What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-12 · 97 added, 132 removed, 65 unchanged (78% of the section changed)

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This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this report.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance and capital raising efforts, risks inherent in our ability to consummate the proposed business combination with Peraso Technologies, Inc., the impacts of COVID-19 on our business, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 18, 2021 and in other reports that we file from time to time with the Securities and Exchange Commission.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance and capital raising effort., the impacts of COVID-19 on our business, and other aspects of our business identified in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2022 and in other reports that we file from time to time with the Securities and Exchange Commission.

Any statements about our business, financial results, financial condition and operations contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements.

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We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events occur in the future.

Company Overview

Our strategy and primary business objective is to be a profitable, intellectual property-rich, fabless semiconductor company offering integrated circuits, or ICs, and related software, firmware and intellectual property, or 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 through at least 2023, and we expect these products to continue to generate significant revenue thereafter.

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.

We are developing our Virtual Accelerator Engine, or VAE, IP solutions which consist of software, firmware and other IP available for license.

This 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 incurred net losses of approximately $4.3 million for the nine months ended September 30, 2021 and $3.8 million and $2.6 million for the years ended December 31, 2020 and 2019, respectively, and had an accumulated deficit of approximately $246.9 million as of September 30, 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.

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.

Recent Developments – Proposed Arrangement with Peraso Technologies Inc.

On September 14, 2021, we and our 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, we, indirectly through Canco, are 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 our 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 shares of our 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, we shall hold an aggregate of 1,815,445 Exchangeable Shares and 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 us 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 our 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;

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

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

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, we 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 our common stock are entitled to vote and will be entitled to receive dividends economically equivalent to the dividends declared by us with respect to our 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 us in consideration for cancellation of the Peraso options and exercisable for shares of our 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 our 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 our 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 our common stock on the Nasdaq Capital Market;

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.

We were formerly known as MoSys, Inc.

(MoSys) and were incorporated in California in 1991 and reincorporated in Delaware in 2000.

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 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 condensed 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 (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 and began 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 radio frequency 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 that 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 research and development (R&D) expenses.

We incurred net losses of approximately $ 6.8 million for the three months ended March 3 1 , 202 2 and $ 10.8 million for the year ended December 3 1 , 20 2 1 and had an accumulated deficit of approximately $ 124.0 million as of March 3 1 , 20 2 2 .

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.

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 effective through the first quarter of 2021.

We have been complying with the Order and have minimized business activities at our San Jose headquarters facility (our only facility) since March 2020.

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

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.

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 continue to have a negative impact on our revenues for the remainder of 2021, although we are not in a position to quantify such impacts.

In addition, we have and continue to experience shortages and 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 the nine months ended September 30, 2021, we were able to raise additional capital and make full repayment of our convertible notes payable (see discussion below under Liquidity and in Notes 8 and 9 to the condensed consolidated financial statements included in Part I, Item I of this Form 10-Q), however, if we need to raise additional capital to support operations in the future, 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 .

For additional information on risks that could impact our future results, please refer to “Risk Factors” in Part II, Item 1A.

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Sources of Revenue

Product revenue is generally recognized at the time of shipment to our customers.

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

Royalty and other.

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

We estimate royalty revenue in the period in which the licensee uses the licensed technology.

Payments are received in the following period.

Product revenue

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

The majority of our contracts have a single performance obligation to transfer products.

Accordingly, we recognize revenue when title and risk of loss have been transferred to the customer, generally at the time of shipment of products.

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

We sell our products both directly to customers and through distributors generally under agreements with payment terms typically 60 days or less.

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

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 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

our technology.

We recognize l icense fee s as revenue at the point of time when the control of the license has been transferred and we ha ve 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.

Critical Accounting Policies and Estimates

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Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes to Consolidated Financial Statements” in our annual report on Form 10-K for the year ended December 31, 2021.

As of September 30, 2021, there have been no material changes to our significant accounting policies and estimates.

As of March 31, 2022, there have been no material changes to our significant accounting policies and estimates.

Results of Operations

September 30,

(dollar amounts in thousands)

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Percentage of total net revenue

Product -nine months ended

Percentage of total net revenue

Product revenue decreased for the three and nine months ended September 30, 2021 compared with the same period of 2020 primarily due to lower sales of our Bandwidth Engine 2 and LineSpeed IC products.

September 30,

Product revenue increased for the three months ended March 31, 2022 compared with the same period of 2021 primarily due to a full quarter contribution of revenues from our memory IC products and increased shipments of our mmWave module products.

We commenced selling our module products in the second quarter of 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.

(dollar amounts in thousands)

Royalty and other -three months ended

Percentage of total net revenue

Royalty and other -nine months ended

License and other -three months ended

Percentage of total net revenue

Royalty and other includes license, royalty and related revenues generated from licensing agreements.

The decrease in royalty and other revenue for the three months ended September 30, 2021 compared with the same period of 2020 was due to a decrease in legacy royalty revenues.

The decrease in royalty and other revenue for the nine months ended September 30, 2021 compared with the same period of 2020 was due to a decrease in royalty revenues and $0.1 million of non-recurring license revenues recognized during the three months ended June 30, 2020.

License and other includes royalty, non-recurring engineering (NRE), services and licenses revenues.

The increase in license and other revenue for the three months ended March 31, 2022 compared with the same period of 2021 was primarily due to a full quarter contribution of royalty revenues from licensees of our memory technology.

Cost of Net Revenue and Gross Profit

September 30,

(dollar amounts in thousands)

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Percentage of total net revenue

Cost of net revenue -nine months ended

Percentage of total net revenue

September 30,

(dollar amounts in thousands)

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Percentage of total net revenue

Gross profit -nine months ended

Percentage of total net revenue

Cost of net revenue is primarily comprised of direct and indirect costs related to the sale of our IC products.

Cost of net revenue decreased for the three and nine months ended September 30, 2021 when compared with the same periods in 2020, primarily due to decreased shipment volumes of our LineSpeed and Bandwidth Engine IC products.

Gross profit decreased for the three and nine months ended September 30, 2021 compared with the same period of 2020 due to the decrease in gross profit attributable to the decreases in revenues.

Cost of net revenue is primarily comprised of direct and indirect costs related to the sale of our products.

Cost of net revenue increased for the three months ended March 31, 2022 when compared with the same period in 2021, primarily due to increased shipment volumes of our LineSpeed and Bandwidth Engine IC and mmWave module products.

Our module products have higher cost of goods sold per unit and generate lower gross profit margin than our IC products.

Gross profit decreased for the three months ended March 31, 2022 compared with the same period of 2021 due to the increased product shipments.

Research and Development

September 30,

(dollar amounts in thousands)

Research and development -three months ended

Percentage of total net revenue

Research and development -nine months ended

R&D -three months ended

Percentage of total net revenue

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

We expense research and development costs as they are incurred.

The increase for the three and nine months ended September 30, 2021 compared with the same period of 2020 was primarily due to increases in personnel costs due to headcount increases and increases in consulting costs for development of our VAE IP.

We expect that total research and development expenses will increase in 2021 compared with 2020 as we incur increased development costs for our VAE IP.

Our R&D expenses include costs related to the development of our products.

We expense R&D costs as they are incurred.

The increase for the three months ended March 31, 2022 compared with the same period of 2021 was primarily due to the inclusion of a full quarter of expenses related to the former operations of MoSys, amortization of intangible assets in the first quarter of 2022 and recognition of government wage and rent subsidies in the first quarter of 2021 that reduced operating expenses.

We expect that total research and development expenses will increase in 2022 compared with 2021, as we will include the operations of MoSys and increase development of our mmWave products and technologies.

In addition, we do not expect to receive any government subsidies in 2022 that would reduce our expenses.

Selling, General and Administrative

September 30,

(dollar amounts in thousands)

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Percentage of total net revenue

SG&A -nine months ended

Percentage of total net revenue

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

The increase for the three and nine months ended September 30, 2021 compared with the same period of 2020 was primarily due to increases in transaction costs related to the Arrangement with Peraso.

Transaction costs incurred in connection with the Arrangement were $0.3 million and $0.7 million for the three and nine months ended September 30, 2021, respectively.

We expect total SG&A expenses to remain relatively consistent for the remainder of 2021.

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

Interest expense

September 30,

(dollar amounts in thousands)

Interest expense - three months ended

Percentage of total net revenue

Interest expense - nine months ended

Percentage of total net revenue

Interest expense consisted of interest expense on our senior secured convertible notes (the Notes).

As of March 31, 2021, we had repaid the full remaining principal amount of the Notes and accrued interest.

We do not expect to incur interest expense during the remainder of 2021.

See Note 10 to the condensed consolidated financial statements included in this report for additional disclosure.

Interest expense incurred during the quarter ended March 31, 2021 related to our loans payable, which were repaid during 2021.

Liquidity and Capital Resources;

Changes in Financial Condition

As of September 30, 2021, we had cash, cash equivalents and investments of $21.2 million and working capital of $18.6 million.

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

Net cash used in operating activities was $4.6 million for the first nine months of 2021, which primarily resulted from our net loss of $4.3 million, adjusted for a $0.6 million of gains for debt extinguishment and $0.1 million in net changes in assets and liabilities, which was partially offset by non-cash charges of $0.4 million.

As of March 31, 2022, we had cash, cash equivalents and investments of $12.2 million and working capital of $13.7 million.

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

Net cash used in operating activities was $5.7 million for the first three months of 2022, which primarily resulted from our net loss of $6.8 million and $1.0 million in net changes in assets and liabilities, partially offset by non-cash charges of $0.8 million of depreciation and amortization, $1.2 million of stock based compensation and a $0.1 million

loss o n disposal of property and equipment .

The changes in assets and liabilities primarily related to the timing of accounts receivable collections , purchases of inventory and other vendor payables and prepayments.

Net cash used in operating activities was $1.6 million for the first nine months of 2020, which primarily resulted from our net loss of $2.8 million, which was partially offset by $0.7 million in net changes in assets and liabilities and non-cash charges of $0.2 million of stock-based compensation, depreciation and amortization expenses and $0.2 million of accrued interest.

The changes in assets and liabilities primarily related to the timing of accounts receivable collections, and inventory and other vendor payables and prepayments.

Net cash used in investing activities of $11.4 million for the nine months ended September 30, 2021 represented $12.7 million in purchases of short and long-term investments, partially offset by $1.3 million in proceeds from maturities of short-term investments.

Net cash provided by investing activities for the nine months ended September 30, 2020 was mainly due to the proceeds from maturities of short-term investments of $0.3 million.

Net cash provided by financing activities of $19.9 million for the nine months ended September 30, 2021 primarily consisted of $6.8 million and $12.0 million in net proceeds received from the registered direct offerings of our common stock completed in February 2021 and June 2021, respectively, and $4.2 million of proceeds from the exercise of warrants to purchase shares of common stock at a price of $2.40 per share.

We used approximately $3 million of these proceeds to repay in full the outstanding balance of the Notes.

Net cash provided by financing activities of $2.2 million for the nine months ended September 30, 2020 primarily consisted of $1.6 million in net proceeds received from the sale of common stock in a registered direct offering of securities completed in April 2020 and $0.6 million of proceeds from an unsecured loan under the Paycheck Protection Program.

Net cash used in operating activities was $1.3 million for the first three months of 2021, which primarily resulted from our net loss of $4.2 million, which was partially offset by $0.9 million in net changes in assets and liabilities and non-cash charges of $1.2 million of stock-based compensation, $0.3 million of depreciation and amortization expenses, $0.3 million amortization of debt discount and $0.2 million of accrued interest.

The changes in assets and liabilities primarily related to the timing of accounts receivable collections and other vendor payables and prepayments.

Net cash provided by investing activities of $3.6 million for the three months ended March 31, 2022 represented $4.2 million in proceeds from maturities of short-term investments, partially offset by $0.5 million purchases of short and long-term investments and $0.1 million of purchases of property and equipment.

Net cash used in investing activities for the three months ended March 31, 2021 represented approximately $9,000 of purchases of property and equipment.

Net cash used in financing activities for the three months ended March 31, 2022 consisted of taxes paid to net share settle equity awards.

Net cash provided by financing activities for the three months ended March 31, 2021 consisted of net proceeds received from an unsecured loan.

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

level of revenue;

cost, timing and success of technology development efforts, especially for our VAE IP;

cost, timing and success of technology development efforts;

inventory levels, timing of product shipments and length of billing and collection cycles;

fabrication costs, including mask costs, of our ICs, currently under development:

variations in manufacturing yields, material lead time and costs and other manufacturing risks;

profitability of our business;

impacts of our proposed Arrangement with Peraso;

costs of acquiring other businesses and integrating the acquired operations;

profitability of our business.

Working Capital

Our primary need for liquidity is to fund working capital requirements of our business and capital expenditures, as well as for general corporate purposes.

We expect our cash expenditures to exceed receipts in 2021, as our revenues will not be sufficient to offset our working capital requirements.

During the nine months ended September 30, 2021, we completed two registered direct offerings of our common stock that generated net proceeds of approximately $18.8 million.

Also, during 2021, we received proceeds of $4.2 million from the exercise of common stock warrants.

During the three months ended March 31, 2021, we repaid in full the outstanding principal balance of our Notes.

In May 2020, we entered into a Promissory Note with Wells Fargo Bank, N.A.

(the Lender) in an aggregate principal amount of approximately $0.6 million (the PPP Note), pursuant to the Paycheck Protection Program (the PPP) under the CARES Act.

In March 2021, we applied for forgiveness of the PPP Note under the terms of the PPP, and, in May 2021, we obtained forgiveness of the full amount of the PPP Note from the Lender.

As a result of these activities, at September 30, 2021, we had approximately $21.2 million in cash and investments and no debt.

In the event that additional financing is required through sales of our equity securities, our stockholders would suffer dilution of their equity ownership, and we may be required to accept other terms that could be significantly detrimental to our existing stockholders and to our business.

If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios, any of which could be significantly detrimental to our business, operating results and financial condition.

Our primary need for liquidity is to fund working capital requirements of our businesses, capital expenditures and for general corporate purposes.

We expect our cash expenditures to exceed receipts in 2022, as we do not expect our revenues will be sufficient to offset our working capital requirements.

We incurred a net loss of approximately $6.8 million for the three months ended March 31, 2022 and had an accumulated deficit of approximately $124.0 million as of March 31, 2022.

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, 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.

We may not be able to obtain additional financing as needed on acceptable terms, or at all, which may require us to reduce our operating costs and other expenditures, including reductions of personnel, salaries and capital expenditures.

Alternatively, or in addition to such potential measures, we may elect to implement additional cost reduction actions as we may determine are necessary and in our best interests.

Any such actions undertaken might limit our opportunities to realize plans for revenue growth and we might not be able to reduce our costs in amounts sufficient to achieve break-even or profitable operations.

If we were to raise additional capital through sales of our equity securities, our stockholders would suffer dilution of their equity ownership.

If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, prohibit us from paying dividends, repurchasing our stock or making investments, and force us to maintain specified liquidity or other ratios, any of which could harm our business, operating results and financial condition.

If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

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respond to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our existing operations or research and development plans.

Our failure to do any of these things could seriously harm our ability to execute our business strategy and may force us to curtail our existing operations or R&D plans.

Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements or obligations that are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources.

Recent Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements for a discussion of recent accounting policies.

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 2. Management’s Discussion and Analysis