What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-31 compared with 2021-03-18 · 96 added, 84 removed, 142 unchanged (56% of the section changed)

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

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.

Our strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering ICs and related software and IP that deliver unparalleled memory bandwidth and access rate performance for high-performance data processing in cloud networking, communications, security appliances, video, test and monitoring, and data center systems.

Our solutions deliver time-to-market, performance, power, area and economic benefits for system original equipment manufacturers, or OEMs.

Our primary product line is marketed under the Accelerator Engine name and comprises our Bandwidth Engine and Programmable HyperSpeed Engine IC products, which integrate our proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance.

Our second-generation Bandwidth Engine, or Bandwidth Engine 2, products are expected to be our primary revenue source for the foreseeable future.

As we are not developing new IC products, from a product development perspective, we continue to leverage our current technologies and core competencies to expand our product offerings without incurring significant additional R&D expenses.

In 2020, we began offering for license the first of our Virtual Accelerator Engine, or VAE, products which consist of software, firmware and related IP.

This new product line will include multiple function accelerator platform products, which target specific application functions and will use a common software interface to allow performance scalability over multiple hardware environments.

These function accelerator platform products are hardware agnostic and operate with or without one of our Accelerator Engine ICs.

This software-defined, hardware-accelerated platform architecture utilizes an internally developed graphical memory engine architecture to provide flexible data classification and analysis capability.

We believe the technology will generate new opportunities that require less up-front architectural changes by system designers and provide a scalable performance roadmap of options using our Accelerator Engine ICs.

Despite our limited new IC product development efforts, we believe our current hardware and software/firmware product portfolio positions us for future growth and profitability.

We continue to seek third-party funding for new product development efforts .

Subsequent to December 31, 2020, we received gross proceeds of approximately $9.3 million from financing activities.

In February 2021, we completed a registered direct offering and sold 1,487,601 shares of common stock at a price of $5.00 per share to institutional investors.

Net proceeds of the offering, after placement agent and other fees and expenses payable by us, were approximately $6,800,000.

During January and February 2021, we received a total of $2,477,657 of proceeds from the exercise of 1,032,357 warrants to purchase shares of common stock at a price of $2.40 per share.

We used approximately $3 million of these proceeds to pay in full the outstanding balance of our senior secured convertible notes.

We were formerly known as MoSys, Inc.

(MoSys) and 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 the Company changed its name to “Peraso Inc.” and began trading on the Nasdaq Stock Market (the Nasdaq) under the symbol “PRSO.”

For accounting purposes, the legal subsidiary, Peraso Tech, has been treated as the accounting acquirer and we, the legal parent, have been treated as the accounting acquiree.

The transaction has been accounted for as a reverse acquisition in accordance with Accounting Standards Codification (ASC) No.

805, Business Combinations (ASC 805).

Accordingly, the financial condition and results of operations discussed herein are a continuation of Peraso Tech’s financial results prior to December 17, 2021 and exclude the financial results of us prior to December 17, 2021.

See Note 2 to the consolidated financial statements for additional disclosure .

Our strategy and primary business objective is to be a profitable, IP-rich fabless semiconductor company offering integrated circuits, or ICs, modules and related non-recurring engineering services.

We specialize in the development of mmWave semiconductors, primarily in the 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 modules based on using those mmWave semiconductor devices.

We have pioneered a high-volume mmWave production test methodology using standard low cost production test equipment.

It has taken us several years to refine performance of this production test methodology, and we believe this places us in a leadership position in addressing operational challenges of delivering mmWave products into high-volume markets.

During 2021, we augmented our business model by selling complete mmWave modules.

The primary advantage provided by a module is the silicon 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, and by providing a module, we can guarantee the performance of the amplifier/antenna interface.

We also acquired a memory product line marketed under the Accelerator Engine name and comprises our Bandwidth Engine and Programmable HyperSpeed Engine IC products, which integrate our proprietary, 1T-SRAM high-density embedded memory and a highly-efficient serial interface protocol resulting in a monolithic memory IC solution optimized for memory bandwidth and transaction access performance.

As we are not developing new memory products, from a product development perspective, we continue to leverage our current technologies and core competencies to expand our product offerings without incurring significant additional R&D expenses.

We incurred net losses of approximately $10.9 million and $10.2 million for the years ended December 31, 2021 and 2020, respectively, and had an accumulated deficit of approximately $117.1 million as of December 31, 2021.

These and prior year losses have resulted in significant negative cash flows for almost a decade and have necessitated that we raise substantial amounts of additional capital during this period.

To date, we have primarily financed our operations through multiple offerings of common stock to investors and affiliates, as well as asset sale transactions and one offering of convertible notes.

In February 2021, we completed a registered direct offering of our common stock for net proceeds of approximately $6.8 million.

We may continue to incur operating losses and 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.

We expect to incur operating losses and 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.

The global outbreak of the coronavirus disease 2019 (COVID-19) was declared a pandemic by the World Health Organization and a national emergency by the U.S.

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and foreign government agencies to prevent disease spread, all of which are uncertain, out of our control, and cannot be predicted.

In March 2020, Santa Clara County in California, where we are based, issued a ”shelter-in-place” order (the Order) that was initially effective through April 7, 2020 and has now been extended.

We have been complying with the Order and have minimized business activities at our San Jose headquarters facility (our only facility).

We have implemented a teleworking policy for our employees and contractors to reduce on-site activity at our facility.

The Order impacted our ability to produce and ship our IC products in the second half of March, as certain of our vendors in the San Francisco Bay Area closed in accordance with the Order.

In April, we resumed shipments of our IC products, as we and our vendors are supporting shipment of components for critical infrastructure, as defined by the federal government;

however, our employees are generally restricted from visiting our customer and vendor sites in compliance with the Order, and, in some cases, we have limited ability to conduct certain product testing and development activities.

Since March 2020, certain jurisdictions in which we operate have issued ”shelter-in-place” orders.

We have complied with these orders and, when such orders were in place, minimized business activities at our facilities.

We have implemented a teleworking policy for our employees and contractors to reduce on-site activity at our facilities.

We remain diligent in continuing to identify and manage risks to our business given the changing uncertainties related to COVID-19.

The ultimate impact of the COVID-19 pandemic on our business and results of operations is uncertain and difficult to predict, and we are closely monitoring impacts, especially to customer programs and our supply chain.

We expect that the impacts of the COVID-19 pandemic will have a negative impact on our revenues for 2021, although we are not in a position to quantify such impacts.

In addition, we have and continue to experience longer lead times for certain components used to manufacture our IC products.

We have and continue to experience longer lead times for certain components used to manufacture our products.

While we believe that our operations personnel are currently in a position to meet expected customer demand levels in the coming quarters, we recognize that unpredictable events could create difficulties in the months ahead.

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The continued spread of COVID-19 has also led to disruption and volatility in the global capital markets.

During 2020, we were able to raise additional capital and received a loan under the Paycheck Protection Program (see discussion below under Liquidity and in Notes 6 and 10 to the consolidated financial statements included in Item 15 of this report), however, our ability to raise additional capital to support operations in the future may be impacted, and 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.

Our ability to raise additional capital to support operations in the future may be impacted, and 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.

Critical Accounting Policies and Use of Estimates

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Although we believe our judgments and estimates are appropriate, actual future results may differ from our estimates, and if different assumptions or conditions were to prevail, the results could be materially different from our reported results.

Business Combination

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill to reporting units based on the expected benefit from the business combination.

Allocation of purchase consideration to identifiable assets and liabilities affects the amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite-lived intangible assets, including goodwill, are not amortized.

During the measurement period, which is not to exceed one year from the acquisition date, our records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.

Acquired Intangibles

Acquired intangible assets consist of developed technology and customer relationships that are measured at fair value at date of acquisition.

In valuing acquired intangible assets, we make assumptions and estimates based in part on projected financial information, which makes assumptions and estimates inherently uncertain, particularly for early-stage technology companies.

The significant estimates and assumptions used by us in the determination of the fair value of acquired intangible technology assets include the revenue growth rate, the royalty rate and the discount rate.

The significant estimates and assumptions used by us in the determination of the fair value of acquired customer contract intangible assets include the revenue growth rate and the discount rate.

As a result of the judgments that need to be made, we obtain the assistance of independent valuation firms.

We complete these assessments as soon as practical after the closing dates.

Any excess of the purchase price over the estimated fair values of the identifiable net assets acquired is recorded as goodwill.

Revenue Recognition

We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 606, Revenue from Contracts with Customers and all its related amendments (“ASC 606”).

This standard update outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers.

We generate revenue primarily from sales of IC products and licensing of our intellectual property.

We recognize revenue in accordance with Financial Accounting Standards Board ( 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.

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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.

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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

License and other

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

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

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

Payments are received in the subsequent quarter.

We also generate revenue from licensing its technology.

We recognize License fee as revenue at the point of time when the control of the license has been transferred and we have no continuing performance obligations to the customer.

Engineering services revenue

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

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

Contract liabilities – deferred revenue

Our contract liabilities consist of advance customer payments and deferred revenue.

We classify advance customer payments and deferred revenue as current or non-current based on the timing of when we expect to recognize revenue.

As of December 31, 2021, contract liabilities were in a current position and included in deferred revenue.

Fair Value Measurements of Financial Instruments

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The determination of fair value for Level 3 investments and other financial instruments involves the most management judgment and subjectivity.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable, notes payable and other payables, approximate their fair values because of the short maturity of these instruments.

The carrying values of lease obligations and long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates

Valuation of long-lived Assets

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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.

similar state provisions.

See Note 4 to the consolidated financial statements in Item 15 of this report for an additional description of these limitations .

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Percentage of total net revenue

Product revenue decreased in 2020 compared with 2019 due to reduced shipments of our Bandwidth engine products.

Specifically, we completed final shipments of our Bandwidth Engine 1 product in the first half of 2019 and experienced reduced shipments to certain of our Bandwidth Engine 2 IC and LineSpeed customers during 2020.

The reduction in shipments was primarily due to customer transitions and inventory reductions.

We expect IC revenues to increase in 2021.

Product revenue increased in 2021 compared with 2020 due to increased shipments of our mmWave IC and module products.

We commenced selling our module products in 2021.

We expect revenues to increase in 2022, as we expect increased sales of our mmWave products and full-year contribution of revenues from our memory products.

Years Ended December 31,

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(dollar amounts in thousands)

Royalty and other

License and other

Percentage of total net revenue

Royalty and other revenue primarily comprises revenue generated from licensing agreements.

The increase from 2019 to 2020 was primarily due to new licensing revenue of $0.1 million in 2020 attributable to our VAE technology, combined with increased royalties from our 1T-SRAM licensees.

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

The decrease from 2021 to 2020 was primarily due to a one-time license of $5.0 million from a lead customer recognized in the fourth quarter of 2020, decrease of $5.0 million one license revenue combined with reduced NRE revenues.

Cost of Net Revenue and Gross Profit

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Percentage of total net revenue

In 2020 and 2019 cost of net revenue primarily consisted of direct and indirect costs related to the sale of IC products.

Cost of net revenue decreased in 2020 from 2019 due to decreased product shipments.

Gross profit decreased from 2020 to 2019 primarily due to the decrease in IC product shipments, which was partially offset by an increase in our royalty and other revenue, which generally has no associated costs.

In 2021 and 2020 cost of net revenue primarily consisted of direct and indirect costs related to IC and module sales.

Cost of net revenue increased in 2021 from 2020 due to increased product shipments.

Gross profit de creased from 20 21 to 20 20 primarily due to the lower l icense and NRE revenue , which have higher margins than product revenues .

Research and Development

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Percentage of total net revenue

Our research and development expenses include costs related to the development of our IC and VAE products.

Our research and development expenses include costs related to the development of our products.

We expense research and development costs as they are incurred.

Research and development expenses decreased slightly in 2020 compared with 2019 primarily due to decreased personnel costs and decreased prototyping, testing and related material costs, partially offset by increases in consulting costs for development of our new VAE products.

Research and development expenses included stock-based compensation expenses of $0.1 million for each of the years ended December 31, 2020 and 2019.

We expect that total research and development expenses will remain flat in 2021.

Research and development expenses increased in 2021 compared with 2020 primarily due to increased personnel costs and consulting expenses were offset by the government wage and rent subsidies.

Research and development expenses included stock-based compensation expenses of $2.8 million and $1.0 million for the years ended December 31, 2021 and 2020, respectively.

We expect that total research and development expenses will increase in 2022, as we continue development of our products and technologies.

Selling, General and Administrative (SG&A)

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Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, finance, human resources and general management.

Selling, general and administrative expenses increased slightly for 2020, compared with the prior year, primarily as a result of increased consulting fees.

Selling, general and administrative expenses included stock-based compensation expense of $0.2 million for each of the years ended December 31, 2020 and 2019.

We expect total selling, general and administrative expenses to remain flat in 2021.

Impairment of Goodwill

Years Ended December 31,

Year-Over-Year Change

(dollar amounts in thousands)

Impairment of goodwill

Percentage of total net revenue

In 2019, we recorded goodwill impairment charges.

See Note 1 of the consolidated financial statements in Item 15 of this report for additional disclosure.

Selling, general and administrative expenses decreased slightly for 2021, compared with the prior year, primarily as a result of decreased legal expenses, bad debt expense and wage and rent expenses.

The decrease in wage and rent expenses was attributed to higher government wage and rent subsidies received from the Canadian government, which are recorded as a reduction of operating expenses.

This was partially offset by $1.6 million in transaction costs, including legal consulting and accounting and auditing) incurred in connection with the business combination with MoSys and a $1.0 million increase in stock-based compensation expense.

Selling, general and administrative expenses included stock-based compensation expenses of $1.7 million for the year ended December 31, 2021 and of $0.7 million for the year ended December 31, 2020.

We expect total selling, general and administrative expenses to increase in 2022, as our 2022 will include the results of the MoSys business for the full year.

Interest expense

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Percentage of total net revenue

Interest expense is incurred on our senior secured convertible notes (the Notes).

Through December 31, 2020, we have paid all accumulated interest for the Notes in-kind through the issuance of identical new senior-secured convertible notes.

See Note 10 and 11 to the consolidated financial statements in Item 15 of this Report for additional disclosure.

Interest expense was incurred on our loans payable and convertible debentures, which were retired during 2021.

See Note 11 to the consolidated financial statements in Item 15 of this Report for additional disclosure.

Liquidity and Capital Resources

At December 31, 2020, we had cash and cash equivalents totaling $5.9 million compared with cash, cash equivalents and short-term investments of $6.4 million as of December 31, 2019.

In February 2021, we completed a registered direct offering of our common stock for net proceeds of approximately $6.8 million.

Subsequent to December 31, 2020, we received a total of $2,476,817 of proceeds from the exercise of 1,032,007 warrants to purchase shares of common stock at a price of $2.40 per share.

We believe that cash generated from our liquidity sources will be sufficient to meet our working capital and capital expenditure needs for the foreseeable future.

In 2020, we used $2.6 million in cash from operating activities, which primarily resulted from the net loss of $3.8 million, adjusted for non-cash charges and gains, which included stock-based compensation expenses of $0.3 million, depreciation and amortization expenses of $0.1 million, accrued interest of $0.2 million, and changes to operating assets and liabilities of approximately $0.6 million.

At December 31, 2021, we had cash, cash equivalents and investments totaling $18.1 million compared with cash, cash equivalents and short-term investments of $1.7 million as of December 31, 2020.

We believe that cash generated from our liquidity sources will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

In 2021, we used $12.0 million in cash from operating activities, which primarily resulted from the net loss of $10.9 million, adjusted for non-cash charges and gains, which included the change in fair value of warrant liability of $8.1 million, changes to operating assets and liabilities of approximately $1.4 million, partially offset by stock-based compensation expenses of $4.5 million, depreciation and amortization expenses of $1.1 million, accrued interest of $0.7 million and amortization of debt discount of $2.1 million.

The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers, payments to vendors and decreases in inventory balances.

In 2019, we used $0.7 million in cash from operating activities, which primarily resulted from the net loss of $2.6 million, adjusted for non-cash charges and gains, which included goodwill impairment of $0.4 million, stock-based compensation expenses of $0.3 million, depreciation and amortization expenses of $0.2 million, accrued interest of $0.2 million, and changes to operating assets and liabilities of approximately $0.8 million.

The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers and payments to vendors, including decreases in inventory.

In 2020, net cash provided from investing activities of $0.2 million represented the $0.3 million proceeds from the maturities of short-term investments partially offset by $0.1 million for purchases of fixed assets.

The majority of net cash used in investing activities in 2019 was due to the purchase of short-term investments of $1.6 million, which did not affect our liquidity, partially offset by proceeds from the maturities of short-term investments of $1.3 million.

The remaining investing activities in 2019 consisted of $0.1 million expended for purchases of fixed assets.

In 2020, net cash provided by financing activities was $2.2 million and consisted of $1.6 million in net proceeds received from the sale of common stock in a registered direct offering of securities in April 2020 and $0.6 million of proceeds received in May 2020 from an unsecured loan under the Paycheck Protection Program.

There were minimal cash flows used in financing activities during the year ended December 31, 2019.

In 2020, we used $10.2 million in cash from operating activities, which primarily resulted from the net loss of $10.2 million, adjusted for non-cash charges and gains, which included stock-based compensation expenses of $1.7 million, depreciation and amortization expenses of $1.4 million, finance cost related to warrants of $1.0 million, accrued interest expense of $0.3 million and amortization of debt discount of $0.6 million, offset by changes to operating assets and liabilities of approximately $5.0 million.

The changes in assets and liabilities primarily related to the timing of the collection of receivables from customers and payments to vendors.

In 2021, net cash provided from investing activities of $6.6 million represented $6.5 million of proceeds from the Arrangement, $0.4 million proceeds from the maturities of short-term investments partially offset by $0.2 million for purchases of fixed assets and intangible assets.

The net cash used in investing activities in 2020 consisted of minimal spend for purchases of fixed assets.

In 2021, net cash provided by financing activities was $9.6 million and consisted of $9.1 million in net proceeds received from convertible debentures and net proceeds of $1.3 million from a loan facility, partially offset by $0.8 million for the repayment of loans.

In 2020, net cash provided by financing activities was $10.1 million and consisted of $3.4 million in net proceeds received from convertible debentures, $6.2 million in net proceeds received from debtor-in-possession loans, and net proceeds of $0.6 million from a loan facility, partially offset by $0.1 million for the repayment of loans.

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

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profitability of our business.

whether interest payments on the Notes are paid in cash or, at our election, in kind through the issuance of new Notes with identical terms for the accrued interest.

Working Capital

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We incurred net losses of approximately $10.8 million and $10.2 million for the years ended December 31, 2021 and 2020, respectively, and had an accumulated deficit of approximately $117.1 million as of December 31, 2021.

These and prior year losses have resulted in significant negative cash flows for more than a decade and have required us to raise substantial amounts of additional capital during this period.

To date, we have primarily financed our operations through multiple offerings of common stock to investors and affiliates, as well as asset sale transactions.

In March 2016, we entered into a 10% Senior Secured Convertible Note Purchase Agreement with the purchasers of $8.0 million principal amount of 10% Senior Secured Convertible Notes due August 15, 2018 (the Notes), at par, in a private placement transaction.

Accrued interest was payable semi-annually in cash or in-kind through the issuance of identical new Notes, or with a combination of the two, at the Company’s option.

As of December 31, 2020, the outstanding balance of the Notes approximated $3.1 million.

The Notes were paid in full in March 2021 using the proceeds from exercises of warrants to purchase common stock and a registered direct offering of common stock in February 2021.

We expect to raise additional capital, but there can be no assurance that such funding will be available to us on favorable terms, if at all.

These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital during this period.

To date, we have primarily financed our operations through multiple equity offerings of preferred stock, issuances of convertible debentures, utilization of loan facilities and government subsidies and credits.

However, there can be no assurance that our capital is sufficient to fund operations until such time as we begin to achieve positive cash flows.

We have an effective shelf registration statement under which we could sell additional securities without advance notice.

We may need to raise additional capital, but there can be no assurance that such funding will be available to us on favorable terms, if at all.

The failure to raise capital when needed could have a material adverse effect on our business and financial condition.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis