Peraso Inc. 10-K

Item 7. 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. Overview We were formerly known as MoSys, Inc. (“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.” 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 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. 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. Subsequent to March 2025, we received additional purchase orders and recorded revenue totaling approximately $0.5 million during the second half of 2025. 30 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, Inc.; 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 provision. 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. 31 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. ATM Offering On August 30, 2024, we entered into an At The Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (“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 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. 32 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 those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. Product revenue Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied. The majority of 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. 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. We estimated 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. 33 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 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. 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. The 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 Net Revenue Years Ended December 31, Year-Over-Year Change 2025 2024 2024 to 2025 (dollar amounts in thousands) Product $ 11,845 $ 14,248 $ (2,403 ) (17 )% Percentage of total net revenue 97 % 98 % 34 The following table details revenue by product category: (amounts in thousands) Years Ended December 31, Year-Over-Year Product category 2025 2024 change Memory ICs $ 2,720 $ 12,914 (10,194 ) mmWave ICs 6,734 302 6,432 mmWave modules 2,293 1,007 1,286 mmWave other products 98 25 73 $ 11,845 $ 14,248 $ (2,403 ) 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 2025 2024 2024 to 2025 (dollar amounts in thousands) Royalty and other $ 348 $ 325 $ 23 7 % Percentage of total net revenue 3 % 2 % 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, Year-Over-Year Change 2025 2024 2024 to 2025 (dollar amounts in thousands) Cost of net revenue $ 5,126 $ 7,040 $ (1,914 ) (27 )% Percentage of total net revenue 42 % 48 % 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. 35 Years Ended December 31, Year-Over-Year Change 2025 2024 2024 to 2025 (dollar amounts in thousands) Gross profit $ 7,067 $ 7,533 $ (466 ) (6 )% Percentage of total net revenue 58 % 52 % 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 with 2024. 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 2025 2024 2024 to 2025 (dollar amounts in thousands) Research and development $ 6,245 $ 9,232 $ (2,987 ) (32 )% Percentage of total net revenue 51 % 63 % 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 2025 compared with 2024 was primarily due to: 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 2025 2024 2024 to 2025 (dollar amounts in thousands) SG&A $ 5,805 $ 8,673 $ (2,868 ) (33 )% Percentage of total net revenue 48 % 60 % 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 2025 2024 2024 to 2025 (dollar amounts in thousands) Severance and software license obligations $ (223 ) $ 2,063 $ (2,286 ) (111 )% Percentage of total net revenue -2 % 14 % 36 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 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 activities. 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; 37 ● 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; and ● profitability of our business. 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. In addition, 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 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. 38 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. 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. 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 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; or ● 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 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. No material amounts related to these indemnifications are reflected in our consolidated financial statements for the years ended December 31, 2025 or 2024. Recent Accounting Pronouncements See Note 1 to the consolidated financial statements in Item 15 of this Report for a description of recent accounting pronouncements.