NASDAQ: PRSO

—

—

Issuable shares, 137 and 917 shares at December 31, 2025 and 2024, respectively
162
1,193

Additional paid-in capital
186,338
179,390

Accumulated deficit
(181,873)
(177,120)

Total stockholders’ equity
4,636
3,466

Total liabilities and stockholders’ equity
$6,079
$7,206

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

F-4

PERASO INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended

December 31,

2025
2024

Net revenue

Product
$11,845
$14,248

Royalty and other
348
325

Total net revenue
12,193
14,573

Cost of net revenue
5,126
7,040

Gross profit
7,067
7,533

Operating expenses

Research and development
6,245
9,232

Selling, general and administrative
5,805
8,673

Severance and software license obligations
(223)
2,063

Total operating expenses
11,827
19,968

Loss from operations
(4,760)
(12,435)

Interest expense
(1)
(10)

Change in fair value of warrant liabilities
31
1,693

Other income (expense), net
(23)
24

Net loss
$(4,753)
$(10,728)

Net loss per share

Basic and diluted
$(0.67)
$(3.57)

Shares used in computing net loss per share

Basic and diluted
7,064
3,002

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

F-5

PERASO INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
EQUITY

(In thousands)

Additional

Total

Common Stock
Issuable
Shares
Exchangeable
Shares
Paid-In
Accumulated
Stockholders’

Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Equity

Balance as of December 31, 2023
673
$1
—
$—
95
$—
$170,474
$(166,392)
$4,083

Shares issued for reverse stock split
51
—
—
—
—
—
—
—
—

Exchange of exchangeable shares
35
—
—
—
(35)
—
—
—
—

Issuance of common stock under stock plans, net of taxes paid related to
net share settlements of restricted stock units
7
—
—
—
—
—
(6)
—
(6)

Sale of common stock and warrants, net
562
—
—
—
—
—
3,431
—
3,431

Issuance of common stock and warrants from warrant inducement offering,
net
1,329
—
917
1,193
—
—
1,389
—
2,582

Sale of common stock
100
—
—
—
—
—
127
—
127

Issuance of common stock upon exercise of pre-funded warrants
1,425
2
—
—
—
—
—
—
2

At-the market sales of stock, net
252
—
—
—
—
—
333
—
333

Shares issued for services
40
—
—
—
—
—
54
—
54

Stock-based compensation
—
—
—
—
—
—
3,588
—
3,588

Net loss
—
—
—
—
—
—
—
(10,728)
(10,728)

Balance as of December 31, 2024
4,474
3
917
1,193
60
—
179,390
(177,120)
3,466

At-the market sales of stock, net
3,714
4
—
—
—
—
4,347
—
4,351

Issuance of abeyance shares
1,618
2
(1,617)
(2,019)
—
—
2,017
—
—

Exchange of exchangeable shares
4
—
—
—
(4)
—
—
—
—

Issuance of common stock and warrants from warrant inducement offering,
net
115
—
837
988
—
—
(55)
—
933

Issuance of common stock under stock plans
40
—
—
—
—
—
28
—
28

Shares issued for services
90
—
—
—
—
—
90
—
90

Stock-based compensation
—
—
—
—
—
—
521
—
521

Net loss
—
—
—
—
—
—
—
(4,753)
(4,753)

Balance as of December 31, 2025
10,055
$9
137
$162
56
$—
$186,338
$(181,873)
$4,636

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

F-6

PERASO INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended

December 31,

2025
2024

Cash flows from operating activities:

Net loss
$(4,753)
$(10,728)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization
263
3,911

Stock-based compensation
521
3,588

Change in fair value of warrant liabilities
(31)
(1,693)

Inventory write downs
36
359

Shares issued for services
90
54

Allowance for bad debt
(21)
(2)

Accrued interest on debt obligation and other

—

(7)

Changes in assets and liabilities

Accounts receivable
(516)
51

Inventories
875
168

Prepaid expenses and other assets
15
432

Accounts payable
(357)
(1,412)

Right-of-use assets
124
348

Lease liabilities - operating
(76)
(260)

Accrued expenses and other
(1,447)
1,376

Deferred revenue
(333)
(764)

Net cash used in operating activities
(5,610)
(4,579)

Cash flows from investing activities:

Purchases of property and equipment
(107)

—

Net cash used in investing activities
(107)

—

Cash flows from financing activities:

Proceeds from at-the-market sales of stock, net
4,351
333

Proceeds from warrant inducement, net
933
2,582

Proceeds from sale of common stock and warrants, net
28
3,559

Repayment of financing lease
(53)
(128)

Taxes paid to net share settle equity awards

—

(6)

Net cash provided by financing activities
5,259
6,340

Net increase (decrease) in cash and cash equivalents
(458)
1,761

Cash and cash equivalents at beginning of year
3,344
1,583

Cash and cash equivalents at end of year
$2,886
$3,344

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

F-7

PERASO INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Summary of Significant
Accounting Policies

Peraso Inc., formerly known as MoSys, Inc. (the Company),
was incorporated in California in 1991 and reincorporated in 2000 in Delaware. The Company is a fabless semiconductor company specializing
in the development of millimeter wave (mmWave), which is generally described as the frequency band from 24 Gigahertz (GHz) to 300 GHz,
wireless technology. The Company derives revenue from selling its semiconductor devices and modules, performance of non-recurring engineering
services and licensing of its technology.

On September 14, 2021, the Company and its subsidiaries,
2864552 Ontario Inc. (Callco) and 2864555 Ontario Inc. (Canco), entered into an Arrangement Agreement (the Arrangement Agreement) with
Peraso Technologies Inc. (Peraso Tech), a corporation existing under the laws of the province of Ontario, to acquire all of the issued
and outstanding common shares of Peraso Tech (the Peraso Shares), including those Peraso Shares to be issued in connection with the conversion
or exchange of secured convertible debentures and common share purchase warrants of Peraso Tech, as applicable, by way of a statutory
plan of arrangement (the Arrangement) under the Business Corporations Act (Ontario). On December 17, 2021, following the satisfaction
of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed and, the Company changed its name to
“Peraso Inc.” and began trading on the Nasdaq Stock Market (the Nasdaq) under the symbol “PRSO.”

Liquidity and Going Concern

The Company incurred net losses of approximately $4.8 million and $10.7
million for the years ended December 31, 2025 and 2024, respectively, and had an accumulated deficit of approximately $181.9 million as
of December 31, 2025. These and prior year losses have resulted in significant negative cash flows and have required the Company to raise
substantial amounts of additional capital. To date, the Company has primarily financed its operations through multiple offerings of common
stock and warrants and the issuance of convertible notes and loans to investors and affiliates.

As disclosed in Note 10, in September 2025, the Company
completed a warrant inducement offering for net proceeds of approximately $0.9 million. Additionally, as disclosed in Note 9, on August
30, 2024, the Company entered into the Sales Agreement with Ladenburg, pursuant to which the Company may offer and sell, from time to
time at its sole discretion, shares of its common stock through Ladenburg as agent and/or principal (subject to the limitations of General
Instruction I.B.6 of Form S-3) through an at-the-market program. During the year ended December 31, 2025, the Company sold 3,713,939 shares
of common stock for net proceeds of $4.4 million pursuant to the Sales Agreement.

The Company expects to continue to incur operating
losses for the foreseeable future as it secures additional customers and continues to invest in the commercialization of its products.
The Company will need to increase revenues substantially beyond levels that it has 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. As a result
of the Company’s expected operating losses and cash burn for the foreseeable future, as well as recurring losses from operations,
management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern for a period
of at least 12 months beyond the filing of this Annual Report on Form 10-K. These consolidated financial statements do not include any
adjustments that might result from this uncertainty. There can be no assurance that the Company can raise additional capital, whether
in the form of debt or equity financing, that will be sufficient or available and, if available, that such capital will be offered on
terms and conditions acceptable to the Company. The Company’s primary focus is producing and selling its products. If the Company
is unsuccessful in these efforts, it will need to implement additional cost reduction strategies, which could further affect its near-
and long-term business plan. These efforts may include, but are not limited to, reducing headcount and curtailing business activities.

F-8

Basis of Presentation

The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated
in consolidation. The Company’s fiscal year ends on December 31 of each calendar year. Certain prior year amounts have been reclassified
for consistency with the current-period presentation. These reclassifications had no effect on the reported results of operations or
cash flows.

Reverse Stock Split

On December 15, 2023, the Company filed a certificate
of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect
a 1-for-40 reverse stock split of the Company’s shares of common stock. Further, on January 2, 2024, Canco filed a certificate
of amendment to its amended and restated certificate of incorporation under the Ontario Business Corporations Act to effect a 1-for-40
reverse stock split of the outstanding exchangeable shares. Such amendments and ratio were previously approved by the Company’s
stockholders and board of directors.

As a result of the reverse stock split, which was
effective for trading purposes on January 3, 2024, every 40 shares of the Company’s pre-reverse split outstanding common stock
and exchangeable shares were combined and reclassified into one share of common stock. Proportionate voting rights and other rights of
holders of common stock and exchangeable shares were not affected by the reverse stock split. Any fractional shares of common stock and
exchangeable shares resulting from the reverse stock split were rounded up to the nearest whole share. All stock options and restricted
stock units outstanding and common stock reserved for issuance under the Company’s equity incentive plans and warrants outstanding
immediately prior to the reverse stock split were adjusted by dividing the number of affected shares of common stock by 40 and, as applicable,
multiplying the exercise price by 40, as a result of the reverse stock split. All share and per-share amounts in these consolidated financial
statements have been restated to reflect the reverse stock split as if it had occurred at the beginning of the earliest period presented.

Risks and Uncertainties

The Company is subject to risks from, among other
things, competition associated with the industry in general, other risks associated with financing, liquidity requirements, the volatility
of public markets, rapidly changing customer requirements, limited operating history, tariffs, pandemics, wars and acts of terrorism.
The Company may be unable to access the capital markets, and additional capital may only be available to the Company on terms that could
be significantly detrimental to its existing stockholders and to its business.

Use of Estimates

The preparation of financial statements in accordance
with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses recognized
during the reported period. Material estimates may include assumptions made in determining reserves for uncollectible receivables, inventory
write-downs, impairment of long-term assets, purchase price allocations, valuation allowance on deferred tax assets, accruals for potential
liabilities and assumptions made in valuing equity instruments and warrant liabilities. Actual results could differ from those estimates.

Cash Equivalents and Investments

The Company may invest its excess cash in money market accounts, certificates
of deposit, corporate debt, government-sponsored enterprise bonds and municipal bonds and considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash equivalents. Investments with original maturities greater than
three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities
greater than one year are classified as long-term investments. Management generally determines the appropriate classification of securities
at the time of purchase. All securities are classified as available-for-sale. The Company’s available-for-sale short-term and long-term
investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income
(loss). Realized gains and losses and declines in the value judged to be other-than-temporary are included in the other income, net line
item in the consolidated statements of operations. The cost of securities sold is based on the specific identification method.

F-9

Fair Value Measurements

The Company measures the fair value of financial
instruments using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad
levels:

Level 1 —Inputs used to measure
fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting
date.

Level 2 —Pricing is provided
by third party sources of market information obtained through the Company’s investment advisors, rather than models. The Company
does not adjust for, or apply, any additional assumptions or estimates to the pricing information it receives from advisors. The Company’s
Level 2 securities include cash equivalents and available-for-sale securities, which consisted primarily of certificates of deposit,
corporate debt, and government agency and municipal debt securities from issuers with high-quality credit ratings. The Company’s
investment advisors obtain pricing data from independent sources, such as Standard & Poor’s, Bloomberg and Interactive
Data Corporation, and rely on comparable pricing of other securities because the Level 2 securities are not actively traded and
have fewer observable transactions. The Company considers this the most reliable information available for the valuation of the securities.

Level 3 —Unobservable inputs
that are supported by little or no market activity and reflect the use of significant management judgment are used to measure fair value.
These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant
assumptions. The determination of fair value for Level 3 investments and other financial instruments involves the most management
judgment and subjectivity.

The carrying amounts of financial assets
and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable and other payables, approximate their fair
values because of the short maturity of these instruments. The carrying values of lease obligations and long-term financing obligations
approximate their fair values because interest rates on these obligations are based on prevailing market interest rates. The Company
measures the fair value of its warrant liabilities using Level 3 inputs.

Allowance for Credit Losses

The Company establishes an allowance for credit losses to ensure that
its trade receivables balances are not overstated due to uncollectibility. The Company performs ongoing customer credit evaluations within
the context of the industry in which it operates and generally does not require collateral from its customers. A specific allowance of
up to 100% of the invoice value is provided for any problematic customer balances. Delinquent account balances are written off after management
has determined that the likelihood of collection is remote. The Company grants credit only to customers deemed creditworthy in the judgment
of management. The allowance for credit losses was not material as of December 31, 2025 and 2024.

F-10

Inventories

The Company values its inventories at the lower of
cost, which approximates actual cost on a first-in, first-out basis, or net realizable value. Costs of inventories primarily consisted
of material and third party assembly costs. The Company records write-downs for estimated obsolescence or unmarketable inventories based
upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those expected by management,
additional adjustments to inventory valuation may be required. Charges for obsolete and slow-moving inventories are recorded based upon
an analysis of specific identification of obsolete inventory items and quantification of slow moving inventory items. The Company recorded
write-downs of inventory of approximately $36,000 and $0.4 million during the years ended December 31, 2025 and 2024, respectively.

Property and Equipment

Property and equipment are originally recorded at
cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to six years.
Depreciation is recorded in cost of sales and operating expenses in the consolidated statements of operations. Leasehold improvements
and assets acquired through capital leases are amortized over the shorter of their estimated useful life or the lease term, and related
amortization is recorded in operating expenses in the consolidated statements of operations.

Intangible and Long-lived Assets

Intangible assets are recorded at cost and amortized
on a straight-line method over their estimated useful lives of three to ten years. Amortization of developed technology and other intangibles
directly related to the Company’s products is included in cost of net revenue, while amortization of customer relationships and
other intangibles not associated with the Company’s products is included in selling, general and administrative expenses in the
consolidated statements of operations.

The Company regularly reviews the carrying value
and estimated lives of its long-lived assets and finite-lived intangible assets to determine whether indicators of impairment may exist
which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s
estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as
the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would
be measured based on the excess of the carrying amount of the long-lived asset group over the asset’s fair value.

F-11

Purchased Intangible Assets

Intangible assets acquired in business combinations
are accounted for based on the fair value of assets purchased and are amortized over the period in which economic benefit is estimated
to be received. Intangible assets subject to amortization, including those acquired in business combinations were as follows (amounts
in thousands):

December 31, 2025

Gross

Net

Carrying
Accumulated
Other
Carrying

Amount
Amortization
Impairment
Amount

Developed technology
$5,726
$(5,726)
$
—

$
—

Customer relationships
2,556
(2,556)

—

—

Other
186
(74)
(106)
6

Total
$8,468
$(8,356)
$(106)
$6

December 31, 2024

Gross

Net

Carrying
Accumulated
Other
Carrying

Amount
Amortization
Impairment
Amount

Developed technology
$5,726
$(5,726)
$
—

$
—

Customer relationships
2,556
(2,556)

—

—

Other
186
(67)
(106)
13

Total
$8,468
$(8,349)
$(106)
$13

Developed technology primarily consisted of MoSys’
products that had reached technological feasibility and primarily related to its memory semiconductor products and technology. The value
of the developed technology was determined by discounting estimated net future cash flows of these products. Amortization related to
developed technology of $2.3 million for the year ended December 31, 2024, was included in cost of net revenue in the consolidated statements
of operations. There was no amortization related to developed technology for the year ended December 31, 2025, as the purchased intangible
assets were fully amortized as of December 31, 2024.

Customer relationships relate to the Company’s
ability to sell existing and future versions of its products to MoSys’ customers existing at the time of the arrangement. The fair
value of the customer relationships was determined by discounting estimated net future cash flows from the customer relationships. Amortization
related to customer relationships of $1.0 million for the year ended December 31, 2024, was included in selling, general and administrative
expense in the consolidated statements of operations. There was no amortization related to customer relationships for the year ended
December 31, 2025, as the purchased intangible assets were fully amortized as of December 31, 2024.

Leases

ASC 842, Leases (ASC 842), requires an entity
to recognize a right-of-use asset and a lease liability for all leases with terms longer than 12 months. The Company adopted
ASC 842 utilizing the modified retrospective transition method. The Company elected the practical expedient afforded in ASC 842 in which
the Company did not reassess whether any contracts that existed prior to adoption have or contain leases or the classification of its
existing leases.

Warrants

The Company
accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific
terms of the warrants and the guidance provided by the Financial Accounting Standards Board (FASB) in Accounting Standards Codification
(ASC) 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815). The assessment considers whether
the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet
all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own
stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s
control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted
at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Revenue Recognition

The Company recognizes revenue in accordance with
ASC Topic 606, Revenue from Contracts with Customers, and its amendments (ASC 606). As described below, the analysis of contracts
under ASC 606 supports the recognition of revenue at a point in time, resulting in revenue recognition timing that is materially consistent
with the Company’s historical practice of recognizing product revenue when title and risk of loss pass to the customer.

The Company generates revenue primarily from sales
of integrated circuits and module products, performance of engineering services and licensing of its intellectual property. Revenues
are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled
to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the
contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the
transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue
when or as a performance obligation is satisfied.

F-12

Product revenue

Revenue is recognized when performance obligations
under the terms of a contract with a customer are satisfied. The majority of the Company’s contracts have a single performance
obligation to transfer products. Accordingly, the Company recognizes revenue when title and risk of loss have been transferred to the
customer, generally at the time of shipment of products. Revenue is measured as the amount of consideration the Company expects to receive
in exchange for transferring products and is generally based upon a negotiated, formula, list or fixed price. The Company sells its products
both directly to customers and through distributors generally under agreements with payment terms typically 60 days or less.

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

Royalty and other

Historically, the Company’s licensing contracts for its memory
technology typically provided for royalties based on the licensee’s use of the Company’s memory technology in its currently
shipping commercial products. The Company estimates its royalty revenue in the calendar quarter in which the licensee uses the licensed
technology. Payments are received in the subsequent quarter. The Company also generates revenue from licensing its mmWave technology.
The Company recognizes license fees as revenue at the point of time when the control of the license has been transferred and the Company
has no continuing performance obligations to the customer.

Engineering services revenue

Engineering and development contracts with customers
generally contain a single performance obligation that is delivered over time. Revenue is recognized using an output method that is consistent
with the satisfaction of the performance obligation as a measure of progress.

Contract liabilities – deferred revenue

The Company’s contract liabilities consist
of advance customer payments and deferred revenue. The Company classifies advance customer payments and deferred revenue as current or
non-current based on the timing of when the Company expects to recognize revenue. As of December 31, 2025 and 2024, contract liabilities
were in a current position and included in deferred revenue.

During the year ended December 31, 2025, the Company
recognized approximately $333,400 of revenue that had been included in deferred revenue as of December 31, 2024.

See Note 7 for disaggregation of revenue by geography.

The Company does not have significant financing components,
as payments from customers are typically due within 60 days of invoicing, and the Company has elected the practical expedient to not
value financing components that are less than one year. Shipping and handling costs are generally incurred by the customer, and, therefore,
are not recorded as revenue.

Cost of Net Revenue

Cost of net revenue consists primarily of direct
and indirect costs of product sales, including amortization of intangible assets and depreciation of production-related fixed assets.

Advertising Costs

Advertising costs are expensed as incurred. Advertising
costs were not material for the years ended December 31, 2025 and 2024.

F-13

Research and Development

Engineering costs are recorded as research and development
expense in the period incurred.

Stock-Based Compensation

The Company periodically issues stock options and
restricted stock units (RSUs) to employees and non-employees. The Company accounts for such awards based on ASC 718, whereby the value
of the award is measured on the date of award and recognized as compensation expense on a straight-line basis over the vesting period.
The fair value of the Company’s stock options is estimated using the Black-Scholes-Merton Option Pricing (Black-Scholes) model,
which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the options, and future dividends.
Compensation expense is recorded based upon the value derived from the Black-Scholes model. The assumptions used in the Black-Scholes
model could materially affect compensation expense recorded in future periods. The fair value of restricted stock awards, restricted
stock units, and performance-based restricted stock units is based on the closing price of the Company’s common stock on the date
of grant. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for
the services.

Foreign Currency Transactions

The functional currency of the Company is the U.S.
dollar. All foreign currency transactions are initially measured and recorded in an entity’s functional currency using the exchange
rate on the date of the transaction. All monetary assets and liabilities are remeasured at the end of each reporting period using the
exchange rate at that date. All non-monetary assets and related expense, depreciation or amortization are not subsequently remeasured
and are measured using the historical exchange rate. An average exchange rate may be used to recognize income and expense items earned
or incurred evenly over a period. Foreign exchange gains and losses resulting from the settlement of such transactions are recognized
in the statement of operations, except for the gains and losses arising from the conversion of the carrying amount of the foreign currency
denominated convertible preferred shares into the functional currency that are presented as adjustment to the net loss to arrive at net
loss attributable to common stockholders.

Per-Share Amounts

Basic net loss per share is computed by dividing
net loss for the period by the weighted-average number of exchangeable shares and shares of common stock outstanding during the period.
In addition, the Company includes the number of issuable shares and shares of common stock issuable upon exercise of pre-funded warrants
as outstanding. Diluted net loss per share gives effect to all potentially dilutive exchangeable and common shares outstanding during
the period. Potentially dilutive common shares consist of incremental exchangeable shares and shares of common stock issuable upon the
achievement of escrow terms, exercise of stock options, vesting of stock awards and exercise of warrants.

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

December 31,

2025
2024

Escrow shares - exchangeable shares
33
33

Escrow shares - common stock
13
13

Options to purchase common stock
1,347
30

Unvested restricted common stock units

—

3

Warrants classified as equity
8,837
8,770

Warrants classified as liabilities
235
235

Total
10,465
9,084

F-14

Income Taxes

The Company determines deferred tax assets and liabilities
based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates
in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for
any deferred tax assets for which it is more likely than not that all or a portion of the deferred tax assets will not be realized.

The Company files U.S. federal and state and foreign
income tax returns in jurisdictions with varying statutes of limitations. The 2021 through 2025 tax years generally remain subject to
examination by U.S. federal and state tax authorities, and the 2022 through 2025 tax years generally remain subject to examination by
foreign tax authorities.

At December 31, 2025, the Company did not have any
material unrecognized tax benefits, except for the Sec. 382 limitation for loss carryforwards as discussed in Note 8, nor expect its unrecognized
tax benefits to change significantly over the next 12 months. The Company recognizes interest related to unrecognized tax benefits as
income tax expense and penalties related to unrecognized tax benefits as other income and expense. During the years ended December 31,
2025 and 2024, the Company did not recognize any interest or penalties related to unrecognized tax benefits.

Comprehensive loss

Comprehensive loss represents the changes in equity
of an enterprise, other than those resulting from stockholder transactions. Accordingly, comprehensive loss may include certain changes
in equity that are excluded from net loss. For the years ended December 31, 2025 and 2024, the Company’s comprehensive loss was
the same as its net loss.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement
– Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the
face of the income statement as well as disclosures about selling expenses. The standard is effective for the Company for annual periods
beginning January 1, 2027 and interim periods beginning January 1, 2028, with early adoption permitted. The standard may be applied either
prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods
presented in the financial statements. The Company is evaluating the impact that this ASU will have on the presentation of its consolidated
financial statements.

In December 2025, the FASB
issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (the “Update”), an amendment to improve
the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying
when that guidance is applicable. The amendments add to Topic 270 a principle that requires entities to disclose events since the end
of the last annual reporting period that have a material impact on the entity. The amendments in this Update clarify interim disclosure
requirements and the applicability of Topic 270 apply to all entities that provide interim financial statements and notes in accordance
with GAAP. In addition, the amendments in this Update result in a comprehensive list of interim disclosures that are required by GAAP
with the objective to provide clarity about the current requirements. The Update is effective for the Company for interim reporting periods
within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Update can be applied either prospectively
or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact that the Update
will have on the presentation of its consolidated financial statements.

Other recent authoritative guidance issued by the FASB (including technical
corrections to the ASCs), the American Institute of Certified Public Accountants, and the Securities and Exchange Commission (the SEC)
did not, or is not expected to, have a material impact on the Company’s consolidated financial statements and related disclosures.

F-15

Note 2. Fair Value of Financial Instruments

The following table represents the Company’s
assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 and the basis for that
measurement (in thousands):

December 31, 2025

Fair Value
Level 1
Level 2
Level 3

Assets:

Money market funds (1)
$ 1
$
—

$
—

$
—

Liabilities:

Warrant liability
$24
$
—

$
—

$24

December 31, 2024

Fair Value
Level 1
Level 2
Level 3

Assets:

Money market funds (1)
$ 1
$
—

$
—

$
—

Liabilities:

Warrant liability
$55
$
—

$
—

$55

(1)Included
in cash and cash equivalents

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

December 31, 2025

Unrealized
Unrealized
Fair

Cost
Gains
Losses
Value

Cash and cash equivalents
$2,886
$
—

$
—

$2,886

December 31, 2024

Unrealized
Unrealized
Fair

Cost
Gains
Losses
Value

Cash and cash equivalents
$3,344
$
—

$
—

$3,344

F-16

Note 3. Balance Sheet Detail

December 31,

2025
2024

(in thousands)

Inventories:

Raw materials
$342
$627

Work-in-process
361
473

Finished goods
465
979

$1,168
$2,079

Prepaid expenses and other:

Prepaid inventory and production costs
$31
$9

Prepaid insurance
36
41

Prepaid software
46
39

Other
82
99

$195
$188

Property and equipment, net:

Machinery and equipment
$4,946
$4,848

Computer equipment and software
413
377

Furniture and fixtures
92
93

Leasehold improvements
428
428

Total property and equipment
5,879
5,746

Less: Accumulated depreciation and amortization
(5,516)
(5,234)

$363
$512

December 31,

2025
2024

(in thousands)

Accrued Expenses & Other:

Accrued wages and employee benefits
$280
$457

Professional fees, legal and consulting
175
223

Software license obligations

—

1,118

Severance benefits

—

118

Warranty accrual
12
34

Other
73
37

$540
$1,987

F-17

Note 4. Severance and Software License Obligations

In November 2023, the Company implemented an employee
lay-off and terminated certain consulting positions (the Reductions) to reduce operating expenses and cash burn, as the Company prioritized
business activities and projects that it believes will have a higher return on investment. As part of the Reductions, the Company implemented
a temporary lay-off that impacted 16 employees (the Employees) of Peraso Tech. During 2024, the Company determined that it would not
recall any of the 11 Employees that remained on the Company’s payroll and commenced notifying the remaining Employees that their
employment would be terminated. As a result of the termination of the Employees’ employment, the Company recorded severance charges
of approximately $446,000 during the six months ended June 30, 2024. The severance liabilities were fully paid as of December 31, 2025.

As a result of the decision to not recall the Employees,
the Company determined that it was probable that a number of its non-cancelable licenses for computer-aided design software would not
be utilized during the remaining license terms. During the three months ended June 30, 2024, the Company accrued the value of the remaining
contractual liabilities of approximately $1,617,000. During the three months ended June 30, 2025, a licensor terminated one of the license
agreements and initiated a refund of approximately $56,300 for amounts previously paid by the Company. As a result, the Company reversed
approximately $222,600 of expense and approximately $166,300 of related contractual liabilities during the three months ended June 30,
2025. As of December 31, 2025, the remaining contractual liabilities had been fully paid.

Note 5. Commitments and Contingencies

Leases

The Company has operating leases for its facilities in Toronto and Markham,
Ontario, Canada and recognizes lease expense on a straight-line basis over the respective lease terms. The Company had an operating lease
for its corporate headquarters facility in San Jose, California that was not renewed when the lease term expired on January 14, 2025.

In May 2022, the Company entered into a lease for the facility in Markham
with a 60-month term, which commenced June 21, 2022. The initial right-of-use asset and corresponding liability of approximately CAD$1.0
million for the Markham facility lease were measured at the present value of the future minimum lease payments. The discount rate used
to measure the lease assets and liabilities was 8%. The Markham landlord also provided a lease incentive of approximately CAD$286,200
(the Incentive). In 2023, the Company received payment of CAD$143,100 from the Markham landlord of the first installment of the Incentive.
The remaining balance of the Incentive is paid to the Company in the form of an adjustment to rent during the last three months of each
calendar year during the remaining lease term. As of December 31, 2025, the pending Incentive to be received was CAD$35,775.

In December 2023, the Company renewed the Toronto office lease for a reduced
amount of square footage for a one-year term, which commenced January 1, 2024. Upon the renewal of the Toronto lease in December 2023,
the Company recognized a right-of-use asset of approximately $137,700. The discount rate used to measure the lease assets and liabilities
for the renewal was 8%. In December 2024, the Company renewed the Toronto office lease for a one-year term, which commenced January 1,
2025, and the Company ceased accounting for the lease under ASC 842.

On March 1, 2022, the Company entered into a 36-month finance lease agreement
for the lease of equipment resulting in the recognition of a right-of-use asset and lease liability of approximately $274,000. On March
1, 2025, the finance lease expired, and the Company took ownership of the equipment and the related right of use asset and liability
was fully amortized.

On November 1, 2022, the Company entered into a 36-month finance lease
agreement for the lease of equipment resulting in the recognition of a right-of-use asset of approximately $124,000 and lease liability
of approximately $117,000. The final invoice was dated August 15, 2025. The finance lease expired and the Company took ownership of the
equipment. The related right-of-use asset and liability was fully amortized on October 15, 2025.

F-18

The following table provides the details of right-of-use
assets and lease liabilities as of December 31, 2025 (in thousands):

Year Ended December 31,

2025
2024

Right-of-use assets:

Operating leases
$143
$213

Finance leases

—

54

Total right-of-use assets
$143
$267

Lease liabilities:

Operating leases
$192
$266

Finance leases

—

55

Total lease liabilities
$192
$321

Future minimum payments under the leases at December
31, 2025 are listed in the table below (in thousands):

Year ending December 31,

2026
$106

2027
99

Total future lease payments
205

Less: imputed interest
(13)

Present value of lease liabilities
$192

The following table provides the details of supplemental cash flow information
(in thousands):

Year Ended December 31,

2025
2024

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

Operating cash flows for leases
$161
$487

Rent expense was approximately $0.5 million and $0.7
million for the years ended December 31, 2025 and 2024, respectively. In addition to the minimum lease payments, the Company is responsible
for property taxes, insurance and certain other operating costs related to the leased facilities.

Indemnification

In the ordinary course of business, the Company enters
into contractual arrangements under which it may agree to indemnify the counterparties from any losses incurred relating to breach of
representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within
the particular 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. The Company has also entered into indemnification agreements with
its officers and directors. No material amounts were reflected in the Company’s consolidated financial statements for the years
ended December 31, 2025 and 2024 related to these indemnifications.

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

F-19

Product Warranties

The Company warrants certain of its products to be
free of defects generally for a period of three years. The Company estimates its warranty costs based on historical warranty claim experience
and includes such costs in cost of net revenues. Warranty costs were not material for the years ended December 31, 2025 and 2024.

Legal Matters

The Company is not a party to any legal proceeding
that the Company believes is likely to have a material adverse effect on its consolidated financial position or results of operations.
From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if
not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

Purchase Obligations

The Company’s primary purchase obligations
include non-cancelable purchase orders for inventory. At December 31, 2025, the Company had outstanding non-cancelable purchase orders
for inventory, primarily wafers and substrates, and related expenditures of approximately $2.7 million.

Note 6. Retirement Savings Plan

Effective January 1997, the Company adopted the Peraso
401(k) Plan (the Savings Plan), which qualifies as a thrift plan under Section 401(k) of the Internal Revenue Code. Full-time and part-time
employees who are at least 21 years of age are eligible to participate in the Savings Plan at the time of hire. Participants may contribute
up to 15% of their earnings to the Savings Plan. No matching contributions were made by the Company during the years ended December 31,
2025 and 2024.

Note 7. Business Segments, Concentration
of Credit Risk and Significant Customers

Segment Information

The Company determines its reporting units in accordance
with ASC No. 280, Segment Reporting (ASC 280), as amended by ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures, which the Company adopted effective December 31, 2024. Management evaluates a reporting unit by first
identifying its operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or
more components that constitute a business. If there are components within an operating segment that meet the definition of a business,
the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when
determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar
and, if so, the operating segments are aggregated.

The Company’s chief executive officer is the
chief operating decision maker (CODM), and the CODM evaluates financial performance and makes operating decisions about allocating resources
based on financial data presented on a consolidated basis, including consolidated net income (loss). Because the CODM evaluates financial
performance on a consolidated basis, the Company operates and manages its business as one reportable and operating segment as a fabless
semiconductor company focused on the development and sale of mmWave wireless technology, semiconductor devices and antenna modules, the
performance of non-recurring engineering, or NRE, services and the licensing of intellectual property. The measure of segment assets
is reported on the balance sheet as total consolidated assets.

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

F-20

Significant segment expenses include research and development expenditures,
salaries and benefits, stock-based compensation, and software license obligations. Operating expenses include all remaining costs necessary
to operate the Company’s business, which primarily include facilities, external professional services and other administrative expenses.
The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

Year Ended

December 31,

2025
2024

Total net revenue
$12,193
$14,573

Less:

Cost of net revenue
5,126
7,040

Research and development
2,171
3,303

Salaries
5,829
6,138

Stock-based compensation
522
3,588

Severance and software license obligations
(223)
2,063

Other operating expenses
3,528
4,876

Other income
(7)
(1,707)

Net loss
$(4,753)
$(10,728)

Concentrations

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

Year Ended

December 31,

2025
2024

Taiwan
$5,275
$238

Europe
3,132
995

North America
2,356
12,478

Hong Kong
14
474

Rest of world
1,416
388

Total net revenue
$12,193
$14,573

The following is a breakdown of product revenue by category (in thousands):

Years Ended December 31,

Product category
2025
2024

Memory ICs
$2,720
$12,914

mmWave ICs
6,734
302

mmWave modules
2,293
1,007

mmWave other products
98
25

$11,845
$14,248

F-21

The following table lists significant customers that represented more
than 10% of total revenue during each respective period:

Year Ended

December 31,

2025
2024

Customer A
29%

*

Customer B
13%
61%

Customer C
13%

*

Customer D
13%

*

Customer E
12%

*

Customer F

*

25%

*Represents
less than 10%

The following table lists significant customers that
represented more than 10% of the net accounts receivable balance at each respective balance sheet date:

Accounts Receivable

As of December 31,

2025
2024

Customer A
78%

*

Customer B
15%

*

Customer C

*

58%

Customer D

*

15%

Customer E

*

18%

*
Represents less than 10%

The following table lists significant vendors that
represented more than 10% of the total accounts payable balance at each respective balance sheet date:

Accounts Payable

As of December 31,

2025
2024

Vendor A
23%

*

Vendor B
15%

*

Vendor C
15%

*

Vendor D

*

16%

Vendor E

*

15%

*
Represents less than 10%

F-22

Note 8. Income Tax Provision

The income tax provision consisted of the following
(in thousands):

Year Ended

December 31,

2025
2024

Current portion:

Federal and state
$
—

$
—

Deferred portion:

Federal
3,903
(381)

State
946
83

Foreign
(35,136)
(34,793)

(30,287)
(35,091)

Change in valuation allowance
30,287
35,091

Provision for income taxes
$
—

$
—

Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes.

Significant components of the Company’s deferred
tax assets and liabilities were (in thousands):

Year Ended

December 31,

2025
2024

Deferred tax assets:

Federal, state and foreign loss carryforwards
$34,616
$34,231

Reserves, accruals and other
588
1,195

Depreciation and amortization
44
1,792

Deferred stock-based compensation
39
2,450

Capitalized research and development costs
464
595

Research and development credit carryforwards
11,170
11,165

Total deferred tax assets
46,921
51,428

Less: Valuation allowance
(46,921)
(51,428)

Net deferred tax assets, net
$
—

$
—

Utilization of the Company’s net operating
losses (NOLs) and tax credit carryforwards is subject to a substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code (IRC) and similar state provisions. Section 382 of the IRC (Section 382) imposes limitations on a corporation’s
ability to utilize its NOL and tax credit carryforwards, if it experiences an “ownership change.” In general terms, an ownership
change may result from transactions increasing the ownership percentage of certain stockholders in the stock of the corporation by more
than 50% over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation
under Section 382 determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable
long-term tax-exempt rate. While a formal study has not been performed, the Company believes that Section 382 ownership changes
occurred as a result of financing transaction in 2018 and the Arrangement. The Company believes the Section 382 limitations will result
in approximately 91% and 89% of the federal and state NOLs, respectively, expiring before they can be utilized, and approximately 100%
of the federal tax credit carryforwards expiring before they can be utilized.

F-23

As of December 31, 2025, the Company had NOLs of approximately
$214.1 million for federal income tax purposes, approximately $132.4 million for state income tax purposes and approximately $114.2 million
for foreign income tax purposes. Only approximately $20.3 million of the federal NOLs and $14.8 million of the state NOLs are expected
to be available before expiration due to the Section 382 limitation. These NOLs are available to reduce future taxable income and will
expire at various times from 2026 through 2045, except federal NOLs from 2018 and later which have no expiration date. As of December
31, 2025, the Company also had federal research and development tax credit carryforwards of approximately $8.0 million that will expire
at various times through 2042, California research and development credits of approximately $8.5 million, which do not have an expiration
date, and foreign research and development tax credit carryforwards of approximately $4.4 million that will expire at various times through
2040.

During the preparation of the 2025 consolidated financial
statements, the Company identified an adjustment related to its 2024 income tax accounting footnote. Accordingly, the Company has adjusted
the 2024 income tax footnote to reflect increases to both the deferred tax asset and the associated valuation allowance by approximately
$34.8 million. This adjustment had no impact on the Company’s consolidated balance sheet, statement of operations, or statement
of cash flows.

A reconciliation of income taxes provided at the federal statutory rate
to the actual income tax provision is as follows (in thousands):

Year Ended

December 31,

2025
2024

Income tax benefit computed at U.S. statutory rate
$(998)
$359

Foreign taxes in excess of U.S. rates
79

—

Amortization of intangible assets

—

(60)

Change in fair value of warrant liabilities
(6)
(356)

Change in state rate
846

—

Valuation allowance changes affecting tax provision
106
62

Other
(27)
(5)

Income tax provision
$
—

$
—

Note 9. Stockholders’ Equity

Exchangeable Shares and Preferred Stock

As discussed in Note 1, on December 17, 2021, following
the satisfaction of the closing conditions set forth in the Arrangement Agreement, the Arrangement was completed. Pursuant to the completion
of the Arrangement, each Peraso Share that was issued and outstanding immediately prior to December 17, 2021 was converted into either
newly issued shares of common stock of the Company or shares of Canco, which are exchangeable for shares of the Company’s common
stock (Exchangeable Shares), at the election of each former Peraso Tech stockholder. Of the shares issued to the holders of Peraso Tech
Shares, pursuant to the terms of the Agreement, the Company held in escrow an aggregate of 32,822 Exchangeable Shares and 12,564 shares
of common stock (collectively, the Escrow Shares). The Escrow Shares are escrowed pursuant to the terms of an escrow agreement on a pro
rata basis from the aggregate consideration received by the holders of Peraso Shares, subject to the offset by the Company for any losses
in accordance with the Agreement. Such Escrow Shares shall be released, subject to any offset claim, upon the satisfaction of the earlier
of: (a) any date following the first anniversary of December 17, 2021 and prior to December 17, 2024 where the volume weighted average
price of the common stock for any 20 trading days within a period of 30 consecutive trading days is at least $342.80 per share, subject
to further 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 Escrow Shares are suspended until the Escrow Shares are released from escrow.

F-24

The Exchangeable Share structure is commonly used
for cross-border transactions of this nature so as to provide non-tax-exempt Canadian shareholders with the same economic rights and
benefits as holders of the Company’s shares into which the Exchangeable Shares are exchangeable, while allowing those Canadian
shareholders to benefit from the tax-rollover available on the issuance of the Exchangeable Shares. In general terms, by choosing to
acquire Exchangeable Shares from Canco, such a former Peraso Tech shareholder was able to rely on a rollover rule in the Income Tax Act
(Canada) in order to defer any capital gain that he/she/it would have otherwise realized.

Callco was incorporated to exercise the call rights,
while Canco was incorporated to acquire the shares of Peraso Tech from Canadian shareholders that wished to receive Exchangeable Shares
as consideration, so it was a tax deferred transaction for such Canadian shareholders. The use of a separate entity, Callco, helps maximize
cross border paid-up capital, which represents the amount that can generally be distributed free of Canadian withholding tax. The call
rights also allow Callco to “purchase” the Exchangeable Shares rather than having them redeemed by Canco on a redemption
or retraction or in connection with a liquidity event, thus avoiding the adverse deemed dividend tax consequences to shareholders that
may arise from a redemption or retraction of Exchangeable Shares.

Holders of Exchangeable Shares have the right at
any time (the Retraction Right) to retract or redeem any or all of the Exchangeable Shares owned by them for an amount per share equal
to the market price of a share of the Company’s common stock plus the full amount of all declared and unpaid dividends on such
Exchangeable Share (the Exchangeable Share Purchase Price). The Exchangeable Share Purchase Price is payable only by the Company delivering
or causing to be delivered to the relevant holder one share of the Company’s common stock for each Exchangeable Share purchased
plus a cash amount equal to the amount of any accrued and unpaid dividends on such Exchangeable Share. The Company and Callco each have
an overriding right, in the event that a holder of Exchangeable Shares exercises its Retraction Right, to redeem from such holder all,
but not less than all, of the Exchangeable Shares tendered for redemption.

The Exchangeable Shares are subject to redemption
by the Company, Callco and Canco at the Exchangeable Share Purchase Price, on the “Redemption Date,” which date shall be
no earlier than the seventh anniversary of the date on which Exchangeable Shares are first issued, unless: (a) less than 10% of the aggregate
number of Exchangeable Shares issued remain outstanding; (b) there is a change in control of the Company (defined generally as (i) any
merger, amalgamation, arrangement, takeover bid or tender offer, material sale of shares or rights or interests that results in the holders
of outstanding voting securities of the Company directly or indirectly owning, or exercising control or direction over, voting securities
representing less than 50% of the total voting power of all of the voting securities of the surviving entity; or (ii) any sale or disposition
of all or substantially of the Company’s assets), and (c) upon the occurrence of certain other events. The Exchangeable Share Purchase
Price is payable only by the Company delivering or causing to be delivered to the relevant holder one share of the Company’s common
stock for each Exchangeable Share purchased plus a cash amount equal to the amount of any accrued and unpaid dividends on such Exchangeable
Share.

In the event of the liquidation, dissolution or winding-up
of Canco, holders of Exchangeable Shares have the right to receive in respect of each Exchangeable Share held by such holder, an amount
per share equal to the Exchangeable Share Purchase Price, which shall be satisfied in full by Canco by delivering to such holder one
Company Share, plus an amount equal to the Dividend Amount. The Company and Callco each have an overriding right to purchase from all
holders all but not less than all of the Exchangeable Shares upon the occurrence of such events.

In addition, the Company and Callco have the right
to purchase all outstanding Exchangeable Shares at the Exchangeable Share Purchase Price if there is a change of law that permits holders
of Exchangeable Shares to exchange their Exchangeable Shares for shares of common stock on a basis that will not require holders to recognize
any gain or loss or any actual or deemed dividend for Canadian tax purposes.

The holders of Exchangeable Shares have an “automatic
exchange right” in the event of any insolvency, liquidation, dissolution or winding-up or in general, related proceedings, of the
Company for an amount per share equal to the Exchangeable Share Purchase Price.

It is expected that Callco will exercise its call
rights, as that is more beneficial to the holders of the Exchangeable Shares. Once Callco acquires the Exchangeable Shares from a holder,
it (Callco and the Company) is obligated to deliver the Company shares to the holder. Callco discharges this obligation by arranging
for the Company to issue and deliver those shares to the holders on behalf of Callco. As consideration for satisfying the delivery obligation,
Callco would issue its own shares to the Company.

F-25

There are no cash redemption features, as all redemption
and exchange scenarios are payable in a share of the Company’s common stock. Neither Canco, Callco, or the Company assume any tax
liabilities of a former Peraso Tech shareholder who acquired Exchangeable Shares under the plan of arrangement. The purchase price computed
upon the exercise of rights pertaining to retraction, redemption, or liquidation, or otherwise giving rise to a purchase or cancellation
of an Exchangeable Share, will, in all cases, consist of a 1:1 exchange involving the Company’s common stock, regardless of the
market price of a share of the Company’s common stock.

In connection with the Arrangement, on December 15,
2021, the Company filed the Certificate of Designation of Series A Special Voting Preferred Stock (the Certificate) with the Secretary
of State of the State of Delaware to designate Series A Special Voting Preferred Stock (the Special Voting Share) in accordance with
the terms of the Arrangement Agreement in order to enable the holders of Exchangeable Shares to exercise their voting rights. The Special
Voting Share was issued to a third-party administrative agent (the Agent) solely to facilitate the exercise of rights by holders of Exchangeable
Shares. The rights of the Agent, as holder of the Special Voting Share, are limited to effecting the rights of the holders of the Exchangeable
Shares; the Special Voting Share does not confer any independent rights to the Agent. Under the Certificate, when all of the Exchangeable
Shares have been converted into shares of the Company’s common stock, the Special Voting Share shall be automatically cancelled
and shall not be reissued. Each Exchangeable Share is exchangeable for one share of common stock of the Company and while outstanding,
the Special Voting Share enables holders of Exchangeable Shares to cast votes on matters for which holders of the common stock are entitled
to vote, and by virtue of the share terms relating to the Exchangeable Shares, enable the Exchangeable Shares to receive dividends that
are economically equivalent to any dividends declared with respect to the shares of common stock. As the Special Voting Share does not
participate in dividends (only the Exchangeable Shares participate in dividends) and is not entitled to participate in the residual interest
of the Company, it is not classified as an equity instrument in the Company’s financial statements.

The Exchangeable Shares, which can be converted into
common stock at the option of the holder and have the same voting and dividend rights as common stock, are similar in substance to shares
of common stock. Further, Canco and Callco are non-substantive entities, which are looked through with the Exchangeable Shares being,
in substance, common stock of the Company. Therefore, the Exchangeable Shares have been included in the determination of outstanding
common stock. The Special Voting Share was issued to a third-party administrative agent (the Agent) solely to facilitate the exercise
of rights by holders of Exchangeable Shares. The rights of the Agent, as holder of the Special Voting Share, are limited to effecting
the rights of the holders of the Exchangeable Shares; the Special Voting Share does not confer any independent rights to the Agent. Under
the Certificate, when all of the Exchangeable Shares have been converted into shares of the Company’s common stock, the Special
Voting Share shall be automatically cancelled and shall not be reissued.

Reverse Stock Split

As disclosed in Note 1, effective January 2, 2024,
the Company effected a 1-for-40 reverse stock split of its outstanding common stock.

February 2024 Public Offering

On February 6, 2024, the Company entered into an
underwriting agreement (the Underwriting Agreement) with Ladenburg Thalmann & Co. Inc. (Ladenburg), as the sole underwriter, relating
to the issuance and sale in a public offering (the Offering) of: (i) 480,000 shares of common stock, (ii) pre-funded warrants to purchase
up to 1,424,760 shares of common stock, (iii) Series A warrants to purchase up to 3,809,520 shares of common stock, (iv) Series B warrants
to purchase up to 3,809,520 shares of common stock, and (v) up to 285,714 additional shares of common stock, Series A warrants to purchase
up to 571,428 shares of common stock and Series B warrants to purchase up to 571,428 shares of common stock that may be purchased pursuant
to a 45-day option to purchase additional securities granted to Ladenburg by the Company. Ladenburg partially exercised this option on
February 7, 2024 for 82,500 shares of common stock, Series A warrants to purchase up to 165,000 shares of common stock and Series B warrants
to purchase up to 165,000 shares of common stock. The combined public offering price of each share of common stock, together with the
accompanying Series A warrants and Series B warrants, was $2.10, less underwriting discounts and commissions. The combined public offering
price of each pre-funded warrant, together with the accompanying Series A warrants and Series B warrants, was $2.099, less underwriting
discounts and commissions. The Offering, including the additional shares of common stock, Series A warrants and Series B warrants sold
pursuant to the partial exercise of Ladenburg’s option, closed on February 8, 2024.

F-26

The net proceeds from the Offering, including the
additional shares of common stock, Series A warrants and Series B warrants sold pursuant to the partial exercise of Ladenburg’s
option, after deducting underwriting discounts and commissions and other estimated Offering expenses payable by the Company and excluding
any proceeds from the exercise of the Series A warrants, Series B warrants and pre-funded warrants, were approximately $3.4 million.

The Series A warrants have an exercise price of $2.25,
were immediately exercisable upon issuance, and expire on February 8, 2029. The Series B warrants had an original exercise price of $2.25
per share, were immediately exercisable upon issuance, and expired on November 8, 2024. The Series B warrants had an initial expiration
date of August 8, 2024, which was extended to November 8, 2024 pursuant to amendments to the Warrant Agency Agreement dated as of February
8, 2024 by and between the Company and the warrant agent, Equiniti Trust Company, LLC (the Warrant Agency Agreement) (see Note 10). The
pre-funded warrants have an exercise price of $0.001 per share, were exercisable immediately and may be exercised at any time until all
of the pre-funded warrants are exercised in full. As of December 31, 2024, the holders exercised all of the pre-funded warrants for 1,424,760
shares of common stock. The exercise price and number of shares of common stock issuable upon exercise of the warrants is subject to
appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the common stock and
the exercise price. Subject to limited exceptions, a holder may not exercise any portion of its warrants to the extent that the holder
would beneficially own more than 9.99% or 4.99% (at the election of the holder) of the Company’s outstanding common stock after
exercise.

