Peraso Inc
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
PRSO$0.35+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001213900-24-068354
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0001213900-24-097140
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 60 previous paragraphs and 62 current paragraphs.
36 unchanged; 24 reworded; 2 added; 0 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 23 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
As discussed in Note 13 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report, on November 5, 2024, we entered into inducement offer letter agreements (the “Inducement Letters”) with certain holders (the “Holders”) of existing Series B warrants (the “Existing Warrants”) to purchase up to an aggregate of 2,246,030 shares of our common stock, having an original exercise price of $2.25 per share, issued to the Holders on February 8, 2024. Pursuant to the Inducement Letters, the Holders agreed to exercise for cash their existing warrants at a reduced exercise price of $1.30 per share (the “Reduced Exercised Price”) in consideration for our agreement to issue in a private placement (i) new Series C common stock purchase warrants (the “Series C Warrants”) to purchase an aggregate of 2,246,030 shares of common stock, and (ii) new Series D common stock purchase warrants (the “Series D Warrants” and, collectively with the Series C Warrants, the “New Warrants”) to purchase an aggregate of 2,246,030 shares of our common stock. In connection with this offering, we also agreed to reduce the exercise price of the Existing Warrants to purchase an aggregate of 1,728,490 shares of common stock for all holders of the Existing Warrants not participating in this offering to the Reduced Exercise Price for the remaining term of the Existing Warrants.
Current report
Further, as discussed in Note 8 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report, on August 30, 2024, we entered into an At The Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann& Co. Inc. (“Ladenburg”) with respect to an “at the market” offering program, under which the Company may, from time to time, in its sole discretion, issue and sell through Ladenburg, acting as agent or principal, shares of the Company’s common stock initially having an aggregate offering price of up to $1,425,000. The Sales Agreement provides that Ladenburg will be entitled to compensation for its services equal to 3.0% of the gross proceeds from sales of any shares of common stock under the Sales Agreement in addition to the reimbursement of certain expenses. During the three months ended September 30, 2024, under the Sales Agreement, we sold 110,688 shares of common stock for net proceeds of approximately $164,000.
Reworded paragraphs (24)
Previous wording
We incurred net losses of approximately $6.5 million for the six months ended June 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated deficit of approximately $173 million as of June 30, 2024. These and prior year losses have resulted in significant negative cash flows and historically have required us to raise substantial amounts of additional capital. As discussed below, this raises significant doubt about our ability to continue as a going concern. We will need to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time.
Current wording
We incurred net losses of approximately $9.2 million for the nine months ended September 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated deficit of approximately $175.6 million as of September 30, 2024. These and prior year losses have resulted in significant negative cash flows and historically have required us to raise substantial amounts of additional capital. As discussed below, this raises significant doubt about our ability to continue as a going concern. We will need to increase revenues substantially beyond levels that we have attained in the past in order to generate sustainable operating profit and sufficient cash flows to continue doing business without raising additional capital from time to time.
Previous wording
The following table details revenue by product category for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table details revenue by product category for the three and nine months ended September 30, 2024 and 2023:
Previous wording
Product revenue increased for the three months ended June 30, 2024 compared with the same period of 2023 primarily due to increases in EOL shipments of our memory IC products. Product revenue decreased for the six months ended June 30, 2024 compared with the same period of 2023 primarily due to the decrease in shipments of our mmWave ICs and antenna modules, which was partially offset by increases in EOL shipments of our memory IC products. We initiated price increases on certain of our antenna module products in 2022, however, through June 30, 2024, we had not realized any material increase in revenue as a result of those price increases.
Current wording
Product revenue decreased for the three and nine months ended September 30, 2024 compared with the same periods of 2023 primarily due to the decrease in shipments of our mmWave ICs and antenna modules, which was partially offset by increases in shipments of our memory IC products. The increase in memory IC product shipments during 2024 was attributable to the increase in EOL shipments. We initiated price increases on certain of our antenna module products in 2022, however, through September 30, 2024, we had not realized any material increase in revenue as a result of those price increases.
Previous wording
Taiwan Semiconductor Manufacturing Corporation (TSMC) is the sole foundry that manufactures the wafers used to produce our memory IC products. TSMC has informed us that TSMC is discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory ICs. As a result, in May 2023, we informed our customers that we would be initiating an end-of-life (EOL) of our memory IC products. As of June 30, 2024, we had a non-cancelable purchase order backlog for our memory IC products of $9.1 million. We expect to fulfill this backlog and complete final shipments of our memory IC products by March 31, 2025.
Current wording
Taiwan Semiconductor Manufacturing Corporation (TSMC) is the sole foundry that manufactures the wafers used to produce our memory IC products. TSMC informed us that TSMC is discontinuing the foundry process used to produce wafers, in turn, necessary to manufacture our memory ICs. As a result, in May 2023, we informed our customers that we would be initiating an end-of-life (EOL) of our memory IC products. As of September 30, 2024, we had non-cancelable purchase order backlog from customers for our memory IC products of $5.7 million. We expect to fulfill this backlog and complete final shipments of our memory IC products by March 31, 2025.
Previous wording
We expect revenues to increase in 2024 as compared with 2023, as we anticipate increased sales of our memory IC products, based on EOL purchase orders received from customers. In addition, we expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as we expect new customers to commence production during 2024.
Current wording
We expect revenues to increase in 2024 as compared with 2023, as we anticipate increased sales of our memory IC products based on our EOL purchase order backlog. In addition, we expect sales of our mmWave products to increase from a volume and revenue perspective over the next 12 months, as we expect to commence production shipments to new customers beginning in early 2025.
Previous wording
Royalty and other includes royalty, non-recurring engineering services and license revenues. The decrease in royalty and other revenue for the three and six months ended June 30, 2024 compared with the same periods of 2023 was primarily due to a decrease in royalty revenues from licensees of our memory technology due to reduced shipments by these licensees, as partially offset by an increase in non-recurring engineering services revenue related to our mmWave technology.
Current wording
Royalty and other includes royalty, non-recurring engineering services and license revenues. The decrease in royalty and other revenue for the three and nine months ended September 30, 2024 compared with the same periods of 2023 was primarily due to a decrease in royalty revenues from licensees of our memory technology due to reduced shipments by these licensees, which we attribute to the EOL initiated by TSMC, as partially offset by increases in non-recurring engineering services revenue related to our mmWave technology.
Previous wording
Cost of net revenue increased slightly for the three months ended June 30, 2024 when compared with the same period in 2023, primarily due to the combined effect of i) an increase in shipments of our memory IC products and ii) increased amortization of developed technology of approximately $0.2 million. Cost of net revenue decreased for the six months ended June 30, 2024 when compared with the same period in 2023, primarily due to the combined effect of i) a decrease in sales of our mmWave IC and module products, partially offset by an increase in shipments of our memory IC products in 2024, and ii) increased amortization of developed technology of approximately $0.3 million.
Current wording
Cost of net revenue decreased for the three months ended September 30, 2024 when compared with the same period in 2023, primarily due to a decrease in sales of our mmWave IC and module products, which was partially offset by an increase in shipments of our memory IC products in 2024 and $0.2 million of inventory write downs of our mmWave product inventory. Cost of net revenue decreased for the nine months ended September 30, 2024 when compared with the same period in 2023, primarily due to the decrease in sales of our mmWave IC and module products, which was partially offset by an increase in shipments of our memory IC products in 2024, $0.3 million of inventory write downs of our mmWave product inventory and increased amortization of developed technology of approximately $0.3 million, as we reduced the useful life of the assets in May 2023 as a result of the EOL of our memory products.
Previous wording
Gross profit increased for the three and six months ended June 30, 2024 compared with the same periods of 2023 primarily due to the increase in shipment volumes of our memory IC products. The increase in our gross profit margin percentage for the three and six months ended June 30, 2024 compared with the prior year period was primarily attributable to the increase in shipments of our memory products, which carry higher gross margins than our mmWave products. During the three months ended June 30, 2024, we sold inventory with a value of $81,000 that had been written down in 2023.
Current wording
Gross profit decreased for the three months ended September 30, 2024 compared with the same period of 2023 primarily due to a decrease in sales of our mmWave IC and module products and royalty and other revenues, partially offset by an increase in shipment volumes of our memory IC products to fulfill EOL purchase orders. Gross profit increased for the nine months ended September 30, 2024 compared with the same period of 2023 due to the increase in shipments of our memory IC products, as these products carry higher gross margins, and this increase was partially offset by a decrease in shipments of our mmWave products. The increase in our gross profit margin percentage for the nine months ended September 30, 2024 compared with the prior year period was primarily attributable to the increase in shipments of our memory IC products, which carry higher gross margins than our mmWave products. During the nine months ended September 30, 2024, we recorded revenue of $81,000 from inventory that had been written down in prior periods.
Previous wording
The decrease for the three and six months ended June 30, 2024 compared with the same periods of 2023 was primarily due to reduced salary and consulting costs, as we implemented reductions in force in February and November 2023 and terminated consultant contracts.
Current wording
The decrease for the three and nine months ended September 30, 2024 compared with the same periods of 2023 was primarily due to reduced salary and consulting costs, as we implemented reductions in force in February and November 2023 and terminated consultant contracts, as well as a decrease in rent expense for the Toronto office lease, as we reduced the space we rent effective January 2024, and reduced software license expense. As disclosed in Note 4 to the condensed consolidated financial statements, in June 2024, we recorded a charge of approximately $1.6 million for non-cancelable license commitments for computer-aided design software.
Previous wording
The increase for the three and six months ended June 30, 2024 compared with the same periods of 2023 was primarily attributable to increased consulting and professional services costs and increased amortization of purchased intangible assets for customer relationships, as we reduced the estimated life of these intangibles during 2023 due to the EOL of our memory IC products. These increases were partially offset bythe impact of headcount reductions initiated in 2023, including the elimination of certain employee and consulting positions and reductions of other discretionary operating expenses during 2023. We expect that total SG&A expense will remain flat or slightly decrease for the remainder of 2024 compared with 2023 due to our continued cost reduction initiatives.
Current wording
The increase for the three and nine months ended September 30, 2024 compared with the same periods of 2023 was primarily attributable to increased consulting and professional services costs and increased amortization of purchased intangible assets for customer relationships, as we reduced the estimated life of these intangibles. These increases were partially offset bythe impact of headcount reductions initiated in 2023, including the elimination of certain employee and consulting positions and reductions of other discretionary operating expenses during 2023. We expect that total SG&A expense will remain flat or slightly decrease for the remainder of 2024 compared with 2023 due to our continued cost reduction initiatives.
Previous wording
On November 7, 2023, we implemented an employee lay-off and terminated certain consulting positions (the “Reductions”) to reduce operating expenses and cash burn, as we prioritized business activities and projects that we believe will have a higher return on investment. As part of the Reductions, we implemented a temporary lay-off that impacted 16 employees (the “Employees”) of Peraso Tech. The employment of one Employee was terminated during the three months ended March 31, 2024. During the three months ended June 30, 2024, we determined that we would not recall any of the 10 Employees that remained on our payroll and commenced notifying the remaining Employees that their employment would be terminated. As a result, we recorded severance charges of approximately $424,000 and $446,000 for the three and six months ended June 30, 2024, respectively.
Current wording
In November 2023, we implemented an employee lay-off and terminated certain consulting positions (the “Reductions”) to reduce operating expenses and cash burn, as we prioritized business activities and projects that we believe will have a higher return on investment. As part of the Reductions, we implemented a temporary lay-off that impacted 16 employees (the “Employees”) of Peraso Tech. During the six months ended June 30, 2024, we determined that we would not recall any of the 11 Employees that remained on our payroll and commenced notifying the remaining Employees that their employment would be terminated. As a result, we recorded severance charges of approximately $0.4 million for each of the three and six months ended June 30, 2024, respectively.
Previous wording
As a result of the decision to not recall the Employees, we determined that it was probable that a number of our non-cancelable licenses for computer-aided design software would not be utilized during the remaining license terms. During the three months ended June 30, 2024, we expensed the value of the remaining contractual liabilities and certain prepaid amounts totaling approximately $1,617,000 and recorded liabilities totaling approximately $1,533,000, which are expected to be paid through September 30, 2025. As of June 30, 2024, the current portion of the remaining contractual liabilities of $257,000 and $1,015,000 are included in accounts payable and accrued expenses and other, respectively (see Note 3), and the non-current portion of $261,000 is included in other long-term liabilities.
Current wording
As a result of the decision to not recall the Employees, we determined that it was probable that a number of our non-cancelable licenses for computer-aided design software would not be utilized during the remaining license terms. During the three months ended June 30, 2024, we expensed the value of the remaining contractual liabilities and recorded liabilities of approximately $1.6 million.
Previous wording
As of June 30, 2024, we had cash and cash equivalents of $1.9 million and working capital of $1.1 million.
Current wording
As of September 30, 2024, we had cash and cash equivalents of $1.3 million and working capital of $0.4 million.
Previous wording
Net cash used in operating activities was $3.2 million for the first six months of 2024, which primarily resulted from our net loss of $6.5 million, as adjusted for a $1.6 million non-cash gain on the change in fair value of warrant liability, as partially offset by non-cash charges of $2.0 million of depreciation and amortization, $2.4 million of stock based compensation and $0.5 million in net changes in assets and liabilities. The changes in assets and liabilities primarily related to the timing of accounts receivable collections, accruals for software license obligations, accrued severance benefits and other vendor payables and prepayments.
Current wording
Net cash used in operating activities was $3.9 million for the first nine months of 2024, which primarily resulted from our net loss of $9.2 million, as adjusted for a $1.6 million non-cash gain on the change in fair value of warrant liability, as partially offset by non-cash charges of $3.0 million of depreciation and amortization, $3.3 million of stock based compensation and $0.6 million in net changes in assets and liabilities. The changes in assets and liabilities primarily related to the timing of accruals for software licenses, accrued severance benefits and accounts receivable collections, and other vendor payables and prepayments.
Previous wording
Net cash used in operating activities was $3.6 million for the first six months of 2023, which primarily resulted from our net loss of $7.2 million, as adjusted for a $1.6 million non-cash gain on the change in fair value of warrant liability and $0.2 million of other non-cash changes, as partially offset by non-cash charges of $1.7 million of depreciation and amortization, $2.6 million of stock based compensation, and $1.1 million in net changes in assets and liabilities. The changes in assets and liabilities primarily related to the timing of accounts receivable collections, purchases of inventory and other vendor payables and prepayments.
Current wording
Net cash used in operating activities was $5.6 million for the first nine months of 2023, which primarily resulted from our net loss of $7.9 million, as adjusted for a $4.2 million non-cash gain on the change in fair value of warrant liability and $0.2 million in other non-cash changes, and was partially offset by non-cash charges of $2.8 million of depreciation and amortization and $3.9 million of stock based compensation.
Previous wording
Net cash provided by investing activities of $0.4 million for the six months ended June 30, 2023 represented $0.5 million in proceeds from maturities of short-term investments, partially offset by $0.1 million of purchases of property and equipment. For the six months ended June 30, 2024, no cash was provided by or used in investing activities.
Current wording
Net cash provided by investing activities of $1.0 million for the nine months ended September 30, 2023 represented $1.1 million in proceeds from maturities of short-term investments, partially offset by $0.1 million of purchases of property and equipment. For the nine months ended September 30, 2024, no cash was provided by or used in investing activities.
Previous wording
Net cash provided by financing activities of $3.5 million for the six months ended June 30, 2024 primarily comprised $3.4 million in net proceeds from a public offering of our common stock and common stock purchase warrants completed in February 2024 and a $0.1 million sale of unregistered stock to a member of our board of directors.
Current wording
Net cash provided by financing activities of $3.6 million for the nine months ended September 30, 2024 primarily comprised $3.4 million in net proceeds from a public offering of our common stock and common stock purchase warrants completed in February 2024 and a $0.1 million sale of unregistered stock to a member of our board of directors, $0.2 million of net proceeds from at-the-market sales of stock, which was partially offset by $0.1 million for repayment of finance lease liabilities.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2023 consisted of $3.5 million, primarily comprised $3.6 million in net proceeds from a registered direct offering of our common stock and common stock purchase warrants completed in June 2023, partially offset by taxes paid to net share settle equity awards and repayment of finance lease liabilities.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2023 consisted of $3.5 million, which primarily comprised $3.6 million in net proceeds from a registered direct offering of our common stock and common stock purchase warrants completed in September 2023, as partially offset by taxes paid to net share settle equity awards and repayment of finance lease liabilities.
Previous wording
Our primary purchase obligations include non-cancelable purchase orders for inventory. At June 30, 2024, we had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $2.9 million. As disclosed above and in Note 4 to the condensed consolidated financial statements, we recorded liabilities of approximately $1.6 million for non-cancelable license commitments for computer-aided design software. We expect to pay these license fees through September 30, 2025.
Current wording
Our primary purchase obligations include non-cancelable purchase orders for inventory. At September 30, 2024, we had outstanding non-cancelable purchase orders for inventory, primarily wafers and substrates, and related expenditures of approximately $2.9 million.
Previous wording
We incurred net losses of approximately $6.5 million for the six months ended June 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated deficit of approximately $173 million as of June 30, 2024. These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital. To date, we have primarily financed our operations through offerings of equity and equity-linked securities, issuance of convertible notes and loans.
Current wording
We incurred net losses of approximately $9.2 million for the nine months ended September 30, 2024 and $16.8 million for the year ended December 31, 2023, and we had an accumulated deficit of approximately $175.6 million as of September 30, 2024. These and prior year losses have resulted in significant negative cash flows and have required us to raise substantial amounts of additional capital. To date, we have primarily financed our operations through offerings of equity and equity-linked securities, issuance of convertible notes and loans.
Previous wording
As discussed in Note 8 of the “Notes to Condensed Consolidated Financial Statements” included in Part I, Item 1 of this report, in February 2024, we completed a public offering of common stock and common stock purchase warrants for net proceeds to us of approximately $3.4 million. If we were to raise additional capital through the exercise of the common stock purchase warrants issued in February 2024 or other 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:
Current wording
As we have and may raise additional capital through sales of our equity securities, our stockholders will 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:
Previous wording
We believe that our existing cash and cash equivalents as of June 30, 2024, plus expected receipts associated with forecasted product sales, will provide us with liquidity to fund our planned operating needs into the fourth quarter of 2024. Variability in our operating forecast, driven primarily by (i) product sales and collections, (ii) potential customer licensing and non-recurring engineering (NRE) transactions, (iii) timing of operating expenditures, and (iv) unanticipated changes in net working capital will impact our cash runway. Likewise, we may decide to revise our financial priorities and operating plans, depending on the level of customer shipments, licensing and NRE arrangements and timing of related collections. This could impact our ability to enter into strategic arrangements and to access additional capital.
Current wording
We believe that our existing cash and cash equivalents as of September 30, 2024, plus the proceeds from the warrant inducement offering and expected receipts associated with forecasted product sales, will provide us with liquidity to fund our planned operating needs into the second quarter of 2025. Variability in our operating forecast, driven primarily by (i) product sales and collections, (ii) potential customer licensing and non-recurring engineering (NRE) transactions, (iii) timing of operating expenditures, and (iv) unanticipated changes in net working capital, will impact our cash runway. Likewise, we may decide to revise our financial priorities and operating plans, depending on the level of customer shipments, licensing and NRE arrangements and timing of related collections. This could impact our ability to enter into strategic arrangements and to access additional capital.
Previous wording
We will need additional funding to continue our operating activities beyond those activities currently included in our operating forecast and related cash projection. Therefore, we will need to secure additional capital or financing and/or significantly delay, defer or reduce our cash expenditures before the end of 2024. There can be no assurance that we will be able to obtain additional capital or financing on terms acceptable to us, on a timely basis or at all.
Current wording
We will need additional funding to continue our operating activities beyond those activities currently included in our operating forecast and related cash projection. Therefore, we will need to secure additional capital or financing and/or significantly delay, defer or reduce our cash expenditures over the next two quarters. There can be no assurance that we will be able to obtain additional capital or financing on terms acceptable to us, on a timely basis or at all.
Previous wording
In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. We have also entered into indemnification agreements with our officers and directors. No material amounts related to these indemnifications are reflected in our condensed consolidated financial statements for the three and six months ended June 30, 2024.
Current wording
In the ordinary course of business, we enter into contractual arrangements under which we may agree to indemnify the counter-party from losses relating to a breach of representations and warranties, a failure to perform certain covenants, or claims and losses arising from certain external events as outlined within the contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be subject to maximum loss clauses. We have also entered into indemnification agreements with our officers and directors. No material amounts related to these indemnifications are reflected in our condensed consolidated financial statements for the three and nine months ended September 30, 2024.