going concern, and do not include any adjustments

that might result from the outcome of this uncertainty.

There can be no assurance that such additional capital, whether in the form of

equity or debt financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions

acceptable to us.

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

the Company is unsuccessful in these efforts, it will need to implement additional cost reduction strategies, which could further affect

its near- and long-term business plan.

These efforts may include, but are not limited to, reducing headcount and curtailing business activities.

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

on an annualized basis.

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

full-time equivalent positions in the U.S.

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

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

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

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

In June 2023, we completed a registered direct

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

If we were to raise additional capital through

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

If we engage in debt financing, we may

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

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

We incurred net losses of

approximately $2.0 million for the three months ended March 31, 2024 and $16.8 million for the year ended December 31, 2023, and we had

an accumulated deficit of approximately $168.4 million as of March 31, 2024.

These and prior year losses have resulted in significant

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

To date, we have primarily financed our operations

through offerings of equity and equity-linked securities, issuance of convertible notes and loans.

We expect to continue to incur

operating losses for the foreseeable future as we continue to secure new customers for and continue to invest in the development of our

products, and we expect our cash expenditures to continue to exceed receipts for the foreseeable future, as our revenues will not be sufficient

to offset our operating expenses.

We will need to increase revenues

beyond the levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue

doing business without raising additional capital from time to time.

As a result of our expected

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

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

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

consolidated financial statements.

The condensed consolidated financial statements presented in Part I, Item 1 of this Report have been

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

There can be no assurance that such additional capital, whether in the form of equity or debt financing, will be sufficient

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

We are currently seeking additional

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

If the Company is unsuccessful in these efforts, it will

need to implement additional cost reduction strategies, which could further affect its near- and long-term business plan.

These efforts

may include, but are not limited to, reducing headcount and curtailing business activities.

In February 2023, we announced that we had

implemented cost-reduction initiatives to reduce operating expenses by approximately $5 million on an annualized basis.

Most recently,

in November 2023, we initiated a temporary lay-off in Canada of 16 positions, and eliminated three full-time equivalent positions in the

We have the ability to recall the employees subject to temporary lay-off, however such recalls would be dependent on

improvements in business conditions and our financial condition, which we are unable to predict.

If we do not recall any of the affected

employees in Canada, we would achieve annual total savings of approximately $2.8 million from these reductions, excluding the impacts

of any severance and related termination payments.

As discussed in Note 7 of

the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report, in February 2024, we

completed a public offering of common stock and common stock purchase warrants for net proceeds to us of approximately $3.4 million.

we were to raise additional capital through the exercise of the common stock purchase warrants issued in February 2024 or other sales

of our equity securities, our stockholders would suffer dilution of their equity ownership.

If we engage in debt financing, we may be

required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends, repurchasing our

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

results and financial condition.

If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other

or enhance our products;

to expand our product development and sales and marketing organizations;

complementary technologies, products or businesses;

operations, in the United States or internationally;

train and retain employees;

to competitive pressures or unanticipated working capital requirements.

Discontinuing the above-mentioned activities could

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

We believe that our existing cash and cash equivalents

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

needs into the first quarter of 2024.

Variability in our operating forecast, driven primarily by (i) product sales and collections, (ii)

potential customer licensing and NRE transactions, (iii) timing of operating expenditures, and (iv) unanticipated changes in net working

capital, will impact our cash runway.

Likewise, we may decide to revise our financial priorities and operating plans, depending on the

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

This could impact our ability to enter

into strategic arrangements and to access additional capital.

We will need additional funding to continue our

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

Therefore, we will

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

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

develop or enhance our products;

continue to expand our product development and sales and marketing organizations;

acquire complementary technologies, products or businesses;

expand operations, in the United States or internationally;

hire, train and retain employees;

respond to competitive pressures or unanticipated working capital requirements.

Discontinuing any of the above-mentioned

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

We believe that our existing

cash and cash equivalents as of March 31, 2024, plus expected receipts associated with forecasted product sales, will provide us with

liquidity to fund our planned operating needs into the first half of 2025.

Variability in our operating forecast, driven primarily by

(i) product sales and collections, (ii) potential customer licensing and non-recurring engineering (NRE) transactions, (iii) timing of

operating expenditures, and (iv) unanticipated changes in net working capital, will impact our cash runway.

Likewise, we may decide to

revise our financial priorities and operating plans, depending on the level of customer shipments, licensing and NRE arrangements and

timing of related collections.

This could impact our ability to enter into strategic arrangements and to access additional capital.

We will need additional funding

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

Therefore, we will need to secure additional capital or financing and/or significantly delay, defer or reduce our cash expenditures before

the end of 2024.

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

a timely basis or at all.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements

or obligations that are reasonably likely to have a material current or future effect on our financial condition, results of operations,

liquidity or capital resources.

We do not maintain any off-balance

sheet arrangements or obligations that are reasonably likely to have a material current or future effect on our financial condition, results

of operations, liquidity or capital resources.

Indemnifications

In the ordinary course of business, we enter into

contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and

warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract,

which may include, for example, losses arising from litigation or claims relating to past performance.

Such indemnification clauses may

not be subject to maximum loss clauses.

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

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

In the ordinary course of

business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach

of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as

outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance.

indemnification clauses may not be subject to maximum loss clauses.

We have also entered into indemnification agreements with our officers

and directors.

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

for the three months ended March 31, 2024.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial

statements for a discussion of recently-issued accounting pronouncements.

See Note 1 to the condensed

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis