What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-14 · 158 added, 143 removed, 225 unchanged (57% of the section changed)

67 unchanged sentences

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 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.

Under our EOL plan, we expect to complete shipments of our

memory products by June 30, 2025.

However, the timing of EOL shipments will be dependent on the potential receipt of additional purchase

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

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.

$6.5 million for the six months ended June 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated

deficit of approximately $173 million as of June 30, 2024.

These and prior year losses have resulted in significant negative

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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.

in March 2020.

This negatively affected the U.S.

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

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

financial markets.

While the U.S.

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

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

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

and foreign government agencies to prevent disease

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

World unrest due to wars and

terrorist attacks have led to further economic disruptions.

Mounting inflationary cost pressures and recessionary fears have negatively

impacted the global economy.

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.

Risks and Uncertainties

We are 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, pandemics, wars and acts of terrorism and the volatility of public

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

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

As of March 31, 2024, there have been

As of June 30, 2024, there have been

no material changes to our significant accounting policies and estimates.

Results of Operations

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Product - six months ended

Percentage of total net revenue

The following table details

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

(amounts in thousands)

revenue by product category for the three and six months ended June 30, 2024 and 2023:

Three months Ended

Six Months Ended

Product category

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mmWave other products

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.

Product revenue increased

for the three months ended June 30, 2024 compared with the same period of 2023 primarily due to increases in EOL shipments of our memory

Product revenue decreased for the six months ended June 30, 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

We initiated price increases on certain of our antenna module products in 2022, however, through June 30, 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 June 30, 2024, we had a non-cancelable purchase order backlog

for our memory IC products of $9.1 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

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as we expect new customers to commence production during 2024.

Year-Over-Year Change

(dollar amounts in thousands)

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Percentage of total net revenue

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.

Royalty and other - six months ended

Percentage of total net revenue

Royalty and other includes royalty, non-recurring engineering services

and license revenues.

The decrease in royalty and other revenue for the three and six months ended June 30, 2024 compared with the same

periods of 2023 was primarily due to a decrease in royalty revenues from licensees of our memory technology due to reduced shipments by

these licensees, as partially offset by an increase in non-recurring engineering services revenue related to our mmWave technology.

Cost of Net Revenue and Gross Profit

Year-Over-Year Change

(dollar amounts in thousands)

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Percentage of total net revenue

Cost of net revenue -six months ended

Percentage of total net revenue

Cost of net revenue is primarily

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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

Cost of net revenue increased

slightly for the three months ended June 30, 2024 when compared with the same period in 2023, primarily due to the combined effect of

i) an increase in shipments of our memory IC products and ii) increased amortization of developed technology of approximately $0.2 million.

Cost of net revenue decreased for the six months ended June 30, 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 $0.3 million.

(dollar amounts in thousands)

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Percentage of total net revenue

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.

Gross profit -six months ended

Percentage of total net revenue

Gross profit increased for the three and six months ended June 30,

2024 compared with the same periods of 2023 primarily due to the increase in shipment volumes of our memory IC products.

in our gross profit margin percentage for the three and six months ended June 30, 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.

three months ended June 30, 2024, we sold inventory with a value of $81,000 that had been written down in 2023.

Research and Development

Year-Over-Year Change

(dollar amounts in thousands)

R&D - three months ended

Research and development -three months ended

Percentage of total net revenue

Research and development -six months ended

Percentage of total net revenue

Our research and development,

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We expense R&D costs as they are incurred.

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.

The decrease for the three and six months ended June 30, 2024 compared

with the same periods of 2023 was primarily due to reduced salary and consulting costs, as we implemented reductions in force in February

and November 2023 and terminated consultant contracts.

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

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Selling, General and Administrative

Year-Over-Year Change

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

SG&A -six months ended

Percentage of total net revenue

Selling, general and administrative,

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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.

The increase for the three and six months ended June 30, 2024 compared

with the same periods of 2023 was primarily attributable to increased consulting and professional services costs and increased amortization

of purchased intangible assets for customer relationships, as we reduced the estimated life of these intangibles during 2023 due to the

EOL of our memory IC products.

These increases were partially offset by the impact of headcount

reductions initiated in 2023, including the elimination of certain employee and consulting positions and reductions of other discretionary

operating expenses during 2023.

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.

Severance and Software License Obligations

(dollar amounts in thousands)

Severance and software license obligations -three months ended

Percentage of total net revenue

Severance and software license obligations -six months ended

Percentage of total net revenue

On November 7, 2023, we implemented

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

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

As part of the Reductions,

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

The employment of one Employee

was terminated during the three months ended March 31, 2024.

During the three months ended June 30, 2024, we determined that we would

not recall any of the 10 Employees that remained on our payroll and commenced notifying the remaining Employees that their employment

would be terminated.

As a result, we recorded severance charges of approximately $424,000 and $446,000 for the three and six months ended

June 30, 2024, respectively.

As a result of the decision

to not recall the Employees, we determined that it was probable that a number of our non-cancelable licenses for computer-aided design

software would not be utilized during the remaining license terms.

During the three months ended June 30, 2024, we expensed the value

of the remaining contractual liabilities and certain prepaid amounts totaling approximately $1,617,000 and recorded liabilities totaling

approximately $1,533,000, which are expected to be paid through September 30, 2025.

As of June 30, 2024, the current portion of the remaining

contractual liabilities of $257,000 and $1,015,000 are included in accounts payable and accrued expenses and other, respectively (see

Note 3), and the non-current portion of $261,000 is included in other long-term liabilities.

Liquidity and Capital Resources;

Changes in Financial Condition

As of March 31, 2024, we had

As of June 30, 2024, we had

cash and cash equivalents of $1.9 million and working capital of $1.1 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.

activities was $3.2 million for the first six months of 2024, which primarily resulted from our net loss of $6.5 million, as adjusted

for a $1.6 million non-cash gain on the change in fair value of warrant liability, as partially offset by non-cash charges of $2.0 million

of depreciation and amortization, $2.4 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, accruals for software license

obligations, accrued severance benefits 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

activities was $3.6 million for the first six months of 2023, which primarily resulted from our net loss of $7.2 million, as adjusted

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

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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.

activities of $0.4 million for the six months ended June 30, 2023 represented $0.5 million in proceeds from maturities of short-term investments,

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

For the six months ended June 30, 2024, no cash was provided

by or used in investing activities.

Net cash provided by financing activities of $3.5 million for the six

months ended June 30, 2024 primarily comprised $3.4 million in net proceeds from a public offering of our common stock and common stock

purchase warrants completed in February 2024 and a $0.1 million sale of unregistered stock to a member of our board of directors.

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.

activities for the six months ended June 30, 2023 consisted of $3.5 million, primarily comprised $3.6 million in net proceeds from a registered

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

settle equity awards and repayment of finance lease liabilities.

Our future liquidity and capital

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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;

inventory levels, as supply chain disruption during the COVID-19 pandemic 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;

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Our primary purchase obligations

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

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.

include non-cancelable purchase orders for inventory.

At June 30, 2024, we had outstanding non-cancelable purchase orders for inventory,

primarily wafers and substrates, and related expenditures of approximately $2.9 million.

As disclosed above and in Note 4 to the condensed

consolidated financial statements, we recorded liabilities of approximately $1.6 million for non-cancelable license commitments for computer-aided

design software.

We expect to pay these license fees through September 30, 2025.

Going Concern - Working Capital

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.

approximately $6.5 million for the six months ended June 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an

accumulated deficit of approximately $173 million as of June 30, 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

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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.

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

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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

If we are unsuccessful in these efforts, we will need to

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

These efforts may include,

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

In 2023, we implemented cost-reduction initiatives, including

headcount reductions, to reduce operating expenses.

As discussed in Note 8 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.

If 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 things:

develop or enhance our products;

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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 believe that our existing cash and cash equivalents as of June 30,

2024, plus expected receipts associated with forecasted product sales, will provide us with liquidity to fund our planned operating needs

into the fourth quarter of 2024.

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

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

for the three months ended March 31, 2024.

for the three and six months ended June 30, 2024.

Recent Accounting Pronouncements

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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