Peraso Inc. 10-Q

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include, without limitation, statements about the market for our technology, our strategies, competition, expected financial performance and capital raising efforts. Any statements about our business, financial results, financial condition and operations contained in this Quarterly Report on Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects” or similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 and the risk factors described below under Part II, Item 1A of this Quarterly Report on Form 10-Q. We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events occur in the future. Overview 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. During the three months ended March 31, 2026, we received an additional purchase order and recorded revenue totaling approximately $20,000. We incurred net losses 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 we had an accumulated deficit of approximately $184.4 million as of March 31, 2026. 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. 25 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. 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. 26 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 continues to evaluate 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. 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 twelve months ended December 31, 2025 and 2024, we sold 3,713,939 and 251,621 shares, respectively, of common stock for net proceeds of approximately $4,351,100 and $336,000, respectively, pursuant to the Sales Agreement. During the three months ended March 31, 2026, we sold 2,371,943 shares of common stock for net proceeds of approximately $2,303,484 pursuant to the Sales Agreement. Subsequent to March 31, 2026, we have sold 2,104,742 shares of common stock for net proceeds of approximately $2,061,205 through May 12, 2026. We currently have no amounts registered for sale under the Sales Agreement. We intend to file a new prospectus supplement under our existing shelf registration statement on Form S-3 following the filing of this Quarterly Report on Form 10-Q to register additional shares of common stock for sale under the Sales Agreement. The amount available for sale under any such prospectus supplement will be subject to limitations under General Instruction I.B.6 of Form S-3, which limits the aggregate market value of securities that may be sold by us during any 12-month period, as well as market conditions and other factors. Risks and Uncertainties We are subject to risks from, among other things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, tariffs, pandemics, wars and acts of terrorism and the volatility of public markets. We may be unable to access the capital markets, and additional capital may only be available to us on terms that could be significantly detrimental to our existing stockholders and to our business. For additional information on risks that could impact our future results of operations, please refer to “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. 27 Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these condensed consolidated financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances. Actual results may differ from these estimates and reported results could differ under different assumptions or conditions. Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this Quarterly Report on Form 10-Q and Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2025. As of March 31, 2026, there have been no material changes to our significant accounting policies and estimates. Results of Operations Net Revenue Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) Product $ 667 $ 3,800 $ (3,133 ) (82 )% Percentage of total net revenue 69 % 98 % The following table details revenue by product category for the three months ended March 31, 2026 and 2025: (amounts in thousands) Three Months Ended March 31, Year-Over-Year Product category 2026 2025 Change Memory ICs $ 20 $ 2,267 (2,247 ) mmWave ICs 504 975 (471 ) mmWave modules 111 558 (447 ) mmWave other products 32 - 32 $ 667 $ 3,800 $ (3,133 ) 28 Product revenue decreased for the three months ended March 31, 2026 compared with the same period of 2025 primarily due to the decrease in sales of our memory IC products due to the significant decrease in EOL shipments and decreases in shipments of our mmWave ICs and antenna modules. The decline in mmWave product shipments during the three months ended March 31, 2026 also reflected the delayed shipment of a sizable order due to material availability constraints from one of our suppliers, as well as subdued near-term demand from existing fixed wireless access customers. The delayed order was shipped subsequent to March 31, 2026. Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) Services and other $ 296 $ 69 $ 227 329 % Percentage of total net revenue 31 % 2 % Services and other revenue includes royalty, non-recurring engineering services and license revenues. The increase in services and other revenue for the three months ended March 31, 2026 compared with the same period of 2025 was primarily due to an increase in non-recurring engineering services revenue related to our mmWave technology, 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 Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) Cost of net revenue $ 371 $ 1,189 $ (818 ) (69 )% Percentage of total net revenue 39 % 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. Cost of net revenue decreased for the three months ended March 31, 2026 when compared with the same period in 2025, primarily related to the decrease in product revenue. Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) Gross profit $ 592 $ 2,680 $ (2,088 ) (78 )% Percentage of total net revenue 61 % 69 % Gross profit decreased for the three months ended March 31, 2026 compared with the same period of 2025, primarily due to the reduction in product revenues, partially offset by increased services and other revenues. During the three months ended March 31, 2026 and 2025, mmWave inventory with values of approximately $182,000 and $94,000, respectively, which was written down prior to January 1, 2026, was sold to customers. 29 Research and Development Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) Research and development $ 1,590 $ 1,583 $ 7 0 % Percentage of total net revenue 165 % 41 % Our research and development, or R&D, expenses include costs related to the development of our products, including facility allocations. We expense R&D costs as they are incurred. We expect that total R&D expenses will remain flat for the remainder of 2026 compared with the prior periods of 2025. Selling, General and Administrative Three Months Ended March 31, Year-Over-Year Change 2026 2025 2025 to 2026 (dollar amounts in thousands) SG&A $ 1,486 $ 1,611 $ (125 ) (8 )% Percentage of total net revenue 154 % 42 % 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. The decrease for the three months ended March 31, 2026 compared with the same period of 2025 was primarily attributable to reductions in expenses for facilities and stock based compensation. These decreases were partially offset by increases in consulting and professional services costs. We expect that total SG&A expense will remain flat or slightly decrease for the remainder of 2026 compared with 2025, as we continue to manage our SG&A expenses. 30 Liquidity and Capital Resources; Changes in Financial Condition Cash Flows As of March 31, 2026, we had cash and cash equivalents of $2.7 million and working capital of $4.0 million. Net cash used in operating activities was $2.3 million for the first three months of 2026, which primarily resulted from our net loss of $2.5 million, as partially offset by non-cash charges of $0.1 million of depreciation and amortization and $0.1 million of stock based compensation. Net cash used in operating activities was $1.0 million for the first three months of 2025, which primarily resulted from our net loss of $0.5 million, as adjusted for cash outflows of $0.7 million in net changes in assets and liabilities, and partially offset by non-cash charges of $0.1 million of depreciation and amortization and $0.1 million of stock based compensation. The changes in assets and liabilities primarily related to the timing of collections of receivables, purchases of inventory and other vendor payables and prepayments. Net cash used in investing activities of approximately $0.2 million for the three months ended March 31, 2026 which was attributable to the purchase of fixed assets. For the three months ended March 31, 2025 no cash was provided by or used in investing activities. Net cash provided by financing activities of $2.3 million for the three months ended March 31, 2026 primarily comprised $2.3 million of net proceeds from sales of our common stock under the Sales Agreement. Net cash provided by financing activities for the three months ended March 31, 2025 comprised $0.4 million of net proceeds from sales of our common stock under the Sales Agreement, partially offset by repayment of financing 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, which may fluctuate based on supply chain conditions, customer demand patterns and the timing of supplier deliveries, and we maintain non-cancelable purchase orders with our suppliers, which exposes us to additional inventory risk if demand does not materialize as expected; ● timing of product shipments, which may be impacted by supply chain disruptions experienced by us or our customers; ● length of billing and collection cycles, which may be impacted in the event of a global recession or economic downturn; ● 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. 31 Purchase Obligations Our primary purchase obligations include non-cancelable purchase orders for inventory. At March 31, 2026, we had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $3.2 million. Going Concern - Working Capital We incurred net losses 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 we had an accumulated deficit of approximately $184.4 million as of March 31, 2026. 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. 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, which costs include the fees of our financial and legal advisors. We believe that our existing cash and cash equivalents as of March 31, 2026 and expected receipts associated with forecasted product sales will enable us to meet our capital needs into the fourth 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 condensed consolidated financial statements. In addition, our independent registered public accounting firm, in its report on our consolidated financial statements for the year ended December 31, 2025, expressed substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements presented in Part I, Item 1 of this Quarterly Report on Form 10-Q 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 selling shares of our common stock under the Sales Agreement and 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 cost reduction strategies may include, but are not limited to, reducing headcount and curtailing business activities. 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; 32 ● 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 condensed consolidated financial statements for the three months ended March 31, 2026. Recent Accounting Pronouncements See Note 1 to the condensed consolidated financial statements for a discussion of recently-issued accounting pronouncements.