What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-30 compared with 2025-03-28 · 463 added, 415 removed, 36 unchanged (96% of the section changed)

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

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

consolidated financial statements and notes included in this Report.

Some of the information contained in this discussion and analysis

or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, include forward-looking

statements that involve risks and uncertainties.

You should review “Risk Factors” for a discussion of important factors that

could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained

in the following discussion and analysis.

were formerly known as MoSys, Inc.

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

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

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.

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

addressing the 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.

also had 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 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.

As of December 31, 2024, we had remaining EOL purchase

orders totaling approximately $2.3 million, and we expect to ship all of these orders by March 2025.

We do not expect any further

shipments or to generate any revenue from shipments of our memory IC products after March 2025.

incurred net losses of approximately $10.7 million and $16.8 million for the years ended December 31, 2024 and 2023, respectively, and

we had an accumulated deficit of approximately $177.1 million as of December 31, 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.

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 we may, from time to

time, in our sole discretion, issue and sell through Ladenburg, acting as agent or principal, shares of our common stock initially having

an aggregate offering price of up to $1,425,000.

After selling $169,215 of shares pursuant to the Sales Agreement, on December 10, 2024,

we increased the maximum aggregate offering amount of common stock issuable pursuant to the Sales Agreement to $2,693,527.

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 pursuant to the Sales Agreement in addition to the reimbursement of certain expenses.

We have no obligation

to sell any shares pursuant to the Sales Agreement and either we or Ladenburg may terminate the Sales Agreement in accordance with its

During the three months ended December 31, 2024, we sold 153,200 shares of common stock for net proceeds of approximately

$186,500 pursuant to the Sales Agreement.

shares of common stock we may issue or sell pursuant to the Sales Agreement are registered under our Registration Statement on Form S-3

333-280798), which was declared effective by the SEC on July 22, 2024.

We are currently subject to the limitations contained

in General Instruction I.B.6 of Form S-3.

As a result, we are limited to selling no more than one-third of the aggregate market value

of the equity held by non-affiliates, or the public float, during any 12-month period.

If our public float increases, we will have additional

availability under such limitations, and if our public float increases to $75 million or more, we will no longer be subject to such limitations.

There can be no assurance that our public float will increase or that we will no longer be subject to such limitations.

Inducement Offering

On August 6, 2024, we extended

the expiration date of our outstanding Series B warrants, which were issued in a public offering completed in February 2024, to October

7, 2024, by entering into an amendment to the Warrant Agency Agreement dated as of February 8, 2024 by and between us and the warrant

agent, Equiniti Trust Company, LLC (the Warrant Agency Agreement).

On October 3, 2024, we extended the expiration date of the Series B

warrants to November 8, 2024, by entering into a second amendment to the Warrant Agency Agreement.

The Series B warrants would otherwise

have expired on October 7, 2024.

See Note 10 of the consolidated financial statements for additional information about the Series B warrants

and the offering.

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 the Company’s common stock, having an original exercise price of $2.25 per share, issued to

the Holders on February 8, 2024 in the offering (see Note 10 of the consolidated financial statements).

Pursuant 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”) for gross proceeds of approximately $2.92 million in consideration for the Company’s 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 common stock.

Each New Warrant

has an exercise price equal to $1.61 per share, subject to adjustment as provided in the New Warrants.

The Series C Warrants were exercisable

upon issuance and expire on the six-month anniversary of the date of issuance.

The Series D Warrants were exercisable upon issuance and

expire on the five-year anniversary of the date of issuance.

During the quarter ended December 31, 2024, we received net proceeds of approximately

$2.6 million from the warrant inducement offering.

unrest due to wars and terrorist attacks have led to economic disruptions.

Mounting inflationary cost pressures and recessionary fears

have negatively impacted the global economy.

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 consolidated financial statements

and notes included in this Report.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Report,

including information with respect to our plans and strategy for our business, include forward-looking statements that involve risks and

uncertainties.

You should review “Risk Factors” for a discussion of important factors that could cause our actual results

to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion

and analysis.

We were formerly known as MoSys, Inc.

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

Our 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.

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 the 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.

Our module is designed to enhance 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 had a memory product line comprising our Bandwidth

Engine IC products.

Taiwan Semiconductor Manufacturing Corporation, or TSMC, the sole foundry that manufactured the wafers used to produce

our memory IC products, discontinued the foundry process used to produce such wafers.

As a result, in May 2023, we initiated an end-of-life,

or EOL, of our memory IC products, and, in March 2025, we fulfilled all then-outstanding EOL orders for our memory IC products.

to March 2025, we received additional purchase orders and recorded revenue totaling approximately $0.5 million during the second half

We incurred net losses of approximately $4.8 million

and $10.7 million for the years ended December 31, 2025 and 2024, respectively, and we had an accumulated deficit of approximately $181.9

million as of December 31, 2025.

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.

Recent Developments

Unsolicited, Non-binding Proposal from Mobix Labs,

Strategic Review Process

On June 27, 2025, we confirmed in a public press release

the receipt of an unsolicited, non-binding proposal from Mobix Labs, Inc.

(“Mobix Labs”) to acquire all of the Company’s

issued and outstanding equity securities in exchange for newly issued shares of Mobix Labs common stock, with a fixed exchange ratio based

on the average daily closing price of our common stock over the 30 calendar days ending on June 11, 2025, plus a 20% premium, or approximately

$1.20 per share.

On July 11, 2025, we issued a press release announcing

the initiation of the strategic review process.

Following this, our financial advisor contacted potential counterparties to invite them

to participate in the process subject to such parties’ execution of our standard non-disclosure agreement, which includes a standstill

Our financial advisor also contacted Mobix Labs to request that Mobix Labs execute our non-disclosure agreement in order to

participate in the process, which Mobix Labs declined to execute.

On August 19, 2025, we issued a public press release

providing an update on our strategic review process, including our engagement with potential counterparties and our continued openness

to engaging with Mobix Labs and others, while noting that Mobix Labs declined to enter into our standard non-disclosure agreement and

indicated it would not agree to receive material non-public information (“MNPI”).

On September 8, 2025, we issued a press release providing

another update on our strategic review process, including regarding the two letters that we received from Mobix Labs, dated as of September

4, 2025, and September 5, 2025, in connection with its unsolicited offer to acquire all outstanding shares of the Company.

The September

4 letter included a revised acquisition proposal involving a combination of cash and stock consideration in an undetermined amount, and

a reiteration of Mobix Labs’ refusal to enter into a confidentiality agreement or receive MNPI from us.

The September 5 follow-up

letter stated that while Mobix Labs continued to oppose any standstill restrictions, it would be willing to consider a limited confidentiality

arrangement to permit us to share MNPI deemed reasonably necessary, provided that such arrangement did not include a standstill and did

not indefinitely constrain Mobix Labs.

In response to such letters, we authorized a limited exploratory call with Mobix Labs, and we requested

that any such discussion take place without us sharing any MNPI and outside the bounds of a confidentiality agreement, which exploratory

call would serve to allow us to better understand Mobix Labs’ revised proposal and intentions.

On September 11, 2025, following the limited exploratory

call with Mobix Labs on September 10, 2025, Mobix Labs issued a public statement describing the discussions had in such limited exploratory

call and announcing an enhanced proposal of approximately 30% cash and 70% Mobix Labs common stock.

Then, on September 12, 2025, we issued

a press release to provide clarification to all stockholders relating to such public statements made by Mobix Labs, including that we

did not respond to Mobix Labs’ proposal and that we did not agree to continue discussions with Mobix Labs during the call, and we

sent a letter to Mobix Labs to clarify our position.

On September 13, 2025, Mobix Labs filed a Form 425

with the SEC and issued a related press release announcing its intent to commence a hostile exchange offer to acquire all outstanding

shares of the Company.

In the press release, Mobix Labs stated that the proposed offer is expected to consist of a mix of cash and Mobix

Labs common stock, with an intended closing timeline of approximately 75 days.

On September 29, 2025, Mobix Labs delivered another

letter to our board of directors reiterating its interest in a business combination and submitting what it described as a definitive proposal

to acquire all outstanding shares of the Company for $1.30 per share, consisting of a mix of cash and Mobix Labs common stock, and also

separately requested our cooperation with respect to an anticipated registration statement on Form S-4.

On October 3, 2025, Mobix Labs delivered an updated

letter superseding its prior proposal and proposing to acquire all outstanding shares of the Company for $1.30 per share in cash, stating

that the proposal was not subject to financing contingencies and was based on our publicly reported share count as of June 30, 2025.

On October 6, 2025, we sent a letter to Mobix Labs

acknowledging receipt of its revised proposal and requesting clarification regarding share count assumptions, treatment of the Company’s

publicly disclosed warrants and equity-linked instruments, and financing sources.

Also on October 6, 2025, Mobix Labs issued a press release

publicly announcing its updated all-cash proposal and reiterating its preference for a cooperative process with the Company.

On October 30, 2025, we entered into a mutual confidentiality

agreement with Mobix Labs in connection with our ongoing review of strategic alternatives.

The confidentiality agreement contains customary

terms, including mutual 12-month standstill and non-solicitation provisions.

On November 3, 2025, Mobix Labs issued a press release publicly

announcing its entry into a mutual confidentiality agreement with us.

On January 21, 2026, Mobix Labs issued a press release, and we filed

a Current Report on Form 8-K disclosing that the Company and Mobix Labs continue to engage in discussions regarding a potential strategic

transaction and are conducting customary, confidential diligence and that Mobix Labs delivered to the Company a non-binding indication

of interest contemplating a potential all-stock transaction at a premium to the Company’s trading price, subject to further diligence,

negotiation, and the execution of definitive documentation.

Our board of directors is evaluating the Company’s options to

enhance stockholder value.

Our board of directors and management team are committed to acting in the best interests of all stockholders.

Consistent with its fiduciary duties and in consultation with the Company’s financial and legal advisors, our board of directors

will continue to carefully review Mobix Labs’ proposal to determine the course of action that it believes is in the best interest

of the Company and its stockholders.

We do not intend to make further comments regarding potential transactions or provide any public

updates regarding proposed or potential transactions, unless required by applicable law or a regulatory body.

There can be no assurance

that any transaction will be completed with Mobix Labs or any other third party.

On August 30, 2024, we entered into an At The

Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann & Co.

(“Ladenburg”) with respect

to an “at the market” offering program, under which we may, from time to time, in our sole discretion, issue and sell through

Ladenburg, acting as agent or principal, shares of our common stock.

On November 21, 2025, we filed a prospectus supplement to our registration

statement on Form S-3 (File No.

333-280798) to increase the maximum number of shares of common stock to up to an aggregate of $3,150,000

of shares, exclusive of previously sold shares.

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 pursuant to the Sales Agreement in addition to the reimbursement

of certain expenses.

We have no obligation to sell any shares pursuant to the Sales Agreement and either we or Ladenburg may terminate

the Sales Agreement in accordance with its terms.

During the three and twelve months ended December 31, 2025, we sold 1,710,732 and 3,713,939

shares of common stock for net proceeds of approximately $2,095,000 and $4,351,100 pursuant to the Sales Agreement

World unrest due to wars and terrorist attacks have

led to 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.

Market conditions may prevent us from accessing 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.

Accounting Policies and Estimates

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

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

The preparation

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

liabilities, revenues and expenses.

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

that we consider reasonable under the circumstances.

Actual results may differ from these estimates and reported results could differ

under different assumptions or conditions.

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

to Consolidated Financial Statements” as of and for the years ended December 31, 2024 and 2023 included elsewhere in this Report.

As of December 31, 2024, there have been no material changes to our significant accounting policies and estimates.

recognize revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with Customers, and its amendments (ASC 606).

As described below, the analysis of contracts under ASC 606 supports the recognition of revenue at a point in time, resulting in revenue

recognition timing that is materially consistent with our historical practice of recognizing product revenue when title and risk of loss

pass to the customer.

generate revenue primarily from sales of integrated circuits and module products, performance of engineering services and licensing of

its intellectual property.

Revenues are recognized when control is transferred to customers in amounts that reflect the consideration

we expect to be entitled to receive in exchange for those goods.

Federal Reserve has addressed elevated inflation by increasing interest rates.

Market conditions may

prevent us from accessing 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.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition

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

principles generally accepted in the United States (“GAAP”).

The preparation of these consolidated financial statements requires

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

On an ongoing

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

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

Our significant

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

the years ended December 31, 2025 and 2024 included elsewhere in this Report.

As of December 31, 2025, there have been no material changes

to our significant accounting policies and estimates.

Revenue Recognition

We recognize revenue in accordance with FASB ASC Topic

606, Revenue from Contracts with Customers, and its amendments (ASC 606).

As described below, the analysis of contracts under ASC

606 supports the recognition of revenue at a point in time, resulting in revenue recognition timing that is materially consistent with

our historical practice of recognizing product revenue when title and risk of loss pass to the customer.

We generate revenue primarily from sales of integrated

circuits and module products, performance of engineering services and licensing of its intellectual property.

Revenues are recognized

when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for

Revenue recognition is evaluated through the following five steps:

identification of the contract, or contracts, with a customer;

(i) identification of the contract, or contracts, with

(ii) identification of the performance obligations in the contract;

determination of the transaction price;

(iv) allocation of the transaction price to the performance obligations in the contract;

(v) recognition of revenue when or as a performance obligation is satisfied.

is recognized when performance obligations under the terms of a contract with a customer are satisfied.

The majority of our contracts

have a single performance obligation to transfer products.

Accordingly, we recognize revenue when title and risk of loss have been transferred

to the customer, generally at the time of shipment of products.

Revenue is measured as the amount of consideration we expect to receive

in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price.

We sell our products both

directly to customers and through distributors generally under agreements with payment terms typically 60 days or less.

may record an estimated allowance, at the time of shipment, for future returns and other charges against revenue consistent with the

terms of sale.

licensing contracts typically provide for royalties based on the licensee’s use of our memory technology in its currently shipping

commercial products.

We estimate its royalty revenue in the calendar quarter in which the licensee uses the licensed technology.

are received in the subsequent quarter.

We also generate revenue from licensing its technology.

We recognize License fee as revenue at

the point of time when the control of the license has been transferred and we have no continuing performance obligations to the customer.

services revenue

and development contracts with customers generally contain a single performance obligation that is delivered over time.

Revenue is recognized

using an output method that is consistent with the satisfaction of the performance obligation as a measure of progress.

liabilities - deferred revenue

contract liabilities consist of advance customer payments and deferred revenue.

We classify advance customer payments and deferred revenue

as current or non-current based on the timing of when we expect to recognize revenue.

As of December 31, 2024 and 2023, contract liabilities

were in a current position and included in deferred revenue.

tax valuation allowance

we prepare our consolidated financial statements, we estimate our income tax liability for each of the various jurisdictions where we

conduct business.

This requires us to estimate our actual current tax exposure and to assess temporary differences that result from differing

treatment of certain items for tax and accounting purposes.

These differences result in deferred tax assets, which we show on our consolidated

balance sheet under the category of other assets.

The net deferred tax assets are reduced by a valuation allowance if, based upon weighted

available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We must make significant

judgments to determine our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded

against our net deferred tax asset.

We believe that utilization of our net operating loss and tax credit carryforwards, which comprise

the majority of our deferred tax assets, may be subject to a substantial annual limitation due to the ownership change limitations provided

by the Internal Revenue Code and similar state provisions.

See Note 8 to the consolidated financial statements in Item 15 of this

report for an additional description of these limitations.

and liability-classified instruments

account for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific

terms of the warrants and the guidance provided by FASB ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815,

Derivatives and Hedging (ASC 815).

The assessment considers whether the warrants are freestanding financial instruments pursuant

to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under

ASC 815, including whether the warrants are indexed to our stock and whether the holders of the warrants could potentially require net

cash settlement in a circumstance outside of our control, among other conditions for equity classification.

This assessment, which requires

the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while

the warrants are outstanding.

recognize stock-based compensation for equity awards on a straight-line basis over the requisite service period, usually the vesting

period, based on the grant-date fair value.

We estimate the value of employee stock options on the date of grant using the Black-Scholes

option pricing model.

The determination of fair value of share-based payment awards on the date of grant using an option pricing model

is affected by our stock price, as well as assumptions regarding a number of highly complex and subjective variables.

These variables

include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock

option exercise behaviors.

The expected term of options granted is derived from historical data on employee exercises and post-vesting

employment termination behavior.

The expected volatility is based on the historical volatility of our stock price.

The fair value of

restricted stock awards, restricted stock units, and performance-based restricted stock units is based on the closing price of the Company’s

common stock on the date of grant.

of Operations

(iii) determination of the transaction price;

(iv) allocation

of the transaction price to the performance obligations in the contract;

and (v) recognition of revenue when or as a performance obligation

is satisfied.

Product revenue

Revenue is recognized when performance obligations

under the terms of a contract with a customer are satisfied.

The majority of our contracts have a single performance obligation to transfer

Accordingly, we recognize revenue when title and risk of loss have been transferred to the customer, generally at the time of

shipment of products.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products and

is generally based upon a negotiated, formula, list or fixed price.

We sell our products both directly to customers and through distributors

generally under agreements with payment terms typically 60 days or less.

We may record an estimated allowance, at the time

of shipment, for future returns and other charges against revenue consistent with the terms of sale.

Royalty and other

Historically, our licensing contracts for our memory technology typically

provided for royalties based on the licensee’s use of our memory technology in its currently shipping commercial products.

royalty revenue in the calendar quarter in which the licensee uses the licensed technology.

Payments were received in the subsequent quarter.

Royalty revenues from licensees of our memory technology are no longer material due to reduced shipments by these licensees, which we

attribute to the discontinuation of the foundry process by TSMC, therefore royalty revenue is recorded when a licensee reports actual

amounts to us.

We also generate revenue from licensing our mmWave technology.

We recognize license fees as revenue at the point of time

when the control of the license has been transferred and we have no continuing performance obligations to the customer.

Engineering services revenue

Engineering and development contracts with customers

generally contain a single performance obligation that is delivered over time.

Revenue is recognized using an output method that is consistent

with the satisfaction of the performance obligation as a measure of progress.

Contract liabilities - deferred revenue

Our contract liabilities consist of advance customer

payments and deferred revenue.

We classify advance customer payments and deferred revenue as current or non-current based on the timing

of when we expect to recognize revenue.

As of December 31, 2025 and 2024, contract liabilities were in a current position and included

in deferred revenue.

Deferred tax valuation allowance

When we prepare our consolidated financial statements,

we estimate our income tax liability for each of the various jurisdictions where we conduct business.

This requires us to estimate our

actual current tax exposure and to assess temporary differences that result from differing treatment of certain items for tax and accounting

These differences result in deferred tax assets, which we show on our consolidated balance sheet under the category of other

The net deferred tax assets are reduced by a valuation allowance if, based upon weighted available evidence, it is more likely

than not that some or all of the deferred tax assets will not be realized.

We must make significant judgments to determine our provision

for income taxes, our deferred tax assets and liabilities and any valuation allowance to be recorded against our net deferred tax asset.

We believe that utilization of our net operating loss and tax credit carryforwards, which comprise the majority of our deferred tax assets,

may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar

state provisions.

See Note 8 to the consolidated financial statements in Item 15 of this report for an additional description of

these limitations.

Derivatives and liability-classified instruments

We account for common stock warrants as either equity-classified

or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by FASB ASC

480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815).

The assessment considers

whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480,

and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to our stock and

whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of our control, among other

conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant

issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Stock-based compensation

We periodically issue stock options and

restricted stock units (RSUs) to employees and non-employees.

We account for such awards based on ASC 718, whereby the value of the

award is measured on the date of award and recognized as compensation expense on a straight-line basis over the vesting period.

fair value of our stock options is estimated using the Black-Scholes-Merton Option Pricing (Black-Scholes) model, which uses

certain assumptions related to risk-free interest rates, expected volatility, expected life of the options, and future dividends.

Compensation expense is recorded based upon the value derived from the Black-Scholes model.

The assumptions used in the

Black-Scholes model could materially affect compensation expense recorded in future periods.

The fair value of restricted stock

awards, restricted stock units, and performance-based restricted stock units is based on the closing price of our common stock on

the date of grant.

Recognition of compensation expense for non-employees is in the same period and manner as if we had paid cash for

the services.

Results of Operations

Years Ended December 31,

2 unchanged sentences

Percentage of total net revenue

following table details revenue by product category:

in thousands)

Ended December 31,

The following table details revenue by product category:

(amounts in thousands)

Years Ended December 31,

Year-Over-Year

Product category

mmWave modules

mmWave other products

revenue increased for 2024 compared with 2023 primarily due to the increase in shipments of our memory IC products due to the EOL we

initiated in 2023.

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

expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as we expect i) an increase

in orders from existing customers, which appear to have reduced inventory levels that had increased due to the worldwide inventory correction

and ii) new customers to commence production during 2025.

Ended December 31,

Product revenue decreased for 2025 compared with 2024

primarily due to the decrease of our memory IC product shipments attributable to the significant reduction in EOL shipments in 2025 as

compared with 2024.

The decreases were partially offset by an increase in shipments of our mmWave ICs and antenna modules.

We expect sales of our mmWave products to increase

from a volume and revenue perspective in 2026, as we expect i) an increase in orders from existing customers and ii) new customers to

commence production during 2026.

Years Ended December 31,

Year-Over-Year Change

(dollar amounts

in thousands)

(dollar amounts in thousands)

Royalty and other

Percentage of total net revenue

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

The decrease in royalty and other revenue

for 2024 compared with 2023 was due to a decrease in non-recurring engineering services revenue related to our mmWave technology combined

with a decrease in royalties from licensees of our memory technology, which were impacted by the same factors that produced our EOL.

Net Revenue and Gross Profit

Royalty and other revenue includes royalty, non-recurring

engineering services and license revenues.

The increase in royalty and other revenue for 2025 compared with 2024 was primarily due to

an increase in non-recurring engineering services revenue related to our mmWave technology attributable to a statement of work entered

into in July 2025 partially offset by a decrease in royalties from licensees of our memory technology due to reduced shipments by these

licensees, which we attribute to the discontinuation of the foundry process by TSMC.

Cost of Net Revenue and Gross Profit

Years Ended December 31,

3 unchanged sentences

Percentage of total net revenue

of net revenue is primarily comprised of direct and indirect costs related to the sale of our products, including amortization of certain

intangible assets and depreciation of production-related fixed assets.

Cost of net revenue decreased for 2024 compared with 2023, primarily

due to product mix, as sales of our memory IC products increased, and a reduction in inventory write-down charges.

Our memory products

generate higher margins than our mmWave products, for which we experienced reduced sales during 2024.

Inventory write-down charges declined

by $3.1 million from $3.5 million recorded in 2023 to $0.4 million recorded in 2024.

The write-downs were primarily attributable to inventory

identified as excess and obsolete based on inventory expiration and customer forecasts.

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.

Ended December 31,

Cost of net revenue is primarily comprised of direct

and indirect costs related to the sale of our products, including depreciation of production-related fixed assets and, prior to January

1, 2025, amortization of intangible assets.

Cost of net revenue decreased for 2025 compared with

2024, primarily related to the decrease in product revenue and amortization of developed technology intangible assets of approximately

$2.3 million incurred in 2024, as these assets were fully amortized as of December 31, 2024.

Inventory write-down charges declined by

approximately $374,000 from $0.4 million recorded in 2024 to approximately $36,000 recorded in 2025.

The previous write-downs were primarily

attributable to inventory identified as excess and obsolete based on inventory expiration and customer forecasts.

Years Ended December 31,

Year-Over-Year Change

1 unchanged sentence

Percentage of total net revenue

Gross profit increased for 2024 compared with 2023 primarily due to

product mix, specifically the increase in memory IC shipments and reduction in mmWave product shipments combined with a $3.1 million decrease

in inventory write-down charges in 2024 compared with 2023.

During the year ended December 31, 2024, we recorded revenue of approximately

$139,000 from inventory that had been written down in prior periods.

and Development (R&D)

Ended December 31,

Gross profit decreased for 2025 compared with 2024 primarily due to

the reduction in revenue combined with product mix, specifically the decrease in memory IC shipments partially offset by an increase in

mmWave product shipments.

The gross margin percentage increased in 2025 compared with 2024 due to approximately $2.3 million of amortization

of intangible assets recorded to cost of net revenue combined with a $374,000 decrease in inventory write-down charges in 2025 compared

In addition, during the year ended December 31, 2025, we recorded revenue for sales of mmWave inventory with a cost of

approximately $1,351,000 that had been written down prior to January 1, 2025.

Research and Development

Years Ended December 31,

Year-Over-Year Change

amounts in thousands)

(dollar amounts in thousands)

Research and development

Percentage of total net revenue

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.

decrease for 2024 compared with 2023 was primarily due to reduced salary and consulting costs.

2023 and 2024 we implemented workforce reductions, as well as targeted reductions in certain longer-term research and development

expect that total R&D expenses will increase during 2025 compared with 2024, as a result of continued development of our mmWave products

and headcount additions to support anticipated increased customer activity.

General and Administrative (SG&A)

Ended December 31,

Year-Over-Year Change

(dollar amounts

in thousands)

Percentage of total net revenue

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

human resources and general management and amortization of certain intangible assets.

increase for 2024 compared with 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

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.

expect that total SG&A expense will remain flat or slightly increase during 2025 compared with 2024 as we continue to secure new

customers for and continue to invest in the development of our products.

and Software License Obligations

Ended December 31,

The decrease for 2025 compared with 2024 was primarily

i) reduced salary and consulting costs, as we implemented reductions in force during 2024 and terminated consultant contracts,

ii) reduced rent expense, as our San Jose office lease expired in January 2025, and iii) reduced software license expense, as, during

2024, we accrued the value of certain of our software license obligations and certain other licenses expired in the second half of 2025.

Selling, General and Administrative

Years Ended December 31,

Year-Over-Year Change

amounts in thousands)

Severance and software license

(dollar amounts in thousands)

Percentage of total net revenue

In 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 the year ended December 31, 2024.

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 year ended December 31, 2024, we expensed $1.6 million for the value of the remaining contractual

license and asset sale

Ended December 31,

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, prior to January 1, 2025, amortization of intangible assets.

The decrease for 2025 compared with 2024 was primarily

attributable to reductions in expenses for facilities, stock based compensation and amortization of purchased intangible assets for customer

relationships of approximately $1.0 million, which were fully amortized as of December 31, 2024.

These decreases were partially offset

by increases in consulting and professional services costs.

Severance and Software License Obligations

Years Ended December 31,

Year-Over-Year Change

(dollar amounts in thousands)

Gain on license and asset sale

Severance and software license obligations

Percentage of total net revenue

August 5, 2022, we entered into a Technology License and Patent Assignment Agreement (the Intel Agreement) with Intel Corporation (Intel).

As consideration, Intel paid us $3,062,500 in August 2022 and $437,500 (the Holdback) in January 2023 upon the satisfaction by us of

certain release criteria set forth in the Intel Agreement regarding the Licensed Technology.

We determined that the license and

asset sale did not qualify as a sale of a business, but as a sale of a non-financial asset, with the resultant gain recorded as income

from operations.

In January 2023, upon receipt of the Holdback, we recognized a gain, net of transaction costs, which was recorded

as a reduction of operating expenses in the consolidated statements of operations.

and Capital Resources;

In 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 the year ended

December 31, 2024.

The severance liabilities were fully paid as of December 31, 2025.

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 year ended December 31, 2024, we expensed the value of the remaining contractual liabilities

and recorded liabilities of approximately $1.6 million.

During the three months ended June 30, 2025, a licensor terminated one of the

license agreements and initiated a refund of approximately $56,300 for amounts previously paid by us.

As a result, we reversed approximately

$222,600 of expense and approximately $166,300 of the related contractual liabilities for this licensor during the three months ended

June 30, 2025.

As of December 31, 2025, the remaining contractual liabilities had been paid.

Liquidity and Capital Resources;

Changes in Financial Condition

December 31, 2024, we had cash and cash equivalents totaling $3.3 million compared with cash, cash equivalents and investments of $1.6

million as of December 31, 2023.

2024, we used $4.6 million in cash from operating activities, which primarily resulted from our net loss of $10.7 million, adjusted for

non-cash charges and gains, including stock-based compensation expenses of $3.6 million, depreciation and amortization expenses of $3.9

million and $0.4 million in inventory write-downs, partially offset by a $1.7 million non-cash gain on the change in fair value of warrant

liabilities and $0.1 million of changes to operating assets and liabilities.

2023, we used $4.7 million in cash from operating activities, which primarily resulted from our net loss of $16.8 million and changes

to operating assets and liabilities of approximately $2.8 million, adjusted for non-cash charges and gains, including stock-based compensation

expenses of $5.2 million, depreciation and amortization expenses of $3.8 million, $3.6 million in inventory write-downs and $0.3 million

of asset impairment charges, partially offset by a $3.5 million non-cash gain on the change in fair value of warrant liability and $0.1

million of other changes.

The changes in assets and liabilities primarily related to the timing of the collection of receivables from

customers, payments to vendors and increases in inventory balances.

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

2023, net cash provided from investing activities of $1.0 million represented $1.1 million of proceeds from maturities and sales of short-term

investments, partially offset by $0.1 million of purchases of fixed assets.

2024, net cash provided by financing activities of $6.3 million primarily comprised $3.5 million in net proceeds from a public offering

of our common stock and common stock purchase warrants in February 2024, $2.6 million in net proceeds from a warrant inducement offering

in November 2024, a $0.1 million sale of unregistered stock, and $0.3 million of net proceeds from sales under our at-the market offering

The proceeds were partially offset by $0.1 million of repayments of finance lease liabilities.

2023, net cash provided by financing activities was $3.4 million and consisted of $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.

future liquidity and capital requirements are expected to vary from quarter-to-quarter, depending on numerous factors, including:

At December 31, 2025, we had cash and cash equivalents

totaling $2.9 million compared with cash, cash equivalents and investments of $3.3 million as of December 31, 2024.

In 2025, we used $5.6 million in cash from operating

activities, which primarily resulted from our net loss of $4.8 million, adjusted for non-cash charges and gains, including stock-based

compensation expenses of $0.5 million, depreciation and amortization expenses of $0.3 million, shares issued for services of $0.1 million

and approximately $36,000 in inventory write-downs, partially offset by $1.7 million of changes to operating assets and liabilities.

In 2024, we used $4.6 million in cash from operating

activities, which primarily resulted from our net loss of $10.7 million, adjusted for non-cash charges and gains, including stock-based

compensation expenses of $3.6 million, depreciation and amortization expenses of $3.9 million and $0.4 million in inventory write-downs,

partially offset by a $1.7 million non-cash gain on the change in fair value of warrant liabilities and $0.1 million of changes to operating

assets and liabilities.

In 2025, net cash used in investing activities was

approximately $107,000 which was attributable to the purchase of fixed assets.

In 2024, no cash was provided by or used in investing

In 2025, net cash provided by financing activities of $5.3 million

primarily comprised $0.9 million in net proceeds from a warrant inducement offering in September 2025 and $4.4 million of net proceeds

from sales under our at-the market offering program.

In 2024, net cash provided by financing activities

of $6.3 million primarily comprised $3.5 million in net proceeds from a public offering of our common stock and common stock purchase

warrants in February 2024, $2.6 million in net proceeds from a warrant inducement offering in November 2024, a $0.1 million sale of unregistered

stock, and $0.3 million of net proceeds from sales under our at-the market offering program.

The proceeds were partially offset by $0.1

million of repayments of finance 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 any new ICs that we develop;

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 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 any new ICs that we develop;

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.

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

At December 31, 2024, the Company had outstanding

non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $3.1 million.

Concern - Working Capital

incurred net losses of approximately $10.7 million and $16.8 million for the years ended December 31, 2024 and 2023, respectively, and

we had an accumulated deficit of approximately $177.1 million as of December 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 loans, offerings of common stock and warrants and issuances of convertible notes.

expect to continue to incur operating losses during 2025, as we will cease shipments of our memory products after March 2025 and continue

to secure new customers for and continue to invest in the development of our products.

Purchase Obligations

Our primary purchase obligations include non-cancelable

purchase orders for inventory.

At December 31, 2025, we had outstanding non-cancelable purchase orders for inventory, primarily wafers

and substrates, and related expenditures of approximately $2.7 million.

Going Concern - Working Capital

We incurred net losses of approximately $4.8 million and $10.7 million

for the years ended December 31, 2025 and 2024, respectively, and we had an accumulated deficit of approximately $181.9 million as of

December 31, 2025.

These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial

amounts of additional capital.

As a result, management has concluded, and our independent registered public accounting firm has agreed

with our conclusion, that there is substantial doubt regarding our ability to continue as a going concern for a period of at least 12

months beyond the filing of this Annual Report on Form 10-K.

To date, we have primarily financed our operations through loans, offerings

of common stock and warrants and issuances of convertible notes.

We expect to continue to incur operating losses during

2026, as we do not expect to generate any meaningful revenue from shipments of our remaining memory products and as we continue to secure

new customers for and continue to invest in the development of our mmWave products.

Further, we expect our cash expenditures to continue

to exceed receipts for at least the next 12 months, as our revenues will not be sufficient to offset our operating expenses.

that our existing cash and cash equivalents as of December 31, 2024 will enable us to meet our capital needs through at least the second

quarter of 2025.

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

debt or equity 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 consolidated financial statements.

The consolidated financial statements presented in Item 8 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 debt or equity 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 its near- and long-term business plan.

These efforts may include, but

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

As further discussed in Note 10 to the consolidated financial

statements, in November 2024, we entered into a warrant inducement offering for net proceeds of approximately $2.6 million.

Additionally,

on August 30, 2024, we entered into the Sales Agreement with Ladenburg, pursuant to which we may offer and sell, from time to time at

our sole discretion, shares of our common stock through Ladenburg as agent and/or principal (subject to the limitations of General Instruction

I.B.6 of Form S-3) through an at-the-market program.

Further, during 2023 and 2024, we implemented reductions in our workforce and eliminated

19 full-time equivalent positions.

These cost reduction actions were intended to preserve cash, as we kept capital expenditures to minimum

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

we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership.

If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit

us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios,

any of which could harm our business, operating results and financial condition.

If we need additional capital and cannot raise it on

acceptable terms, we may not be able to, among other things:

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.

failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our existing

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.

we have incurred and may continue to incur substantial costs related to our strategic alternative exploration process, including our evaluation

of Mobix Labs’ proposal, which costs include the fees of our financial and legal advisors.

We believe that our existing cash and

cash equivalents as of December 31, 2025 and expected receipts associated with forecasted product sales will enable us to meet our capital

needs into the third quarter of 2026.

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 debt or equity 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 our consolidated financial statements.

The consolidated financial statements presented

in Item 8 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 debt

or equity 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

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

As further discussed in Note 10 to the consolidated financial statements,

we completed warrant inducement offerings in September 2025 and November 2024 for net proceeds of approximately $0.9 million and $2.6

million, respectively.

Additionally, on August 30, 2024, we entered into the Sales Agreement with Ladenburg, pursuant to which we may

offer and sell, from time to time at our sole discretion, shares of our common stock through Ladenburg as agent and/or principal (subject

to the limitations of General Instruction I.B.6 of Form S-3) through an at-the-market program.

During the three and twelve months ended

December 31, 2025, we sold 1,710,732 and 3,713,939 shares of common stock for proceeds of approximately $2,095,000 and $4,351,100 (net

of commissions paid to Ladenburg of approximately $65,500 and $135,700 and legal fees), respectively, pursuant to the Sales Agreement.

Further, during 2023 and 2024, we implemented reductions in our workforce and eliminated 19 full-time equivalent positions.

reduction actions were intended to preserve cash, as we kept capital expenditures to minimum levels in order to reduce operating costs

and our short-term cash needs.

If we were to raise additional capital through sales

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

If we engage in debt financing, we may be

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

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

results and financial condition.

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

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.

Our failure to do any of these things could seriously

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

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements

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

liquidity or capital resources.

Indemnifications

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

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

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

to past performance.

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

We have also entered into indemnification

agreements with our officers and directors.

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

statements for the years ended December 31, 2024 or 2023.

Accounting Pronouncements

Note 1 to the consolidated financial statements in Item 15 of this Report for a description of recent accounting pronouncements.

In the ordinary course of business, we enter into

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

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

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

Such indemnification clauses may

not be subject to maximum loss clauses.

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

amounts related to these indemnifications are reflected in our consolidated financial statements for the years ended December 31, 2025

Recent Accounting Pronouncements

See Note 1 to the consolidated financial statements

in Item 15 of this Report for a description of recent 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-K

Item 7. Management’s Discussion and Analysis