What changed in this filing

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Item 1. Financial Statements

2026-05-14 compared with 2025-11-12 · 209 added, 371 removed, 675 unchanged (46% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

Current assets

22 unchanged sentences

Series A, special voting preferred stock, $ 0.01 par value;

one share authorized, issued and outstanding at September 30, 2025 and December 31, 2024

one share authorized, issued and outstanding at March 31, 2026 and December 31, 2025

Common stock, $ 0.001 par value;

120,000 shares authorized;

7,580 and 4,474 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

12,582 shares and 10,055 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively

Exchangeable shares, no par value;

unlimited shares authorized;

57 and 60 shares outstanding at September 30, 2025 and December 31, 2024, respectively

Issuable shares, 837 and 917 shares at September 30, 2025 and December 31, 2024, respectively

56 shares outstanding at March 31, 2026 and December 31, 2025

Issuable shares, none and 137 shares at March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Royalty and other

Services and other

Total net revenue

3 unchanged sentences

Selling, general and administrative

Severance and software license obligations

Total operating expenses

1 unchanged sentence

Change in fair value of warrant liabilities

Other expense, net

Other income (expense), net

Net loss per share

11 unchanged sentences

At-the market sales of stock, net

Shares issued for services

Stock-based compensation

Balance as of March 31, 2025

At-the market sales of stock, net

Issuance of abeyance shares

Exchange of exchangeable shares

Issuance of common stock under stock plan, net

Stock-based compensation

Balance as of June 30, 2025

At-the market sales of stock, net

Issuance of common stock under stock plans

Issuance of abeyance shares

Issuance of common stock and warrants from warrant inducement offering, net

Issuance of common stock under stock plan, net

Stock-based compensation

Balance as of September 30, 2025

Balance as of March 31, 2026

$ ( 184,370 )

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$ ( 177,120 )

Shares issued for reverse stock split

Sale of common stock and warrants, net

Issuance of common stock upon exercise of warrants

Stock-based compensation

Balance as of March 31, 2024

Issuance of common stock upon exercise of warrants

Sale of common stock

Exchange of exchangeable shares

Issuance of common stock under stock plan, net

Stock-based compensation

Balance as of June 30, 2024

At-the market sales of stock, net

1 unchanged sentence

Stock-based compensation

Balance as of September 30, 2024

Balance as of March 31, 2025

$ ( 177,591 )

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Shares issued for services

Inventory write downs

Changes in assets and liabilities

Accounts receivable

Prepaid expenses and other

Prepaid expenses and other assets

Accounts payable

7 unchanged sentences

Cash flows from financing activities:

Proceeds from Warrant Inducement Offering

Proceeds from at-the-market sales of stock, net

Proceeds from option exercises

Taxes paid to net share settle equity awards

Repayment of financing leases

Proceeds from exercises of stock options

Repayment of financing lease

Net cash provided by financing activities

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necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented.

The operating results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results that may be

expected for the year ending December 31, 2025 or for any other future period.

The operating results for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for

the year ending December 31, 2026 or for any other future period.

Liquidity and Going Concern

The Company incurred net losses

of approximately $ 3.5 million for the nine months ended September 30, 2025 and $ 10.7 million for the year ended December 31, 2024 and

had an accumulated deficit of approximately $ 180.6 million as of September 30, 2025.

of approximately $ 2.5 million for the three months ended March 31, 2026 and $ 4.8 million for the year ended December 31, 2025 and had

an accumulated deficit of approximately $ 184.4 million as of March 31, 2026.

These and prior year losses have resulted in significant

9 unchanged sentences

As a result of the Company’s expected operating losses and cash burn for the foreseeable future, as well as recurring losses from

operations, if the Company is unable to raise sufficient capital through additional debt or equity arrangements, there will be uncertainty

regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt

as to the Company’s ability to continue as a going concern within one year from the date of issuance of these condensed consolidated

financial statements.

In addition, the Company’s independent registered public accounting firm, in its report on the Company’s

consolidated financial statements for the year ended December 31, 2024, expressed substantial doubt about the Company’s ability

to continue as a going concern.

These condensed consolidated financial statements do not include any adjustments that might result from

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 the Company.

The Company is currently

seeking additional financing in order to meet its cash requirements for the foreseeable future.

If the Company is unsuccessful in these

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

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

operations, management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern

for a period of at least 12 months beyond the filing of this Quarterly Report on Form 10-Q.

In addition, the Company’s independent

registered public accounting firm, in its report on the Company’s consolidated financial statements for the year ended December

31, 2025, expressed substantial doubt about the Company’s ability to continue as a going concern.

These condensed consolidated financial

statements do not include any adjustments that might result from this uncertainty.

There can be no assurance that the Company can raise

additional capital, whether in the form of debt or equity financing, that will be sufficient or available and, if available, that such

capital will be offered on terms and conditions acceptable to the Company.

The Company’s primary focus is producing and selling

its products.

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

further affect its near- and long-term business plan.

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

business activities.

Basis of Presentation

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on the reported results of operations or cash flows.

Reverse Stock Split

On December 15, 2023, the

Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State

of Delaware to effect a 1-for-40 reverse stock split of the Company’s shares of common stock.

Further, on January 2, 2024, Canco

filed a certificate of amendment to its amended and restated certificate of incorporation under the Ontario Business Corporations Act

to effect a 1-for-40 reverse stock split of the outstanding exchangeable shares.

Such amendments and ratio were previously approved by

the Company’s stockholders and board of directors.

As a result of the reverse

stock split, which was effective for trading purposes on January 3, 2024, every 40 shares of the Company’s pre-reverse split outstanding

common stock and exchangeable shares were combined and reclassified into one share of common stock.

Proportionate voting rights and other

rights of holders of common stock and exchangeable shares were not affected by the reverse stock split.

Any fractional shares of common

stock and exchangeable shares resulting from the reverse stock split were rounded up to the nearest whole share.

All stock options and

restricted stock units outstanding and common stock reserved for issuance under the Company’s equity incentive plans and warrants

outstanding immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of common stock by 40

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

All share and per-share amounts in these

condensed consolidated financial statements have been restated to reflect the reverse stock split as if it had occurred at the beginning

of the earliest period presented.

Risks and Uncertainties

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

Allowance for Doubtful Accounts

Allowance for Credit Losses

The Company establishes an

allowance for doubtful accounts to ensure that its trade receivables balances are not overstated due to uncollectibility.

performs ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral

allowance for credit losses to ensure that its trade receivables balances are not overstated due to uncollectibility.

The Company performs

ongoing customer credit evaluations within the context of the industry in which it operates and generally does not require collateral

from its customers.

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only to customers deemed creditworthy in the judgment of management.

The allowance for doubtful accounts receivable was approximately

$ 16,500 and $ 30,000 as of September 30, 2025 and December 31, 2024, respectively.

The allowance for credit losses was not material as of March 31,

2026 and December 31, 2025.

The Company values its inventories

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

Royalty and other revenue

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.

Services and other revenue

Historically, the Company’s

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transferred and the Company has 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

3 unchanged sentences

as current or non-current based on the timing of when the Company expects to recognize revenue.

As of September 30, 2025 and December

As of March 31, 2026 and December 31,

2025, contract liabilities were in a current position and included in deferred revenue.

During the nine months ended

September 30, 2025, the Company recognized approximately $ 333,400 of revenue that had been included in deferred revenue as of December

During the three months ended

March 31, 2026, the Company recognized an immaterial amount of revenue that had been included in deferred revenue as of December 31, 2025.

See Note 5 for disaggregation of revenue by geography.

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(in thousands):

Nine months ended

September 30,

Three Months Ended

Escrow shares - exchangeable shares

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presentation of its consolidated financial statements.

December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270):

Narrow-Scope Improvements (the “Update”),

an amendment to improve the guidance in Topic 270, Interim Report ing, by improving the navigability of the required interim disclosures

and clarifying when that guidance is applicable.

The amendments add to Topic 270 a principle that requires entities to disclose events

since the end of the last annual reporting period that have a material impact on the entity.

The amendments in this Update clarify interim

disclosure requirements and the applicability of Topic 270 apply to all entities that provide interim financial statements and notes in

accordance with GAAP.

In addition, the amendments in this Update result in a comprehensive list of interim disclosures that are required

by GAAP with the objective to provide clarity about the current requirements.

The Update is effective for the Company for interim reporting

periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

The Update can be applied either

prospectively or retrospectively to any or all prior periods presented in the financial statements.

The Company is evaluating the impact

that the Update will have on the presentation of its consolidated financial statements.

Other recent authoritative

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the Company’s assets and liabilities measured at fair value on a recurring basis and the basis for that measurement (in thousands):

September 30, 2025

March 31, 2026

Money market funds (1)

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the Company’s determination of fair value for its financial assets (cash equivalents) (in thousands):

September 30, 2025

March 31, 2026

Cash and cash equivalents

2 unchanged sentences

Balance Sheet Detail

September 30,

(in thousands)

2 unchanged sentences

Finished goods

September 30,

(in thousands)

Accrued Expenses and Other:

Prepaid expenses and other:

Prepaid inventory and production costs

Prepaid insurance

Prepaid software

(in thousands)

Accrued Expenses & Other:

Accrued wages and employee benefits

Professional fees, legal and consulting

Software license obligations

Severance benefits

Warranty accrual

Severance and Software License Obligations

In November 2023, the Company

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

as the Company prioritized business activities and projects that it believes will have a higher return on investment.

As part of the Reductions,

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

During the six months ended June

30, 2024, the Company determined that it would not recall any of the 11 Employees that remained on the Company’s payroll and commenced

notifying the remaining Employees that their employment would be terminated.

As a result of the termination of the Employees’ employment,

the Company recorded severance charges of approximately $ 446,000 during the six months ended June 30, 2024.

The severance liabilities

were fully paid as of September 30, 2025.

As a result of the decision

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

design software would not be utilized during the remaining license terms.

During the three months ended June 30, 2024, the Company accrued

the value of the remaining contractual liabilities of approximately $ 1,617,000 .

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 the Company.

a result, the Company reversed approximately $ 222,600 of expense and approximately $ 166,300 of related contractual liabilities during

the three months ended June 30, 2025.

As of September 30, 2025, the remaining contractual liabilities of approximately $ 0.2 million were

included in accounts payable and are expected to be paid by December 31, 2025.

Commitments and Contingencies

3 unchanged sentences

the lease term expired on January 14, 2025.

In December 2024, the Company

renewed the Toronto office lease for a one-year term, which commenced January 1, 2025, and the Company ceased accounting for the lease

under ASC 842.

In May 2022, the Company entered

into a lease for the facility in Markham with a 60 -month term, which commenced June 21, 2022.

The initial right-of-use asset and corresponding

liability of approximately CAD$ 1.0 million for the Markham facility lease were measured at the present value of the future minimum lease

The discount rate used to measure the lease assets and liabilities was 8 %.

The Markham landlord also provided a lease incentive

of approximately CAD$ 286,200 (the Incentive).

In 2023, the Company received payment of CAD$ 143,100 from the Markham landlord of the first

installment of the Incentive.

The remaining balance of the Incentive is paid to the Company in the form of an adjustment to rent during

the last three months of each calendar year during the remaining lease term.

As of September 30, 2025, the pending Incentive to be received

was CAD$ 71,550 .

On March 1, 2022, the Company

entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset and lease

liability of approximately $ 274,000 .

On March 1, 2025, the finance lease expired, and the Company took ownership of the equipment and

the related right of use asset and liability was fully amortized.

On November 1, 2022, the Company

entered into a 36-month finance lease agreement for the lease of equipment resulting in the recognition of a right-of-use asset of approximately

$ 124,000 and lease liability of approximately $ 117,000 .

The final invoice was dated August 15, 2025.

The finance lease expired and

the Company took ownership of the equipment.

The related right-of-use asset and liability will be fully amortized on October 15,

The lease for the facility

in Markham has a 60 -month term, which commenced June 21, 2022.

The initial right-of-use asset and corresponding liability of approximately

CAD$ 1.0 million for the lease were measured at the present value of the future minimum lease payments.

The discount rate used to measure

the lease assets and liabilities was 8 %.

The Markham landlord also provided a lease incentive of approximately CAD$ 286,200 (the Incentive).

In 2023, the Company received payment of CAD$ 143,100 from the Markham landlord of the first installment of the Incentive.

The remaining

balance of the Incentive is paid to the Company in the form of an adjustment to rent during the last three months of each calendar year

during the remaining lease term.

As of December 31, 2025, the pending Incentive to be received was CAD$ 35,775 .

The Toronto office lease has

a one-year term, which commenced January 1, 2026, and the lease is not accounted for under ASC 842.

The following table provides

the details of right-of-use assets and lease liabilities as of September 30, 2025 (in thousands):

the details of right-of-use assets and lease liabilities as of March 31, 2026 and December 31, 2025 (in thousands):

Right-of-use assets:

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Future minimum payments under

the leases at September 30, 2025 are listed in the table below (in thousands):

the Markham lease at March 31, 2026 are listed in the table below (in thousands):

Year ending December 31,

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the details of supplemental cash flow information (in thousands):

Nine Months Ended

September 30,

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

Rent expense was approximately

$ 0.1 million and $ 0.2 million for the three months ended September 30, 2025 and 2024, respectively.

Rent expense was approximately $ 0.4

million for each of the nine-months ended September 30, 2025 and 2024.

$ 0.1 million for the three months ended March 31, 2026 and 2025.

In addition to the minimum lease payments, the Company is responsible

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No material amounts were reflected in the Company’s condensed consolidated financial

statements for the three and nine months ended September 30, 2025 and 2024 related to these indemnifications.

statements for the three months ended March 31, 2026 and 2025 related to these indemnifications.

The Company has not estimated

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warranty claim experience and includes such costs in cost of net revenues.

Warranty costs were not material for the three and nine months

ended September 30, 2025 and 2024.

Warranty costs were not material for the three months ended

March 31, 2026 and 2025.

Legal Matters

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purchase obligations include non-cancelable purchase orders for inventory.

At September 30, 2025, the Company had outstanding non-cancelable

At March 31, 2026, the Company had outstanding non-cancelable

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

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The following table presents the significant segment expenses and other segment items regularly

reviewed by the CODM:

reviewed by the CODM (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Total net revenue

2 unchanged sentences

Stock-based compensation

Severance and software license obligations

Other operating expenses

Other (income) expense, net

Concentrations

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

North America

Rest of the world

Rest of world

Total net revenue

2 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Product category

4 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

* Represents less than 10%

1 unchanged sentence

significant customers that represented more than 10% of the net accounts receivable balance at each respective balance sheet date:

September 30,

Accounts Receivable

Represents less than 10%

2 unchanged sentences

Accounts Payable

September 30,

Represents less than 10%

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for issuance.

In November 2021 and December 2024, the Company’s stockholders approved amendments increasing the number of shares

reserved for issuance under the 2019 Plan by 77,674 and 1,500,000 shares, respectively.

Under the 2019 Plan, the term

of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10 % of the voting power

of all classes of the Company’s stock may not exceed five years .

The exercise price of stock options granted under the 2019 Plan

must be at least equal to the fair market value of the shares on the date of grant.

Generally, awards under the 2019 Plan will vest over

a three to four-year period, and options will have a term of 10 years from the date of grant.

In addition, the 2019 Plan provides for

automatic acceleration of vesting for options granted to non-employee directors upon a change of control of the Company.

In November 2021, December 2024 and December 2025, the Company’s stockholders approved amendments increasing the number

of shares reserved for issuance under the 2019 Plan by 77,674 , 1,500,000 , and 1,000,000 shares, respectively.

Under the 2019 Plan,

the term of all incentive stock options granted to a person who, at the time of grant, owns stock representing more than 10 % of the voting

power of all classes of the Company’s stock may not exceed five years .

The exercise price of stock options granted under the 2019

Plan must be at least equal to the fair market value of the shares on the date of grant.

Generally, awards under the 2019 Plan will vest

over a three to four-year period, and options will have a term of 10 years from the date of grant.

In addition, the 2019 Plan provides

for automatic acceleration of vesting for options granted to non-employee directors upon a change of control of the Company.

In December 2021, the Company

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The Company reflected compensation

costs related to the vesting of stock options of $ 0.4 million and $ 2.7 million during the nine-months ended September 30, 2025 and 2024,

respectively.

At September 30, 2025, the unamortized compensation cost was approximately $ 0.7 million related to stock options and is

expected to be recognized as expense over a weighted average period of approximately 2.0 years.

costs related to the vesting of stock options of approximately $ 0.1 million and $ 0.1 million during the three-month ended March 31, 2026

and 2025, respectively.

At March 31, 2026, the unamortized compensation cost was approximately $ 1.2 million related to stock options and

is expected to be recognized as expense over a weighted average period of approximately 1.2 years.

The Company reflected compensation

costs of approximately $ 30,000 and $ 0.6 million related to the vesting of restricted stock units during the nine-months ended September

costs of approximately $ 44,000 and $ 17,000 related to the vesting of restricted stock units during the three-months ended March 31, 2026

and 2025, respectively.

The unamortized compensation cost at September 30, 2025 was approximately $ 5,000 related to restricted

stock units and is expected to be recognized as expense over a weighted average period of approximately 0.2 years.

No stock options

were granted or exercised during the nine months ended September 30, 2024.

The unamortized compensation cost at March 31, 2026 was approximately $ 0.1 million related to restricted stock

units and is expected to be recognized as expense over a weighted average period of approximately 0.8 years.

Valuation Assumptions and Expense Information for Stock-Based

The fair value of the Company’s

share-based payment awards for the nine months ended September 30, 2025 was estimated on the grant dates using the Black-Scholes model

with the following assumptions:

option grants for the three months ended March 31, 2026 and March 31, 2025 was approximately $ 656,000 and $ 832,000 , respectively.

weighted-average grant date fair value of options granted was $ 0.73 and $ 0.63 per share for the three months ended March 31, 2026 and

2025, respectively.

The following assumptions were used in the fair-value method calculations:

Option Grants

Grant Date 02/11/25 08/07/25

Three Months Ended

Interest rate (risk-free rate) 3.70 % - 3.75 % 4.34 %

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Expected dividend 0 % 0 %

Fair value (in thousands) $ 832 $ 69

The risk-free interest rate

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The Company accounts for forfeitures as they occur.

Common Stock Options and Restricted Stock

Common Stock Options and Restricted Stock Units

The term of all incentive

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The following table summarizes

the activity in the shares available for grant under the Plans during the three and nine months ended September 30, 2025 and options outstanding

as of September 30, 2025 (in thousands, except exercise price):

the activity in the shares available for grant under the Plans during the three months ended March 31, 2026 and options outstanding as

of March 31, 2026 (in thousands, except exercise price):

Options Outstanding

1 unchanged sentence

Options granted

Balance as of March 31, 2025

RSUs cancelled and returned to the 2019 Plan

Options exercised

Options cancelled and returned to the 2019 Plan

Balance as of June 30, 2025

Options granted

Options exercised

Options cancelled and returned to the 2019 Plan

Balance as of September 30, 2025

Balance as of March 31, 2026

The following table summarizes

significant ranges of outstanding and exercisable options as of September 30, 2025 (in thousands, except contractual life and exercise

significant ranges of outstanding and exercisable options as of March 31, 2026 (in thousands, except contractual life and exercise price):

Options Outstanding Options Exercisable

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$ 0.00 - $ 599.60 2,222 9.24 $ 2.33 472 $ 7.86 $ 99

The total options outstanding

had an intrinsic value of $ 0.4 million.

A summary of RSU activity

under the Plans is presented below (in thousands, except for fair value):

under the 2019 Plan is presented below (in thousands, except for fair value):

Non-vested shares as of December 31, 2025

Non-vested shares as of March 31, 2026

Non-vested shares as of June 30, 2025

Non-vested shares as of September 30, 2025

Stockholders’ Equity

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$ 3.4 million.

The Series A warrants have

an exercise price of $ 2.25 , were immediately exercisable upon issuance, and expire on February 8, 2029 .

The Series B warrants had an original

exercise price of $ 2.25 per share, were immediately exercisable upon issuance, and expired on November 8, 2024 .

The Series B warrants

had an initial expiration date of August 8, 2024, which was extended to November 8, 2024 pursuant to amendments to the Warrant Agency

Agreement dated as of February 8, 2024 by and between the Company and the warrant agent, Equiniti Trust Company, LLC (the Warrant Agency

Agreement) (see Note 9).

The pre-funded warrants have an exercise price of $ 0.001 per share, were exercisable immediately and may be exercised

at any time until all of the pre-funded warrants are exercised in full.

As of December 31, 2024, the holders exercised all of the pre-funded

warrants for 1,424,760 shares of common stock.

The exercise price and number of shares of common stock issuable upon exercise of the warrants

is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common

stock and the exercise price.

Subject to limited exceptions, a holder may not exercise any portion of its warrants to the extent that

the holder would beneficially own more than 9.99 % or 4.99 % (at the election of the holder) of the Company’s outstanding common stock

after exercise.

The Series A warrants have an exercise price of $ 2.25 , were immediately

exercisable upon issuance, and expire on February 8, 2029 .

The Series B warrants had an original exercise price of $ 2.25 per share, were

immediately exercisable upon issuance, and expired on November 8, 2024 .

The Series B warrants had an initial expiration date of August

8, 2024, which was extended to November 8, 2024 pursuant to amendments to the Warrant Agency Agreement dated as of February 8, 2024 by

and between the Company and the warrant agent, Equiniti Trust Company, LLC.

The pre-funded warrants have an exercise price of $ 0.001 per

share, were exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full.

December 31, 2024, the holders exercised all of the pre-funded warrants for 1,424,760 shares of common stock.

The exercise price and number

of shares of common stock issuable upon exercise of the warrants is subject to appropriate adjustment in the event of stock dividends,

stock splits, reorganizations or similar events affecting the common stock and the exercise price.

Subject to limited exceptions, a holder

may not exercise any portion of its warrants to the extent that the holder would beneficially own more than 9.99 % or 4.99 % (at the election

of the holder) of the Company’s outstanding common stock after exercise.

On February 8, 2024, pursuant

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subject to adjustments, which were exercisable immediately and have substantially similar terms to the Series A warrants.

Shares Issued for Services

In January 2025, the Company

issued 40,000 unregistered shares of common stock with a fair value of approximately $ 40,000 to a service provider.

On August 30, 2024, the Company

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principal, shares of the Company’s common stock.

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.

The Company has no obligation to sell any shares pursuant to the Sales Agreement and either

the Company or Ladenburg may terminate the Sales Agreement in accordance with its terms.

During the three and nine months ended September

30, 2025, the Company sold 733,049 and 2,003,207 shares of common stock for net proceeds of approximately $ 751,200 and $ 2,270,200 ,

respectively, pursuant to the Sales Agreement.

2024 Warrant Inducement Offering

On August 6, 2024, the Company

extended the expiration date of the Series B warrants issued in the Offering to October 7, 2024, by entering into an amendment to the

Warrant Agency Agreement.

On October 3, 2024, the Company extended the expiration date of the Series B warrants to November 8, 2024,

by entering into a further amendment to the Warrant Agency Agreement.

On November 5, 2024, the Company

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.

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 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)

to purchase an aggregate of 2,246,030 shares of common stock.

The Series C Warrants have an exercise price of $ 1.61 per share, were exercisable

upon issuance and originally expired on the nine-month anniversary of the date of issuance.

The Series D Warrants have an exercise price

of $ 1.61 per share, were exercisable upon issuance and expire on the five-year anniversary of the date of issuance.

The warrant inducement offering

closed on November 6, 2024.

Upon exercise of the Existing Warrants, the Company issued 1,328,650 shares of its common stock while the

remaining 917,380 shares (the Issuable Shares) remained under abeyance, pending issuance instructions from the Holders, pursuant to the

terms of the Inducement Letters.

The Company accounted for the issuance of the:

i) shares of its common stock, ii) the Series C Warrants,

iii) the Series D Warrants, and iv) the remaining Issuable Shares as a single equity transaction for gross proceeds of approximately $ 2.92

The fair value of the unissued Issuable Shares at each balance sheet date has been presented separately as issuable shares on

the condensed consolidated balance sheets and statements of stockholders’ equity.

As of September 30, 2025, all of the Issuable

Shares had been issued and no shares remained under abeyance.

In relation to the above warrant

inducement offering, the Company engaged Ladenburg as placement agent and paid cash compensation of 9 % of the gross proceeds.

the Company issued Ladenburg and its designees warrants to purchase up to an aggregate of 157,223 shares of common stock at an exercise

price of $ 1.625 , which were exercisable upon issuance, expire on the five-year anniversary of the date of issuance, and other than the

foregoing terms, have substantially similar terms to the Series C Warrants.

On November 21, 2025, the Company filed a prospectus supplement to increase the

maximum number of shares of the Company’s common stock up to an aggregate of $ 3,150,000 of shares, which did not include the shares

having an aggregate gross sales price of approximately $ 4,095,176 that had previously been sold under the Sales Agreement.

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.

The Company has no obligation to

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

During the year ended December

31, 2024, the Company sold 251,621 shares of common stock for net proceeds of approximately $ 336,000 pursuant to the Sales Agreement.

During the year ended December 31, 2025, the Company sold 3,713,939 shares of common stock for net proceeds of approximately $ 4,351,100

pursuant to the Sales Agreement.

During the three months ended March 31, 2026, the Company sold 2,371,943 shares of common stock for net

proceeds of approximately $ 2,303,484 , pursuant to the Sales Agreement.

Amendments to Series C Warrants

On May 2, 2025, the Company

extended the expiration date of its Series C Warrants to purchase an aggregate of 2,246,030 shares of common stock from May 6, 2025 to

August 4, 2025, by entering into an amendment with each holder of the Series C Warrants.

On August 4, 2025, the Company extended the expiration

date of its outstanding Series C Warrants to purchase an aggregate of 2,246,030 shares of common stock from August 4, 2025 to December

5, 2025, by entering into a second amendment with each holder of the Series C Warrants.

2025 Warrant Inducement Offering

On September 11, 2025, the

Company entered into an inducement offer letter agreement (the 2025 Inducement Letter) with a holder (the Series C Holder) of Series C

Warrants to purchase up to an aggregate of 952,380 shares of common stock.

Pursuant to the 2025 Inducement Letter, the Series C Holder

agreed to exercise for cash its Series C Warrants at a reduced exercise price of $ 1.18 per share in consideration for the Company’s

agreement to issue in a private placement new Series E common stock purchase warrants (the Series E Warrants) to purchase an aggregate

of 952,380 shares of common stock.

The Series E Warrants have an exercise price of $ 1.25 per share, will be exercisable upon the six-month

anniversary of the date of issuance and will have a term of exercise of 5.5 years from the initial exercise date.

The warrant inducement offering

closed on September 12, 2025.

Upon exercise of the Series C Warrants, the Company issued 115,000 shares of common stock while the remaining

837,380 shares (the 2025 Issuable Shares) remained under abeyance, pending issuance instructions from the Series C Holder, pursuant to

the terms of the 2025 Inducement Letter.

The Company accounted for the issuance of the:

i) shares of common stock, ii) the Series E Warrants

and iii) the remaining 2025 Issuable Shares as a single equity transaction for gross proceeds of approximately $ 1.1 million.

value of the unissued 2025 Issuable Shares has been presented separately as issuable shares on the condensed consolidated balance sheets

and statements of stockholders’ equity.

In relation to the above warrant

inducement offering, the Company engaged Ladenburg as placement agent and paid cash compensation of 9 % of the gross proceeds.

the Company issued Ladenburg and its designees warrants to purchase up to an aggregate of 66,667 shares of common stock at an exercise

price of $ 1.475 , which will be exercisable on the six-month anniversary of the date of issuance, expire on the five-year anniversary of

the date of issuance, and include piggyback registration rights that are triggered if there is not an effective registration statement

covering the resale of all of the shares issuable upon the exercise of the warrants while the warrants are outstanding.

The remaining

material terms of the warrants issued to Ladenburg and its designees are substantially similar to those of the Series E Warrants.

extended the expiration date of its Series C warrants, which were issued in November 2024, to purchase an aggregate of 2,246,030 shares

of common stock from May 6, 2025 to August 4, 2025, by entering into an amendment with each holder of the Series C warrants.

4, 2025, the Company extended the expiration date of its outstanding Series C warrants to purchase an aggregate of 2,246,030 shares of

common stock from August 4, 2025 to December 5, 2025, by entering into a second amendment with each holder of the Series C warrants.

December 5, 2025, the Company extended the expiration date of its outstanding Series C warrants to purchase an aggregate of 2,246,030

shares of common stock from December 5, 2025 to January 7, 2026, by entering into a third amendment with each holder of the Series C warrants.

In September 2025, the Company effected a warrant inducement offering, and certain of the Series C shares were exercised.

On January 7,

2026, the remaining 1,293,650 Series C warrants expired.

Warrants Classified as Liabilities

10 unchanged sentences

in the fair value reported in other income (expense) in the consolidated statements of operations.

As of September 30, 2025,

the Company had the following Purchase Warrants outstanding (share amounts in thousands):

Number of Shares Exercise Price Expiration Date

As of March 31, 2026, the

Company had the following Purchase Warrants outstanding (share amounts in thousands):

Shares Exercise

Price Expiration

Warrants issued - November 2022 92 $ 40.00 May 28, 2028

2 unchanged sentences

changes in the fair value of the Purchase Warrants outstanding (amounts in thousands):

Number of Warrants

on Common Shares

Balance as of December 31, 2025

1 unchanged sentence

Balance as of March 31, 2026

Change in fair value of warrants

Balance as of June 30, 2025

Change in fair value of warrants

Balance as of September 30, 2025

The outstanding Purchase Warrants had no intrinsic

value at September 30, 2025.

value at March 31, 2026.

The fair value of the Purchase

Warrants at September 30, 2025 was determined using the Black Scholes model with the assumptions in the following table.

Purchase Warrant

Expected term based on contractual term

Warrants at March 31, 2026 was determined using the Black Scholes model with the following assumptions:

Expected term based on contractual term 2.2 years 2.2 years

Interest rate (risk-free rate):

3.94 % 3.94 %

Expected volatility 137 % 137 %

2 unchanged sentences

The fair value of the Purchase

Warrants at December 31, 2024 was determined using the Black Scholes model with the assumptions in the following table.

Purchase Warrant

Expected term based on contractual term

Warrants at December 31, 2025 was determined using the Black Scholes model with the following assumptions:

Expected term based on contractual term 2.4 years 2.4 years

Interest rate (risk-free rate):

3.71 % 3.71 %

Expected volatility 129 % 129 %

2 unchanged sentences

Warrants Classified as Equity

As of September 30, 2025,

the Company had the following equity-classified common stock purchase warrants outstanding (share amounts in thousands):

Warrant Type Number of Shares Exercise Price Expiration

Common Stock Warrant 7 $ 28.00 June 2, 2028

Series A warrants 3,975 $ 2.250 February 8, 2029

Series A warrants 139 $ 2.625 February 8, 2029

Series C warrants 1,294 $ 1.610 December 5, 2025

Series C warrants 157 $ 1.625 November 6, 2029

Series D warrants 2,246 $ 1.610 November 6, 2029

Series E warrants 952 $ 1.250 September 12, 2031

Series E warrants 67 $ 1.475 September 12, 2030

Balance as of September 30, 2025 8,837

As of March 31, 2026, the

Company had the following equity-classified common stock purchase warrants outstanding (share amounts in thousands):

Warrant Type Number of

Shares Exercise

Price Expiration

Common stock warrants 7 $ 28.00 June 2, 2028

Series A warrants issued 3,975 $ 2.250 February 8, 2029

Series A warrants issued 139 $ 2.625 February 8, 2029

Series C warrants issued 2,246 $ 1.610 January 7, 2026

Series C warrants exercised ( 952 ) $ 1.610 —

Series C warrants expired ( 1,294 ) $ 1.610 —

Series C warrants issued 157 $ 1.625 November 6, 2029

Series D warrants issued 2,246 $ 1.610 November 6, 2029

Series E warrants issued 952 $ 1.250 September 12, 2031

Series E warrants issued 67 $ 1.475 September 12, 2030

Balance as of March 31, 2026 7,543

The outstanding equity-classified warrants had

no intrinsic value at September 30, 2025.

no intrinsic value at March 31, 2026.

Related Party Transactions

2 unchanged sentences

The Company recorded compensation expense of approximately $ 38,300

and $ 30,300 for the employed family member during the three months ended September 30, 2025 and 2024, respectively.

The Company recorded

compensation expense of approximately $ 88,900 and $ 85,600 for the employed family member during the nine months ended September 30, 2025

and 2024, respectively.

and $ 41,600 for the employed family member during the three months ended March 31, 2026 and 2025, respectively, which includes the aggregate

grant date fair values, as determined pursuant to FASB ASC Topic 718, of any stock options during each period.

Memory IC Product End-of-Life

Taiwan Semiconductor Manufacturing

Corporation, the sole foundry that manufactured the wafers used to produce the Company’s memory IC products, discontinued the foundry

process used to produce such wafers.

Taiwan Semiconductor Manufacturing Corporation, the sole foundry that

manufactured the wafers used to produce the Company’s memory IC products, discontinued the foundry process used to produce such

As a result, the Company commenced an end-of-life (EOL) of its memory products in 2023.

2025, the Company fulfilled all then-outstanding EOL orders for its memory IC products.

Since March 2025, the Company received additional

purchase orders totaling approximately $ 452,800 from customers for remaining inventory.

The Company recorded approximately $ 72,000 of

product revenue from these purchase orders during the three months ended September 30, 2025.

During the three months ended March 31,

2026, the Company recorded approximately $ 20,000 of product revenue.

Subsequent Events

Issuance of Common Stock under ATM Offering

Subsequent to September 30,

2025, the Company sold 929,737 shares of common stock for net proceeds of approximately $ 1,365,976 pursuant to the Sales Agreement (see

On April 10, 2026, the Company

filed a prospectus supplement to its registration statement on Form S-3 to increase the maximum number of shares of common stock available

for sale under the Sales Agreement on such date to $ 2,125,000 , exclusive of previously sold shares.

Subsequent to March 31, 2026, the

Company has sold 2,104,742 shares of common stock for net proceeds of approximately $ 2,061,205 pursuant to the Sales Agreement.

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

What changed 10-Q

Item 1. Financial Statements