What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-13 · 356 added, 346 removed, 37 unchanged (95% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

This Management’s

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

consolidated financial statements and notes included in this report.

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

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

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

performance and capital raising effort, the impacts of COVID-19 on our business, 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,”

“expects,” “intends,” “plans,” “projects” or similar expressions are intended to identify

forward-looking statements.

Our actual results could differ materially from those expressed or implied by these forward-looking statements

as a result of various factors, including the risk factors described under Item 1A of our annual report on Form 10-K for the year

ended December 31, 2023 and the risk factors described below under Item 1A of this Form 10-Q.

We undertake no obligation to update

publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events

occur in the future.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

condensed consolidated financial statements and notes included in this report.

This Form 10-Q contains forward-looking statements

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

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

financial performance and capital raising effort, the impacts of COVID-19 on our business, 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,” “expects,” “intends,” “plans,” “projects” or similar expressions

are intended to identify forward-looking statements.

Our actual results could differ materially from those expressed or implied by these

forward-looking statements as a result of various factors, including the risk factors described under Item 1A of our annual report on

Form 10-K for the year ended December 31, 2023 and the risk factors described below under Item 1A of this Form 10-Q.

no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes

available or events occur in the future.

were formerly known as MoSys, Inc.

(“MoSys”) and 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

(“MoSys”), and we were

incorporated in California in 1991 and reincorporated in 2000 in Delaware.

On September 14, 2021,

we and our subsidiaries, 2864552 Ontario Inc.

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

Agreement”) with Peraso Technologies Inc.

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

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

Peraso Shares to be issued in connection with the conversion or exchange of secured convertible debentures and common share purchase

warrants of Peraso Tech, as applicable, by way of a statutory plan of arrangement (the “Arrangement”) under the Business

Corporations Act (Ontario).

On December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement

Agreement, the Arrangement was completed and we changed our name to “Peraso Inc.”

and began trading on the Nasdaq Stock Market (the “Nasdaq”) under the symbol “PRSO.”

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

3 unchanged sentences

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 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

$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 historically have required us to raise substantial amounts of additional capital.

As discussed below, this raises significant

doubt about our ability to continue as a going concern.

We will need to increase revenues substantially beyond levels that we have attained

in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional

capital from time to time.

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.

We have pioneered a high-volume mmWave IC 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

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.

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.

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

Under our EOL plan, we expect to complete shipments

of our memory products by March 31, 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.

incurred net losses of approximately $9.2 million for the nine months ended September 30, 2024 and $16.8 million for the year ended

December 31, 2023, and we had an accumulated deficit of approximately $175.6 million as of September 30, 2024.

These and prior

year losses have resulted in significant negative cash flows and historically have required us to raise substantial amounts of additional

As discussed below, this raises significant doubt about our ability to continue as a going concern.

We will need to increase

revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient

cash flows to continue doing business without raising additional capital from time to time.

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

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

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.

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 June 30, 2024, there have been

no material changes to our significant accounting policies and estimates.

Results of Operations

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.

Exchangeable shares, which can be converted to common stock at any time by their respective holders,

were also adjusted to reflect the reverse stock split.

and Uncertainties

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 markets.

We may be unable to access the capital markets, and additional capital may only be available to us

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

additional information on risks that could impact our future results of operations, please refer to “Risk Factors” in Part

of this quarterly report on Form 10-Q.

Accounting Policies and Estimates

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

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

The preparation of

these condensed consolidated financial statements requires us to make certain estimates and judgments that affect the reported amounts

of assets, liabilities, revenues and expenses.

On an ongoing basis we make these estimates based on our historical experience and on

assumptions that we consider reasonable under the circumstances.

Actual results may differ from these estimates and reported results

could differ under different assumptions or conditions.

Our significant accounting policies and estimates are disclosed in Note 1 of

the “Notes to 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,

As of September 30, 2024, there have been no material changes to our significant accounting policies and estimates.

of Operations

September 30,

(dollar amounts in thousands)

1 unchanged sentence

Percentage of total net revenue

Product - six months ended

Product - nine months ended

Percentage of total net revenue

The following table details

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

Three months Ended

Six Months Ended

Product category

following table details revenue by product category for the three and nine months ended September 30, 2024 and 2023:

months Ended September 30,

Months Ended September 30,

mmWave modules

mmWave other products

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

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.

(dollar amounts in thousands)

Royalty and other - three months ended

revenue decreased for the three and nine months ended September 30, 2024 compared with the same periods of 2023 primarily due to the

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

The increase in memory IC product shipments during 2024 was attributable to the increase in EOL shipments.

We initiated price increases

on certain of our antenna module products in 2022, however, through September 30, 2024, we had not realized any material increase in

revenue as a result of those price increases.

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

TSMC informed us that TSMC is discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory

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 September 30, 2024, we had non-cancelable purchase order backlog from customers for our memory IC products of $5.7 million.

expect to fulfill this backlog and complete final shipments of our memory IC products by March 31, 2025.

expect revenues to increase in 2024 as compared with 2023, as we anticipate increased sales of our memory IC products based on our EOL

purchase order backlog.

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 to commence production shipments to new customers beginning in early 2025.

September 30,

(dollar amounts

in thousands)

Royalty and other - three months

Percentage of total net revenue

Royalty and other - six months ended

Royalty and other - nine 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

(dollar amounts in thousands)

Cost of net revenue -three months ended

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

The decrease in royalty and other revenue for the

three and nine months ended September 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, which we attribute to the EOL initiated by TSMC,

as partially offset by increases in non-recurring engineering services revenue related to our mmWave technology.

Net Revenue and Gross Profit

September 30,

(dollar amounts

in thousands)

Cost of net revenue -three months

Percentage of total net revenue

Cost of net revenue -six months ended

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

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)

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.

of net revenue decreased for the three months ended September 30, 2024 when compared with the same period in 2023, primarily due to a

decrease in sales of our mmWave IC and module products, which was partially offset by an increase in shipments of our memory IC products

in 2024 and $0.2 million of inventory write downs of our mmWave product inventory.

Cost of net revenue decreased for the nine months

ended September 30, 2024 when compared with the same period in 2023, primarily due to the decrease in sales of our mmWave IC and module

products, which was partially offset by an increase in shipments of our memory IC products in 2024, $0.3 million of inventory write downs

of our mmWave product inventory and increased amortization of developed technology of approximately $0.3 million, as we reduced the useful

life of the assets in May 2023 as a result of the EOL of our memory products.

September 30,

(dollar amounts

in thousands)

Gross profit -three months ended

Percentage of total net revenue

Gross profit -six months ended

Gross profit -nine 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

(dollar amounts in thousands)

Research and development -three months ended

profit decreased for the three months ended September 30, 2024 compared with the same period of 2023 primarily due to a decrease in sales

of our mmWave IC and module products and royalty and other revenues, partially offset by an increase in shipment volumes of our memory

IC products to fulfill EOL purchase orders.

Gross profit increased for the nine months ended September 30, 2024 compared with the same

period of 2023 due to the increase in shipments of our memory IC products, as these products carry higher gross margins, and this increase

was partially offset by a decrease in shipments of our mmWave products.

The increase in our gross profit margin percentage for the nine

months ended September 30, 2024 compared with the prior year period was primarily attributable to the increase in shipments of our memory

IC products, which carry higher gross margins than our mmWave products.

During the nine months ended September 30, 2024, we recorded

revenue of $81,000 from inventory that had been written down in prior periods.

and Development

September 30,

(dollar amounts

in thousands)

Research and development -three

Percentage of total net revenue

Research and development -six months ended

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.

We expense R&D costs as they are incurred.

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.

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

We expense R&D costs as

they are incurred.

decrease for the three and nine months ended September 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, as well

as a decrease in rent expense for the Toronto office lease, as we reduced the space we rent effective January 2024, and reduced software

license expense.

As disclosed in Note 4 to the condensed consolidated financial statements, in June 2024, we recorded a charge of approximately

$1.6 million for non-cancelable license commitments for computer-aided design software.

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

(dollar amounts in thousands)

General and Administrative

September 30,

(dollar amounts

in thousands)

SG&A -three months ended

Percentage of total net revenue

SG&A -six months ended

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 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.

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.

increase for the three and nine months ended September 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.

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.

and Software License Obligations

September 30,

(dollar amounts

in thousands)

Severance and software license obligations

(dollar amounts in thousands)

Severance and software license obligations -three months ended

-three months ended

Percentage of total net revenue

Severance and software license obligations -six months ended

Severance and software license

obligations -nine 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;

November 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.

During the six months ended June 30, 2024, we determined that we would not recall any of the 11 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 $0.4 million for each of the three and six months ended June 30, 2024, respectively.

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 recorded liabilities of approximately $1.6 million.

and Capital Resources;

Changes in Financial Condition

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 $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 $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

offset by non-cash charges of $1.7 million of depreciation and amortization, $2.6 million of stock based compensation, and $1.1 million

in net changes in assets and liabilities.

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

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

Net cash provided by investing

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

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

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 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

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

of September 30, 2024, we had cash and cash equivalents of $1.3 million and working capital of $0.4 million.

cash used in operating activities was $3.9 million for the first nine months of 2024, which primarily resulted from our net loss of $9.2

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 $3.0 million of depreciation and amortization, $3.3 million of stock based compensation and $0.6 million in net changes in

assets and liabilities.

The changes in assets and liabilities primarily related to the timing of accruals for software licenses, accrued

severance benefits and accounts receivable collections, and other vendor payables and prepayments.

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.

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.

For the nine months

ended September 30, 2024, no cash was provided by or used in investing activities.

cash provided by financing activities of $3.6 million for the nine months ended September 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, $0.2 million of net proceeds from at-the-market sales of stock, which

was partially offset by $0.1 million for repayment of finance lease liabilities.

cash provided by financing activities for the nine months ended September 30, 2023 consisted of $3.5 million, which 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, as partially offset by taxes paid to net share settle equity awards and repayment of finance lease liabilities.

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 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;

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;

cost, timing and success

of technology development efforts;

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;

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

Our primary purchase obligations

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 $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

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 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;

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 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.

primary purchase obligations include non-cancelable purchase orders for inventory.

At September 30, 2024, we had outstanding non-cancelable

purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $2.9 million.

Concern - Working Capital

incurred net losses of approximately $9.2 million for the nine months ended September 30, 2024 and $16.8 million for the year ended December

31, 2023, and we had an accumulated deficit of approximately $175.6 million as of September 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 through offerings of equity and equity-linked securities, issuance of convertible notes and loans.

expect to continue to incur operating losses for the foreseeable future as we continue to secure new customers for and continue to invest

in the development of our products, and we expect our cash expenditures to continue to exceed receipts for the foreseeable future, as

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

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.

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

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

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.

implemented cost-reduction initiatives, including headcount reductions, to reduce operating expenses.

discussed in Note 13 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report,

on November 5, 2024, we entered into inducement offer letter agreements (the “Inducement Letters”) with certain holders (the

“Holders”) of existing Series B warrants (the “Existing Warrants”) to purchase up to an aggregate of 2,246,030

shares of our common stock, having an original exercise price of $2.25 per share, issued to the Holders on February 8, 2024.

to the Inducement Letters, the Holders agreed to exercise for cash their existing warrants at a reduced exercise price of $1.30 per share

(the “Reduced Exercised Price”) in consideration for our agreement to issue in a private placement (i) new Series C common

stock purchase warrants (the “Series C Warrants”) to purchase an aggregate of 2,246,030 shares of common stock, and (ii)

new Series D common stock purchase warrants (the “Series D Warrants” and, collectively with the Series C Warrants, the “New

Warrants”) to purchase an aggregate of 2,246,030 shares of our common stock.

In connection with this offering, we also agreed to

reduce the exercise price of the Existing Warrants to purchase an aggregate of 1,728,490 shares of common stock for all holders of the

Existing Warrants not participating in this offering to the Reduced Exercise Price for the remaining term of the Existing Warrants.

as discussed in Note 8 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report,

on August 30, 2024, we entered into an At The Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann &

(“Ladenburg”) with respect to an “at the market” offering program, under which the Company may,

from time to time, in its sole discretion, issue and sell through Ladenburg, acting as agent or principal, shares of the Company’s

common stock initially having an aggregate offering price of up to $1,425,000.

The Sales Agreement provides that Ladenburg will be entitled

to compensation for its services equal to 3.0% of the gross proceeds from sales of any shares of common stock under the Sales Agreement

in addition to the reimbursement of certain expenses.

During the three months ended September 30, 2024, under the Sales Agreement, we

sold 110,688 shares of common stock for net proceeds of approximately $164,000.

we have and may raise additional capital through sales of our equity securities, our stockholders will suffer dilution of their equity

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

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

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.

believe that our existing cash and cash equivalents as of September 30, 2024, plus the proceeds from the warrant inducement offering

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

the second quarter of 2025.

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

1 unchanged sentence

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.

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.

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 over the next two quarters.

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.

Sheet Arrangements

do not maintain any off-balance sheet arrangements or obligations that are reasonably likely to have a material current or future effect

on our financial condition, results of operations, liquidity or capital resources.

Indemnifications

In the ordinary course of

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

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

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

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 and six months ended June 30, 2024.

Recent Accounting Pronouncements

See Note 1 to the condensed

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

the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from

losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from

certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating

to past performance.

Such indemnification clauses may not be subject to maximum loss clauses.

We have also entered into indemnification

agreements with our officers and directors.

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

financial statements for the three and nine months ended September 30, 2024.

Accounting Pronouncements

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis