As filed with the Securities and Exchange Commission on May 24, 2018December 15, 2022
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
MOSYS,PERASO INC.
(Exact name of registrant as specified in its charter)
| Delaware | 3674 | 77-0291941 | ||
(State or other jurisdiction of
| (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification |
2309 Bering DriveDr.
San Jose, California 95131
Tel: (408)418-7500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
James Sullivan
Leonard Perham
Chief ExecutiveFinancial Officer and President
MoSys,Peraso Inc.
2309 Bering DriveDr.
San Jose, CACalifornia 95131
Tel: (408)418-7500
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications to:
Alan B. KalinBlake Baron, Esq.
Pillsbury Winthrop Shaw PittmanMitchell Silberberg & Knupp LLP
2550 Hanover Street
Palo Alto, CA 94304
(650) 233-4048437 Madison Ave., 25th Floor
New York, NY 10022
Tel: (917) 546 7709
Approximate date of commencement of proposed sale to the public:
From time to timepublic: As soon as practicable after this registration statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. box: ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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| Title of each class of securities to be registered | Proposed maximum aggregate offering price(1) | Amount of registration fee | ||
Common Units consisting of: (4) | ||||
(i) common stock, par value $0.001 per share(2) | ||||
(ii) warrants to purchase shares of common stock(2)(3) | ||||
Pre-funded Units consisting of: (4) | ||||
(i)pre-funded warrants to purchase shares of common stock(2)(3) | ||||
(ii) warrants to purchase shares of common stock(2)(3) | ||||
Shares of common stock issuable upon exercise of warrants | ||||
Shares of common stock issuable upon exercise ofpre-funded warrants | ||||
Total | $10,000,000 | $1,245 | ||
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. WeThe Selling Stockholder may not sell these securities pursuant to this prospectus until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not solicitingpermitted.
SUBJECT TO COMPLETION, DATED DECEMBER 15, 2022
PRELIMINARY PROSPECTUS
3,675,000 Shares of Common Stock issuable upon exercise of the Purchase Warrants
This prospectus relates to the resale of up to an aggregate of 3,675,000 shares of our common stock, par value $0.001 per share (the “Common Stock”), issuable upon the exercise of the purchase warrants (“Purchase Warrants”) by Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (the “Selling Stockholder”), that were issued pursuant to a Securities Purchase Agreement (the “Purchase Agreement”), dated November 28, 2022, between the Company and the Selling Stockholder.
We will not receive any proceeds from the sale of the Common Stock covered by this prospectus by the Selling Stockholder. All net proceeds from the sale of the Common Stock covered by this prospectus will go to the Selling Stockholder. See “Use of Proceeds.”
The Selling Stockholder may sell all or a portion of the Common Stock covered by this prospectus from time to time in market transactions through any market on which our shares of Common Stock are then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. See “Plan of Distribution.”
Our Common Stock is listed on the Nasdaq Capital Market under the symbol “PRSO.” On December 12, 2022, the last reported sale price of our Common Stock was $1.05.
Investing in our shares of Common Stock involves a high degree of risk. Before buying any shares of Common Stock, you should review carefully the risks and uncertainties described under the heading “Risk Factors” section beginning on page 6 of this prospectus and in the documents incorporated by reference into this prospectus.
Neither the Securities and Exchange Commission (“SEC”) nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2022.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the SEC. As permitted by the rules and regulations of the SEC, the registration statement filed by us includes additional information not contained in this prospectus. You may read the registration statement and the other reports we file with the SEC at the SEC’s website described below under the heading “Where You Can Find More Information.”
Neither we nor the Selling Stockholder have authorized anyone to provide you with information different from that contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. Neither we nor the Selling Stockholder take any responsibility for, or can provide any assurance as to the reliability of, any information other than the information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us or on our behalf. We and the Selling Stockholder are offering to sell, and seeking offers to buy, shares of our Common Stock only in jurisdictions where offers and sales are permitted. You should assume that the information appearing in this prospectus or in any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates which are specified in such documents. Our business, financial condition, results of operations and prospects may have changed since those dates.
Neither we nor the Selling Stockholder are offering to sell or seeking offers to purchase these securities in any jurisdiction where the offer or sale is not permitted. We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities as to distribution of the prospectus outside of the United States.
Unless the context otherwise requires, references to “Peraso,” “we,” “our,” “us” or the “Company” in this prospectus mean Peraso Inc. and its consolidated subsidiaries.
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PROSPECTUS SUMMARY
SUBJECT TO COMPLETION, DATED MAY 24, 2018
PROSPECTUS
Up to Common Units (each Common Unit contains one Share of Common Stock and one Warrant to purchase Shares of Common Stock)
or
Upto Pre-Funded Units (eachPre-Funded Unit contains onePre-funded Warrant to purchase one Share of Common Stock and one Warrant to purchase Shares of Common Stock)
and
Shares of Common Stock Underlying the Warrants and
Shares of Common Stock Underlying thePre-funded Warrants
We are offering common units, each common unit consisting of one share of our common stock and one warrant to purchase shares of our common stock (together with the shares of common stock underlying such warrants). Each warrantThe following summary highlights information contained elsewhere in a common unit will have an exercise price per share equal to $ per share. The warrants contained in the common units will be exercisable immediately and will expire on the year anniversary of the original issuance date. We are also offering the shares of our common stock that are issuable from time to time upon exercise of the warrants contained in the common units.
We are also offering to each purchaser whose purchase of common units in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of thisoffering, pre-funded units (eachpre-funded unit consisting of onepre-funded warrant to purchase one share of our common stock and one warrant to purchase shares of our common stock) in lieu of common units that would otherwise result in a purchaser’s beneficial ownership exceeding 4.99% of our outstanding common stock (or at the election of the purchaser, 9.99%). Eachpre-funded warrant contained in apre-funded unit will be exercisable for one share of our common stock. The purchase price of eachpre-funded unit is equal to the price per common unit being sold to the public in this offering, minus $0.01, and the exercise price of eachpre-funded warrant included in thepre-funded unit is $0.01 per share. Thepre-funded warrants expire when exercised in full. This offering also relates to the shares of common stock issuable upon exercise of anypre-funded warrants contained in thepre-funded units sold in this offering. Because we will issue a warrant as part of each common unit orpre-funded unit, the number of warrants sold in this offering will not change as a result of a change in the mix of the common units andpre-funded units sold. Each warrant contained in apre-funded unit will have an exercise price per share equal to $ per share. The warrants contained in thepre-funded units will be exercisable immediately and will expire on the year anniversary of the original issuance date. We are also offering the shares of our common stock that are issuable from time to time upon exercise of the warrants contained in thepre-funded units.
The common units and thepre-funded units will not be issued or certificated. The shares of common stock orpre-funded warrants, as the case may be, and the warrants can only be purchased together in this offering but the securities contained in the common units orpre-funded units will be issued separately. The common units and thepre-funded units may be referred to collectively as the “units.”
Our common stock is currently listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “MOSY.” On May 23, 2018, the last reported sale price of our common stock on Nasdaq was $1.94 per share.
You should read carefully this prospectus and any applicable free writingdoes not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should read this entire prospectus together withcarefully, including the additional information describedsection entitled “Risk Factors” included elsewhere in this prospectus, underand the headings “Incorporation of Certain Information by Reference” and “Where You Can Find More Information,” before you invest in any of our securities.
Investing in our securities involves risks. You should carefully read and consider the “Risk Factors” beginning on page 8 of this prospectus before investing. You should also consider the risk factors described or referred to in any documents incorporated by reference in this prospectus before investing in these securities.
Neitherherein, including the Securitiessections entitled “Risk Factors” and Exchange Commission nor any state securities commission has approved or disapproved“Management’s Discussion and Analysis of these securities or passed uponFinancial Condition and Results of Operations” and our financial statements and the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
We have retained Roth Capital Partners, LLC to act as our placement agent in connection with this offering. The placement agent has agreed to use its reasonable best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any of the securities from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a condition to the closing of this offering, the actual offering amount, placement agent fees and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refundrelated notes thereto, in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus. In addition, because there is no escrow account and no minimum offering amount in this offering, investors could be in a position where they have invested in our company, but we are unable to fulfill our objectives due to a lack of interest in this offering. Also, any proceeds from the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able to use such funds to effectively implement our business plan.
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Delivery of the securities offered hereby is expected to be made on or about , 2018.
Roth Capital Partners
The date of this prospectus is , 2018.
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In this prospectus, “MoSys,” the “Company,” “we,” “us,” and “our” refer to MoSys, Inc. and its subsidiaries.
You should rely only on information contained ordocuments incorporated by reference in this prospectus. We have not authorized any person to provide you with information that differs from what is contained or incorporated by reference in this prospectus. If any person does provide you with information that differs from what is contained or incorporated by reference in this prospectus, you should not rely on it. This prospectus is not an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates, or an offer of solicitation in any jurisdiction where offers or sales are not permitted. The information contained in this prospectus is accurate only asherein. Some of the date of this prospectus, even though this prospectus may be delivered or shares may be sold under this prospectus on a later date.
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You should rely only on the information containedstatements in this prospectus and in the documents incorporated by reference herein, or any amendment hereto or any free writing prospectus prepared by us or on our behalf. We have not authorized any other person to provide you with different information. We are not making an offer to sell our common stock in any jurisdiction in which the offer or sale is not permitted. The information contained in this prospectus, the documents incorporated by reference or any free writing prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or any free writing prospectus or of any sale of the common stock.
Neither we, nor any of our officers, directors, agents or representatives make any representation to you about the legality of an investment in our common stock. You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.
Unless the context indicates otherwise, all references in this prospectus to “MoSys,” “we,” “us,” “our company” and “our” refer to MoSys, Inc. and its consolidated subsidiaries.
Some of the statements in this prospectus constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause ourSee “Cautionary Note Regarding Forward-Looking Statements.”
Overview
Peraso Inc., together with its subsidiaries (“Peraso,” the “Company,” “we,” “our” or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. These factors include, among others, those incorporated by reference under “Risk Factors” below.
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or similar terms.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors under the section titled “Risk Factors” and a variety of other factors, including, without limitation, statements about our future business operations and results, the market for our technology, our strategy and competition.
Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this prospectus may not occur.
The following summary highlights information contained elsewhere or incorporated by reference in this prospectus. This summary does not contain all of the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the matters discussed under the heading “Risk Factors” in this prospectus.
Our Company
We are“us”), is a fabless semiconductor company focused on the development and sale of: i) semiconductor devices and modules based on our proprietary semiconductor devices and ii) performance of non-recurring engineering, or NRE, services and licensing of intellectual property, or IP. Our primary focus is the development of millimeter wavelength, or mmWave, wireless technology, for the 60 Gigahertz, or GHz, spectrum and for 5G cellular networks, or 5G. Our mmWave products enable a range of applications, such as 5G with low latency and high reliability, as well as multi-gigabit, mmWave links over 25 kilometers. Our mmWave product address consumer applications, such as wireless video streaming and untethered augmented reality and virtual reality, or AR/VR. We also have a line of memory-denominated integrated circuits or ICs, for the high-speed cloud networking, communications, security appliances,appliance, video, testmonitor and monitoring, andtest, data center markets. Our solutionsand computing markets that delivertime-to-market, performance, power, area and economic benefits for system original equipment manufacturers, or OEMs. Our principal product line
Business Combination
We were formerly known as MoSys, Inc., or MoSys. On September 14, 2021, we and sourceour subsidiaries, 2864552 Ontario Inc. and 2864555 Ontario Inc., entered into an Arrangement Agreement, or the Arrangement Agreement, with Peraso Technologies Inc., or Peraso Tech, a privately-held corporation existing under the laws of substantiallythe province of Ontario, to acquire all of the issued and outstanding common shares of Peraso Tech, or 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, or 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 we changed our name from MoSys to “Peraso Inc.” and began trading on The Nasdaq Stock Market, or the Nasdaq, under the symbol “PRSO.” Certain previous shareholders of Peraso Tech elected to convert their common stock of Peraso Tech into exchangeable shares in 2864555 Ontario Inc., one of our wholly-owned subsidiaries. These exchangeable shares, which can be converted into Common Stock of ours at the option of the holder, are similar in substance to our Common Stock.
Our Products
We are a fabless semiconductor company specializing in the development of millimeter wave, or mmWave, which is generally described as the frequency band from 24 Gigahertz, GHz, to 300GHz, wireless technology. We derive revenue is the Bandwidth Engine® product family. Bandwidth Engine ICs combinefrom selling our proprietary1T-SRAM® high-density embedded60GHz and 5G semiconductor devices and modules and performance of non-recurring engineering services. We also manufacture and sell high-performance memory integrated macro functionssemiconductor devices for a wide range of markets and high-speed serial interface, or SerDes I/O, withreceive royalties from licensees of our intelligent access technology and a highly efficient interface protocol. Historically, ourmemory technology.
Our primary business was the design, development, marketing, sale and support of differentiated intellectual property, or IP, including embedded memory and high-speed parallel and SerDes I/O used in advancedsystems-on-chips, or SoCs.
Our future success and ability to achieve and maintain profitability are dependentfocus is on the marketingdevelopment and salessale of our Bandwidth Engine ICmmWave wireless technology. mmWave is generally described as the frequency band from 24 GHz to 300 GHz. There are two industry standards that incorporate mmWave technology for wireless communications: (1) IEEE 802.11ad/ay; and (2) 3GPP Release 15-17 (commonly referred to as 5G). PerasoTech has developed and continues to develop products into networking, communications and other markets requiring high-bandwidth memory access.
We had net income of $0.3 million for the three-month period ended March 31, 2018, and incurred a net loss of $4.4 million for the three-month period ended March 31, 2017. We had an accumulated deficit of $224 million as of March 31, 2018. In addition, we incurred net losses of approximately $10.7 million and $32 million for the years ended December 31, 2017 and 2016, respectively. These and prior year losses have resulted in significant negative cash flows for almost a decade and have required usthat conform to raise substantial amounts of additional capital during this period.these standards. To date, we have primarily financed our operations through multiple offeringsnot sold a minimal amount of common stock5G products.
mmWave ICs
Our first mmWave product line operated in the 60 GHz band and conformed to investors and affiliates and an issuancethe IEEE 802.11ad standard. This product line included a baseband IC, several variations of convertible notes,mmWave radio frequency, or RF, ICs, as well as asset sale transactions.associated antenna technology. The second product line is currently in development and addresses the 5G mmWave opportunity. Given our extensive experience in the development of mmWave technology, 5G mmWave, is a logical adjacent market.
The first market that was targeted was the 60GHz IEEE 802.11ad market. Our 60GHz IEEE802.11ad products had two very important advantages over traditional 2.4GHz / 5GHz Wi-Fi products: very high data rates (up to 4.5 Gb/s) and low latency (less than 5ms). The first application that had traction was outdoor broadband. This included applications such as point-to-point, or PtP, backhaul links or fixed wireless access using point-to-multipoint links, or PtMP. Products using the 60GHz band are for this market. Since the spectrum is unlicensed (free), wireless carriers can provide services without having to spend significantly on wireless spectrum. We are a leading supplier of semiconductors in the PtP and PtMP markets. We are currently shipping to leading equipment suppliers in this space, as well as directly to service providers who are building their own equipment. We believe we bring certain advantages to the market. First, our products support the spectrum from 66 GHz to 71 GHz. These are often referred to as channels 5 and 6 in the 802.11ad/ay specifications. The key advantage in supporting these channels is that the signals are able to propagate much further than channels 1-4; this is a result of significantly lower oxygen absorption at frequencies above 66 GHz. To date, our customers have achieved links in the range of 25 kilometers, which is substantially longer than any 60 GHz links in the past.
In the indoor area, the 802.11ad technology is ideal for high speed, low latency video applications. In an indoor situation, our products can support 3 Gb/s links with under 5ms of latency. Example applications include:
| ● | AR/VR links between the headset and the video console; |
| ● | USB video cameras for corporate video conferencing; |
| ● | Wireless security cameras; and |
| ● | Smart factory safety and surveillance. |
We are a leader in the manufacturing of mmWave devices and 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 address operational challenges of delivering mmWave products into high-volume markets.
Modules
In the second half of 2021, we augmented our business model to produce and phone numbersell 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 our principal executive offices are MoSys, Inc., 2309 Bering Drive, San Jose, CA 95131, (408)418-7500.mmWave technology is that the RF amplifiers must be as close as possible to the antenna to minimize loss. By providing a module, Peraso can guarantee the performance of amplifier/antenna interface which simplifies the RF design engineering, facilitating more opportunities for new companies that have not provided RF type systems as well as shortening the time to market for new products. It is possible for third parties to provide module products, but, because we have significant, proprietary mmWave antenna IP, we can provide a highly-competitive solution as we own and produce the module components.
Acceleration and other IC products
Our Strategy
Our primary business objective is to be a profitableIP-rich fabless semiconductor company offeringmemory products comprise our Accelerator Engine ICs, 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 Business
which include our Bandwidth Engine and quad-partition rate SRAM memory ICs.
Bandwidth Engine
The Bandwidth Engine is a memory-dominated IC that has beenwas designed to be a high-performance companion IC to packet processors.processors and is targeted for high-performance applications where throughput is critical. While the Bandwidth Engine primarily functions as a memory device with a high-performance and high-efficiency interface, it also can accelerate certain processing operations by serving as aco-processor element. Our Bandwidth Engine ICs combine: (1) our proprietary high-density, high-speed, low latency embedded memory, (2) our high-speed serial interface technology, or SerDes, I/O, (3) an open-standard interface protocol and (4) intelligent access technology. We believe an IC combining our1T-SRAM memory and serial interface with logic and other intelligence functions provides a system-level solution and significantly improves overall system performance at lower cost, size and power consumption. Our Bandwidth Engine ICs can provide up to 4.5and over 6.5 billion memory accesses per second (and more in some applications),externally and 12 billion memory accesses per second internally, which we believe is more than twicethree times the performance of current memory-based solutions. They also can enable customers’ system designers to significantly narrow the gap between processor and memory IC performance by designingperformance. Our customers that design Bandwidth Engine ICs onto the networking system line cards and modifyingin their systems will re-architect their systems at the line-card level and use our product to replace traditional
memory solutions with Bandwidth Engine ICs.solutions. When compared with existing commercially available solutions, our Bandwidth Engine ICs may:
| ● | provide up to four times the performance; |
| ● | reduce power consumption by approximately 50%; |
| ● | reduce cost by greater than 50%; and |
| ● | result in a dramatic reduction in IC pin counts on the line card. |
Our first-generation Bandwidth Engine IC products contain 576 megabytes, or MB, of memory and use a serial interface with up to 16 lanes operating at up to 10.3 Gbps per lane. In 2017, we announced theend-of-life of these products and expect to complete fulfillment of last-time customer orders by March 31, 2019.
Our second-generation Bandwidth Engine IC products contain 576 MB of memory and use our SerDes I/O with up to 16 lanes operating at up to 15 Gbps per lane. In addition to a speed improvement of up to 50% over our first-generation products, the second-generation architecture enables multiple family-member parts with added specialized features. We have been shipping Bandwidth Engine 2 IC products since 2013 and expect these products to be our primary revenue source for the foreseeable future.
Our third-generation Bandwidth Engine IC products contain 1152 MB576 megabits, or Mb, of memory and use a SerDes interface with up to 16 lanes operating at up to 30 Gbps12.5Gbps per lane. We have been shipping our Bandwidth Engine 2 IC products since 2013. We expect these products to be a significant revenue source for the foreseeable future.
Our Bandwidth Engine 3 targetsIC products contain 1152Mb of memory and use a SerDes interface with up to 16 lanes operating at up to 25Gbps per lane. Our Bandwidth Engine 3 ICs target support for packet-processing applications with up to five billion memory single word accesses per second, as well as a burst mode to enable full duplex buffering up to 400 Gbps for ingress, egress and oversubscription applications. TheseThe devices provide benefits of size, power, and pin count, reductions, as well asand cost savings forto our customers. We do not anticipate significant revenues from these products until 2019,
QPR
Our quad partition rate, or later.
Programmable Search Engine (PSE)
We brought our PSE IC productsQPR, family of low cost, ultra-high speed SRAM memory devices optimized for FPGA-based systems. Our QPR memory technology features an architecture that allows for parallel accesses to market in 2016 to further leverage our proven serial interface technology and high-density integrated memory with processor engine architecture to enable high-speed customizable search, security, and data analysis functions for networking, security, and data center applications. Our PSE architecture features 32 search-optimized processor engines, data flow schedulers, and over a terabit of internal access bandwidth. The device leverages our GigaChip Interface communication protocol, or GCI, and high-density integrated memory (1152 Mb of1T-SRAM embedded memory).
IP Licensing and Distribution
Historically, we have offered our memory and interface technologies on a worldwide basis to semiconductor companies, electronic product manufacturers, foundries, intellectual property companies and design companies through product development, technology licensing and joint marketing relationships. We licensed our technology to semiconductor companies who incorporated our technology into ICs that they sold to their customers. As a resultmultiple partitions of the change in our corporate strategy, since 2012, our licensing activities have primarily been limitedmemory simultaneously and allows access of up to collecting royalties on existing agreements,576 bits per read or write cycle. The QPR device includes four independent partitions per input/output and we expect this trendeach partition functions as a stand-alone random-access SRAM. The high-performance interface, larger density and the multiple partitions work together to continue. Royaltysupport multiple independent functional blocks within an FPGA with one QPR device. Our MSQ220 and MSQ230 QPR devices are ideally suited for random-access applications. We also offer an optional FPGA RTL memory controller to simplify the interface to its high capacity 567Mb or 1Gb devices. We also offer an RTL memory controller that presents an SRAM-like interface to simplify the QPR design effort.
The target applications are FPGA-based and include a broad range of markets, including test and measurement, 5G networks, router, switching, security, computational storage, database acceleration, Big Data, aerospace and defense, advanced video, high-performance computing, machine learning and AI and other revenue represented 12%data-driven areas.
LineSpeed Flex PHYs
Our LineSpeed Flex family of our total revenues for100G physical interface layer (PHY) devices are designed to support industry standards and includes gearbox, multi-link gearbox and high density clock data recovery, or retimer devices
Summary of Risk Factors
Our business and this offering are subject to numerous risks and uncertainties, discussed in more detail in the quarter ended March 31, 2018. Royalty and other revenue generated from our existing license agreements represented 11%, 24%, and 45% of our total revenue forfollowing section. These risks include, among others, the years ended December 31, 2017, 2016, and 2015, respectively. Licensing and royalty revenues have been declining since 2010, and we expect continued decline of royalty revenues in 2018.following key risks:
SUMMARY OF THE OFFERING
Risks Related to this Offering
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| ● | Resale of our |
| ● | There may be future sales of our Common Stock, which could adversely affect the market price of our Common Stock and |
| ● | You may experience future dilution as a result of future equity offerings. |
| ● | A substantial number of shares of our |
| ● | Future sales of |
Corporate Information
We are incorporated under the laws of the State of Delaware. Our principal corporate offices are located at 2309 Bering Drive, San Jose, California 95131. Our telephone number is (408) 418-7500. The address of our website is www.peraso.com. The information provided on or accessible through our website (or any other website referred to in the registration statement, of which this prospectus forms a part, or the documents incorporated by reference herein) is not part of the registration statement, of which this prospectus forms a part, and is not incorporated by reference as part of the registration statement, of which this prospectus forms a part.
The Offering
| Issuer | Peraso Inc. | |
| Shares offered | 3,675,000 shares of | |
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| Shares of common stock outstanding | ||
| 14,073,912 shares of Common Stock. | ||
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| Use of proceeds | We will not receive any proceeds from the sale of the shares of Common Stock by the Selling Stockholder. All net proceeds from the sale of the shares of Common Stock covered by this prospectus will go to the Selling Stockholder. See “Use of Proceeds.” | |
| Nasdaq Capital Market symbol | Our Common Stock is listed on the Nasdaq Capital Market under the symbol “PRSO.” | |
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The
Unless otherwise indicated, the number of shares of our common stock shown aboveCommon Stock outstanding prior to be outstanding immediately before and after this offering is based on 8,170,91014,073,912 shares of Common Stock outstanding as of April 30, 2018,December 9, 2022, and excludes as of such date:
| ● | 9,106,876 shares of Common Stock issuable upon the exchange of exchangeable shares; |
| ● | 1,504,678 shares of Common Stock issuable upon exercise of outstanding stock options; |
| ● | 1,370,088 shares of Common Stock issuable upon vesting of restricted stock units; |
| ● | 1,438,946 shares of Common Stock available for future issuance under the Amended and Restated 2019 Stock Incentive Plan; |
| ● | 33,125 shares of Common Stock issuable upon exercise of warrants dated July 2017 at $47.00 per share; |
| ● | 100,771 shares of Common Stock issuable upon exercise of warrants dated October 2018 at $2.40 per share; |
| ● | 1,150,000 shares of Common Stock issuable upon exercise of Pre-Funded Warrants at $0.01 per share; and |
| ● | 3,675,000 shares of Common Stock issuable upon exercise of Purchase Warrants at $1.36 per share. |
UnlessAdditionally, unless otherwise indicated, thestated, all information in this prospectus assumes no exercise of the warrants offered hereby.registration statement:
| ● | reflects all currency in United States dollars. |
Summary Consolidated Financial and Other Data
We derived the summary consolidated statements of operations data for the years ended December 31, 2017 and 2016 and the consolidated balance sheet data as of December 31, 2017 from our audited consolidated financial statements incorporated by reference to this prospectus. We derived the unaudited summary consolidated statements of operations data for the three months ended March 31, 2018 and 2017 and the unaudited summary consolidated balance sheet data as of March 31, 2018 from our unaudited condensed consolidated financial statements incorporated by reference to this prospectus. The unaudited condensed consolidated financial statements were prepared on a basis consistent with our annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal, recurring nature that are necessary for the fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in the future, and our results for the three-months ended March 31, 2018 are not necessarily indicative of the operating results to be expected for the full year ending December 31, 2018 or any other period. You should read the following summary consolidated financial and other data in conjunction with our consolidated financial statements, related notes and other financial information incorporated by reference to this prospectus.
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| (In thousands) | March 31, 2018 | March 31, 2017 | December 31, 2017 | December 31, 2016 | ||||||||||||
Statement of Operations Data: | ||||||||||||||||
Net revenue | $ | 4,208 | $ | 1,212 | $ | 8,842 | $ | 6,024 | ||||||||
Product gross profit (unaudited) | 2,103 | 353 | 3,139 | 1,529 | ||||||||||||
Product gross margin (unaudited) | 57 | % | 37 | % | 40 | % | 33 | % | ||||||||
Total gross profit | 2,607 | 610 | 4,148 | 2,949 | ||||||||||||
Total gross margin | 62 | % | 50 | % | 47 | % | 49 | % | ||||||||
Operating expenses | 2,040 | 4,799 | 14,181 | 34,313 | ||||||||||||
Net income (loss) | 348 | (4,405 | ) | (10,668 | ) | (32,048 | ) | |||||||||
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| March 31, 2018 | March 31, 2017 | December 31, 2017 | December 31, 2016 | |||||||||||||
Balance Sheet Data: | ||||||||||||||||
Cash | $ | 3,501 | $ | 5,330 | $ | 3,868 | $ | 8,766 | ||||||||
Total assets | 22,441 | 22,328 | 23,139 | 27,145 | ||||||||||||
Total liabilities | 14,474 | 11,240 | 15,793 | 11,817 | ||||||||||||
Total stockholders’ equity | 7,967 | 11,088 | 7,346 | 15,328 | ||||||||||||
Key Metrics
We monitor various key financial metrics to assess the business and compare operating results to our performance objectives. In addition to our financial results determined in accordance with United States generally accepted accounting principles, or GAAP, we believe the followingnon-GAAP financial measure is useful in evaluating our performance:
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| (In thousands; unaudited) | March 31, 2018 | March 31, 2017 | December 31, 2017 | December 31, 2016 | ||||||||||||
Adjusted EBITDA | $ | 860 | $ | (3,767 | ) | $ | (7,075 | ) | $ | (518 | ) | |||||
Non-GAAP Financial Measures
Adjusted EBITDA. We define adjusted EBITDA as GAAP net income (loss), as reported on our consolidated statements of operations, excluding stock-based compensation, restructuring and impairment charges, amortization of intangibles, interest expense, depreciation, and our provision for income taxes. We believe that the exclusion of the amounts eliminated in calculating adjusted EBITDA can provide a useful measure forperiod-to-period comparisons of our operating performance. Further, we believe that adjusted EBITDA provides useful information in understanding and evaluating our operating results in the same manner as our management and our board of directors.
Our use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Because of these limitations, you should consider adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income (loss) attributable to us and our financial results presented in accordance with GAAP.
The following table reconciles our net income (loss) to adjusted EBITDA:
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| (In thousands; unaudited) | March 31, 2018 | March 31, 2017 | December 31, 2017 | December 31, 2016 | ||||||||||||
Reconciliation of GAAP net income (loss) and adjusted EBITDA: | ||||||||||||||||
GAAP net income (loss) | $ | 348 | $ | (4,405 | ) | $ | (10,668 | ) | $ | (32,048 | ) | |||||
Stock-based compensation expense | 94 | 185 | 719 | 2,155 | ||||||||||||
Restructuring and impairment charges | — | — | 1,321 | 10,534 | ||||||||||||
Amortization of intangible assets | 27 | 28 | 112 | 111 | ||||||||||||
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Non-GAAP net income (loss) | 469 | (4,192 | ) | (8,516 | ) | (19,248 | ) | |||||||||
EBITDA adjustments: | ||||||||||||||||
Depreciation | 169 | 196 | 747 | 998 | ||||||||||||
Interest expense | 221 | 224 | 927 | 687 | ||||||||||||
Provision (benefit) for income taxes | 1 | 5 | (233 | ) | 45 | |||||||||||
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Adjusted EBITDA | $ | 860 | $ | (3,767 | ) | $ | (7,075 | ) | $ | (17,518 | ) | |||||
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An investment
Investing in our securities is risky.includes a high degree of risk. Prior to making a decision about investing in our securities, you should consider carefully consider the specific risksfactors discussed below, together with all of the other information contained in this prospectus or otherwiseand the documents incorporated by reference, in this prospectus. Theincluding the risks and uncertainties describedidentified under “Item 1A. Risk Factors” in our SEC filings are notAnnual Report on Form 10-K for the only ones facing us. Additional risksfiscal year ended December 31, 2021, and uncertainties not presently known to us, or that we currently see as immaterial, may also harm our business. If any ofQuarterly Reports on Form 10-Q for the risks or uncertainties described in this prospectus or our SEC filings or any such additional risksquarterly periods ended March 31, 2022, June 30, 2022 and uncertainties actually occur, ourSeptember 30, 2022. Our business, financial condition, results of operations cash flows and financial conditionprospects could be materially and adversely affected. Inaffected by these risks.
Risks Related to this Offering
It is not possible to predict the actual number of shares we will issue under the Purchase Agreement to the Selling Stockholder, or the actual gross proceeds resulting from exercises of Warrants for cash, if any.
On November 28, 2022, we entered into the Purchase Agreement with the Selling Stockholder, pursuant to which, among other things, we issued Purchase Warrants to the Selling Stockholder to purchase up to 3,675,000 shares of our Common Stock with an initial exercise price of $1.36 per share of Common Stock, exercisable beginning six months and one day from the date of the Purchase Agreement (the “Initial Exercise Date”) for a period of five years from the Initial Exercise Date, subject to certain limitations and conditions set forth in the Purchase Warrants. The shares of our Common Stock that case,may be issued under the Purchase Warrants may be issued to the Selling Stockholder at its discretion from time to time, subject to certain limitations and conditions set forth in the Warrants.
The Selling Stockholder generally has the right to control the timing and amount of exercises of Purchase Warrants for cash, if any. Sales of our Common Stock, if any, by the Selling Stockholder will depend upon, among other things, market conditions and other factors to be determined by the Selling Stockholder. The Selling Stockholder may ultimately decide to sell all, some or none of the shares of our Common Stock that may be available for potential resale. Depending on market liquidity at the time, resales of those shares by the Selling Stockholder may cause the public trading price of our common stock could decline,Common Stock to decrease.
Because the Selling Stockholder has the right, under certain circumstances, to exercise the Purchase Warrants on a cashless basis (and the exercise price thereunder is subject to adjustment, as discussed in more detail below), it is not possible for us to predict, as of the date of this prospectus and you might lose partprior to any such exercises, the number of shares of Common Stock that we will issue to the Selling Stockholder under the Purchase Agreement, the exercise price per share that the Selling Stockholder will pay for shares upon exercise of the Purchase Warrants, or all of your investment.the aggregate gross proceeds that we will receive from those exercises by the Selling Stockholder under the Purchase Agreement, if any.
Risks Related to this Offering
This is a best efforts offering, no minimum amount of securities isIn addition, the Selling Stockholder will not be required to be sold,acquire any shares of our Common Stock if such acquisition would result in the Selling Stockholder’s beneficial ownership exceeding 4.99% of the then issued and outstanding Common Stock.
The issuances of Common Stock to the Selling Stockholder upon exercise of Purchase Warrants will cause dilution to our existing stockholders, and the sale of the shares of Common Stock acquired by the Selling Stockholder, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
If and when the Selling Stockholder exercises its Purchase Warrants, after the Selling Stockholder has acquired the shares, the Selling Stockholder may resell all, some, or none of those shares at any time or from time to time in its discretion. Therefore, issuances to the Selling Stockholder upon exercise of Purchase Warrants could result in substantial dilution to the interests of other holders of our Common Stock. Additionally, the issuance of a substantial number of shares of our Common Stock to the Selling Stockholder, or the anticipation of such issuances, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
Investors who buy shares at different times will likely pay different prices and may not raiseexperience different levels of dilution.
If and when the amountSelling Stockholder elects to sell shares of capital we believe is requiredour Common Stock upon exercise of the Purchase Warrants, the Selling Stockholder may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from the Selling Stockholder in this offering at different times will likely pay different prices for our business.
We have retained Roth Capital Partners, LLCthose shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from the Selling Stockholder in this offering as a result of future sales made by us to act as our placement agent in connection with this offering. The placement agent has agreed to use its reasonable best efforts to solicit offers to purchase the securitiesSelling Stockholder at prices lower than the prices such investors paid for their shares in this offering. The placement agent has no obligationIn addition, if we sell a substantial number of shares to buy anythe Selling Stockholder under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with the Selling Stockholder may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
Our management team will have broad discretion over the use of the securitiesnet proceeds from us or to arrange for the purchase or saleshares of any specific number or dollar amount of the securities. There is no required minimum number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required as a conditionCommon Stock issued to the closingSelling Stockholder following its exercise of this offering, the actual offering amount, placement agent feesWarrants for cash, if any, and proceeds to us are not presently determinable and may be substantially less than the maximum amounts set forth above. We may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus. Thus, weyou may not raiseagree with how we use the amount of capital we believe is required for our businessproceeds and may need to raise additional funds, whichthe proceeds may not be available or available on terms acceptable to us. Despite this, any proceeds from the sale of securities offered by us will be available for our immediate use, and because there is no escrow account and no minimum offering amount in this offering, investors could be in a position where they have invested in us, but we are unable to fulfill our objectives due to a lack of interest in this offering.
An investment in the common units andpre-funded units is extremely speculative and there can be no assurance of any return on any such investment.successfully.
An investment in the common units andpre-funded units is extremely speculative and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in us, including the risk of losing their entire investment.
Our management hasteam will have broad discretion as to the use of the net proceeds from the issuance of shares of Common Stock to the Selling Stockholder following its exercise of Purchase Warrants for cash, if any, and we could use such proceeds for purposes other than those contemplated at the time of commencement of this offering.
We cannot specify with certainty the particular uses of the net proceeds we will receive from this offering, and these uses may vary from our current plans. Our management will have discretion in the application of the net proceeds, including for working capital, general corporate purposes and repayment of indebtedness as described in “Use of Proceeds.” Accordingly, you will have to rely uponbe relying on the judgment of our management team with respectregard to the use of the proceeds. Our management may spend a portion or all of thethose net proceeds, from this offering in waysand you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, holders of our common stock may not desire or that may not yield a significant return or any return at all. The failure by our management to apply these funds effectively could harm our business. Pendingpending their use, we may also invest thethose net proceeds from this offering in a mannerway that does not produce incomeyield a favorable, or that loses value.
You will experience immediate and substantial dilution in the net tangible book deficit per share of the common stock included in the common units or issuable upon exercise of the warrants orpre-funded warrants in this offering.
Since the effective price per share of common stock included in the common units or issuable upon exercise of the warrants or thepre-funded warrants being offered is substantially higher than the net tangible book deficit per shareany, return for us. The failure of our common stock outstanding priormanagement team to this offering, you will suffer immediateuse such funds effectively could have a material adverse effect on our business, financial condition, operating results and substantial dilution in the net tangible book deficit of the common stock included in the common units or issuable upon the exercise of the warrants or thepre-funded warrants issued in this offering. See the section titled “Dilution” below for a more detailed discussion of the dilution you will incur if you purchase units in this offering.cash flows.
Holders
There may be future sales of our warrants will have no rights as a common stockholder until they acquire our common stock.
Until you acquire shares of our common stock upon exercise of your warrants, you will have no rights with respect to shares of our common stock issuable upon exercise of your warrants. Upon exercise of your warrants, you will be entitled to exercise the rights of a common stockholder only as to matters forCommon Stock, which the record date occurs after the exercise date.
A large number of shares issued in this offering may be sold in the market following this offering, which may depresscould adversely affect the market price of our common stock.Common Stock and dilute a stockholder’s ownership of Common Stock.
A large number
The sale of shares issued in this offering may be sold in the market following this offering, which may depressour Common Stock resulting from (a) exercise of any options or vesting of restricted stock units granted to executive officers and other employees under our equity compensation plan and (b) of any warrants, and other issuances of our Common Stock could have an adverse effect on the market price of the shares of our common stock.Common Stock. Other than the restrictions set forth in the section titled “Plan of Distribution,” we are not restricted from issuing additional shares of Common Stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive shares of Common Stock, provided that we are subject to the requirements of the Nasdaq Capital Market (which generally requires stockholder approval for any transactions which would result in the issuance of more than 20% of our then outstanding shares of Common Stock or voting rights representing over 20% of our then outstanding shares of stock). Sales of a substantial number of shares of our common stockCommon Stock in the public market following thisor the perception that such sales might occur could materially adversely affect the market price of the shares of our Common Stock. Because our decision to issue securities in any future offering could causewill depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Accordingly, our stockholders bear the risk that our future offerings will reduce the market price of our commonCommon Stock and dilute their stock holdings in us.
Potential volatility of the price of our Common Stock could negatively affect your investment.
We cannot assure you that there will continue to decline.be an active trading market for our Common Stock. Historically, the stock market, as well as our Common Stock, has experienced significant price and volume fluctuations. The closing market price for our Common Stock has varied between a high of $5.07 on December 22, 2021, and a low of $1.05 on December 12, 2022, in the twelve-month period ended December 12, 2022. During this time, the price per share of Common Stock has ranged from an intra-day low of $1.03 per share to an intra-day high of $5.19 per share. Market prices of securities of technology companies can be highly volatile and frequently reach levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations. If there are more shares of common stock offered for sale than buyers are willingour Common Stock trades to purchase, thenunsustainably high levels, it is likely that the market price of our commonCommon Stock will thereafter experience a material decline. As a result of fluctuations in the price of our Common Stock, you may be unable to sell your shares at or above the price you paid for them. In addition, if we seek additional financing, including through the sale of equity or convertible securities, such sales could cause our stock price to decline and result in dilution to existing stockholders.
In addition, the stock markets in general, and the markets for semiconductor stocks in particular, have experienced significant volatility that has often been unrelated to the financial condition or results of operations of particular companies. These broad market fluctuations may decline to a marketadversely affect the trading price of our Common Stock and, consequently, adversely affect the price at which buyers are willing to purchase the offered shares of common stock and sellers remain willing toyou could sell the shares. All of the shares of common stock issued in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, as amended.
The warrants issuedthat you purchase in this offering may not have any value.
Each warrant will have an exercise price equal to $ and will expire on the year anniversary of the date they first become exercisable. In the event our common stock price does not exceed the exercise price of the warrants during the period when the warrants are exercisable, the warrants may not have any value.
There is no public market for the warrants or thepre-funded warrants to purchase shares of our common stock included in the common units and thepre-funded units being offered by us in this offering.
There is no established public trading market for the warrants or thepre-funded warrants included in the common units and thepre-funded units being offered in this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the warrants or thepre-funded warrants on any national securities exchange or other nationally recognized trading system, including the Nasdaq Capital Market. Without an active market, the liquidity of the warrants and thepre-funded warrants will be limited.
Risks Related to our Business
We have a history of losses and we will need to raise additional capital in the future.
We recorded operating income of approximately $0.6 million for the three-month period ended March 31, 2018 and we recorded an operating loss of approximately $10.0 million for the year ended December 31, 2017. As of March 31, 2018, we had an accumulated deficit of approximately $224 million. We recorded an operating loss of approximately $31.4 million for the year ended December 31, 2016, and ended the period with an accumulated deficit of approximately $214.0 million. 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 remain competitive and expand our product offerings to customers, 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. Given our history of fluctuating revenues and operating losses, the expected reduction in royalty revenues and challenges we face in securing customers for our IC products, we cannot be certain that we will be able to continue to achieve and maintain profitability on either a quarterly or annual basis in the future.
We currently lack the funds to repay the convertible notes due in August 2019.
In March 2016, we entered into a 10% Senior Secured Convertible Note Purchase Agreement and issued $8 million aggregate principal amount of 10% Senior Secured Convertible Notes due August 15, 2018 (the “Notes”) to the purchasers of the Notes. Accrued interest is payable semi-annually in cash or in kind through the issuance of identical new Notes, or with a combination of the two, at our option. The terms of the Notes were amended pursuant to a written amendment effective as of February 18, 2018. The amendment extended the maturity date of the Notes to August 15, 2019. The principal amount of the Notes is convertible into our common stock, as is the accrued and unpaid interest on the Notes. We have the option of paying the interestin-kind by converting it into additional note principal. Through February 2018, we have made the required interest paymentsin-kind through the issuance of additional notes totaling approximately $1.7 million.
The February 2018 amendment also: (i) reduced the conversion rate of the Notes from one share of our common stock for each $8.50 of outstanding debt to one share of our common stock for each $4.25 of outstanding debt under the Notes, (ii) reduced the interest rate to 8%, and (iii) reduced the redemption purchase price in the event of certain transactions like an acquisition from 120% to 100% of the total amount of debt to be redeemed. The Notes are secured by substantially all of our assets.
If we fail to pay the Notes, including accrued interest, in full when due, the holders of the Notes, acting through their agent, will be entitled to pursue all of their remedies as secured creditors, including taking possession of the collateral securing the Notes and effecting a private sale of some or all of our assets securing the Notes. After the holders of the Notes take such actions, we may not have enough assets to make payments owed to other creditors, to continue operating our business, or distribute any funds to stockholders.
Our failure to raise additional capital or generate the significant capital necessary to expand our operations and invest in new products could reduce our ability to compete and could harm our business.
We intend to continue spending substantial amounts to grow our business. Despite the recent extension of the repayment date for the Notes, as of the date of the prospectus, we still will need to obtain additional financing to pursue our business strategy, develop new products, respond to competition and market opportunities and acquire complementary businesses or technologies, in addition to repaying the Notes. There can be no assurance that such additional capital, whether in the form of debt or equity financing, will be sufficient or available and, if available, that such capital will be offered on terms and conditions acceptable to us.
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 a subsequent 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:
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 research and development plans or existing operations.
Our success depends upon the acceptance of our integrated circuits, or ICs, by equipment suppliers to the cloud networking, security and other systems markets.
The future prospects of our business depend on the adoption and acceptance by our target markets, which include cloud networking, communications, security appliances, video, test and monitoring, and data center. Our prospective customers may be unwilling to adopt anddesign-in our ICs due to the uncertainties and risks surrounding designing a new IC into their systems and relying on a supplier that has a limited history of manufacturing such ICs. In addition, our Bandwidth Engine IC products require our customers and their other IC suppliers to implement our proprietary GCIchip-to-chip communication protocol, which they may be unwilling to do. In the past, we have experienced reluctance to adopt the GCI interface from potential customers. We have determined and negotiated prices with a few customers for our ICs but to date still have limited experience with the costfollowing periods of making and selling these products. Thus, currently, we do not know whether we will be able to generate adequate profit from making and selling these products.
An important part of our strategy to gain market acceptance is to penetrate new markets by targeting market leaders to accept our IC solutions. This strategy is designed to encourage other participants in those markets to follow these leaders in adopting our solutions. If a high-profile industry participant adopts our ICs for one or more of its products but fails to achieve success with those products, or is unable to successfully implement our ICs, other industry participants’ perception of our solutions could be harmed. Any such event could reduce the amount of future sales of our IC products.
Future revenue growth depends on our winning designs with existing and new customers, and those customers designing our solutions into their product offerings and successfully selling and marketing such products. If we do not continue to win designsvolatility in the short term, our product revenue in the following years will not grow.
We sell our ICs to OEM customers that include our ICs in their products. Our technology is generally incorporated into products at the design stage, which we refer to as a design win, and which we define as the point at which a customermarket or significant price declines, securities class-action litigation has made a commitment to build a boardoften been instituted against a fixed schematic for his system, and this board will utilize our ICs. As a result, our future revenue depends on our OEM customers designing our ICs into their products, and on those products being produced in volume and successfully commercialized. If we fail to convince our current or prospective customers to include our ICs in their products and fail to achieve a consistent number of design wins, our results of operations and business will be harmed. In addition,companies. Such litigation, if a current or prospective customer designs a competitor’s offering into its product, it becomes significantly more difficult forinstituted against us, to sell our IC solutions to that customer because changing suppliers involves significant cost, time, effort and risk for the OEM. Even if a customer designs one of our ICs into its product, we cannot be assured that the OEM’s product will be commercially successful over time or at all or that we will receive or continue to receive any revenue from that customer. Furthermore, the customer product for which we obtain a design win may be canceled before the product enters production or is introduced into the market. Because of our extended sales cycle, our revenue in future years is highly dependent on design wins we are awarded today. Our lack of capital and uncertainty about our future technology roadmap also may limit our success in achieving additional design wins, as discussed under, “We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.”
The design win process is generally a lengthy, expensive and competitive process, with no guarantee of revenue, and if we fail to generate sufficient revenue to offset our expenses, our business and operating results would suffer.
Achieving a design win is typically a lengthy, expensive and competitive process because our customers generally take a considerable amount of time to evaluate our ICs. In the markets we serve, the time from initial customer engagement to design win to production volume shipments can range from two to three years, though it may take longer for new customers or markets we intend to address. In order to win designs, we are required to both incur design and development costs and dedicate substantial engineering resources in pursuit of a single customer opportunity. Even though we incur these costs, we may not prevail in the competitive selection process, and, even if we do achieve a design win, we may never generate sufficient, or any, revenue to offset our development expenditures. Our customers have the option to decide whether or not to put our solutions into production after initially designing our products in the specification. The customer can make changes to its product after a design win has been awarded to us, which can have the effect of canceling a previous design win. The delays inherent in our protracted sales cycle increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated revenue. In addition, any change, delay or cancellation of a customer’s plans could harm our financial results, as we may have incurred significant expense while generating no revenue.
If our foundries do not achieve satisfactory yields or quality, our cost of goods sold will increase, our operating margins will decline, and our reputation and customer relationships could be harmed.
We depend not only on sufficient foundry manufacturing capacity and wafer prices, but also on good production yields (the number of good die per wafer) and timely wafer delivery to meet customer demand and maintain profit margins. The fabrication of our products is a complex and technically demanding process. Minor deviations in the manufacturing process can cause substantial decreases in yields, and in some cases, cause production to be suspended. Our foundry, Taiwan Semiconductor Manufacturing Company, or TSMC, from time to time, experiences manufacturing defects and reduced manufacturing yields. Changes in manufacturing processes or the inadvertent use of defective or contaminated materials by our foundries could result in lower than anticipated manufacturing yields,substantial costs and diversion of management’s attention and resources, which would harm our revenue or increase our costs. For example, in the past, our foundry produced ICscould materially and met its process specification
range but did not meet our customer’s specifications causing us to write off a portion of our production lot. Many of these problems are difficult to detect at an early stage of the manufacturing process and may be time consuming and expensive to correct. Poor yields from our foundry, or defects, integration issues or other performance problems in our ICs, could cause us significant customer relations and business reputation problems, harm our operating results and give rise to financial or other damages to our customers. Our customers might consequently seek damages from us for their losses. A product liability claim brought against us, even if unsuccessful, would likely be time consuming and costly to defend.
We may experience difficulties in transitioning to new wafer fabrication process technologies or in achieving higher levels of design integration, which may result in reduced manufacturing yields, delays in product deliveries and increased costs.
We aim to use the most advanced manufacturing process technology appropriate for our solutions that is available from TSMC. As a result, we periodically evaluate the benefits of migrating our solutions to other technologies in order to improve performance and reduce costs. These ongoing efforts require us from time to time to modify the manufacturing processes for our products and to redesign some products, which in turn may result in delays in product deliveries. We are dependent on TSMC to support the production of wafers for future versions of our ICs, as TSMC is our sole foundry. Such production may require changes to TSMC’s existing process technology. If TSMC elects to not alter their process technology to support future versions of our ICs, we would need to identify a new foundry.
In addition, our1T-SRAM technology used in our Bandwidth Engine and PSE products is not available at process nodes below 40 nanometers. To date, we have not developed any memory products below the40-nanometer process node. To continue the product roadmap for our Bandwidth Engine and PSE products, we will need to identify a new foundry and/or no longer use our1T-SRAM technology. We do not consider this to adversely affect our current product offerings, but we expect to face difficulties, delays and increased expense as we transition our products to new processes, and potentially to new foundries for future products. For example, we believe our next generation of products will need to be designed using a FinFET process, which will require us to incur significantly high development costs for mask tooling and computer-aided design software. We currently lack the funds to pay for such development costs. Moreover, an inability to continue our product roadmap can adversely affect, and has in the past affected our efforts to win new customers, secure additional design wins and significantly grow our future revenues.
Because the manufacturing of integrated circuits is extremely complex, the process of qualifying a new foundry is a lengthy process and there can be no assurance that we will be able to find and qualify replacement suppliers without materially adversely affecting our business, financial condition, results of operations and prospects for future growth. We cannot assure you that we will be able to maintain our relationship with our current foundry or develop relationships with new foundries. If we or TSMC experience significant delays in transitioning to smaller geometries or fail to efficiently implement transitions, we could experience reduced manufacturing yields, delays in product deliveries and increased costs, any of which could harm our relationships with our customers and our operating results.
Our main objective is the development and sale of our products to networking communications and data center systems providers and their subsystem and component vendors, and, if demand for these products does not grow, we may not achieve revenue growth and our strategic objectives.
We market and sell our ICs to cloud networking, communications, data center and other equipment providers and their subsystem and component vendors. We believe our future business and financial success depends on market acceptance and increasing sales of these products. In order to meet our growth and strategic objectives, networking infrastructure OEMs must incorporate our products into their systems, and the demand for their systems must grow as well. We cannot provide assurance that sales of our products to these OEMs will increase substantially in the future or that the demand for our customers’ systems will increase. Our future revenues from these products may not increase in accordance with our growth and strategic objectives if instead our OEM customers modify their product designs, select products sold by our competitors or develop their own proprietary ICs. Moreover, demand for their products that incorporate our ICs may not grow or result in significant sales of such products due to factors affecting the customers and their business, such as industry downturns, declines in capital spending in the enterprise and carrier markets and unfavorable macroeconomic conditions. Thus, the future success of our business depends in large part on factors outside our control, and sales of our products may not meet our revenue growth and strategic objectives.
Our failure to continue to develop new products and enhance our products on a timely basis could diminish our ability to attract and retain customers.
The existing and potential markets for our products are characterized by ever-increasing performance requirements, evolving industry standards, rapid technological change and product obsolescence. These characteristics lead to periodic changes in customer requirements, shorter product life cycles and changes in industry demands and mandate new product introductions and enhancements to maintain customer engagements and design wins. In order to attain and maintain a significant position in the market, we will need to continue to enhance and evolve our products and the underlying proprietary technologies in anticipation of these market trends which may be impeded by our reductions in design engineering staff since the beginning of 2017.
Our future performance depends on a number of factors, including our ability to:
prospects.
Our failure to enhance our existing IC products and develop future products that achieve broad market acceptance will harm our competitive position and impede our future growth.
Our ICs have a lengthy sales cycle, which makes it difficult to predict success in this market and the timing of future revenue.
Our ICs have a lengthy sales cycle, ranging from six to 24 months from the date of our initial proposal to a prospective customer until the date on which the customer confirms that it has designed our product into its system. As lengthy, or an even lengthier period, could ensue before we would know the volume of products that such customer will, or is likely to, order. A number of factors can contribute to the length of the sales cycle, including technical evaluations of our products by the customers, the design process required to integrate our products into the customers’ products and the timing of the customers’ new product announcements. In anticipation of product orders, we may incur substantial costs before the sales cycle is complete and before we receive any customer payments. As a result, in the event that a sale is not completed or is cancelled or delayed, we may have incurred substantial expenses, making it more difficult for us to become profitable or otherwise negatively impacting our financial results. Furthermore, because of this lengthy sales cycle, the recording of revenues from our selling efforts may be substantially delayed, our ability to forecast our future revenue may be more limited and our revenue may fluctuate significantly from quarter to quarter. We cannot provide any assurances that our efforts to build a strong and profitable business based on the sale of ICs will succeed. If these efforts are not successful, in light of the substantial resources that we have invested, our future operating results and cash flows could be materially and adversely affected.
The semiconductor industry is cyclical in nature and subject to periodic downturns, which can negatively affect our revenue.
The semiconductor industry is cyclical and has experienced pronounced downturns for sustained periods of up to several years. To respond to any downturn, many semiconductor manufacturers and their customers will slow their research and development activities, cancel or delay new product developments, reduce their workforces and inventories and take a cautious approach to acquiring new equipment and technologies. As a result, our business has been in the past and could be adversely affected in the future by an industry downturn, which could negatively impact our future revenue and profitability. Also, the cyclical nature of the semiconductor industry may cause our operating results to fluctuate significantly fromyear-to-year, which may tend to increase the volatility of the price of our common stock.
We expect our royalty revenues to decrease compared with our historical results, and there is no guarantee revenues from our IC products will replace these lost revenues in the near future.
In 2011, we began to place greater emphasis on our IC business andre-deploy engineering, marketing and sales resources from IP to IC activities. We are no longer actively pursuing new license arrangements, and, as a result, our royalty and other revenues in 2017 declined when compared with prior years. In addition, the production volumes of the current royalty-bearing products shipped by our licensees are expected to decrease; therefore we expect our royalty revenue to decrease in 2018 and future periods. Historically, royalties have generated a 100% gross margin, and any decrease in royalties adversely affects our gross margin, operating results and cash flows.
Our revenue has been highly concentrated among a small number of licensees and customers, and our results of operations could be harmed if we lose a key revenue source and fail to replace it.
Our overall revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the quarter ended March 31, 2018, our three largest customers represented 34%, 24% and 17% of total revenue, respectively. For the year ended December 31, 2017, our three largest customers represented 46%, 17% and 11% of total revenue, respectively. For the year ended December 31, 2016, our three largest customers represented 47%, 21% and 13% of total revenue, respectively. We expect that a relatively small number of customers will continue to account for a substantial portion of our revenue for the foreseeable future.
As a result of this revenue concentration, our results of operations could be adversely affected by the decision of a single key licensee or customer to cease using our technology or products or by a decline in the number of products that incorporate our technology that are sold by a single licensee or customer or by a small group of licensees or customers.
Our revenue concentration may also pose credit risks, which could negatively affect our cash flow and financial condition.
We might also face credit risks associated with the concentration of our revenue among a small number of licensees and customers. As of March 31, 2018, one customer represented 59% of total trade receivables. Our failure to collect receivables from any customer that represents a large percentage of receivables on a timely basis, or at all, could adversely affect our cash flow or results of operations and might cause our stock price to fall.
Our products must meet exact specifications, and defects and failures may occur, which may cause customers to return or stop buying our products.
Our customers generally establish demanding specifications for quality, performance and reliability that our products must meet. However, our products are highly complex and may contain defects and failures when they are first introduced or as new versions are released. If defects and failures occur in our products during the design phase or after, we could experience lost revenues, increased costs, including warranty and customer support expenses and penalties fornon-performance stipulated in customer purchase agreements, delays in or cancellations or rescheduling of orders or shipments, product returns or discounts, diversion of management resources or damage to our reputation and brand equity, and in some cases consequential damages, any of which would harm our operating results. In addition, delays in our ability to fill product orders as a result of quality control issues may negatively impact our relationship with our customers. We cannot assure you that we will have sufficient resources to satisfy any asserted claims. Furthermore, any such defects, failures or delays may be particularly damaging to us as we attempt to establish our reputation as a reliable provider of IC products.
Because we sell our products on a purchase order basis and rely on estimated forecasts of our customers’ needs, inaccurate forecasts could adversely affect our business.
We sell our IC products pursuant to individual purchase orders, rather than long-term purchase commitments. Therefore, we will rely on estimated demand forecasts, based upon input from our customers, to determine how much product to manufacture. Because our sales will be based primarily on purchase orders, our customers may cancel, delay or otherwise modify their purchase commitments with little or no notice to us. For these reasons, we will generally have limited visibility regarding our customers’ product needs. In addition, the product design cycle for networking OEMs is lengthy, and it may be difficult for us to accurately anticipate when they will commence commercial shipments of products that include our ICs.
Furthermore, if we experience substantial warranty claims, our customers may cancel existing orders or cease to place future orders. Any cancellation, delay or other modification in our customers’ orders could significantly reduce our revenue, cause our operating results to fluctuate from period to period, and make it more difficult for us to predict our revenue. In the event of a cancellation or reduction of an order, we may not have enough time to reduce operating expenses to mitigate the effect of the lost revenue on our business.
If we overestimate customer demand for our products, we may purchase products from our manufacturers that we cannot sell. Conversely, if we underestimate customer demand or if sufficient manufacturing and testing capacity were unavailable, we would forego revenue opportunities and could lose market share in the markets served by our products and could incur penalty payments under our customer purchase agreements. In addition, our inability to meet customer requirements for our products could lead to delays in product shipments, force customers to identify alternative sources and otherwise adversely affect our ongoing relationships with our customers.
We depend on contract manufacturers for a significant portion of our revenue from the sale of our IC products.
Many of our current and prospective OEM customers use third party contract manufacturers to manufacture their systems, and these contract manufacturers purchase our products directly from us on behalf of the OEMs. Although we expect to work with our OEM customers in the design and development phases of their systems, these OEMs often give contract manufacturers some authority in product purchasing decisions. If we cannot compete effectively for the business of these contract manufacturers, or, if any of the contract manufacturers that work with our OEM customers experience financial or other difficulties in their businesses, our revenue and our business could be adversely affected. For example, if a contract manufacturer becomes subject to bankruptcy proceedings, we may not be able to obtain our products held by the contract manufacturer or recover payments owed to us by the contract manufacturer for products already delivered to the contract manufacturer. If we are unable to persuade contract manufacturers to purchase our products, or if the contract manufacturers are unable to deliver systems with our products to OEMs on a timely basis, our business would be adversely affected.
We rely on independent foundries and contractors for the manufacture, assembly, testing and packaging of our integrated circuits, and the failure of any of these third parties to deliver products or otherwise perform as requested could damage our relationships with our customers and harm our sales and financial results.
As a fabless semiconductor company, we rely on third parties for substantially all of our manufacturing operations. We depend on these parties to supply us with material in a timely manner that meets our standards for yield, cost and quality. We do not have long-term supply contracts with any of our suppliers or manufacturing service providers, and therefore they are not obligated to manufacture products for us for any specific period, in any specific quantity or at any specified price, except as may be provided in a particular purchase order. Any problems with our manufacturing supply chain could adversely impact our ability to ship our products to our customers on time and in the quantity required, which in turn could damage our customer relationships and impede market acceptance of our IC solutions.
Our third party wafer foundries, and testing and assembly vendors are located in regions at high risk for earthquakes and other natural disasters. Any disruption to the operations of these foundries and vendors resulting from earthquakes or other natural disasters could cause significant delays in the development, production, shipment and sales of our IC products.
TSMC, which manufactures our products, is located in Asia, as are other foundries we may use in the future. Our vendors that provide substrates and wafer sorting and handle the testing of our products, are headquartered in either Asia or the San Francisco Bay Area of California. Our primary manufacturing operations are located in San Jose, California. The risk of an earthquake in the Pacific Rim region is significant due to the proximity of major earthquake fault lines. The occurrence of earthquakes or other natural disasters could result in the disruption of the wafer foundry or assembly and test capacity of the third parties that supply these services to us and may impede our research and development efforts, as well as our ability to market and sell our products. We may not be able to obtain alternate capacity on favorable terms, if at all.
We might not be able to protect and enforce our intellectual property rights, which could impair our ability to compete and reduce the value of our technology.
Our technology is complex and is intended for use in complex SoCs and networking systems. Our licensees’ products utilize our embedded memory and/or interface technology, and a large number of companies manufacture and market these products. Because of these factors, policing the unauthorized use of our intellectual property is difficult and expensive. We cannot be certain that we will be able to detect unauthorized use of our technology or prevent other parties from designing and marketing unauthorized products based on our technology. In the event we identify any past or present infringement of our patents, copyrights or trademarks, or any violation of our trade secrets, confidentiality procedures or licensing agreements, we cannot assure you that the steps taken by us to protect our proprietary information will be adequate to prevent misappropriation of our technology. Our inability to adequately protect our intellectual property would reduce significantly the barriers of entry for directly competing technologies and could reduce the value of our technology. Furthermore, we might initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Litigation by us could result in significant expense and divert the efforts of our technical and management personnel, whether or not such litigation results in a determination favorable to us.
Our existing patents might not provide us with sufficient protection of our intellectual property, and our patent applications might not result in the issuance of patents, either of which could reduce the value of our core technology and harm our business.
We rely on a combination of patents, trademarks, trade secret laws and confidentiality procedures to protect our intellectual property rights. We cannot be sure that any patents will be issued from any of our pending applications or that any claims allowed from pending applications will be of sufficient scope or strength, or issued in all countries where our products can be sold, to provide meaningful protection or any commercial advantage to us. Failure of our patents or patent applications to provide meaningful protection might allow others to utilize our technology without any compensation to us.
Any claim that our products or technology infringe third party intellectual property rights could increase our costs of operation and distract management and could result in expensive settlement costs or the discontinuance of our technology licensing or product offerings. In addition, we may incur substantial litigation expense, which would adversely affect our profitability.
The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights or positions, which has resulted in often protracted and expensive litigation. We are not aware of any third party intellectual property that our products or technology would infringe. However, like many companies of our size with limited resources, we have not searched for all potentially applicable intellectual property in the public databases. It is possible that a third party now has, or may in the future obtain, patents or other intellectual property rights that our products or technology may now, or in the future, infringe. Our licensees and IC customers, or we, might, from time to time, receive notice of claims that we have infringed patents or other intellectual property rights of others. Litigation against us can result in significant expense and divert the efforts of our technical and management personnel, whether or not the litigation has merit or results in a determination adverse to us.
The discovery of defects in our technology and products could expose us to liability for damages.
The discovery of a defect in our technologies and products could lead our customers to seek damages from us. Many of our agreements with customers include provisions waiving implied warranties regarding our technology and products and limiting our liability to our customers. We cannot be certain, however, that the waivers or limitations of liability contained in our agreements with customers will be enforceable.
Royalty amounts owed to us might be difficult to verify, and we might find it difficult, expensive and time-consuming to enforce our license agreements.
The standard terms of our1T-SRAM license agreements require our licensees to document the manufacture and sale of products that incorporate our technology and generally report this data to us after the end of each quarter. We have the right to audit these royalty reports periodically, although we have not conducted any such audits recently. These audits can be expensive, time-consuming and potentially detrimental to our business relationships. A failure to fully enforce the royalty provisions of our license agreements could cause our revenue to decrease and impede our ability to achieve and maintain profitability.
If we fail to retain key personnel, our business and growth could be negatively affected.
Our business has been dependent to a significant degree upon the services of a small number of executive officers and technical employees. The loss of key personnel could negatively impact our technology development efforts, our ability to deliver under our existing agreements, maintain strategic relationships with our partners, and obtain new customers. We generally have not entered into employment ornon-competition agreements with any of our employees and do not maintainkey-man life insurance on the lives of any of our key personnel.
Risks Related to Ownership of Our Common Stock
We may incur additional debt in the future, subject to certain limitations contained in our Notes.
The degree to which we are leveraged and the restrictions governing our indebtedness could have important consequences including, but not limited to:
If we are in violation of the terms of the Notes in the future and do not receive a waiver, the Note holders could choose to accelerate payment on all outstanding loan balances. If we needed to obtain replacement financing, we may not be able to quickly obtain equivalent or suitable replacement financing. If we are unable to secure alternative sources of funding, such acceleration would have a material adverse impact on our financial condition.
Provisions of our certificate of incorporation and bylaws or Delaware law might delay or prevent achange-of-control transaction and depress the market price of our stock.
Various provisions of our certificate of incorporation and bylaws might have the effect of making it more difficult for a third party to acquire, or discouraging a third party from attempting to acquire, control of our company. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock.Common Stock. Certain of these provisions eliminate cumulative voting in the election of directors, limit the right of stockholders to call special meetings and establish specific procedures for director nominations by stockholders and the submission of other proposals for consideration at stockholder meetings.
We are also subject to provisions of Delaware law which could delay or make more difficult a merger, tender offer or proxy contest involving our company. In particular, Section 203 of the Delaware General Corporation Law prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years unless specific conditions are met. Any of these provisions could have the effect of delaying, deferring or preventing a change in control, including without limitation, discouraging a proxy contest or making more difficult the acquisition of a substantial block of our common stock.Common Stock.
Under our certificate of incorporation, our board of directors may issue up to a maximum of 20,000,000 shares of preferred stock without stockholder approval on such terms as the board might determine. The rights of the holders of common stockCommon Stock will be subject to, and might be adversely affected by, the rights of the holders of any preferred stock that might be issued in the future.
Our stockholder rights plan could prevent stockholders from receiving a premium over the market price for their shares from a potential acquirer.
We adopted a stockholder rights plan that generally entitles our stockholders to rights to acquire additional shares of our common stock when a third party acquires 15% of our common stock or commences or announces its intent to commence a tender offer for at least 15% of our common stock. The plan also includes an exception to permit the acquisition of shares representing more than 15% of our common stock by a brokerage firm that manages independent customer accounts and generally does not have any discretionary voting power with respect to such shares. This plan could delay, deter or prevent an investor from acquiring us in a transaction that could otherwise result in stockholders receiving a premium over the market price for their shares of common stock. Our intention is to maintain and enforce the terms of this plan, which could delay, deter or prevent an investor from acquiring us in a transaction that could otherwise result in stockholders receiving a premium over the market price for their shares of common stock.
Potential volatility of the price of our common stock could negatively affect your investment.
We cannot assure you that there will continue to be an active trading market for our common stock. Historically, the stock market, as well as our common stock, has experienced significant price and volume fluctuations. Market prices of securities of technology companies have been highly volatile and frequently reach levels that bear no relationship to the operating performance of such companies. These market prices generally are not sustainable and are subject to wide variations. If our common stock trades to unsustainably high levels, it is likely that the market price of our common stock will thereafter experience a material decline. In the past, our board of directors approved stock repurchase programs, and any future program could impact the price of our common stock and increase volatility.
In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We could be the target of similar litigation in the future. Securities litigation could cause us to incur substantial costs, divert management’s attention and resources, harm our reputation in the industry and the securities markets and negatively impact our operating results.
Our stock price could drop, and there could be significantly less trading activity in our stock, if securities or industry analysts downgrade our stock or do not publish research or reports about our business.
Our stock price and the trading market for our stock are likely to be affected significantly by the research and reports concerning our company and our business which are published by industry and securities analysts. We do not have any influence or control over these analysts, their reports or their recommendations. Our stock price and the trading market for our stock could be negatively affected if any analyst downgrades our stock, publishes a report which is critical of our business, or discontinues coverage of us.
We are a “smaller reporting company” and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors.
We are a “smaller reporting company,” meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a “smaller reporting company,” have a public float of less than $75 million and have annual revenues of less than $50 million during the most recently completed fiscal year. As a “smaller reporting company,” we are subject to lesser disclosure obligations in our SEC filings compared to other issuers. Specifically, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings, are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting and have certain other decreased disclosure obligations in their SEC filings, including, among other things, only being required to provide two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as a “smaller reporting company” may make it harder for investors to analyze our operating results and financial prospects.
If we fail to maintain compliance with the continued listing requirements of the Nasdaq CapitalStock Market, our common stockCommon Stock may be delisted and the price of our common stockCommon Stock and our ability to access the capital markets could be negatively impacted.
Our common stockCommon Stock currently trades on the Nasdaq CapitalStock Market under the symbol “MOSY.“PRSO.” This market has continued listing standards that we must comply with in order to maintain the listing of our common stock.Common Stock. The continued listing standards include, among others, a minimum bid price requirement of $1.00 per share and any of: (i) a minimum stockholders’ equity of $2.5 million; (ii) a market value of listed securities of at least $35.0 million; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in the two of the last three fiscal years. Our results of operations and fluctuating stock price directly impact our ability to satisfy these continued listing standards. In the event we are unable to maintain these continued listing standards, our common stockCommon Stock may be subject to delisting from the Nasdaq CapitalStock Market.
We have received deficiency letters from The Nasdaq Stock Market from time to time, and while we have always regained compliance, we may receive them again in the future. Ultimately such deficiencies, if not remedied, could cause the Nasdaq Stock Market to delist our common stock.
If we arewere to be delisted, we would expect our common stockCommon Stock to be traded in theover-the-counter market which could adversely affect the liquidity of our common stock.Common Stock. Additionally, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our Common Stock; |
| ● | a reduced amount of analyst coverage |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future; |
| ● | reduced liquidity for our stockholders; |
| ● | potential loss of confidence by customers, collaboration partners and employees; and |
| ● | loss of institutional investor interest. |
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
Some of the statements in this prospectus supplement and the accompanying prospectus and the documents incorporated by reference constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. These factors include, among others, those incorporated by reference under “Risk Factors” below.
In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or similar terms.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors under the section titled “Risk Factors” and a variety of other factors, including, without limitation, statements about our future business operations and results, the market for our common stock;technology, our strategy and competition.
Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed or incorporated by reference in this prospectus supplement and the accompanying prospectus may not occur.
PRIVATE OFFERING OF PURCHASE WARRANTS
On November 28, 2022, we entered into the Purchase Agreement with the Selling Stockholder pursuant to which we agreed to offer and sell to the Selling Stockholder, in a reducedregistered direct offering, an aggregate of 1,300,000 shares (the “Shares”) of Common Stock at a negotiated purchase price of $1.00 per Share. We also offered and sold to the Selling Stockholder pre-funded warrants to purchase up to 1,150,000 shares of Common Stock (the “Pre-Funded Warrants”), in lieu of shares of Common Stock at the Selling Stockholder’s election. Each Pre-Funded Warrant is exercisable for one share of Common Stock. The purchase price of each Pre-Funded Warrant was $0.99, and the exercise price of each Pre-Funded Warrant is $0.01 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full.
The Shares, the Pre-Funded Warrants and the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants (the “Pre-Funded Warrant Shares”) were offered by us pursuant to an effective shelf registration statement on Form S-3 (No. 333-258386), which was declared effective by the SEC on August 9, 2021, and a corresponding prospectus supplement, dated November 28,2022.
In a concurrent private placement, we sold to the Selling Stockholder warrants (the “Purchase Warrants” and together with the Pre-Funded Warrants, the “Warrants”) to purchase up to 3,675,000 shares of Common Stock (the “Purchase Warrant Shares” and together with the Pre-Funded Warrant Shares, the “Warrant Shares”). The Purchase Warrants will be exercisable beginning six months and one day from the date of the Purchase Agreement (the “Initial Exercise Date”) at an exercise price of $1.36 per share and will expire on the five-year anniversary of the Initial Exercise Date.
The Purchase Warrants will be exercisable on a “cashless” basis if at any time they are exercised there is not an effective registration statement for the resale of the Purchase Warrant Shares in place, or there is not a current resale prospectus then available.
The exercise price and number of Warrant Shares will be subject to adjustment in the event of any stock dividend or split, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants.
The Purchase Agreement contained customary representations and warranties and agreements of the Company and the Selling Stockholder and customary indemnification rights and obligations of the parties. The closing of the offering occurred on November 30, 2022 (the “Closing Date”), once the customary closing conditions were met. We received gross proceeds of approximately $2.45 million in connection with the offering, before deducting placement agent fees and related offering expenses.
From the date of the Purchase Agreement until six months after the Closing Date, the Selling Stockholder has a right to participate in subsequent financings by us up to an amount equal to 30% of the total amount of analyst coverage;such financing by giving notice of the exercise of such right on the third trading day after which the Selling Stockholder receives notice of the proposed financing.
From the date of the Purchase Agreement until 90 days after the Closing Date, the provisions of the Purchase Agreement generally prohibit us from issuing or agreeing to issue additional securitiesshares of Common Stock or obtain additional financingCommon Stock equivalents other than under equity compensation plans, outstanding rights to acquire Common Stock or Common Stock equivalents, or in connection with certain strategic transactions.
Pursuant to the terms of the Purchase Agreement, we are also prohibited from (i) entering into an “ATM” offering, that is an offering of Common Stock into the existing trading market for our Common Stock at a price or prices related to the then-market price of the Common Stock, within six months after the date of the Purchase Agreement and (ii) issuing or agreeing to issue shares of Common Stock or Common Stock equivalents that are variable until the earlier of 12 months after the date of the Purchase Agreement or the date the Purchaser no longer holds any Warrants.
The Purchase Warrants and the Purchase Warrant Shares were not registered under the Securities Act of 1933, as amended (the “Securities Act”), instead were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder, or in the future;event of an issuance of Warrant Shares on a cashless basis, pursuant to the exemption provided in Section 3(a)(9) under the Securities Act.
In connection with the Purchase Agreement, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Selling Stockholder. Under the Registration Rights Agreement, the Company was required to file a registration statement within 15 calendar days after signing the Registration Rights Agreement to register the Purchase Warrant Shares for resale by the Selling Stockholder. The Company’s failure to meet the filing deadlines and other requirements set forth in the Registration Rights Agreement may subject the Company to monetary penalties.
The Benchmark Company, LLC acted as the sole placement agent (the “Placement Agent”) on a “best efforts” and exclusive basis, in connection with the offering. The Placement Agent was entitled to a cash fee of 7.0% of the gross proceeds paid to the Company for the Shares and the Warrants and reimbursement of certain out-of-pocket expenses.
The foregoing summaries of the Pre-Funded Warrants, the Purchase Warrants, the Purchase Agreement and the Registration Rights Agreement do not purport to be complete and are qualified in their entirety by reference to the definitive transaction documents. Copies of the form of Purchase Agreement, the Registration Rights Agreement, the form of Pre-Funded Warrant and the form of Purchase Warrant were attached as Exhibits 10.1, 10.2, 4.1 and 4.2, respectively, to our Current Report on Form 8-K filed with the SEC on November 30, 2022, which is incorporated by reference herein.
USE OF PROCEEDS
We will not receive any proceeds from the sale of confidence by customers, collaboration partners and employees; and
MARKET INFORMATION FOR OUR COMMON STOCK
The following table sets forth the range of high and low sales prices of our common stock on Nasdaq forby the periods indicated:
| High | Low | |||||||
2018 | ||||||||
First Quarter (January 1 – March 31, 2018) | $ | 2.08 | $ | 1.03 | ||||
2017 | ||||||||
First Quarter (January 1 – March 31, 2017) | $ | 4.32 | $ | 1.75 | ||||
Second Quarter (April 1 – June 30, 2017) | $ | 2.70 | $ | 0.55 | ||||
Third Quarter (July 1 – September 30, 2017) | $ | 1.81 | $ | 0.89 | ||||
Fourth Quarter (October 1 – December 31, 2017) | $ | 1.45 | $ | 0.64 | ||||
2016 | ||||||||
First Quarter (January 1 – March 31, 2016) | $ | 11.70 | $ | 5.70 | ||||
Second Quarter (April 1 – June 30, 2016) | $ | 6.50 | $ | 3.23 | ||||
Third Quarter (July 1 – September 30, 2016) | $ | 8.03 | $ | 4.10 | ||||
Fourth Quarter (October 1 – December 31, 2016) | $ | 7.80 | $ | 2.30 | ||||
Dividend Policy
Selling Stockholder. All net proceeds from the sale of the shares of Common Stock covered by this prospectus will go to the Selling Stockholder. We expect that the Selling Stockholder will sell their shares of Common Stock as described under “Plan of Distribution.”
DIVIDEND POLICY
To date, we have never declared or paid anyno cash dividends on our common stockshares of Common Stock and we do not currently anticipate declaring or payingexpect to pay cash dividends on our common stockCommon Stock in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance operations.provide funds for operations of our business. Therefore, any potential return investors may have in our Common Stock will be in the form of appreciation, if any, in the market value of their shares of Common Stock. We are not subject to any legal restrictions respecting the payment of dividends, except that we may not pay dividends if the payment would render us insolvent. Any future determination relatingas to the payment of cash dividends on our dividend policyCommon Stock will be made at the discretion of our boardBoard of directorsDirectors.
DESCRIPTION OF CAPITAL STOCK
Capital Stock
The following description of our capital stock is summarized from, and will depend onqualified in its entirety by reference to, our certificate of incorporation, as amended, including the certificates of designation, as amended, setting forth the terms of our preferred stock. This summary is not intended to give full effect to provisions of statutory or common law. We urge you to review the following documents because they, and not this summary, define the rights of a numberholder of factors, including future earnings, capital requirements, financial conditions, future prospects, contractual restrictionsshares of common stock and other factors that our board of directors may deem relevant.preferred stock:
Holders of Record
| ● | the General Corporation Law of the State of Delaware, or the “DGCL”, as it may be amended from time to time; |
| ● | our certificate of incorporation, as it may be amended or restated from time to time; and |
| ● | our bylaws, as they may be amended or restated from time to time. |
General
As of April 30, 2018,the date of this prospectus, our authorized capital stock currently consists of 140,000,000 shares, which are divided into two classes consisting of 120,000,000 shares of Common Stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $0.01 per share.
As of December 9, 2022, there were five holders14,073,912 shares of Common Stock outstanding and 1 share of Series A special voting preferred stock outstanding. As of December 9, 2022, there were outstanding 9,106,876 exchangeable shares exchangeable for 9,106,876 shares of Common Stock, 1,504,678 shares of Common Stock issuable upon the exercise of outstanding stock options, 1,370,088 shares of Common Stock issuable upon the vesting of outstanding restricted stock units, 1,438,946 shares of Common Stock available for future issuance under the Amended and Restated 2019 Stock Incentive Plan, warrants to purchase up to 33,125 shares of Common Stock with an exercise price of $47.00 per share, warrants to purchase up to 100,771 shares of Common Stock with an exercise price of $2.40 per share, Pre-Funded Warrants to purchase up to 1,150,000 shares of Common Stock with an exercise price of $0.01 per share and Purchase Warrants to purchase up to 3,675,000 shares of Common Stock with an exercise price of $1.36 per share.
Common Stock
At December 9, 2022, there were 14,073,912 shares of Common Stock outstanding and held of record of our common stock.by 49 stockholders. The actual number of stockholders is significantly greater than this number of record stockholders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers and other nominees. This number of stockholders of record also does not include stockholders whose shares may be held in trust by other entities.
We estimate that we will receive net proceeds of approximately $ million from the sale of units in this offering, after deducting placement agent fees and estimated offering expenses of approximately $payable by us, based on an assumed public offering price of $ per common unit (the last reported sale price of our common stock on Nasdaq on , 2018).
We intend to use the net proceeds from this public offering for working capital and general corporate purposes (including research and development and sales and marketing, and capital expenditures). To the extent the proceeds exceed our working capital needs, we expect to use some of the proceeds to pay all or a portion of the indebtedness represented by the Notes.
In addition, the amount and timing of what we actually spend for these purposes may vary and will depend on a number of factors, including our future revenue and cash generated by operations and the other factors described in “Risk Factors.” Accordingly, our management will have discretion and flexibility in applying the net proceeds of this offering. Pending use of the net proceeds as described above, we intend to invest the net proceeds in money market funds and investment-grade debt securities.
The following table sets forth our actual cash and cash equivalents and our capitalization as of March 31, 2018, sale of the securities offered hereby and the use of proceeds, as described in the section entitled “Use of Proceeds.”
| As of March 31, 2018, (in thousands) | ||||||||
| Actual | Pro Forma | |||||||
Cash and cash equivalents | $ | 3,501 | $ | * | ||||
Convertible notes payable | 9,635 | * | ||||||
Stockholders’ equity: | ||||||||
Convertible preferred stock, $0.01 par value; 20,000 shares authorized and undesignated, actual, pro forma or as adjusted; no shares issued and outstanding, actual or pro forma | — | — | ||||||
Common stock, $0.001 par value, 120,000 shares authorized; 8,171 shares issued and outstanding, actual; ____shares issued and outstanding, pro forma | 8 | * | ||||||
Additionalpaid-in capital | 232,069 | * | ||||||
Accumulated deficit | (224,110 | ) | * | |||||
|
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| |||||
Total stockholders’ equity | 7,967 | * | ||||||
Total capitalization | $ | 17,602 | * | |||||
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If you invest in the common units being offered by this prospectus, your ownership interest will be immediately diluted to the extent of the difference between the public offering price per common unit and the as adjusted net tangible book value per share of our common stock immediately after giving effect to this offering. Our unaudited net tangible book value (deficit) as of March 31, 2018 was approximately $(5.4) million, or $(0.66) per share of our common stock. Net tangible book value (deficit) per share is equal to our total tangible assets minus total liabilities, divided by 8,170,910 shares of common stock outstanding as of March 31, 2018.
The following table illustrates this dilution based solely on the number of shares of common stock issued as part of the common units at closing, and assumes that nopre-funded units are sold and that no warrants offered hereby are exercised.
| Actual (without pro forma adjustments) | ||||
Assumed public offering price per common unit | $ | |||
Net tangible book value (deficit) per share as of March 31, 2018 | $ | (0.66 | ) | |
Increase in pro forma net tangible book value (deficit) per share attributable to new investors | $ | |||
Net tangible book value (deficit) per share after this offering | $ | |||
Pro forma,as-adjusted, net tangible book value (deficit) per share after this offering | $ | |||
Dilution per share to investors in this offering | $ | |||
This table does not take into account further dilution to new investors that could occur upon the exercise of the warrants offered hereby or outstanding options and warrants having a per share exercise price less than the public offering price per common unit in this offering. To the extent that outstanding options or warrants are exercised, or restricted stock units vest and settle, investors purchasing our common stock will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.
The number of shares of our common stock shown above to be outstanding immediately before and after this offering is based on 8,170,910 shares outstanding as of March 31, 2018, and excludes, as of such date:
Overview
We are a fabless semiconductor company focused on the development and sale of integrated circuits, or ICs, for the high-speed cloud networking, communications, security appliance, video, monitor and test, data center and computing markets. Our solutions delivertime-to-market, performance, power, area and economic benefits for system original equipment manufacturers, or OEMs. Our primary product line is marketed under the Bandwidth Engine and Programmable Search Engine names and marks, and these IC products 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. Further performance benefits can be achieved to offload statistical, search or other custom functions using our optional integrated logic and processor elements. As data rates and the amount of high-speed processing increase, critical memory access bottlenecks occur. Our Bandwidth Engine, or BE, and Programmable Search Engine, or PSE, ICs drastically increase memory accesses per second, removing these bottlenecks. In addition, the serial interface and high-memory capacity reduce the board footprint, number of pins and complexity, while using less power.
In April 2017, we implemented restructuring initiatives to effect a reduction in our workforce and associated operating expenses, net loss and cash burn. Under these initiatives, we significantly reduced our headcount, closed international sales offices and relocated and downsized our corporate headquarters. We are primarily focusing our resources on producing and selling our existing products, and have substantially curtailed new product development. Despite the reduction in new product development, we believe our current product portfolio and roadmap position us for future growth and profitability. We will continue to seek opportunities to sell existing products, license our technology and obtain third-party funding for new product development efforts. Our future success and ability to achieve and maintain profitability are dependent on the marketing and sales of our IC products into cloud networking, communications, security appliances, monitoring and test, data center, video, and other markets requiring high-bandwidth memory access.
Industry Background
The amount of data and the number of users and devices is growing exponentially, driven primarily by commercial and consumer cloud applications, video services, high speed mobile networks, Internet of Things, or IoT, and many other cloud applications. In order to meet these demands, the new cloud infrastructure; including the backbone, edge, access network and data centers must scale in both speed and intelligence to handle real-time security, bandwidth allocation, and service-level expectations. In addition, workloads or applications delivered at a massive scale from the cloud require flexible, efficient data and computing transmission to optimize resources to enable these applications and lower the overall cost, size and power of the data center. These increased demands strain communication between onboard IC devices, limiting the data throughput in network switches and routers and the network backbone.
To meet these demands, carrier and enterprise networks are merging with the cloud and are undergoing significant changes and, most significantly, are migrating to packet-based Ethernet networks that enable higher throughput, lower cost and uniform technology across access, core and metro network infrastructure. These networks are now being designed to deliver voice, video and high-speed Internet services on one converged, efficient and flexible network. These trends require networking systems, especially the high-speed switches and routers that primarily comprise these networks, to comply with evolving market requirements and be capable of providing new services and better quality of service while supporting new protocols and standards. To support these trends, traditional OEM network and telecommunications equipment manufacturers, such as Alcatel-Lucent (a subsidiary of Nokia Corporation), Cisco Systems, Inc., Tel. LM Ericsson, Fujitsu Ltd., Hitachi Ltd., Huawei Technologies, Juniper Networks, Inc., Nokia Corporation, and ZTE Corporation, as well as a new set ofwhite-box solutions from new vendors and cloud-service providers, must offer higher levels of packet forwarding rates, bandwidth density and be optimized to enable higher-density, lower power data path connectivity in the next generations of their networking systems.
Networking communications, security, video and computing systems throughout the cloud network must operate at higher speed and performance levels, and so require new generations of packet processors and improved memory subsystems to enable system performance. These systems and their component line cards generally need to support aggregate rates of 100 gigabits per second, or Gbps, and above to meet the continued growth in network traffic.
Cloud services have accelerated this transition with applications such as security. Data centers and access equipment that were previously aggregating slower traffic at rates of 1Gbps to 10Gbps, and 40Gbps, now are being designed to aggregate traffic at 100 Gbps, or more. The transition to 100 Gbps networks is underway, and the increase in data rates for these networks is expected to continue to grow rapidly over the coming years.
Several types of semiconductors are included on each line card, including one or more processors and multiple memory chips. These processors are complex ICs or IC chipsets that perform high-speed data or packet processing for functions, such as traffic routing, shaping, metering, billing, statistics, detection, steering, security, video processing, monitoring and workload acceleration. The line cards use various types of memory ICs to facilitate temporary packet storage and assist in the analysis and tracking of information embedded within the data flowing through the processors. After a packet enters the line card, a packet or data processor helps separate the packet into smaller pieces for rapid analysis. In a typical packet-based network for example, the data is broken up into the packet header, which contains vital information on packet destination and type, such as the Internet protocol address, and the payload, which contains the data being sent. Generally, the line card operations must occur at full data rates and typically require accessing memory ICs many times. Simultaneously, the packet’s payload, which may be substantially larger than the packet header, is also stored in memory ICs until processing is complete and the packet canre-combine and be sent to its next system destination. Within the line card, communication between the packet processor and memory ICs occurs through an interface consisting of combinations of physical pins on each type of chip. These pins are grouped together in a parallel or a serial architecture to form a pathway, called a bus, through which information is transferred from one IC to the next.
Today, the majority of physical buses that connect networking equipment and components use a parallel architecture to communicate between processors and memory ICs, which means information can travel only in one direction and in one instance at a time. As processing speeds increase, the number of pins required and the speed of the bus in a parallel architecture become a limitation on system performance and capability. In contrast, the number of connections is reduced substantially across fewer, higher-rate pins in a serial architecture, and data is transferred simultaneously in both directions. Data transfer rates are limited by the data access rates of the various ICs included on the line card, thus leading to bottlenecks when these ICs perform inadequately. In order to remove these bottlenecks and meet next-generation bandwidth requirements, the line card ICs need to support higher access rates enabled by internal memory or high-speed serial bus architectures and these more advanced interface protocols.
Most networking and communication systems sold and in operation today include line cards that process data at speeds ranging from 10 Gbps, to 100 Gbps, and support many aggregated slower ports. To accommodate the substantial and growing increase in demand for networking communications and applications, networking systems manufacturers are developing and bringing to market next-generation systems that run at aggregate speeds of 100 Gbps to 400 Gbps or more with developments underway to scale to thousands of Gbps, or terabits, per second. However, although processor performance in applications such as computing and networking has continued to double nearly every 18 months, or even sooner, the performance of memory technology has generally been able to double only once every 10 years. Existing memory IC solutions based on parallel interface architecture easily support speeds up to 40 Gbps, but are not optimal for meeting speeds of 100 Gbps and beyond due to system-level limitations for pin counts, power and performance. These networking and communications systems are generally comprised of a chassis populated by four to 16 line cards. Often, these systems are shipped to customers with only a portion of the line card slots populated, and the customer will add additional line cards subsequently to increase system performance, capacity and features.
Each line card requires a significant amount of memory to support its processing capabilities. Traditional external memory IC solutions currently used on line cards include both dynamic random access memory, or DRAM, and static random access memory, or SRAM. Line cards in networking systems use both specialized, high-performance DRAM ICs, such as reduced-latency DRAM, or RLDRAM,low-latency DRAM, or LLDRAM, and commodity DRAM, such as double data rate, or DDR. The latest DDR memory called high-bandwidth memory, or HBM, provides high bandwidth, but has fundamentally slow access time. For very high access, networking systems use higher-performance SRAM ICs such as quad data rate, or QDR SRAM. These memories are very fast, but are much smaller, more costly and burn more power than traditional DRAM. Substantially all of these traditional memory IC solutions use parallel interfaces, which are slower than serial interfaces, so we believe they will be increasingly challenged to meet the performance, pin count, area and power requirements as networking systems expand beyond 100 Gbps. The result is a gap between processor and memory performance. To meet the higher performance requirements being demanded by the industry, while using current components and architectural approaches, system designers must add more discrete memory ICs to the line cards and/or add more embedded memory on the packet processor. This results in higher cost and
power consumption, the use of more space on the line cards and additional communication interference between the ICs, which in turn results in additional bandwidth limitation problems. We believe our Bandwidth Engine family of products is well suited to address these challenges and replace these traditional memory solutions.
We have developed our ICs to synergistically address the need for high-speed data access and throughput currently confronting system designers. We expect our IC products to meet the increasing demands placed on conventional memory technology used on the line cards in high-speed systems. We believe that our products and technology are well positioned as replacements for existing IC solutions in order to meet the needs of a growing number of data processing applications with aggregate rates greater than 100 Gbps that require high bandwidth and high access rate to memory.
Our Approach
We have leveraged our proprietary intellectual property, or IP, to design our IC products to help networking OEMs address the growing bottlenecks in system performance. We have incorporated critical features into our product families to accomplish this objective.
On-Chip Acceleration
One significant performance bottleneck in any network line card is the need to transfer data between discrete ICs. Many of these data-transfer operations are iterative in nature, requiring subsequent,back-to-back accesses of the memory IC by the processor IC. Our Bandwidth Engine ICs include an arithmetic logic unit, or ALU, which enables the performance of mathematical operations on data. Moving certain processing functions from the processor IC to the Bandwidth Engine IC through the use of this embedded ALU, reduces the number of processing transactions and frees the processor IC to perform other important networking or micro-processing functions.
The PSE takes this concept one step further by incorporating integrated search-optimized processors. The processors can be programmed by the user to offload and accelerate standard and/or customized functions from the main processor thereby reducing memory transactions and data path complexity to provide improved performance and lower system latency.
High-Performance Interface
High-speed, efficient interfaces are critical building blocks to meet high data transfer rate requirements for communication between ICs on network line cards. We believe that current networking system requirements necessitate an industry transition from parallel to serial interface. As a result, semiconductor companies are increasingly turning to serial interface architectures to achieve needed system performance. For example, high-performance ICs that are sold into wide markets, such as field programmable gate arrays, or FPGAs, and network processing units, NPUs, are using serial interfaces to ensure they can compete with custom designed application specific ICs, or ASICs, by matching their performance. Using serial interfaces, IC developers also are able to reduce pin count (the wired electrical pins that connect an IC to the network line card on which it is mounted) on the IC. With reducing geometries, the size of most high-performance ICs is dictated by the number of pins required, rather than the amount of logic and memory embedded in the chip. As a result, using serial interface facilitates cost reduction and reduced system power consumption, while improving the performance of both the IC itself and the overall system. While serial interfaces provide significantly enhanced performance over parallel interfaces, SerDes interfaces traditionally have had higher power consumption, which is a challenge for IC designers. Our SerDes interfaces, however, are optimized to meet our customers’ signal integrity,low- power consumption and latency requirements.
We make our interface technologies compliant with industry standards so that they can interoperate with interfaces on existing ICs. In addition, we make them programmable to support multiple data rates, which allows for greater flexibility for the system designer, while lowering their development and validation costs. Interoperability reduces development time, thereby reducing the overall time to market of our customers’ systems.
GigaChip Interface Protocol
In addition to the physical characteristics of the serial interface, the protocol used to transmit data is also an important element that impacts speed and performance. To address this and complement our Bandwidth Engine devices, we have developed the GigaChip® Interface protocol, or GCI, which is an open-interface transport protocol optimized for efficientchip-to-chip communications. The GCI electrical interface is compatible with the current industry standard (Common Electrical Interface, release #11, orCEI-11G-SR and XFI) to simplify electrical interoperability between devices. GCI can enable highly efficient serialchip-to-chip communications, and its transport efficiency averages 90% for the data transfers it handles. GCI is included in our ICs and is offered to customers and prospective partners on terms intended to encourage widespread adoption.
High-Performance and High-Density Memory Architecture
The high-density of our proprietary1T-SRAM technologies stems from the use of a single-transistor, or 1T, which is similar to DRAM, with a storage cell for each bit of information. Embedded memory utilizing our1T-SRAM technologies is typically two to three times denser than thesix-transistor storage cells used by traditional SRAM, or6T-SRAM. Embedded memory utilizing our1T-SRAM technologies typically provides speeds essentially equal to or greater than the speeds of traditional SRAM and DRAM, particularly for larger memory sizes. Our1T-SRAM memory designs can sustain random access cycle times of less than three nanoseconds, significantly faster than DRAM technology. Embedded memory utilizing our1T-SRAM technologies can consume as little asone-half the active power and generate less heat than traditional SRAM when operating at the same speed. The1T-SRAM allows us to integrate more high-performance memory using less expensive processing technology, reduces system level heat dissipation and enables reliable operation using lower-cost packaging.
Our Strategy
Our primary business objective is to be a profitableIP-rich fabless semiconductor company offering ICs that deliver unparalleled memory bandwidth and access rate performance for high-performance data processing in cloud networking, security appliances, video, test and monitoring, and data center systems. The key components of our strategic plan include the following strategies:
Target Large and Growing Markets
Our initial strategy is to target the multi-billion-dollar networking telecommunications, security appliance and data center OEM equipment markets, and we have developed products to support the growth in 100 Gbps and higher networking speeds. We are currently supporting numerous customers, with whom we have achieved design wins. We continue to actively pursue additional design wins for the use of our ICs in our target markets. We believe our design wins represent the potential for significant future revenue growth. With limited history to date, however, we cannot estimate how much revenue each design win is likely to generate, or how much revenue all of these (and future design wins) are likely to generate. There is no assurance that these customer designs will be shipped in large volume by our customers to their customers, however.
Expand Adoption of the GigaChip Interface Protocol
We have provided our GCI interface protocol as an open industry standard that may be designed into other ICs in the system, as we believe this will further enable serial communication on network line cards and encourage adoption of our Bandwidth Engine IC products. A number of IC providers and partners have publicly announced their support of GCI and Bandwidth Engine, including the largest FPGA providers, Altera Corporation (a subsidiary of Intel Corporation), Xilinx, Inc., and EZchip Semiconductor Ltd. (a subsidiary of Mellanox Technologies Ltd.), with whom we work closely to support common customers. In addition, multiple networking systems companies, including actual and prospective customers, have adopted GCI.
Build Long-Term Relationships with FPGA Vendors and Suppliers of Data Processing Solutions
We believe that having long-term relationships with FPGA providers is critical to our success, as such relationships enable us to reduce ourtime-to-market, provide us with a competitive advantage and expand our target markets. A key consideration of network system designers is to demonstrate interoperability between our IC products and the data processing utilized in their systems. To obtain design wins, we must demonstrate this interoperability, and also show that our IC works optimally with the packet processor to achieve the performance requirements. In addition, our current strategy requires packet processor suppliers to adopt our GCI interface. To that end, we have been working closely with FPGA and application specific standard product providers, to enable interoperability between our Bandwidth Engine IC products and their high-performance products. To facilitate the acceptance of our Bandwidth Engine ICs, we have made available development and characterization kits for system designers to evaluate and develop code for next-generation networking systems. Our characterization kits are fully-functional hardware platforms that allow FPGA and ASIC providers, and their customers, to demonstrate interoperability of the Bandwidth Engine IC with the ASIC or FPGA the designers use within their networking systems.
Our Bandwidth Engine Products
The Bandwidth Engine is a memory-dominated IC that has been designed to be a high-performance companion IC to packet processors. While the Bandwidth Engine primarily functions as a memory device with a high-performance and high-efficiency interface, it also can accelerate certain processing operations by serving as aco-processor element. Our Bandwidth Engine ICs combine: (1) our proprietary high-density, high-speed, low latency embedded memory, (2) our high-speed serial interface technology, or SerDes, (3) an open-standard interface protocol and (4) intelligent access technology. We believe an IC combining our1T-SRAM memory and serial interface with logic and other intelligence functions provides a system-level solution and significantly improves overall system performance at lower cost, size and power consumption. Our Bandwidth Engine ICs can provide up to and over 4.5 billion memory accesses per second, which is more than twice the performance of current memory-based solutions. They also can enable system designers to significantly narrow the gap between processor and memory IC performance. Customers that design Bandwidth Engine ICs onto the line cards in their networking systems willre-architect their systems at the line-card level and use our product to replace traditional memory solutions. When compared with existing commercially available solutions, our Bandwidth Engine ICs may:
Our first-generation Bandwidth Engine IC products contain 576 megabytes, or MB, of memory and use a serial interface with up to 16 lanes operating at up to 10.3 Gbps per lane. We announced theend-of-life of these products and expect to complete fulfillment of last-time customer orders by March 31, 2019.
Our second-generation Bandwidth Engine IC products contain 576 MB of memory and use a SerDes interface with up to 16 lanes operating at up to 15 Gbps per lane. In addition to a speed improvement of up to 50% over our first-generation products, the architecture has enabled multiple family-member parts with added specialized features. We have been shipping our Bandwidth Engine 2 IC products since 2013 and expect these products to be our primary revenue source for the foreseeable future.
Our third-generation Bandwidth Engine IC products contain 1152 MB of memory and use a SerDes interface with up to 16 lanes operating at up to 30 Gbps per lane. Bandwidth Engine 3 targets support for packet-processing applications with up to five billion memory single word accesses per second, as well as burst mode to enable full duplex buffering up to 400 Gbps for ingress, egress and oversubscription applications. The devices provide benefits of size, power, pin count and cost savings to our customers. We do not anticipate significant revenues from these products until 2019 or later.
Programmable Search Engine (PSE)
We brought our PSE IC products to market in 2016 to further leverage our proven serial interface technology and high-density integrated memory with the processor engine architecture to enable high-speed customizable search, security, and data analysis functions for networking, security, and data center applications. Our PSE architecture features 32 search-optimized processor engines, data flow schedulers, and over a terabit of internal access bandwidth. The device leverages our GCI technology and high-density integrated memory (1152 Mb of1T-SRAM embedded memory).
IP Licensing and Distribution
Historically, we have offered our memory and interface technologies on a worldwide basis to semiconductor companies, electronic product manufacturers, foundries, intellectual property companies and design companies through product development, technology licensing and joint marketing relationships. We licensed our technology to semiconductor companies who incorporated our technology into ICs that they sold to their customers. As a result of the change in our corporate strategy, since 2012, our licensing activities have primarily been limited to collecting royalties on existing agreements, and we expect this trend to continue. Royalty and other revenue represented 12% of our total revenues for the quarter ended March 31, 2018. Royalty and other revenue generated from our existing agreements represented 11%, 24%, and 45% of our total revenue for the years ended December 31, 2017, 2016, and 2015, respectively. Licensing and royalty revenues have been declining since 2010, and we expect continued decline of royalty revenues in 2018.
Research and Development
Our ability to compete in the future depends on successfully improving our technology to meet the market’s increasing demand for higher performance and lower cost requirements. Development of our IC products requires specialized chip design and product engineers, as well as significant fabrication and testing costs, including mask costs, as we bring these products to market. During 2017, we substantially reduced our headcount, and have limited internal resources available for new IC product development, which will result in fewer product improvements and new developments. In the near term, our planned product roadmap will include software-based capabilities and features that leverage our existing base of IC products.
Sales and Marketing
We believe that systems OEMs typically prefer to extend the use of traditional memory solutions and their parallel interfaces, despite performance and costs challenges, and are reluctant to change their technology platforms and adopt new designs and technologies, such as serial interfaces, which are an integral part of our product solutions. Therefore, our principal selling and marketing activities to date have been focused on persuading these OEMs and key component specialists that our solutions provide critical performance advantages, as well as on securing design wins with them.
In addition to our direct sales personnel, we sell through sales representatives and distributors in the United States and Asia. We also have applications engineers who support our customer engagements and engage with the customers’ system architects and designers to propose and implement our IC and IP solutions, such as the GCI Interface, to address their systems challenges.
In the markets we serve, the time from initial customer engagement to design win to production volume shipments can range from 18 to 36 months. Networking, communications and security appliance systems can have a product life from a few years to over 10 years once a product like ours has been designed into the system.
Our revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the quarter ended March 31, 2018, Flextronics, which primarily purchases on behalf of Palo Alto Networks, Inc. and Nokia, formerly Alcatel-Lucent, Palo Alto Networks, Inc., and Clavis Company, our Japanese IC distributor, represented 34%, 24% and 17% of total revenue, respectively. For the year ended December 31, 2017, Flextronics, Clavis Company and Nokia, represented 46%, 17% and 11% of total revenue, respectively. For the year ended December 31, 2016, Alcatel-Lucent, Clavis Company and Taiwan Semiconductor Manufacturing Co., Ltd., or TSMC, represented 47%, 21% and 13% of total revenue, respectively.
Intellectual Property
We regard our patents, copyrights, trademarks, trade secrets and similar intellectual property as critical to our success, and rely on a combination of patent, trademark, copyright, and trade secret laws to protect our proprietary rights.
As of April 30, 2018, we held 71 U.S. and 42 foreign patents on various aspects of our technology, with expiration dates ranging from 2018 to 2035. We also held 10 pending patent applications in the U.S. and abroad. There can be no assurance that others will not independently develop or patent similar or competing technology or design around any patents that may be issued to us, or that we will be able to successfully enforce our patents against infringement by others.
The semiconductor industry is characterized by frequent litigation regarding patent and other intellectual property rights. Our licensees or we might, from time to time, receive notice of claims that we have infringed patents or other intellectual property rights owned by others. Our successful protection of our patents and other intellectual property rights and our ability to make, use, import, offer to sell, and sell products free from the intellectual property rights of others are subject to a number of factors, particularly those described under the, “Risk Factors” above.
Competition
The markets for our products are highly competitive. We believe that the principal competitive factors are:
We believe that our products compete favorably with respect to each of these criteria. Our proprietary1T-SRAM embedded memory and high-speed serial interface IP can provide our Bandwidth Engine ICs with a competitive advantage over alternative devices. Alternative solutions are either DRAM or SRAM-based and can support either the memory size or speed requirements of high-performance networking systems, but generally not both. DRAM solutions provide a significant amount of memory at competitive cost, but DRAM solutions do not have the required fast access and cycle times to enable high-performance. The DRAM solutions currently used in networking systems include RLDRAM from Micron Technology, Inc., or Micron, and Integrated Silicon Solutions, Inc., LLDRAM from Renesas, DDR from Samsung Electronics Co., Ltd., Micron and others, and HBM, which is stacked memory from Samsung Electronics Co. and SK Hynix. SRAM solutions can meet high-speed performance requirements, but often lack adequate memory size. The SRAM solutions currently used in networking systems primarily include QDR or similar SRAM products from Cypress Semiconductor Corporation and GSI Technology, Inc. Most of the currently available SRAM and DRAM solutions use a parallel, rather than a serial interface. To offset these drawbacks, system designers generally must use more discrete memory ICs, resulting in higher power consumption and greater utilization of space on the line card.
Our competitors include established semiconductor companies with significantly longer operating histories, greater name recognition and reputation, large customer bases, dedicated manufacturing facilities and greater financial, technical, sales and marketing resources. This may allow them to respond more quickly than us to new or emerging technologies or changes in customer requirements. Generally, customers prefer suppliers with greater financial resources than we have currently. Many of our competitors also have significant influence in the semiconductor industry. They may be able to introduce new technologies or devote greater resources to the development, marketing and sales of their products than we can. Furthermore, in the event of a manufacturing capacity shortage, these competitors may be able to manufacture products when we are unable to do so.
Our Bandwidth Engine ICs compete with embedded memory solutions, stand-alone memory ICs, including both DRAM and SRAM ICs, and ASICs designed by customersin-house to meet their system requirements. Our prospective customers may be unwilling to adopt anddesign-in our ICs due to the uncertainties and risks surrounding
designing a new IC into their systems and relying on a supplier that has limited history of manufacturing such ICs and limited financial resources. In addition, Bandwidth Engine ICs require the customer and its other IC suppliers to implement ourchip-to-chip communication protocol, the GCI interface. These parties may be unwilling to do this if they believe it could adversely impact their own future product developments or competitive advantages, or, if they believe it might complicate their development process or increase the cost of their products. To remain competitive, we believe we must provide unparalleled memory IC solutions with the highest bandwidth capability for our target markets, which solutions are engineered and built for high-reliability carrier and enterprise applications.
Manufacturing
We depend on third-party vendors to manufacture, package, assemble and test our IC products, as we do not own or operate a semiconductor fabrication, packaging or production testing facility for boards and system assembly. By outsourcing manufacturing, we can avoid the high cost associated with owning and operating our own facilities, allowing us to focus our efforts on the design and marketing of our products.
We perform an ongoing review of product manufacturing and testing processes. Our IC products are subjected to extensive testing to assess whether their performance meets design specifications. Our test vendors provide us with immediate test data and the ability to generate characterization reports that are made available to our customers. We have achieved ISO 9001:2015 certification, and all of our manufacturing vendors have also achieved ISO 9001 certification.
Employees
As of April 30, 2018, we had 23 employees all of whom are located in the United States, consisting of 14 in research and development and manufacturing operations and 9 in sales, general and administrative functions.
Available Information
We were founded in 1991, and reincorporated in Delaware in September 2000. Our website address is www.mosys.com. The information in our website is not incorporated by reference into this report. Through a link on the Investor section of our website, we make available our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission, or SEC. You can also read and obtain copies of any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1.800.SEC.0330. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table sets forth certain information as of May 15, 2018 concerning the ownership of our common stock by:
Beneficial ownership is determined in accordance withRule 13d-3 of the Exchange Act, and includes all shares over which the beneficial owner exercises voting or investment power. Shares that are issuable upon the exercise of options, warrants and other rights to acquire common stock that are presently exercisable or exercisable within 60 days of May 15, 2018 are reflected in a separate column in the table below. These shares are taken into account in the calculation of the total number of shares beneficially owned by a particular holder and the total number of shares outstanding for the purpose of calculating percentage ownership of the particular holder. We have relied on information supplied by our officers, directors and certain stockholders and on information contained in filings with the SEC. Except as otherwise indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The percentage of beneficial ownership is based on 8,170,910 shares of common stock outstanding as of May 15, 2018.
Unless otherwise stated, the business address of each of our directors and named executive officers listed in the table is 2309 Bering Drive, San Jose, California 95131.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned (Excluding Outstanding Options)(1) | Number of Shares Issuable on Exercise of Outstanding Options or Convertible Securities(2) | Percent of Class | |||||||||
Ingalls & Snyder LLC | — | (3) | 808,920 | (4) | 9.9 | |||||||
1325 Avenue of the Americas | ||||||||||||
New York, NY 10019 | ||||||||||||
Directors and Officers: | ||||||||||||
Leonard Perham | 176,853 | — | 2.2 | |||||||||
James Sullivan | 12,963 | 14,897 | * | |||||||||
John Monson | 10,309 | 13,103 | * | |||||||||
All current directors and executive officers as a group (6 persons) | 200,125 | 28,800 | 2.8 | |||||||||
General
The following description of our capital stock, warrants and provisions of our certificate of incorporation and bylaws is a summary only and not a complete description.
Our authorized capital stock consists of 120,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $0.01 per share
Common Stock
As of May 15, 2018, 8,170,910 shares of our common stock were outstanding and held of record by five stockholders. Each holder of our common stockCommon Stock is entitled to—
to:
| ● | one vote per share on all matters submitted to a vote of the stockholders; |
| ● | dividends as may be declared by our board of directors out of funds legally available for that purpose, subject to the rights of any preferred stock that may be outstanding; and |
| ● | his, her or its pro rata share in any distribution of our assets after payment or providing for the payment of liabilities and the liquidation preference of any outstanding preferred stock in the event of liquidation. |
Holders of common stockCommon Stock have no cumulative voting rights, redemption rights or preemptive rights to purchase or subscribe for any shares of our common stockCommon Stock or other securities. All of the outstanding shares of common stockCommon Stock are fully paid and nonassessable. The rights, preferences and privileges of holders of our common stockCommon Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred Stock
We have designated 20,000 shares of our preferred stock as Series AA preferred stock for issuance pursuant to the exercise of rights under our rights plan, none of which are outstanding. For more information on the rights plan, see the discussion below.
Our board of directors has the authority, subject to any limitations prescribed by Delaware law, to issue shares of preferred stock in one or more series and to fix and determine the relative rights and preferences of the shares constituting any series to be established, without any further vote or action by the stockholders. Any shares of our preferred stock so issued may have priority over our common stockCommon Stock with respect to dividend, liquidation and other rights.
Our board of directors may authorize the issuance of our preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock.Common Stock. Although the issuance of our preferred stock could provide us with flexibility in connection with possible acquisitions and other corporate purposes, under some circumstances, it could have the effect of delaying, deferring or preventing a change of control.
Outstanding Common
Series A Special Voting Preferred Stock
On December 15, 2021, we filed the Certificate of Designation of Series A Special Voting Preferred Stock Warrants
On July 6, 2017, we issued warrants to purchase 662,500 shares(the “Certificate of our common stock. The warrants have an exercise priceDesignation”) with the Secretary of $2.35 per share of our common stock, may be exercised from time to time beginning January 6, 2018 (the “Initial Exercise Date”), and at any time thereafter up to the date that is five years from the Initial Exercise Date, at which time any unexercised warrants will expire and cease to be exercisable.
The warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and by payment in full in immediately available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuanceState of the sharesState of common stock underlying the warrants under the Securities Act is not then effective or available, the holder may exercise the warrant
through a cashless exercise, in whole or in part, in which case the holder would receive upon such exercise the net number of shares of common stock determined accordingDelaware to the formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of a warrant. In lieu of fractional shares, we will either pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole share. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.
designate Series A holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or on election of the holder, 9.99%Special Voting Preferred Stock (the “Special Voting Share”) of the number of shares of our stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentageArrangement Agreement in order to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in such percentage shall not be effective until 61 days after such notice to us.
In the event of a fundamental transaction, as described in the warrants, which generally includes any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person,enable the holders of exchangeable shares to have their voting rights exercised. After the warrants will beclosing of the Arrangement, each exchangeable share has become 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 receive upon exercisevote, and by virtue of the warrantsshare terms relating to the kind and amount of securities, cash or other propertyexchangeable shares, to receive dividends that the holders would have received had they exercised the warrants immediately priorare economically equivalent to such fundamental transaction.
We filed a registration statement onForm S-1any dividends declared with respect to fulfill our obligation under the purchase agreement to provide for the resale by these investors of up to 662,500 shares of common stock issuable upon exerciseCommon Stock. The foregoing is only a brief description of the warrants,material terms of the Certificate of Designation and does not purport to be a complete description of the rights and obligations thereunder. Such description is qualified in its entirety by reference to the Certificate of Designation, which registration statement was declared effective byis attached to the Current Report on Form 8-K filed with the SEC on February 2, 2018. We agreed to use commercially reasonable efforts to keep such registration statement effective at all times until (a) the warrant shares are sold under such registration statement or pursuant to Rule 144 under the Securities Act, (b) the warrant shares may be sold without volume ormanner-of-sale restrictions pursuant to Rule 144 under the Securities Act,December 20, 2021. As of December 9, 2022, there was one Special Voting Share authorized and (c) the five-year anniversary of the Initial Exercise Date, whichever is the earliest to occur.outstanding.
Antitakeover Effects of Provisions of Our Certificate of Incorporation and Bylaws and of Delaware Law.Law
Certain provisions of our charter documents and Delaware law could have an anti-takeover effect and could delay, discourage or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might otherwise result in a premium being paid over the market price of our common stock.Common Stock.
Certificate of Incorporation and Bylaws.
Bylaws. Our certificate of incorporation provides that stockholders can take action only at a duly called annual or special meeting of the stockholders and not by written consent. At the same time, our bylaws provide that special meetings of stockholders may be called only by our chairman of the board, our chief executive officer, a majority of the total number of authorized directors or any individual holder of 25% of the outstanding shares of common stock.Common Stock. These provisions could delay consideration of a stockholder proposal until the next annual meeting. Our bylaws provide for an advance notice procedure for the nomination, other than by or at the direction of our board of directors, of candidates for election as directors, as well as for other stockholder proposals to be considered at annual meetings of stockholders. In addition, under our bylaws newly created directorships resulting from any increase in the number of directors or any vacancies in the board resulting from death, resignation, retirement, disqualification, removal from office or other cause during a director’s term in office can be filled by the vote of the remaining directors in office, and the board is expressly authorized to amend the bylaws without stockholder consent. These provisions may preclude a third party from removing incumbent directors and can control of our board of directors. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of our company.
Delaware Takeover Statute.
Anti-Takeover Statute. Section 203 of the Delaware General Corporation Law, or DGCL, generally prohibits a publicly-held Delaware corporation from engaging in an acquisition, asset sale or other transaction resulting in a financial benefit to any person who, together with affiliates and associates, owns, or within three years did own, 15.0% or more of a corporation’s voting stock. The prohibition continues for a period of three years after the date of the transaction in which the person becomes an owner of 15.0% or more of the corporation’s voting stock, unless the business combination is approved in a prescribed manner. The statute could prohibit, delay, defer or prevent a change in control with respect to our company.
Antitakeover Effects of Our Rights Plan
On November 10, 2010, we executed a rights agreement in connection with the declaration by our board of directors of a dividend of one preferred stock purchase right to be paid on November 10, 2010, referred to as the “record date,” for each share of our common stock issued and outstanding at the close of business on the record date. Each right entitles the registered holder to purchase oneone-thousandth of a share of our Series AA Preferred Stock, $0.01 par value per share, at a price of $48.00 per oneone-thousandth of a share of such Series AA Preferred Stock, subject to adjustment, including as a result of ourone-for-ten reverse stock split in February 2017 (which adjustment is not reflected here). Generally, the rights will not be exercisable until a third party acquires 15% of our common stock or commences or announces its intent to commence a tender offer for at least 15% of our common stock, other than holders of “grandfathered stock” as defined in the rights agreement.
Under the rights agreement, the firm of Ingalls & Snyder LLC, or Ingalls, and its managed account beneficial owners collectively will not trigger the rights as long as none of their shares are held for the purpose of acquiring control or effecting change or influence in control of us. This exclusion applies only to shares of common stock for which there is only shared dispositive power and Ingalls has onlynon-discretionary voting power.
The rights agreement could delay, deter or prevent an investor from acquiring us in a transaction that could otherwise result in our stockholders receiving a premium over the market price for their shares of common stock. The above discussion of the rights agreement is not complete, and we urge you to read the entire rights agreement and our certificate of incorporation, as amended, to see all of the terms and conditions applicable to the Series AA Preferred Stock and the rights to acquire shares of such stock. (See item (n) under “Information Incorporated by Reference.”)
Transfer Agent and RegistrarIndemnification
The transfer agent and registrar for our common stock is Equiniti Trust Company.
Nasdaq Capital Market Listing
Our common stock is listed on Nasdaq under the symbol “MOSY.”
DESCRIPTION OF SECURITIES WE ARE OFFERING
The following description summarizes the material terms and provisions of the warrants that we may offer under this prospectus and any related warrant agreements and warrant certificates.
We are offering up to (i) common units, each common unit consisting of one share of our common stock and one warrant to purchase shares of our common stock, and up to(ii) pre-funded units, eachpre-funded unit consisting of onepre-funded warrant to purchase one share of our common stock and one warrant to purchase shares of our common stock. The share of common stock and accompanying warrant included in each common unit will be issued separately, and thepre-funded warrant to purchase one share of common stock and the accompanying warrant included in eachpre-funded unit will be issued separately. Units will not be issued or certificated. We are also registering the shares of common stock included in the common units and the shares of common stock issuable from time to time upon exercise of thepre-funded warrants included inpre-funded units and warrants included in the common units and thepre-funded units offered hereby.
Common Stock
The material terms and provisions of our common stock and each other class of our securities which qualifies or limits our common stock are described under the caption “Description of Capital Stock” in this prospectus.
Warrants
The following summary of certain terms and provisions of the warrants included in the common units and thepre-funded units that are being offered hereby is not complete and is subject to, and qualified in its entirety by reference to the provisionscomplete text of any statutes referred to below and to the Restated Certificate of Incorporation and the Amended and Restated Bylaws of Peraso Inc., a Delaware corporation.
Section 145 of the warrants,DGCL provides that a corporation has the formpower to indemnify a director, officer, employee or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which willhe was or is a party or is threatened to be filed as an exhibitmade a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisionsbest interests of the formcorporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of warrant for a complete descriptionactions brought by or in the right of the termscorporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and conditionsonly to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the warrants.
Duration and Exercise Price
Each warrant included in the common units and thepre-funded units offered hereby will have an initial exercise price per whole share equal to $ . The warrants will be immediately exercisable and will expire on the ____ year anniversarycircumstances of the original issuance date.case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Our Certificate of Incorporation states that, to the fullest extent permitted by the DGCL as it may be amended, none of our directors shall be personally liable to us or to our stockholders for monetary damages for breach of fiduciary duty as a director. The exercise priceCertificate of Incorporation also states that we shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify and numberhold harmless all of our directors. To the extent permitted by applicable law, we are also authorized to provide indemnification of (and advancement of expenses to) agents (and any other persons to which Delaware law permits us to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory) with respect to actions for breach of duty to us, our stockholders, and others.
As permitted by our Certificate of Incorporation and the DGCL, our Bylaws provide that we shall indemnify our directors and officers against actions by third parties, and that we shall indemnify our directors, officers and employees against actions brought by or on behalf of the Company. The Bylaws also permit us to secure insurance on behalf of any officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability arising out of his or her actions in that capacity if he or she is serving at our request. We have obtained officer and director liability insurance with respect to liabilities arising out of various matters, including matters arising under the Securities Act.
We have entered into agreements with each of our directors that, among other things, indemnify them for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by them in any action or proceeding, including any action by us or in our right, arising out of the person’s services as a director or officer of ours or any other company or enterprise to which the person provides services at our request.
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 consolidated financial statements for the years ended December 31, 2021 or 2020.
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 payments related to these indemnification agreements.
SELLING STOCKHOLDER
The 3,675,000 shares of commonCommon stock being registered for resale hereby are issuable upon exercise is subjectof the Purchase Warrants that were issued to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price. The warrants will be issued separately from the common stock included in the common units, or thepre-funded warrants included in thepre-funded units,Armistice Capital Master Fund Ltd, also referred to herein as the case may be, and may be transferred separately immediately thereafter. A warrant to purchaseSelling Stockholder. For additional information regarding the issuance of those Purchase Warrants, see “Private Offering of Purchase Warrants” above. We are registering the shares of our common stock will be includedCommon Stock issuable upon exercise of the Purchase Warrants in each common unit orpre-funded unit purchased in this offering.
Exercisability
order to permit the Selling Stockholder to offer the shares for resale from time to time. The warrants will be exercisable, atSelling Stockholder has not had any material relationship with us within the optionpast three years.
The table below lists the Selling Stockholder and other information regarding the beneficial ownership of each holder, in whole or in part,the shares of Common Stock by delivering to us a duly executed exercise notice accompanied by payment in full forsuch Selling Stockholder. The second column lists the number of shares of our common stock purchased upon such exercise (except inCommon Stock beneficially owned by the case of a cashless exercise as discussed below). A holder (together withSelling Stockholder, based on its affiliates) may not exercise any portionownership of the warrant to the extent that the holder would own more than 4.99% (or, at the electionPurchase Warrants, as of a purchaser prior to issuanceDecember 9, 2022, assuming exercise of the warrant, 9.99%) ofPurchase Warrants held by such Selling Stockholder on that date, without regard to any limitations on exercises. The third column lists the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’s warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect toCommon Stock being offered by this prospectus by the exercise, as such percentage ownership is determined inSelling Stockholder.
In accordance with the terms of the warrants.
Cashless Exercise
If, at the time a holder exercises its warrants, a registration statement registeringrights agreement with the issuanceSelling Stockholder this prospectus generally covers the resale of the shares of common stock underlying the warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the netmaximum number of shares of common stockCommon Stock issuable upon exercise of the Purchase Warrants, determined accordingas if the outstanding Purchase Warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to a formula set forthadjustment as provided in the warrants.
Fractional Shares
No fractional shares of common stock will be issued uponregistration right agreement, without regard to any limitations on the exercise of the warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.
Transferability
Subject to applicable laws, a warrant may be transferred at the option of the holder upon surrender of the warrant to us together with the appropriate instruments of transfer.
Exchange Listing
We do not intend to list the warrants on any securities exchange or nationally recognized trading system.
Rights as a Stockholder
Except as otherwise provided in the warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.
Fundamental Transaction
In the event of a “fundamental transaction,” as defined in the warrant, and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction.
Pre-Funded Warrants
Purchase Warrants. The following summary of certain terms and provisions ofpre-funded warrants included in thepre-funded units that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions of thepre-funded warrant, the form of which will be filed as an exhibit to the registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form ofpre-funded warrant for a complete description of the terms and conditions of thepre-funded warrants.
Duration and Exercise Price
Eachpre-funded warrant will have an initial exercise price per share equal to $0.01. Thepre-funded warrants will be immediately exercisable and may be exercised at any time until thepre-funded warrants are exercised in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price. Thepre-funded warrants will be issued separately from the accompanying warrants included in thepre-funded units, and may be transferred separately immediately thereafter.
Exercisability
Thepre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of thepre-funded warrant to the extent that the holder would own more than 4.99% (or, at the election of a purchaser prior to issuance of the warrant, 9.99%) of the outstanding common stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to us, the holder may increase the amount of ownership of outstanding stock after exercising the holder’spre-funded warrants up to 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of thepre-funded warrants.
Cashless Exercise
If, at the time a holder exercises itspre-funded warrants, a registration statement registering the issuance of the shares of common stock underlying thepre-funded warrants under the Securities Act is not then effective or available for the issuance of such shares, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in thepre-funded warrants.
Transferability
Subject to applicable laws, apre-funded warrant may be transferred at the option of the holder upon surrender of thepre-funded warrant to us together with the appropriate instruments of transfer.
Fractional Shares
No fractional shares of common stock will be issued upon the exercise of thepre-funded warrants. Rather, the number of shares of common stock to be issued will, at our election, either be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the exercise price.
Trading Market
There is no trading market available for thepre-funded warrants on any securities exchange or nationally recognized trading system.
Rights as a Stockholder
Except as otherwise provided in thepre-funded warrants or by virtue of such holder’s ownership of shares of our common stock, the holders of thepre-funded warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise theirpre-funded warrants.
Fundamental Transaction
In the event of a “fundamental transaction,” as defined in thepre-funded warrant, and generally including any reorganization, recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common stock, the holders of the warrants will be entitled to receive upon exercise of thepre-funded warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised thepre-funded warrants immediately prior to such fundamental transaction.
Roth Capital Partners, LLC, which we refer to as “Roth Capital Partners” or the “placement agent,” has agreed to act as the placement agent in connection with this offering, subject to the terms and conditions of a placement agency agreement dated , 2018. The placement agent is not purchasing or selling any of the units offered by this prospectus, nor is the placement agent required to
arrange the purchase or sale of any specific number or dollar amount of the units. The placement agent has agreed to use reasonable best efforts to arrange forfourth column assumes the sale of all of the unitsshares offered hereby. Therefore, we may not sell the entire amount of the units offeredby each Selling Stockholder pursuant to this prospectus. The placement agent may engage one or moresub-agents or selected dealers in connection with this offering.
In connection with
Under the offering, we will be entering into a securities purchase agreement with each purchaser of not less than $ of common units or pre-funded units. This agreement includes representations and warranties by us and the purchaser. It also includes a covenant that for a period of 45 days after the closing dateterms of the salePurchase Warrants, the Selling Stockholder may not exercise the Purchase Warrants to the extent such exercise would cause the Selling Stockholder, together with its affiliates and attribution parties, to beneficially own a number of the units, we will not sell or issue securities consisting of Common Stock or Common Stock equivalents other than (a) pursuant to our equity compensation plans, (b) securities upon the exercise or exchange of or conversion of securities exercisable or exchangeable for or convertible into shares of Common Stock issued andwhich would exceed 4.99% of our then outstanding on the date of the securities purchase agreement, provided thatCommon Stock following such securities have not been amended since the date of the securities purchase agreement to increase the numberexercise, excluding for purposes of such securities or to decrease the exercise price, exchange price or conversion price of such securities (other than in connection with stock splits or combinations) or to extend the term of such securities, but this provision will not prohibit the issuance of securities in exchange for, or payment of, debt owed under the Notes, (c) unregistered securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, and (d) up to $ of units, includingdetermination shares of Common Stock pre-funded warrants,issuable upon exercise of such Purchase Warrants which have not been exercised. The number of shares in the second and common warrants issuedfourth columns do not reflect this limitation. The Selling Stockholder may sell all, some or none of their shares in this offering. See “Plan of Distribution.”
Selling Stockholder | Number of Shares of Common Stock Owned Prior to Offering | Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus | Number of Shares of Common Stock Owned After the Offering | |||||
| Armistice Capital Master Fund Ltd. (1) | 2,310,000 | 3,675,000 | 2,310,000 | |||||
(1) | The shares are directly held by Armistice and may be deemed to be indirectly beneficially owned by: (i) Armistice Capital, LLC (“Armistice Capital”), as the investment manager of Armistice and (ii) Steven Boyd, as the Managing Member of Armistice Capital. Armistice Capital and Steven Boyd disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. The number of shares beneficially owned includes (i) 1,150,000 shares of Common Stock and issuable upon the exercise of the Pre-Funded Warrants and (ii) 3,675,000 shares of Common Stock issuable upon the exercise of the Purchase Warrants, which will be exercisable beginning six months and one day from the date of the Purchase Agreement. Armistice is prohibited from exercising any portion of a warrant and that would result in Armistice owning a percentage of our outstanding Common Stock exceeding the ownership limitations contained within each instrument (9.99% and 4.99%, respectively) after giving effect to the issuance of Common Stock in connection with Armistice’s exercise. The shares owned before and after this offering assumes the exercise of all warrants held by Armistice, notwithstanding the existence of the beneficial ownership limitations described above. The address of Armistice Capital Master Fund Ltd. is c/o Armistice Capital, LLC, 510 Madison Avenue, 7th Floor, New York, NY 10022. |
PLAN OF DISTRIBUTION
The Selling Stockholder and any of its respective pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the Nasdaq or any other purchasers pursuant to the Prospectus concurrently with the closing of this offering at the common unit purchase pricestock exchange, market or pre-funded unit purchase price.
Only certain institutional investors purchasingtrading facility on which the securities offered hereby will execute a securities purchase agreement with us, providing such investors with certain representations, warranties and covenants from us, which representations, warranties and covenants will notare traded or in private transactions. These sales may be available to other investors who will not execute a securities purchase agreement in connection with the purchaseat fixed or negotiated prices. The Selling Stockholder may use any one or more of the securities offeredfollowing methods when selling securities:
| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| ● | an exchange distribution in accordance with the rules of the applicable exchange; |
| ● | privately negotiated transactions; |
| ● | settlement of short sales; |
| ● | in transactions through broker-dealers that agree with such Selling Stockholder to sell a specified number of such securities at a stipulated price per security; |
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
| ● | a combination of any such methods of sale; or |
| ● | any other method permitted pursuant to applicable law. |
The Selling Stockholder may also sell securities under Rule 144 or any other exemption from registration under the Securities Act, if available, rather than under this prospectus. Therefore, those investors shall rely solely on
Broker-dealers engaged by the Selling Stockholder may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholder (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this prospectus, in connectionthe case of an agency transaction not in excess of a customary brokerage commission in compliance with the purchase of securitiesFINRA Rule 2121; and in the offering.
We will deliver the securities being issued to the investors upon receiptcase of investor funds for the purchase of the securities offered pursuant to this prospectus. We expect to deliver the securities being offered pursuant to this prospectus ona principal transaction a markup or about , 2018.markdown in compliance with FINRA Rule 2121.
Commissions and Expenses
We have agreed to pay the placement agent an aggregate cash placement fee equal to 6% of the gross proceeds received at the closing from the sale of the units.
The following table showsper-unit and total cash placement agent’s fee we will pay to the placement agent inIn connection with the sale of the unitssecurities or interests therein, the Selling Stockholder may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Stockholder may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Stockholder may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus.
| ||||||||
| ||||||||
Because there is no minimum offering amount required as a conditionprospectus (as supplemented or amended to closingreflect such transaction).
The Selling Stockholder and any broker-dealers or agents that are involved in this offering,selling the actual aggregate cash placement fee, if any, is not presently determinable andsecurities may be substantially less thandeemed to be “underwriters” within the maximum amount set forth above. In addition, subject to FINRA Rule 5110(f)(2)(d)(i), we have agreed to reimburse the placement agent for reasonableout-of-pocket expenses up to a maximum of $80,000. We estimate that the total expensesmeaning of the offering payableSecurities Act in connection with such sales. In such event, any commissions received by us, excludingsuch broker-dealers or agents and any profit on the placement agent fees, will be approximately $ .
Determination of Offering Price
The public offering priceresale of the securities wepurchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The Selling Stockholder has informed us that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.
We are offering was negotiated betweenrequired to pay certain fees and expenses incurred by us and the investors, in consultation with the placement agent based on the trading of our common stock priorincident to the offering, among other things. Other factors considered in determining the public offering price of our common stock we are offering include the history and prospectsregistration of the Company, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering and such other factors as were deemed relevant.
Indemnification
securities. We have agreed to indemnify the placement agenteach Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
We have also agreed to contribute to paymentskeep this prospectus effective until the placement agentearlier of (i) the date on which the securities may be requiredresold by a Selling Stockholder without registration and without regard to make in respectany volume or manner-of-sale limitations by reason of such liabilities.
The placement agent may be deemedRule 144, without the requirement for us to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the shares sold by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to complyin compliance with the requirements of the Securities Act and the Exchange Act, including, without limitation,current public information under Rule 415(a)(4)144 under the Securities Act andor any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 10b-5144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and Regulation Mis complied with.
Under applicable rules and regulations under the Exchange Act. TheseAct, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholder will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of sharesthe common stock by the placement agent acting as principal. Under these rules and regulations, the placement agent may not engage in any stabilization activity in connection with our securities; and may not bid forSelling Stockholder or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
Electronic Distribution
This prospectus may be made available in electronic format on websites or through other online services maintained by the placement agent, or by an affiliate. Other than this prospectus in electronic format, the information on the placement agent’s website and any information contained in any other website maintained by the placement agent or by an affiliate is not partperson. We will make copies of this prospectus oravailable to the registration statementSelling Stockholder and have informed them of whichthe need to deliver a copy of this prospectus is a part, has not been approved and/to each purchaser at or endorsed by us orprior to the placement agent, and should not be relied upon by investors.
The foregoing does not purport to be a complete statementtime of the terms and conditionssale (including by compliance with Rule 172 under the Securities Act).
Company Standstill
From the date of the placement agency agreement orPurchase Agreement until 90 days after the securities purchase agreement, copies of which are incorporated by reference intoClosing Date, the registration statement of which this prospectus is a part. See “Where You Can Find More Information.”
Regulation M Restrictions
The placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11)provisions of the Securities Act, and any commissions received by it and any profit realized on the resale of anyPurchase Agreement generally prohibit us from issuing or agreeing to issue shares of Common Stock or the warrants sold by it while acting as a principal might be deemedcommon stock equivalents other than under equity compensation plans, outstanding rights to be underwriting discountsacquire Common Stock or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Securities Exchange Act of 1934, as amended,common stock equivalent, or the “Exchange Act,” including Rule 415(a)(4) under the Securities Act and Rule10b-5 and Regulation M promulgated under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares offered hereby by any placement agent acting as a principal. Under these rules and regulations, a placement agent:
Pursuant to the terms of the Purchase Agreement, we are also prohibited from (i) entering into an at-the-market, or purchase anyATM, offering, that is an offering of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until it has completed its participation in the distribution.
Passive Market Making
In connection with this offering, the placement agent may engage in passive market making transactions in our Common Stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation M promulgated under the Exchange Act during a period before the commencement of offers or sales of the units and extending through the completion of the distribution. A passive market maker must displayinto its bid at a price not in excess of the highest independent bid of that security. If all independent bids are lowered below the passive market maker’s bid, however, that bid must then be lowered when specified purchase limits are exceeded.
Lock-Up Agreements
We and each of our officers and directors have agreed not to offer, pledge, sell, contract to sell, grant any option or contract to purchase, purchase any option or contract to sell, or otherwise dispose of, directly or indirectly, any common stock or any securities convertible into, exercisable for, or exchangeable for common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock for a period of 90 days after the effective date of the registration statement of which this prospectus is a part without the prior written consent of Roth Capital Partners, except for sales of shares to satisfy tax withholding obligations upon settlement of restricted stock units outstanding as of the date of thelock-up agreement. This consent may be given at any time without public notice. Each officer and director shall be immediately and automatically released from all restrictions and obligations under the lock up agreement in the event that he or she ceases to be a director or officer of our company and has no further reporting obligations under Section 16 of the Exchange Act.
Other
From time to time, the placement agent and its affiliates may in the future provide various investment banking, financial advisory and other services to us and our affiliates for which services they may receive customary fees, but we have no present arrangements to do so. Subject to Regulation M and other applicable statutes and regulations, in the course of its businesses, the placement agent and its affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the placement agent and it may at any time hold long or short positions in such securities or loans.
Listing
Our common stock is listed on the Nasdaq Capital Market under the symbol “MOSY.” There is no establishedexisting trading market for the warrantsCommon Stock at a price or thepre-funded warrants offered by this prospectus, and we do not expect a marketprices related to develop. In addition, we do not intend to apply for listingthe then-market price of the warrants orCommon Stock, within six months after thepre-funded warrants offered by this prospectus on any securities exchange or recognized trading system.
Selling Restrictions
European Economic Area
This prospectus does not constitute an approved prospectus under Directive 2003/71/EC and no such prospectus is intended to be prepared and approved in connection with this offering. Accordingly, in relation to each Member State date of the European Economic Area which has implemented Directive 2003/71/EC (each, a “Relevant Member State”) an offerPurchase Agreement and (ii) issuing or agreeing to the public of anyissue shares of Common Stock or common stock whichequivalents that are variable until the subjectearlier of 12 months after the date of the offering contemplated by this prospectus may not be made in that Relevant Member State except that an offer toPurchase Agreement or the public in that Relevant Member State ofdate the investor no longer holds any shares of common stock may be made at any time under the following exemptions under the Prospectus Directive, if and to the extent that they have been implemented in that Relevant Member State:Pre-Funded Warrants or Purchase Warrants.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares of common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of common stock to be offered so as to enable an investor to decide to purchase any shares of common stock, as the expression may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (and any amendments thereto including the 2010 PD Amending Directive to the extent implemented in each Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
United Kingdom
This prospectus is not an approved prospectus for purposes of the UK Prospectus Rules, as implemented under the EU Prospectus Directive (2003/71/EC), and have not been approved under section 21 of the Financial Services and Markets Act 2000 (as amended) (the “FSMA”) by a person authorized under FSMA. The financial promotions contained in this prospectus is directed at, and this prospectus is only being distributed to (1) persons who receive this prospectus outside of the United Kingdom, and (2) persons in the United Kingdom who fall within the exemptions under articles 19 (investment professionals) and 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons together being referred to as “Relevant Persons”). This prospectus must not be acted upon or relied upon by any person who is not a Relevant Person. Any investment or investment activity to which this prospectus relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person that is not a Relevant Person.
The placement agent has represented, warranted and agreed that:
LEGAL MATTERS
The validity of the issuance of shares of common stockCommon Stock offered hereby will be passed upon for us by Pillsbury Winthrop Shaw Pittman LLP, Palo Alto, California. Ellenoff GrossmanMitchell Silberberg & Schole LLP, New York, New York is acting as counsel for the placement agent in connection with this offering.Knupp LLP.
EXPERTS
The
Our consolidated financial statements of MoSys, Inc. as of December 31, 2017 and 2016 and for each of the three years in the period ended December 31, 2017,2021 and 2020 incorporated in this prospectusRegistration Statement on Form S-1 by reference to the Annual Report onForm 10-K for the year ended December 31, 2017,2021, have been so incorporated in reliance on the report of BPM LLP,Weinberg & Company, P.A., an independent registered public accounting firm, given onas indicated in their report with respect thereto, and are included herein in reliance upon the authority of said firm as experts in auditing and accounting.accounting in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We were founded in 1991 and reincorporated in Delaware in September 2000. Our website address is www.mosys.com. The information in our website is not incorporated by reference into this report. Through a link on the Investor section of our website, we make available our annual reports onForm 10-K, quarterly reports onForm 10-Q, current reports onForm 8-K, and any amendments to those reportshave filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission, or SEC. You can also read and obtain copies of any materials we file with the SEC, atunder the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can obtain additional information aboutSecurities Act, a registration statement on Form S-1 relating to the operationsecurities offered hereby. This prospectus does not contain all of the Public Reference Roominformation set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to our company and the securities we are offering by callingthis prospectus you should refer to the registration statement, including the exhibits and schedules thereto. The SEC at 1.800.SEC.0330. In addition, the SECalso maintains a website (www.sec.gov)an Internet site that contains reports, proxy and information statements and other information regarding issuersregistrants that file electronically with the SEC. The SEC’s website address is http://www.sec.gov.
We file periodic reports, proxy statements and other information with the SEC including us.
Thisin accordance with requirements of the Exchange Act. These periodic reports, proxy statements and other information are available at the SEC’s website address referred to above. You may also access our reports and proxy statements free of charge at our website, www.peraso.com. The information contained on our website is not a prospectus and does not constitute a part of this prospectus. The prospectus included in this filing is part of a registration statement onForm S-1 that wefiled by us with the SEC. The full registration statement can be obtained from the SEC, as indicated above, or from us. You may request a copy of any of our periodic reports filed with the SEC at no cost, by writing or telephoning us at the following address:
Peraso Inc.
2309 Bering Dr.
San Jose, California 95131
Tel: (408) 418-7500
Attention: James Sullivan, Chief Financial Officer
You should rely only on the information contained in or incorporated by reference or provided in this prospectus. We have not authorized anyone else to provide you with different information. We are not making an offer of whichthese securities in any state where the offer is not permitted. You should not assume the information in this prospectus is a part, underaccurate as of any date other than the Securities Act, with respect todate on the sharesfront of common stock offered hereby. This prospectus omits some information contained in the registration statement in accordance with SEC rules and regulations. You should review the information and exhibits in the registration statement for further information about us and the securities being offered hereby. Statements in this prospectus concerning any document we filed as an exhibit to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by reference to the filings. You should review the complete document to evaluate these statements.prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to “incorporateincorporate by reference”reference the information we file with them,it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of the accompanying prospectus, and informationanother document that we file laterhave filed separately with the SEC will automatically update and supersede this information.SEC. We hereby incorporate by reference the following information or documents listed below:into this prospectus, except for information “furnished” under Item 2.02 or Item 7.01 of Form 8-K or other information “furnished” to the SEC which is not deemed filed and not incorporated in this prospectus:
| our Annual Report on Form10-K for the |
| our Definitive Proxy Statement on Schedule 14A relating to our 2022 Annual Meeting of Stockholders, filed with the SEC on November 30, 2022; |
| ● | our Quarterly |
| ● | the description of our Common Stock contained in the “Description of Securities” filed as |
In addition, all
Any information in any of the foregoing documents will automatically be deemed to be modified or superseded to the extent that information in this prospectus or in a later filed information contained indocument that is incorporated or deemed to be incorporated herein by reference modifies or replaces such information.
We also incorporate by reference any future filings (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and documentsexhibits filed on such form that are related to such items) made with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date of filing the registration statement that includes the accompanying prospectus and prior to the filingtermination of a post-effective amendment to the registration statement containingoffering of the accompanying prospectus, which indicates that all securities offered have been sold or which deregisters all ofmade by this prospectus. Information in such securities then remaining unsold, shall be deemed to be incorporated by referencefuture filings updates and supplements the information provided in this prospectus. Any statement contained herein orstatements in a document incorporated or deemed to be incorporated by reference herein shallany such future filings will automatically be deemed to be modified or superseded for purposes hereof to the extent that a statement contained herein ormodify and supersede any information in any other subsequentlydocument we previously filed document whichwith the SEC that is also incorporated or deemed to be incorporated herein modifiesby reference to the extent that statements in the later filed document modify or supersedesreplace such statement. Any such statement so modifiedearlier statements.
Upon written or superseded shall not be deemed, except as so modified or superseded,oral request, we will provide to constitute a part of this prospectus.
You may requestyou, without charge, a copy of these filings, at no cost,any or all of the documents that are incorporated by writing or telephoning us atreference into this prospectus but not delivered with the following address or telephone number:
MoSys,prospectus, including exhibits which are specifically incorporated by reference into such documents. Requests should be directed to: Peraso Inc.
2309 Bering Drive
San Jose, CA 95131
(408)418-7500
, Attention: James Sullivan, Chief Financial Officer, 2309 Bering Dr., San Jose, California 95131, Tel: (408) 418-7500.
In addition, you may obtain a copy of these filings from the SEC as described in the section entitled “Where You Can Find More Information.”
Up to Common Units (each Common Unit contains one Share of Common Stock and one Warrant to purchase Shares of Common Stock)
or
Upto Pre-Funded Units (eachPre-Funded Unit contains onePre-funded Warrant to purchase one Share of Common Stock and one Warrant to purchase Shares of Common Stock)
and
3,675,000 Shares of Common Stock Underlyingissuable upon exercise of the Purchase Warrants and
Shares of Common Stock Underlying thePre-funded Warrants
PROSPECTUS
Placement Agent
Roth Capital Partners
, 2018
_____________, 2022
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ItemITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated costsfees and expenses payable by the registrant in connection with the offeringregistration of the securities being registered.hereunder. All amounts are estimates except the SEC registration fee.
| Item | Amount to be paid | |||
| SEC registration fee | $ | 550.77 | ||
| Legal fees and expenses | $ | 10,000.00 | ||
| Accounting fees and expenses | $ | 5,000.00 | ||
| Miscellaneous fees and expenses | $ | 2,000.00 | ||
| Total | $ | 17,550.77 | ||
SEC registration fee | $ | 1,245 | ||
FINRA filing fee | $ | 2,000 | ||
Accounting fees and expenses | * | |||
Legal fees and expenses | * | |||
Printing and miscellaneous expenses | * | |||
|
| |||
Total | $3,245 | |||
|
|
ITEM 14. Indemnification of Directors and Officers.
The following summary is qualified in its entirety by reference to the complete text of any statutes referred to below and to the Restated Certificate of Incorporation and the Amended and Restated Bylaws of Peraso Inc., a Delaware corporation (the “Company”).
Section 145 of the Delaware General Corporation Law,DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the DGCL, authorizes a court to award,corporation, or a corporation’s boardperson serving at the request of directors to grant, indemnity to directorsthe corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and officersamounts paid in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act.
As permittedsettlement actually and reasonably incurred by the DGCL, our bylaws provideperson in connection with an action, suit or proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, wein the case of actions brought by or in the right of the corporation, no indemnification shall indemnify our directorsbe made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and officers,only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and may indemnify our employees andreasonably entitled to indemnity for such expenses which the Court of Chancery or such other agents,court shall deem proper.
The Company’s Certificate of Incorporation states that, to the fullest extent permitted by law.the DGCL as it may be amended, none of its directors shall be personally liable to the Company or to its stockholders for monetary damages for breach of fiduciary duty as a director. The bylawsCertificate of Incorporation also states that the Company shall, to the fullest extent permitted by Section 145 of the DGCL, indemnify and hold harmless all of its directors. To the extent permitted by applicable law, the Company is also authorized to provide indemnification of (and advancement of expenses to) agents (and any other persons to which Delaware law permits the Company to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory) with respect to actions for breach of duty to the Company, its stockholders, and others.
As permitted by the Company’s Certificate of Incorporation and the DGCL, the Company’s Bylaws provide that the Company shall indemnify its directors and officers against actions by third parties, and that the Company shall indemnify its directors, officers and employees against actions brought by or on behalf of the Company. The Bylaws also permit usthe Company to secure insurance on behalf of any officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability arising out of his or her actions in that capacity if he or she is serving at ourthe Company’s request. We haveThe Company has obtained officer and director liability insurance with respect to liabilities arising out of various matters, including matters arising under the Securities Act.
We have
The Company has entered into agreements with oureach of its directors and executive officers that, among other things, indemnify them for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by them in any action or proceeding, including any action by usthe Company or in ourthe Company’s right, arising out of the person’s services as a director or officer of oursthe Company or any other company or enterprise to which the person provides services at ourthe Company’s request.
II-1
ItemITEM 15. Recent Sales of Unregistered SecuritiesSecurities.
On July 6, 2017, we sold warrants to purchase an aggregate of 662,500
Set forth below is information regarding shares of our commoncapital stock issued by the Company since January 1, 2019 that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Also included is the consideration received by the Company for such shares and information relating to purchasersthe section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.
| 1. | On February 1, 2021, the Company issued 42,672 shares of Common Stock valued at $139,964 to the holder of the Senior Secured Convertible Notes due August 15, 2023 in settlement of the accrued interest for the six month period ended February 15, 2021. Such shares were issued in a private placement transaction that was exempt from the registration requirements under the Securities Act pursuant to Section 4(a)(2) of the Securities Act. |
| 2. | On December 17, 2021 (the “Closing Date”), pursuant to the terms and conditions of that certain Arrangement Agreement, dated September 14, 2021, as amended (the “Arrangement Agreement”), an aggregate of 9,295,097 exchangeable shares and 3,558,151 shares of Common Stock were issued to the former stockholders of Peraso Technologies Inc. (“Peraso”). Of such shares, pursuant to the terms of the Arrangement Agreement, the Company held in escrow an aggregate of 1,312,878 exchangeable shares and 502,567 shares of Common Stock (collectively, the “Earnout Shares”). The Earnout Shares are escrowed pursuant to the terms of an escrow agreement on a pro rata basis from the aggregate consideration received by the Peraso stockholders, subject to the offset by the Company for any losses in accordance with the Arrangement 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 Closing Date and prior to the third anniversary of the Closing Date 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. All and any voting rights and other stockholder rights, other than with respect to dividends and distributions, with respect to the Earnout Shares are suspended until the Earnout Shares are released from escrow. |
The issuance of (i) the shares of our common stock in a concurrent public offering of registeredCommon Stock to those Peraso stockholders that elected to receive or otherwise will receive shares of common stockCommon Stock in connection with the Arrangement Agreement and (ii) the exchangeable shares to those Peraso stockholders that elected to receive exchangeable shares in connection with the Arrangement Agreement were issued in reliance upon the exemption from registration provided by Section 3(a)(10) of the Securities Act pursuant to the approval of the terms and conditions of the issuance and exchange of such securities by the Ontario Superior Court of Justice (Commercial List) by the final order issued and entered onForm S-3. November 26, 2021.
| 3. | On November 28, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Armistice Capital Master Fund Ltd. (the “Purchaser”), pursuant to which the Company agreed to offer and sell to the Purchaser, in a registered direct offering, an aggregate of 1,300,000 shares (the “Shares”) of common stock, par value $0.001 per share (the “Common Stock”), at a negotiated purchase price of $1.00 per share. The Company also offered and sold to the Purchaser pre-funded warrants to purchase up to 1,150,000 shares of Common Stock (the “Pre-Funded Warrants”), in lieu of shares of Common Stock at the Purchaser’s election. Each Pre-Funded Warrant is exercisable for one share of Common Stock. The purchase price of each Pre-Funded Warrant was $0.99, and the exercise price of each Pre-Funded Warrant is $0.01 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. |
The warrantsShares, the Pre-Funded Warrants and the shares of our common stockCommon Stock issuable upon the exercise of the Pre-Funded Warrants (the “Pre-Funded Warrant Shares”) were offered by the Company pursuant to an effective shelf registration statement on Form S-3 (No. 333-258386), which was declared effective by the United States Securities and Exchange Commission (the “SEC”) on August 9, 2021 (the “Registration Statement”) and a corresponding prospectus supplement, dated November 28,2022.
In a concurrent private placement offering, the Company also issued to the Purchaser warrants (the “Purchase Warrants” and together with the Pre-Funded Warrants, the “Warrants”) to purchase up to 3,675,000 shares of Common Stock (the “Purchase Warrant Shares” and together with the Pre-Funded Warrant Shares, the “Warrant Shares”). The Purchase Warrants will be exercisable beginning six months and one day from the date of the Purchase Agreement (the “Initial Exercise Date”) at an exercise price of $1.36 per share and will expire on the five-year anniversary of the Initial Exercise Date.
The closing of the offering occurred on November 30, 2022. The Company received gross proceeds of approximately $2.45 million in connection with the offering, before deducting placement agent fees and related offering expenses.
The Purchase Warrants and the Purchase Warrant Shares were not registered under the Securities Act pursuant to the exemption provided in Section 4(a)(2) underof the Securities Act and Rule 506(b). Our total proceeds fromRegulation D promulgated thereunder, or in the sale were $2,252,500, less expensesevent of $113,822, and payments to the placement agent, Roth Capital Partners, LLC,an issuance of $160,150 for placement fees and reimbursement of selling commissions and expenses.
On August 23, 2016, we accepted for cancellation exchanged options to purchase an aggregate of 4,569,959 shares of common stock and issued from the Amended and Restated 2010 Equity Incentive Plan replacement options covering 3,340,273 shares of common stock. The exchange was effectedWarrant Shares on a cashless basis, pursuant to the exemption from registration provided underin Section 3(a)(9) of the Securities Act of 1933, as amended. The option exchange resulted in a net reduction in the number of shares underlying our outstanding derivative equity securities of 1,229,686.
On March 14, 2016, we entered into a 10% Senior Secured Convertible Note Purchase Agreement with the purchaser of $8,000,000 principal amount of 10% Senior Secured Convertible Notes due August 15, 2018, at par, in a private placement transaction effected pursuant to an exemption from the registration requirements under the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. Pursuant to an amendment to the NotesSecurites Act.
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ITEM 16. Exhibits and related documents effective February 18, 2018, the interest rate has been reduced to 8% and the maturity date of the Notes has been extended to August 15, 2019.Financial Statement Schedules.
(a) Exhibit Index
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Item 16.II-3
Reference is hereby made to the attached Exhibit Index, which is incorporated herein by reference.
| (1) | Incorporated by reference to the same-numbered exhibit to Form 8-K, filed by the Company on September 15, 2021 (Commission File No. 000-32929). |
| (2) | Incorporated by reference to Exhibit 2.1 to Form 8-K, filed by the Company on October 22, 2021 (Commission File No. 000-32929) |
| (3) | Incorporated by reference to Exhibit 3.6 to Form 8-K filed by the Company on November 12, 2010 (Commission File No. 000-32929) |
| (4) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed by the Company on February 14, 2017 (Commission File No. 000-32929). |
| (5) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed by the Company on August 27, 2019 (Commission File No. 000-32929). |
| (6) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed by the Company on December 20, 2021 (Commission File No. 000-32929). |
| (7) | Incorporated by reference to Exhibit 3.2 to Form 8-K filed by the Company on December 20, 2021 (Commission File No. 000-32929). |
| (8) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed by the Company on November 23, 2021 (Commission File No. 000-32929). |
| (9) | Incorporated by reference to Exhibit 4.1 to Form 10-K filed by the Company on March 31, 2022 (Commission File No. 000-32929). |
| (10) | Incorporated by reference to Exhibit 4.1 to Form 8-K filed by the Company on June 30, 2017 (Commission File No. 000-32929). |
| (11) | Incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Company on June 30, 2017 (Commission File No. 000-32929). |
| (12) | Incorporated by reference to Exhibit 4.6 to Form 8-K filed by the Company on October 3, 2018 (Commission File No. 000-32929). |
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| (13) | Incorporated by reference to Exhibit 4.6 to Form 10-K filed by the Company on March 31, 2022 (Commission File No. 000-32929). |
| (14) | Incorporated by reference to Exhibit 3.1 to Form 8-K filed by the Company on August 27, 2019 (Commission File No. 000-32929). |
| (15) | Incorporated by reference to Exhibit 4.2 to Form S-8 filed by the Company on January 7, 2022 (Commission File No. 333-262062). |
| (16) | Incorporated by reference to Exhibit 4.10 to the Company’s Registration Statement on Form S-8, filed July 28, 2010 (Commission File No. 333-168358). |
| (17) | Incorporated by reference to Exhibit 4.10 to the Company’s Current Report on Form S-8, filed on November 13, 2019 (Commission File No. 000-32929). |
| (18) | Incorporated by reference to Exhibit 10.23 to the Company’s Form 10-Q filed on August 8, 2013 (Commission File No. 000-32929). |
| (19) | Incorporated by reference to Exhibit 4.10 to the Company’s Current Report on Form S-8, filed November 13, 2019 (Commission File No. 000-32929). |
| (20) | Incorporated by reference to Exhibit 4.5 to the registration statement on Form S-8 filed by the Company on January 7, 2022 (Commission File No. 333-262062). |
| (21) | Incorporated by reference to Exhibit 4.1 to Form 8-K filed by the Company on November 30, 2022 (Commission File No. 000-32929). |
| (22) | Incorporated by reference to Exhibit 4.2 to Form 8-K filed by the Company on November 30, 2022 (Commission File No. 000-32929). |
| (23) | Incorporated by reference to Exhibit 10.26 to Form 10-K filed by the Company on March 17, 2008 (Commission File No. 000-32929). |
| (24) | Incorporated by reference to Exhibit 10.27 to Form 10-K filed by the Company on March 17, 2008 (Commission File No. 000-32929). |
| (25) | Incorporated by reference to Exhibit 4.10 to Form S-8 filed by the Company on July 28, 2010 (Commission File No. 333-168358). |
| (26) | Incorporated by reference to Exhibit 4.8 to Form S-8 filed by the Company on June 5, 2009 (Commission File No. 333-159753). |
| (27) | Incorporated by reference to Exhibit 10.19 to Form 10-K filed by the Company on March 15, 2012 (Commission File No. 000-32929). |
| (28) | Incorporated by reference to Exhibit 10.22 to Form 10-Q filed by the Company on August 9, 2012 (Commission File No. 000-32929). |
| (29) | Incorporated by reference to Exhibit 99.2 to Form 10-Q filed by the Company on November 14, 2017 (Commission File No. 000-32929). |
| (30) | Incorporated by reference to Exhibit 99 to Schedule TO filed by the Company on July 26, 2016 (Commission File No. 005-78033). |
| (31) | Incorporated by reference to Exhibit 10.28 to Form S-1/A filed by the Company on September 17, 2018 (Commission File No. 333-225193). |
| (32) | Incorporated by reference to Exhibit 10.26 to Form 8-K filed by the Company on October 3, 2018 (Commission File No. 000-32929). |
| (33) | Incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Company on April 17, 2020 (Commission File No. 000-32929). |
| (34) | Incorporated by reference to Exhibit 10.21 to Form 10-K filed by the Company on March 18, 2021 (Commission File No. 000-32929). |
| (35) | Incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Company on December 20, 2021 (Commission File No. 000-32929). |
| (36) | Incorporated by reference to Exhibit 10.2 to Form 8-K filed by the Company on December 20, 2021 (Commission File No. 000-32929). |
| (37) | Incorporated by reference to Exhibit 10.3 to Form 8-K filed by the Company on December 20, 2021 (Commission File No. 000-32929). |
| (38) | Incorporated by reference to Exhibit 10.1 to Form 10-Q filed by the Company on August 15, 2022 (Commission File No. 000-32929). |
| (39) | Incorporated by reference to Exhibit 10.2 to Form 10-Q filed by the Company on August 15, 2022 (Commission File No. 000-32929). |
| (40) | Incorporated by reference to Exhibit 10.3 to Form 10-Q filed by the Company on August 15, 2022 (Commission File No. 000-32929). |
| (41) | Incorporated by reference to Exhibit 10.1 to Form 10-Q filed by the Company on November 14, 2022 (Commission File No. 000-32929). |
| (42) | Incorporated by reference to Exhibit 10.1 to Form 8-K filed by the Company on November 30, 2022 (Commission File No. 000-32929). |
| (43) | Incorporated by reference to Exhibit 10.2 to Form 8-K filed by the Company on November 30, 2022 (Commission File No. 000-32929). |
| (44) | Incorporated by reference to Exhibit 21.1 to Form 10-K filed by the Company on March 31, 2022 (Commission File No. 000-32929). |
| + | Filed herewith. |
| * | Management contract, compensatory plan or arrangement. |
| ** | Certain schedules, exhibits and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish copies of such omitted materials supplementally upon request by the SEC. |
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ITEM 17. Undertakings.Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Sectionsection 10(a)(3) of the Securities Act of 1933.1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effectivepost- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement.registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.statement;
Provided, however, that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) above do not apply if the registration statement is onForm S-1,Form S-3,Form SF-3 orForm F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the CommissionSEC by the Registrantregistrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That for the purpose of determining any liability under the Securities Act of 1933, each such post- effectivepost-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and thethis offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, eachpurchaser:
(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) (§ 230.424(b)(3) of this chapter) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date itsuch form of prospectus is first used after effectiveness.effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use,effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use; oreffective date.
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(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
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Thesecurities, the undersigned registrantRegistrant undertakes that in a primary offering of securities of the undersigned registrantRegistrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrantRegistrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser. (b) The undersigned registrant hereby undertakes that, |
(6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof.
(7) The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration of the subscription period, to set forth the results of the subscription offer, the transactions by the underwriters during the subscription period, the amount of unsubscribed securities to be purchased by the underwriters, and the terms of any subsequent reoffering thereof. If any public offering by the underwriters is to be made on terms differing from those set forth on the cover page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
(8)(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrantRegistrant pursuant to the provisions described in Item 15 above,6 hereof, or otherwise, the registrantRegistrant has been advised that in the opinion of the Securities and Exchange CommissionSEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrantRegistrant of expenses incurred or paid by a director, officer or controlling person of the registrantRegistrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrantRegistrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
(9) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.II-7
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EXHIBIT INDEX
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Jose, State of California, on May 24, 2018.
December 15, 2022.
| PERASO INC. | |||
| By: | |||
| /s/ James | |||
| James | |||
POWER OF ATTORNEY
KNOW ALL PERSONSMEN BY THESE PRESENTS,PRESENT, that each person whose signature appears below hereby constitutes and appoints Leonard PerhamRonald Glibbery and James W. Sullivan and each one of them, acting individually andany of whom may act without the joinder of the other, as his or herattorney-in-fact, eachtrue and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Registration Statement (including post-effective amendments), to this registration statement, and to sign any registration statement for the same offering covered by this Registration Statementregistration statement that is to be effective uponon filing pursuant to Rule 462(b) promulgated under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of saidattorneys-in-fact and agents or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statementregistration statement has been signed below by the following persons in the capacities and on the dates indicated.
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| /s/ Ronald Glibbery | Chief Executive Officer | |||
| Ronald Glibbery | (principal executive officer) | |||
| /s/ James
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/s/ Daniel Lewis
| Director | |||
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| /s/ Ian McWalter | Director | December 15, 2022 | ||
| Ian McWalter | ||||
| /s/ Andreas Melder | Director | December 15, 2022 | ||
| Andreas Melder | ||||
| /s/ Robert Y. Newell | Director | December 15, 2022 | ||
| Robert Y. Newell | ||||
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