What changed in this filing

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Item 1. Financial Statements

2022-05-13 compared with 2021-11-12 · 265 added, 200 removed, 225 unchanged (67% of the section changed)

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(In thousands, except par value)

September 30,

Current assets

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Accounts receivable, net

Tax credits and receivables

Prepaid expenses and other

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Property and equipment, net

Intangible assets, net

Right-of-use lease asset, net

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Short-term lease liability

PPP note payable, current

Total current liabilities

Convertible notes payable

PPP note payable

Long-term lease liability

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120,000 shares authorized;

and 3,554 shares issued and outstanding at September 30, 2021 and

21,588 shares

and 21,579 shares issued and outstanding at March 31, 2022 and

December 31, 2021, respectively

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Three Months Ended

Nine Months Ended

September 30,

Royalty and other

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Interest expense

Other income (expense), net

Deemed dividend for warrant exercise price adjustment

Net loss attributable to common stockholders

Other expense, net

Other comprehensive loss, net of tax:

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Comprehensive loss

Net loss per share attributable to common stockholders

Net loss per share

Basic and diluted

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The accompanying notes are an integral part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

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Issuance of common stock under stock plan, net

Exercise of warrants

Issuance of common stock for payment of accrued interest

Sale of common stock, net of placement costs

Stock-based compensation

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

Balance as of March 31, 2022

Issuance of common stock under stock plan, net

Exercise of warrants

Sale of common stock, net of placement costs

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of June 30, 2021

Issuance of common stock under stock plan, net

Exercise of warrants

Stock-based compensation

Unrealized loss on available-for-sale investments

Balance as of September 30, 2021

Comprehensive

Balance as of December 31, 2020

Issuance of common stock for release of awards

Exercise of pre-funded warrants

Stock-based compensation

Balance as of March 31, 2021

Issuance of common stock for release of awards

Sale of common stock, net of placement costs

Deemed dividend for warrant exercise price adjustment

Stock-based compensation

Balance as of June 30, 2020

Issuance of common stock for release of awards

Stock-based compensation

Balance as of September 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

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Stock-based compensation

Accrued interest

Amortization of lease right-of-use asset

Change in operating lease liability

Gain on settlement of convertible notes payable and accrued interest, net

Gain on extinguishment of PPP Note

Change in fair value of warrant liability

Amortization of debt discount

Accrued interest expense

Amortization of lease right-of-use assets

Change in operating lease liabilities

Changes in assets and liabilities:

Accounts receivable

Tax credits and receivables

Prepaid expenses and other assets

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Purchases of property and equipment

Proceeds from maturities of short-term investments

Purchases of investments

Purchases of intangible assets

Proceeds from maturities of marketable securities

Purchases of marketable securities and investments

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from sale of common stock, net

Proceeds from exercise of common stock warrants

Repayment of convertible notes payable

Proceeds from PPP note

Taxes paid to net share settle equity awards

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net proceeds from loan facility

Net cash provided by (used in) financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Supplemental disclosure:

Issuance of convertible notes in settlement of accrued interest

Settlement of accrued interest through issuance of common shares

Fair value of warrant exercise price adjustment considered as deemed dividend

Recognition of right-of-use asset and lease liability

Unrealized loss on securities

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The Company and Summary of Significant Accounting Policies

Peraso Inc., formerly known as MoSys, Inc.

(the Company), was incorporated in California in 1991 and reincorporated in 2000 in Delaware.

The Company provides both integrated circuits (ICs) and intellectual property (IP) solutions that enable fast, intelligent data access and decision making for a wide range of markets.

The Company’s primary product line is marketed under the Accelerator Engine name and includes the Bandwidth Engine IC products, which integrate the Company’s 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.

In 2020, the Company began offering for license the first of its Virtual Accelerator Engine IP solutions which comprise software, firmware and related IP.

The Company’s VAE IP solutions will include multiple function accelerator platform products, which target specific application functions, such as packet classifications, and use a common software interface to allow performance scalability over multiple hardware environments.

The Company is a fabless semiconductor company specializing in the development of mmWave technology, including 60GHz and 5G products, and derives revenue from selling semiconductor devices, licensing of intellectual property (IP) and performance of non-recurring engineering services (NRE).

The Company also manufactures and sells memory semiconductor devices that enable fast, intelligent data access and decision making for a wide range of markets.

On September 14, 2021, the Company and its subsidiaries, 2864552 Ontario Inc.

(Callco) and 2864555 Ontario Inc.

(Canco), 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 the Company, the legal parent, has been treated as the accounting acquiree.

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

805, Business Combinations (ASC 805).

Accordingly, these condensed consolidated financial statements are a continuation of Peraso Tech’s consolidated financial statements prior to December 17, 2021 and exclude the statements of operations and comprehensive loss, statement of stockholders’ equity (deficit) and statements of cash flows of the Company prior to December 17, 2021.

See Note 2 for additional disclosure .

The accompanying condensed consolidated financial statements of the Company have been prepared without audit.

The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated financial statements at that date.

Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted in accordance with these rules and regulations of the Securities and Exchange Commission (SEC).

Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).

The information in this report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) 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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future period.

The operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other future period.

Basis of Presentation

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Use of Estimates

the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized during the reported period.

Material estimates may include assumptions made in determining reserves for uncollectible receivables, inventory write-downs, impairment of long-term assets, purchase price allocations, valuation allowance on deferred tax assets, accruals for potential liabilities and assumptions made in valuing equity instruments.

Actual results could differ from those estimates.

Cash Equivalents and Investments

The Company has invested its excess cash in money market accounts, certificates of deposit, commercial paper, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company has invested its excess cash in money market accounts, certificates of deposit, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments.

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All securities are classified as available-for-sale.

The Company’s available-for-sale short-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income.

Realized gains and losses and declines in the value judged to be other than temporary are included in the other income, net line item in the condensed consolidated statements of operations and comprehensive loss.

The Company’s available-for-sale short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income (loss).

Realized gains and losses and declines in the value judged to be other-than-temporary are included in the other income, net line item in the condensed consolidated statements of operations.

The cost of securities sold is based on the specific identification method.

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The Company does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors.

The Company’s Level 2 securities may include cash equivalents and available-for-sale securities, which consist primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings.

The Company’s Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit, corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings.

The Company’s investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and have fewer observable transactions.

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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 .

Allowance for Doubtful Accounts

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The Company grants credit only to customers deemed creditworthy in the judgment of management.

There was no allowance for doubtful accounts at either September 30, 2021 or December 31, 2020.

The allowance for doubtful accounts receivable was zero as of March 31, 2022 and approximately $ 61,000 as of December 31, 2021.

The Company values its inventories at the lower of cost, which approximates actual cost on a first-in, first-out basis, or net realizable value.

Costs of inventories primarily consisted of material and third party assembly costs.

The Company records inventory reserves for estimated obsolescence or unmarketable inventories based upon assumptions about future demand and market conditions.

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If actual market conditions are less favorable than those expected by management, additional adjustment to inventory valuation may be required.

Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and

quantification of slow moving inventory items.

The Company recorded no material write-downs of inventory during the nine months ended September 3 0 , 202 1 and recorded write-downs of $ 0.1 m illion for the nine months ended September 30 , 2020 .

Charges for obsolete and slow-moving inventories are recorded based upon an analysis of specific identification of obsolete inventory items and quantification of slow moving inventory items.

The Company recorded write-downs of inventory of approximately $ 114,000 during the three months ended March 31, 2022, and recorded no write-downs of inventory during the three months ended March 31, 2021.

Tax Credits and Receivables

The Company is registered for the Canadian federal and provincial goods and services taxes.

As such, the Company is obligated to collect from third parties, and is entitled to claim sales taxes paid on its expenses and capital expenditures incurred in Canada.

In addition, as a Canadian Controlled Private Corporation (CCPC), the Company is also a part of the Scientific Research and Experimental Development (SR&ED) Program, which uses tax incentives to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada.

As a part of the program, the Company may be entitled to a receivable in the form of tax credit or incentive.

The Company records refundable tax credits as a reduction of expense and receivable when the Company can reasonably estimate the amounts and it is more likely than not, they will be received.

A government refund or subsidy that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations in the period in which it becomes receivable.

As of December 17, 2021, Peraso Tech ceased to be a CCPC and is no longer eligible for the expenditure refund program.

However, it is eligible for a tax credit of 15 % on qualified SR&ED expenditures.

Unused tax credits can be carried back three years or forward for 20 years

Intangible and Long-lived Assets

Intangible assets are recorded at cost and amortized on a straight-line method over their estimated useful lives of three to ten years .

The Company regularly reviews the carrying value and estimated lives of its long-lived assets and finite-lived intangible assets to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective.

Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the long-lived asset group over the asset’s fair value.

The Company determines the amount of a potential goodwill impairment by comparing the fair value of the reporting unit with its carrying amount.

To the extent the carrying value of a reporting unit exceeds its fair value, a goodwill impairment charge is recognized.

The Company has determined that it has a single reporting unit for purposes of performing its goodwill impairment test.

As the Company uses the market approach to determine the step one fair value of the reporting unit, the price of its common stock is an important component of the fair value calculation.

If the Company’s stock price experiences significant price and volume fluctuations, this will impact the fair value of the reporting unit, which can lead to potential impairment in future periods.

The Company reviews goodwill for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount as a basis for determining whether it is necessary to perform an impairment test.

If the qualitative assessment warrants further analysis, the Company compares the fair value of the reporting unit to its carrying value.

The fair value of the reporting unit is determined using the market approach.

If the fair value of the reporting unit exceeds the carrying value of net assets of the reporting unit, goodwill is not impaired.

If the carrying value of the reporting unit’s goodwill exceeds its fair value, then the Company must record an impairment charge equal to the difference.

842, Leases (ASC 842) requires an entity to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months.

The Company adopted ASC 842 utilizing the modified retrospective transition method.

The Company elected the practical expedient afforded in ASC 842 in which the Company did not reassess whether any contracts that existed prior to adoption have or contain leases or the classification of its existing leases.

Revenue Recognition

The Company generates revenue primarily from sales of IC products and licensing of its IP.

The Company recognizes 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 the Company’s historical practice of recognizing product revenue when title and risk of loss pass to the customer.

The Company generates 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 the Company expects 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.

P roduct revenue

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

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Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price.

The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically less than 60 days.

Royalty and other

The Company sells its products both directly to customers and through distributors generally under agreements with payment terms typically 60 days or less.

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

License and other

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

The Company estimates its royalty revenue in the calendar quarter in which the licensee uses the licensed technology.

Payments are generally received in the subsequent quarter.

Payments are received in the subsequent quarter.

The Company also generates revenue from licensing its technology.

The Company recognizes license fees as revenue at the point of time when the control of the license has been 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

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The Company classifies advance customer payments and deferred revenue as current or non-current based on the timing of when the Company expects to recognize revenue.

During the nine months ended September 30, 2021, the Company recognized no revenue that had been included in deferred revenue as of December 31, 2020.

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

During the three months ended March 31, 2022, the Company recognized approximately $ 15,000 of revenue that had been included in deferred revenue as of December 31, 2021.

See Note 6 for disaggregation of revenue by geography.

The Company does not have significant financing components, as payments from customers are typically due within 60 days of invoicing, and the Company has elected the practical expedient to net value financing components that are less than one year.

Shipping and handling costs are generally incurred by the customer, and, therefore, are not recorded as revenue.

Cost of Net Revenue

Cost of net revenue consists primarily of direct and indirect costs of IC product sales and engineering personnel costs directly related to maintenance and support services specified in licensing agreements.

Maintenance and support typically includes engineering support to assist in the commencement of production of a licensee’s products.

As of September 30, 2021, the Company had the following warrants outstanding (share amounts in thousands):

Number of Shares

Exercise Price

Cost of net revenue consists primarily of direct and indirect costs of product sales.

Government Subsidies

A grant or subsidy that is compensation for expenses or losses already incurred, or for which there are no future related costs, is recognized in the statement of operations in the period in which it becomes receivable.

Starting in 2020, certain Canadian businesses, which experienced a drop in revenue during the COVID-19 pandemic, became eligible for a rent and wage subsidy from the government.

The Company’s subsidiary, Peraso Tech, began receiving this subsidy on a monthly basis beginning in the fourth quarter of 2020.

During the three months ended March 31, 2021 , the Company recognized payroll subsidies of $ 425,525 as a reduction in the associated wage costs and rent subsidies of $ 77,780 as a reduction of operating expenses in the condensed consolidated statement of operations.

Stock-Based Compensation

The Company periodically issues stock options and restricted stock awards to employees and non-employees.

The Company accounts for such grants based on ASC No.

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

The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing (Black Scholes) model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options, and future dividends.

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

The assumptions used in the Black-Scholes model could materially affect compensation expense recorded in future periods.

Foreign Currency Transactions

The functional currency of the Company is the U.S dollar.

All foreign currency transactions are initially measured and recorded in an entity’s functional currency using the exchange rate on the date of the transaction.

All monetary assets and liabilities are remeasured at the end of each reporting period using the exchange rate at that date.

All non-monetary assets and related expense, depreciation or amortization are not subsequently remeasured and are measured using the historical exchange rate.

An average exchange rate may be used to recognize income and expense items earned or incurred evenly over a period.

Foreign exchange gains and losses resulting from the settlement of such transactions are recognized in the statement of operations, except for the gains and losses arising from the conversion of the carrying amount of the foreign currency denominated convertible preferred shares into the functional currency that are presented as adjustment to the net loss to arrive at net loss attributable to common stockholders.

Per Share Amounts

Basic net income (loss) per share is computed by dividing net income (loss) for the period by the weighted-average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share gives effect to all potentially dilutive shares of common stock outstanding during the period.

Potentially dilutive shares of common stock consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and shares issuable in conjunction with convertible notes.

Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period.

Diluted net loss per share gives effect to all potentially dilutive common shares outstanding during the period.

Potentially dilutive common shares consist of incremental shares of common stock issuable upon the exercise of stock options, vesting of stock awards and exercise of warrants.

The following table sets forth securities outstanding that were excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive (in thousands):

September 30,

Options outstanding to purchase common stock

Escrow shares

Options to purchase common stock

Unvested restricted common stock units

Convertible notes

Proposed Arrangement with Peraso Technologies Inc.

On September 14, 2021, the Company and its newly formed subsidiaries, 2864552 Ontario Inc.

(Callco) and 2864555 Ontario Inc.

(Canco), both corporations existing under the laws of the province of Ontario, entered into an Arrangement Agreement (the Agreement) with Peraso Technologies Inc., a corporation existing under the laws of the province of Ontario (Peraso).

Under the Agreement, the Company, indirectly through Canco, is to acquire all of the issued and outstanding common shares of Peraso (Peraso Shares), including those Peraso Shares to be issued in connection with the conversion or exchange of secured convertible debentures of Peraso and common share purchase warrants of Peraso, as applicable, by way of a statutory plan of arrangement (the Arrangement) under the Business Corporations Act (Ontario) (the OBCA), on and subject to the terms and conditions of the Agreement.

The Agreement provides that the Peraso stockholders may elect to receive either shares of the Company’s common stock or shares of the capital stock of Canco (the Exchangeable Shares) in exchange for such holder’s Peraso Shares, in each case based on an exchange ratio (the Exchange Ratio) to be determined based on the number of Peraso Shares and Company’s common stock outstanding as of immediately prior to the effective time of the Arrangement (the “Effective Time”).

Pursuant to the terms of the Agreement, at the Effective Time, the Company shall hold an aggregate of 1,815,445 Exchangeable Shares and its common stock (collectively, the Earnout Shares).

Such Earnout Shares shall be escrowed pursuant to the terms of an escrow agreement on a pro rata basis from the aggregate consideration to be received by the Peraso stockholders, subject to the offset by the Company for any losses in accordance with the Agreement.

Such Earnout Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of:

(a) any date following the first anniversary of the Effective Time and prior to the third anniversary of the Effective Time where the volume weighted average price of the Common Stock for any 20 trading days within a period of 30 consecutive trading days is at least $ 8.57 per share, subject to adjustment for stock splits or other similar transaction;

Convertible debt

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (ASU) No.

2016-13, Financial Instruments—Credit Losses .

This ASU added a new impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses.

Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments.

The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss.

This update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years

for smaller reporting companies.

The Company is still evaluating the impact of this accounting guidance on its results of operations and financial position.

In August 2020, the FASB issued ASU No.

2020-06 (ASU 2020-06), Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity .

The ASU will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP.

Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that:

i) are not clearly and closely related to the host contract, ii) meet the definition of a derivative, and iii) do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital.

The ASU also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

ASU 2020-06 will be effective for the Company January 1, 2024, and early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year.

The Company is currently evaluating what effect(s) the adoption of ASU 2020-06 may have on its financial statements, but the Company does not believe the impact of the ASU will be material to its financial position, results of operations and cash flows.

The effect will largely depend on the composition and terms of the Company’s financial instruments at the time of adoption.

Business Combination

As discussed in Note 1, on September 14, 2021, the Company and its newly formed subsidiaries Callco and Canco entered into the Arrangement Agreement with Peraso Tech.

On December 17, 2021, following the satisfaction of the closing conditions set forth in the Arrangement Agreement, including approvals from the stockholders of the Company and Peraso Tech, the Arrangement was completed.

Securities Conversion

Pursuant to the completion of the Arrangement, each Peraso Share that was issued and outstanding immediately prior to December 17, 2021 was converted into the right to receive 0.045239122387267 (the Exchange Ratio) newly issued shares of common stock of the Company or shares of Canco, which are exchangeable for shares of the Company’s common stock (Exchangeable Shares) at the election of each former Peraso Tech stockholder.

In addition, all of Peraso Tech’s outstanding stock options and other securities exercisable or exchangeable for, or convertible into, and any other rights to acquire Peraso Shares were exchanged for securities exercisable or exchangeable for, or convertible into, or other rights to acquire the Company’s common stock.

Immediately following the completion of the Arrangement, the former security holders of Peraso Tech owned approximately 61 %, on a fully-diluted basis, of the Company’s common stock, and the former shareholders of Peraso Tech, as a group, obtained control of the Company.

While the Company was the legal acquirer of Peraso Tech, Peraso Tech was deemed to be the acquirer for accounting purposes.

In addition, pursuant to the terms of the Arrangement Agreement, (i) certain warrants to purchase Peraso Shares outstanding immediately prior to the closing of the Arrangement were exercised in consideration for the issuance of Peraso Shares;

(ii) each convertible debenture of Peraso Tech outstanding immediately prior to the closing of the Arrangement and all principal and accrued but unpaid interest thereon was converted into Peraso Shares at a conversion price equal to the conversion price set out in each such debenture;

and (iii) each outstanding option to purchase Peraso Shares (each, a Peraso Option) was exchanged for a replacement option to purchase such number of shares of common stock that was equal to the product of (a) the number of Peraso Shares subject to the Peraso Options immediately before the closing of the Arrangement and (b) the Exchange Ratio, rounded down to the nearest whole number of shares of common stock.

Upon the closing of the Arrangement, an aggregate of 9,295,097 Exchangeable Shares and 3,558,151 shares of common stock were issued to the holders of Peraso Shares.

Of such shares, pursuant to the terms of the Agreement, the Company held in escrow an aggregate of 1,312,878 Exchangeable Shares and 502,567 shares of common stock

(collectively, the Escrow Shares).

The Escrow Shares are escrowed pursuant to the terms of an escrow agreement on a pro rata basis from the aggregate consideration received by the holders of Peraso Shares, subject to the offset by the Company for any losses in accordance with the Agreement.

Such Escrow Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier of:

(a) any date following the first anniversary of December 17, 2021 and prior to December 17, 2024 where the volume weighted average price of the common stock for any 20 trading days within a period of 30 consecutive trading days is at least $ 8.57 per share, subject to adjustment for stock splits or other similar transactions;

(b) the date of any sale of all or substantially all of the assets or shares of the Company;

or (c) the date of any bankruptcy, insolvency, restructuring, receivership, administration, wind-up, liquidation, dissolution, or similar event involving the Company.

Following the Effective Time, each Exchangeable Share will be exchangeable by the holder for one share of Common Stock (subject to customary adjustments for stock splits or other reorganizations).

In addition, the Company may require all outstanding Exchangeable Shares to be exchanged upon the occurrence of certain events and at any time following the seventh anniversary of the closing of the Arrangement.

While outstanding, holders of Exchangeable Shares will be entitled to cast votes on matters for which holders of Common Stock are entitled to vote and will be entitled to receive dividends economically equivalent to the dividends declared by the Company with respect to the Common Stock.

Eligibility to receive Exchangeable Shares will be subject to certain Canadian residency restrictions and tax statuses.

The Agreement also provides that Peraso stock options, which are exercisable for Peraso Shares, will be replaced with an option to acquire Common Stock to be issued by the Company in consideration for cancellation of the Peraso

options and exercisable for shares of Common Stock after the Effective Time, in each case with adjustments based on the Exchange Ratio.

The exact number of shares of Common Stock that will be issued pursuant to the Arrangement will be determined at the Effective Time in accordance with the Exchange Ratio.

Immediately following the Effective Time, based on the Exchange Ratio, the former stockholders of Peraso are anticipated to own approximately 61 % of the economic and voting interest of the combined company with the Company’s current stockholders holding the remaining 39 % economic and voting interest, as calculated on a fully-diluted basis and including the Earnout Shares.

The consummation of the Arrangement is subject to certain closing conditions precedent, including both the Company’s and Peraso’s stockholders approval of the Agreement and transactions contemplated therein;

the order of the Ontario Superior Court of Justice (Commercial List) granted pursuant to Section 182(5) of the Business Corporations Act (Ontario);

all regulatory approvals;

the continuing listing of the Common Stock on Nasdaq;

and other customary closing conditions.

The transaction is expected to close in the fourth calendar quarter of 2021 and to be implemented by way of an arrangement under the OBCA.

The Agreement provides for customary representations, warranties and covenants, including covenants of each party to (i) subject to certain exceptions, carry on its business in the ordinary course of business consistent with past practice during the period between the execution of the Agreement and the Effective Time and (ii) not solicit any alternate transactions or, subject to certain exceptions, to engage in any discussions or negotiations with respect thereto.

Subject to certain terms and conditions, the Agreement may be terminated if the Effective Time does not occur on or before November 30, 2021, subject to certain automatic extensions.

The Agreement may also be terminated by either party, if the respective stockholders’ approval is not obtained, in the event of material adverse effect, or a superior proposal in connection with an alternative acquisition.

The Agreement subjects the parties to certain termination payment obligations.

If the Agreement is terminated because of the failure to obtain stockholders’ approval, the party that failed to obtain such approval will be obligated to pay a fee of $ 750,000 to the other party.

If the Agreement is terminated by either party as a result of obtaining a superior proposal from a third party, breach of non-solicitation covenants of the Agreement, or because either party’s board of directors fails to unanimously recommend to proceed with the Arrangement or withdraws its recommendation, the breaching party will be required to pay a termination fee of $ 3,500,000 .

All and any voting rights and other stockholder rights, other than with respect to dividends and distributions, with respect to the Escrow Shares are suspended until the Escrow Shares are released from escrow.

In connection with the Arrangement, on December 15, 2021, the Company filed the Certificate of Designation of Series A Special Voting Preferred Stock with the Secretary of State of the State of Delaware to designate Series A Special Voting Preferred Stock (the Special Voting Share) in accordance with the terms of the Arrangement Agreement in order to enable the holders of Exchangeable Shares to exercise their voting rights.

Each Exchangeable Share is exchangeable for one share of common stock of the Company and while outstanding, the Special Voting Share enables holders of Exchangeable Shares to cast votes on matters for which holders of the common stock are entitled to vote, and by virtue of the share terms relating to the Exchangeable Shares, to receive dividends that are economically equivalent to any dividends declared with respect to the shares of common stock.

The Exchangeable Shares, which can be converted into common stock at the option of the holder and have the same voting rights as common stock, are similar in substance to shares of common stock and, therefore, have been included in the determination of outstanding common stock.

Reverse Acquisition Determination

Pursuant to ASC 805, the transaction was accounted for as a reverse acquisition because:

(i) the stockholders of Peraso Tech owned the majority of the outstanding common stock of the Company after the share exchange;

(ii) Peraso Tech appointed a majority of the Company’s board of directors;

and (iii) Peraso Tech determined the officers of the Company.

Measuring the Consideration Transferred

In the reverse acquisition, the accounting acquirer did not issue any consideration to the accounting acquiree, rather the accounting acquiree issued its equity shares to the owners of the accounting acquirer in exchange for the accounting acquirer’s shares.

The acquisition date fair value of the consideration transferred by the accounting acquirer for its interest in the accounting acquiree was calculated by Peraso Tech, as the fair value of the consideration effectively transferred.

In accordance with ASC 805, the consideration effectively transferred between the Company (a public company as the accounting acquiree) and Peraso Tech (a private company as the accounting acquirer), was calculated as the fair value of the Company’s equity including the fair value of its common shares outstanding and its warrants, plus the portion of the share-based award fair value allocated to the pre-combination service of the accounting acquiree’s awards.

The fair value of the total consideration effectively transferred was determined to be $ 37.6 million.

The following table summarizes the final allocation of the purchase price to the net assets acquired based on the respective fair value of the acquired assets and assumed liabilities of the accounting acquiree, which is the Company .

(in thousands)

Cash, cash equivalents and investments

Other current assets

Developed technology

Customer relationships

Current liabilities

Unaudited proforma results of operations for the three months ended March 31, 2021 are included below as if the business combination occurred on January 1, 2021.

This summary of the unaudited pro forma results of operations is not necessarily indicative of what the Company’s results of operations would have been had Peraso Tech been acquired at the beginning of 2021, nor does it purport to represent results of operations for any future periods.

Three Months Ended

March 31, 2021

(in thousands)

Fair Value of Financial Instruments

The estimated fair values of financial instruments outstanding were (in thousands):

September 30, 2021

March 31, 2022

Cash and cash equivalents

3 unchanged sentences

Cash and cash equivalents

Short-term investments

Long-term investments

The following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and investments) (in thousands):

September 30, 2021

March 31, 2022

Money market funds

2 unchanged sentences

Money market funds

(1) Includes $ 0.5 million in cash and cash equivalents on the accompanying condensed consolidated balance sheet due to original maturities of less than three months.

There were no transfers in or out of Level 1 and Level 2 securities during the nine months ended September 30, 2021 or 2020.

Corporate notes and commercial paper

There were no transfers in or out of Level 1 and Level 2 securities during the three months ended March 31, 2022 or December 31, 2021.

Balance Sheet Detail

September 30,

(in thousands)

Raw materials

Work-in-process

1 unchanged sentence

Commitments and Contingencies

The Company has three facility leases that it accounts for under ASC 842, and these include the operating leases for its corporate facility in San Jose, California, and facilities in Toronto and Waterloo, Ontario, Canada.

The San Jose lease expires in July 2022 , and the Waterloo and Toronto leases expire in September 2022 and December 2023 , respectively.

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 on the balance sheet of approximately $ 274,000 .

The right-to-use assets and corresponding liabilities for the facility leases were measured at the present value of the future minimum lease payments.

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

Lease expense is recognized on a straight-line basis over the lease term.

Future minimum payments under the leases at March 31, 2022 are listed in the table below (in thousands):

Three Months Ended

Right-of-use assets:

Operating leases

Finance lease

Total right-of-use assets

Lease liabilities:

Operating leases

Finance lease

Total lease liabilities

Year ending December 31,

Total future lease payments

imputed interest

Present value of lease liabilities

Three Months Ended

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

Operating cash flows for leases

Rent expense was approximately $ 0.1 million for each of the three month periods ended March 31, 2022 and 2021.

In addition to the minimum lease payments, the Company is responsible for property taxes, insurance and certain other operating costs related to the leased facilities and equipment.

Indemnification

2 unchanged sentences

The Company has also entered into indemnification agreements with its officers and directors.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the nine months ended September 30, 2021 or 2020 related to these indemnifications.

No material amounts were reflected in the Company’s condensed consolidated financial statements for the three months ended March 31, 2022 and 2021 related to these indemnifications.

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement.

To date, the Company has not made any material payments related to these indemnification agreements.

To date, the Company has not made any payments related to these indemnification agreements.

Product warranties

The Company warrants certain of its products to be free of defects generally for a period of three years.

The Company estimates its warranty costs based on historical warranty claim experience and includes such costs in cost of net revenues.

Warranty costs were not material for the three months ended March 31, 2022 and 2021.

Legal Matters

3 unchanged sentences

Business Segments, Concentration of Credit Risk and Significant Customers

The Company operates in one business segment and uses one measurement of profitability for its business.

Net revenue is attributed to the United States and to all foreign countries based on the geographical location of the customer.

The Company recognized revenue from shipment of product and licensing of its technologies to customers by geographical location as follows (in thousands):

The Company determined its reporting units in accordance with ASC 280, Segment Reporting (ASC 280).

Management evaluates a reporting unit by first identifying its operating segments under ASC 280.

The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business.

If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units.

If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.

Management has determined that the Company has one consolidated operating segment.

The Company’s reporting segment reflects the manner in which its chief operating decision maker reviews results and allocates resources.

The Company’s reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments.

The Company recognized revenue from shipments of product, licensing of its technologies and performance of services to customers by geographical location as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

North America

3 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Represents less than 10%

Four customers accounted for 88 % of accounts receivable as of September 30, 2021.

Three customers accounted for 67 % of accounts receivable as of March 31, 2022.

Three customers accounted for 96 % of accounts receivable as of December 31, 2021.

6 unchanged sentences

Returns filed in foreign jurisdictions may be subject to examination for the years 2011 to 2020.

As of September 30, 2021, the Company has not recorded any liability for unrecognized tax benefits related to uncertain tax positions.

As of March 31, 2022, the Company has no t recorded any liability for unrecognized tax benefits related to uncertain tax positions.

Stock-Based Compensation

2 unchanged sentences

The Amended 2010 Plan was terminated in August 2019 and remains in effect as to outstanding equity awards granted prior to the date of expiration.

As of September 30, 2021, no new awards may be made under the Amended 2010 Plan, and equity awards for approximately 94,224 shares were outstanding.

No new awards may be made under the Amended 2010 Plan.

In August 2019, the Company’s stockholders approved the 2019 Stock Incentive Plan (the 2019 Plan), and it replaced the Amended 2010 Plan.

The 2019 Plan authorizes the board of directors or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation rights, restricted stock, performance-based awards, and restricted stock units.

Under the 2019 Plan, 182,500 shares have been reserved for issuance.

The 2019 Plan provides for annual option grants or other awards to the Company’s non-employee directors to acquire up to 2,000 shares and for a one-time grant of an option or other award to a non-employee director to acquire up to 6,000 shares upon his or her initial appointment or election to the board of directors.

Under the 2019 Plan, 182,500 shares were initially reserved for issuance.

In November 2021, in connection with the approval of the Arrangement, the Company’s stockholders approved an amendment increasing the number of shares reserved for issuance under the 2019 Plan by 3,106,937 shares.

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 .

2 unchanged sentences

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.

The Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.”

The expense relating to stock options is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value.

The unamortized compensation cost, as of September 30, 2021, was $ 0.1 million related to stock options and is expected to be recognized as expense over a weighted-average period of approximately 0.9 years.

The expense related to restricted stock units (RSUs) is generally recognized over a three-year vesting period and is based on the fair value of the underlying stock on the dates of grant.

The unamortized compensation cost, as of September 30, 2021, was $ 0.4 million related to RSUs and is expected to be recognized as expense over a weighted-average period of approximately 0.7 years.

For the three and nine months ended September 30, 2021 and 2020, there were no excess tax benefits associated with the exercise of stock options due to the Company’s historical loss positions.

Valuation Assumptions

There were no stock options granted during the nine months ended September 30, 2021 and 2020.

In connection with the Arrangement, the Company assumed the Peraso Technologies Inc.

2009 Share Option Plan (the 2009 Plan) and all outstanding options granted pursuant to the terms of the 2009 Plan.

Each outstanding, unexercised and unexpired option under the 2009 Plan, whether vested or unvested, was assumed by the Company and converted into options to purchase shares of the Company’s common stock and became exercisable by the holder of such option in accordance with its terms, with (i) the number of shares of common stock subject to each option multiplied by the Exchange Ratio and (ii) the per share exercise price upon the exercise of each option divided by the Exchange Ratio.

In connection with the Arrangement, no further awards will be made under the 2009 Plan.

The 2009 Plan, the Amended 2010 Plan and the 2019 Plan are referred to collectively as the “Plans.”

Stock-Based Compensation Expense

At March 31, 2022, the unamortized compensation cost was approximately $ 11.4 million related to stock options and is expected to be recognized as expense over a weighted average period of approximately 3 years.

The unamortized compensation cost, at March 31, 2022, was $ 0.2 million related to restricted stock units and is expected to be recognized as expense over a weighted average period of approximately 1.6 years.

For the three months ended March 31, 2022 and 2021, there were no excess tax benefits associated with the exercise of stock options due to the Company’s historical loss positions.

Valuation Assumptions and Expense Information for Stock-Based Compensation

There were no stock options granted or exercised during the three months ended March 31, 2022 and 2021.

Common Stock Options and Restricted Stock

2 unchanged sentences

Generally, options granted under the 2019 Plan will vest over a three to four-year period and 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.

The following table summarizes the activity in the shares available for grant under the Plans during the nine months ended September 30, 2021 (in thousands, except exercise price):

In addition, the 2019 Plan provides for automatic acceleration of vesting for options granted to non-employee directors upon a change of control (as defined in the 2019 Plan) of the Company.

The following table summarizes the activity in the shares available for grant under the Plans during the three months ended March 31, 2022 (in thousands, except exercise price):

Options Outstanding

Balance as of January 1, 2021

Balance as of December 31, 2021

Options cancelled

Balance as of March 31, 2022

Balance as of June 30, 2021

Balance as of September 30, 2021

A summary of RSUs activity under the Plans is presented below (in thousands, except for fair value):

Non-vested shares as of January 1, 2021

A summary of RSU activity under the Plans is presented below (in thousands, except for fair value):

Non-vested shares as of December 31, 2021

Non-vested shares as of March 31, 2022

Non-vested shares as of June 30, 2021

Non-vested shares as of September 30, 2021

The fair value of the RSUs granted during the nine months ended September 30, 2021 was $ 0.5 million.

The following table summarizes significant ranges of outstanding and exercisable options as of September 30, 2021 (in thousands, except contractual life and exercise price):

The following table summarizes significant ranges of outstanding and exercisable options as of March 31, 2022 (in thousands, except contractual life and exercise price):

Options Outstanding

7 unchanged sentences

$1.57 - $924.00

There was no stock options exercised during the nine months ended September 30, 2021 and 2020.

Stockholders’ Equity

In February 2021, the Company completed a registered direct offering of securities under an effective registration statement filed with the SEC pursuant to the Securities Act of 1933, as amended.

In the offering, the Company 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 paid by the Company, were approximately $ 6.8 million.

In June 2021, the Company completed a registered direct offering of securities under an effective registration statement filed with the SEC pursuant to the Securities Act of 1933, as amended.

In the offering, the Company sold 1,818,181 shares of common stock at a price of $ 7.15 per share to institutional investors.

Net proceeds of the offering, after placement agent and other fees and expenses paid by the Company, were approximately $ 12.0 million.

During the nine months ended September 30, 2021, the Company received a total of $ 4,189,000 of proceeds from the exercise of 1,744,769 warrants to purchase shares of common stock at a price of $ 2.40 per share.

Notes Payable

Convertible Notes

In March 2016, the Company entered into a 10 % Senior Secured Convertible Note Purchase Agreement (the Purchase Agreement) with the purchasers of $ 8,000,000 principal amount of 10% Senior Secured Convertible Notes due August 15, 2018 (the Notes), at par, in a private placement transaction effected pursuant to an exemption from the registration requirements under the Securities Act of 1933, as amended.

Pursuant to amendments to the Notes and related documents in February and October 2018, the interest rate was reduced to 8 %, the maturity date of the Notes was extended to August 15, 2023, and the optional conversion price was reduced from $ 170.00 of Note principal per share of common stock to $ 11.434 of Note principal per share of common stock.

In accordance with the October 2018 amendment to the Notes, the Company used $ 7.4 million of the proceeds from a public offering of securities effected in October 2018 to repay a portion of the Notes.

Semi-annual interest payments have been made in each of February 2019, August 2019, February 2020 and August 2020 for approximately $ 78,000 , $ 109,000 , $ 112,000 and $ 122,000 , respectively, in-kind with the issue of additional notes (Interest Notes) to the Purchasers.

The Interest Notes have terms identical to the Notes.

During the nine months ended September 30, 2021 the Company issued 42,672 shares of its common stock valued at $ 139,964 to the Note holder in settlement of accrued interest of $ 123,066 .

The Company recorded a loss of $ 16,898 on this payment, which was recorded in other income in the condensed consolidated statements of operation.

In January and February 2021, a holder of warrants, who was also the holder of the Notes, exercised warrants to purchase 613,791 shares of the Company’s common stock at an exercise price of $ 2.40 per share for total proceeds of $ 1,473,098 .

The proceeds from the exercise of these warrants were used to repay a portion of the principal amount of the Notes.

In March 2021, the Company made a repayment of $ 1,554,173 in settlement of the outstanding principal amount of the Notes, and the Note holder’s security interest was terminated.

The Company recorded a gain of $ 64,757 on the Note settlement, and the gain was recorded in other income in the condensed consolidated statements of operations.

On May 7, 2020, the Company entered into a Promissory Note with Wells Fargo Bank, N.A.

(the Lender) in an aggregate principal amount of $ 579,330 (the PPP Note), pursuant to the Paycheck Protection Program (the PPP) under the CARES Act.

The Company applied to the Lender for forgiveness of the PPP Note, under the terms of the PPP, and, in May 2021, obtained forgiveness for the full amount of the PPP Note and recognized the forgiven amount in other income in the condensed consolidated statements of operations.

The Company has one lease, which is the lease for its corporate facility that expires in July 2022, that it accounts for under Accounting Standards Update No.

The right-of-use asset and corresponding liability for the facility lease have been measured at the present value of the future minimum lease payments.

The discount rate used to measure the lease asset and liability represents the interest rate on the Notes ( 8 %).

Lease expense is recognized on a straight-line basis over the lease term, and operating lease expense was approximately $ 0.2 million and $ 0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company does not have an option to extend the lease term beyond the current extension.

Future minimum payments under the facility operating lease at September 30, 2021 were as follows (in thousands):

Year ending December 31,

Total future lease payments

imputed interest

Present value of lease liabilities

Supplemental cash flow information related to the operating lease was as follows (in thousands):

Nine Months Ended

September 30,

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

Operating cash flows for lease

Non-cash activity:

Recognition of additional right-of-use asset and liability upon lease modification

As of March 31, 2022, the Company had the following warrants outstanding (share amounts in thousands):

Number of Shares

Exercise Price

Loan Facilities

On February 5, 2021, March 5, 2021 and September 17, 2021 the Company raised additional funds from the second, third and fourth draws under the SRED financing of $ 274,715 (CDN$ 350,000 ), $ 274,715 (CDN$ 350,000 ) and $ 745,655 (CDN$ 950,000 ) respectively, totaling year to date gross proceeds of $ 1,295,085 (CDN$ 1,650,000 ) net of financing fees of $ 32,770 (CDN$ 41,750 ).

The loan agreement for all tranches carried an interest rate of 1.6 % per month, compounded monthly ( 20.98 %).

The loan was sanctioned against the Company’s tax credit refund.

The first, second and third draws, including interest of $ 136,900 (CDN$ 174,417 ), were repaid through proceeds from the Company’s tax credit refund of $ 1,093,230 (CDN$ 1,392,831 ) and the balance of $ 184,558 (CDN$ 235,132 ) was paid from the fourth draw.

The remaining loan balance, including interest, of $ 816,964 (CDN$ 1,044,177 ) was repaid on December 16, 2021.

Interest expense of $ 513,438 for the three months ended March 31, 2021 consisted of, i) $ 348,134 of amortization of debt discount and $ 120,950 of interest expense on the convertible debt and ii) $ 44,354 of interest expense on the SRED financing.

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