Overview

Peraso Inc. (formerly known as MoSys, Inc.) is a fabless semiconductor company that specializes in the development of mmWave semiconductors, primarily in the unlicensed 60 GHz spectrum band for 802.11ad/ay-compliant devices and in the ²⁸⁄₃₉ GHz spectrum bands for 5G-compliant devices. The company derives revenue from selling semiconductor devices and antenna modules based on these mmWave technologies.

In December 2021, the company completed the acquisition of Peraso Technologies Inc. and changed its name to Peraso Inc. The company also acquired a memory product line comprising its Bandwidth Engine IC products. However, in May 2023, the company initiated an end-of-life (EOL) for its memory IC products due to the discontinuation of the foundry process used to manufacture these products.

Peraso has incurred significant net losses in recent years, resulting in negative cash flows that have required the company to raise substantial additional capital. As of September 30, 2024, the company had $1.3 million in cash and cash equivalents and $0.4 million in working capital. This raises substantial doubt about the company’s ability to continue as a going concern.

To address its financial challenges, Peraso has implemented cost-reduction initiatives, including headcount reductions, and is seeking additional financing. The company has also entered into an “at-the-market” offering agreement to raise additional capital through the sale of common stock. However, there is no assurance that the company will be able to obtain sufficient capital on acceptable terms to fund its operations and execute its business strategy.

Risks and Uncertainties

Peraso faces a number of risks and uncertainties, including competition in the industry, liquidity requirements, rapidly changing customer requirements, limited operating history, and the volatility of public markets. The company may be unable to access the capital markets, and additional capital may only be available on terms that could be significantly detrimental to existing stockholders and the business.

Critical Accounting Policies and Estimates

Peraso’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) in the United States. The preparation of these financial statements requires the company to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. As of September 30, 2024, there have been no material changes to the company’s significant accounting policies and estimates.

Results of Operations

Net Revenue:

• Product revenue decreased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to decreases in shipments of mmWave ICs and antenna modules, partially offset by increases in shipments of memory IC products.
• Royalty and other revenue decreased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to a decrease in royalty revenues from licensees of the company’s memory technology.

Cost of Net Revenue and Gross Profit:

• Cost of net revenue decreased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to the decrease in sales of mmWave products.
• Gross profit decreased for the three months ended September 30, 2024 compared to the same period in 2023, but increased for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the increase in shipments of higher-margin memory IC products.

Research and Development (R&D) Expenses:

• R&D expenses decreased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to reduced salary and consulting costs, as well as a decrease in rent and software license expenses.

Selling, General and Administrative (SG&A) Expenses:

• SG&A expenses increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to increased consulting and professional services costs, as well as increased amortization of intangible assets.

Severance and Software License Obligations:

• In November 2023, the company implemented employee layoffs and terminated certain consulting positions, resulting in severance charges of $0.4 million for each of the three and six months ended June 30, 2024.
• The company also expensed approximately $1.6 million related to non-cancelable licenses for computer-aided design software that were determined to be unused due to the employee layoffs.

Liquidity and Capital Resources; Changes in Financial Condition

Cash Flows:

• Net cash used in operating activities was $3.9 million for the first nine months of 2024, primarily due to the net loss of $9.2 million, partially offset by non-cash charges.
• Net cash provided by financing activities of $3.6 million for the first nine months of 2024 was primarily from a public offering of common stock and warrants, as well as at-the-market sales of stock.

Going Concern:

• The company’s recurring losses and negative cash flows raise substantial doubt about its ability to continue as a going concern within one year from the date of the financial statements.
• Peraso is seeking additional financing and may need to implement further cost-reduction strategies to maintain liquidity and continue operations.

Off-Balance Sheet Arrangements and Indemnifications

Peraso does not have any off-balance sheet arrangements, and the company provides standard indemnifications in the ordinary course of business.