On February 8, 2024, pursuant to the Underwriting
Agreement, the Company paid Ladenburg a cash fee of 9% of the gross proceeds received from the Offering and issued Ladenburg and its
designees warrants to purchase up to an aggregate of 139,108 shares of common stock at an exercise price of $2.625, subject to adjustments,
which were exercisable immediately and have substantially similar terms to the Series A warrants.

June 2024 Private Sale

In June 2024, the Company entered into a Stock Purchase
Agreement (the Purchase Agreement) with a member of the Company’s board of directors, pursuant to which the Company sold and the
board member purchased 100,000 shares (the Shares) of common stock resulting in net proceeds of $127,000. The Shares sold pursuant to
the Purchase Agreement were issued as restricted securities, as defined in Rule 144 of the Securities Act of 1933, as amended.

Shares Issued for Services

In January 2025, the Company issued 40,000 unregistered
shares of common stock with a fair value of approximately $40,000 to a service provider. In December 2025, the Company issued 50,000
unregistered shares of common stock with a fair value of approximately $50,000 to a service provider.

ATM Offering

On August 30, 2024, the Company entered into an At The Market Offering
Agreement (the Sales Agreement) with Ladenburg with respect to an “at the market” offering program, under which the Company
may, from time to time, in its sole discretion, issue and sell through Ladenburg, acting as agent or principal, shares of the Company’s
common stock. On November 21, 2025, the Company filed a prospectus supplement to increase the maximum number of shares of the Company’s
common stock up to an aggregate of $3,150,000 of shares, which did not include the shares having an aggregate gross sales price of approximately
$4,095,176 that had previously been sold under the Sales Agreement. The Sales Agreement provides that Ladenburg will be entitled to compensation
for its services equal to 3.0% of the gross proceeds from sales of any shares of common stock pursuant to the Sales Agreement in
addition to the reimbursement of certain expenses. The Company has no obligation to sell any shares pursuant to the Sales Agreement and
either the Company or Ladenburg may terminate the Sales Agreement in accordance with its terms. During the year ended December 31, 2024,
the Company sold 251,621 shares of common stock for net proceeds of approximately $336,000 pursuant to the Sales Agreement.
During the year ended December 31, 2025, the Company sold 3,713,939 shares of common stock for net proceeds of approximately
$4,351,100 pursuant to the Sales Agreement.

F-27

Note 10. Warrants

2024 Warrant Inducement Offering

On August 6, 2024, the Company extended the expiration
date of the Series B warrants issued in the Offering to October 7, 2024, by entering into an amendment to the Warrant Agency Agreement. On
October 3, 2024, the Company extended the expiration date of the Series B warrants to November 8, 2024, by entering into a further amendment
to the Warrant Agency Agreement.

On November 5, 2024, the Company entered into inducement offer letter
agreements (the Inducement Letters) with certain holders (the Holders) of existing Series B warrants (the Existing Warrants) to purchase
up to an aggregate of 2,246,030 shares of the Company’s common stock. Pursuant to the Inducement Letters, the Holders agreed to
exercise for cash their Existing Warrants at a reduced exercise price of $1.30 per share in consideration for the Company’s agreement
to issue in a private placement (i) new Series C common stock purchase warrants (the Series C Warrants) to purchase an aggregate of 2,246,030
shares of common stock and (ii) new Series D common stock purchase warrants (the Series D Warrants) to purchase an aggregate of 2,246,030
shares of common stock. The Series C Warrants have an exercise price of $1.61 per share, were exercisable upon issuance and originally
expired on the six-month anniversary of the date of issuance. The Series D Warrants have an exercise price of $1.61 per share, were exercisable
upon issuance and expire on the five-year anniversary of the date of issuance. The expiration date of the Series C Warrants was subsequently
extended pursuant to amendments, as described below.

The warrant inducement offering closed on November
6, 2024. Upon exercise of the Existing Warrants, the Company issued 1,328,650 shares of its common stock while the remaining 917,380 shares
(the Issuable Shares) remained under abeyance, pending issuance instructions from the Holders, pursuant to the terms of the Inducement
Letters. The Company accounted for the issuance of the: i) shares of its common stock, ii) the Series C Warrants, iii) the Series D Warrants,
and iv) the remaining Issuable Shares as a single equity transaction for gross proceeds of approximately $2.92 million. The fair value
of the unissued Issuable Shares at each balance sheet date has been presented separately as issuable shares on the consolidated balance
sheets and statements of stockholders’ equity. As of December 31, 2025, all of the Issuable Shares with a fair value of $1.2 million
had been issued and no shares remained under abeyance.

In relation to the above warrant inducement offering,
the Company engaged Ladenburg as placement agent and paid cash compensation of 9% of the gross proceeds. In addition, the Company issued
Ladenburg and its designees warrants to purchase up to an aggregate of 157,223 shares of common stock at an exercise price of $1.625,
which were exercisable upon issuance, expire on the five-year anniversary of the date of issuance, and other than the foregoing terms,
have substantially similar terms to the Series C Warrants.

Amendments to Series C Warrants

On May 2, 2025, the Company extended the expiration
date of its Series C Warrants to purchase an aggregate of 2,246,030 shares of common stock from May 6, 2025 to August 4, 2025, by entering
into an amendment with each holder of the Series C Warrants. On August 4, 2025, the Company extended the expiration date of its outstanding
Series C Warrants to purchase an aggregate of 2,246,030 shares of common stock from August 4, 2025 to December 5, 2025, by entering into
a second amendment with each holder of the Series C Warrants. On December 5, 2025, the Company extended the expiration date of its outstanding
Series C Warrants to purchase an aggregate of 2,246,030 shares of common stock from December 5, 2025 to January 7, 2026, by entering
into a third amendment with each holder of the Series C Warrants.

F-28

2025 Warrant Inducement Offering

On September 11, 2025, the Company entered into an
inducement offer letter agreement (the 2025 Inducement Letter) with a holder (the Series C Holder) of Series C Warrants to purchase up
to an aggregate of 952,380 shares of common stock. Pursuant to the 2025 Inducement Letter, the Series C Holder agreed to exercise for
cash its Series C Warrants at a reduced exercise price of $1.18 per share in consideration for the Company’s agreement to issue
in a private placement new Series E common stock purchase warrants (the Series E Warrants) to purchase an aggregate of 952,380 shares
of common stock. The Series E Warrants have an exercise price of $1.25 per share, will be exercisable upon the six-month anniversary
of the date of issuance and will have a term of exercise of 5.5 years from the initial exercise date.

The warrant inducement offering closed on September 12, 2025. Upon
exercise of the Series C Warrants, the Company issued 115,000 shares of common stock while the remaining 837,380 shares (the 2025 Issuable
Shares) remained under abeyance, pending issuance instructions from the Series C Holder, pursuant to the terms of the 2025 Inducement
Letter. The Company accounted for the issuance of the: i) shares of common stock, ii) the Series E Warrants and iii) the remaining 2025
Issuable Shares as a single equity transaction for gross proceeds of approximately $1.1 million. The fair value of the unissued 2025 Issuable
Shares has been presented separately as issuable shares on the consolidated balance sheets and statements of stockholders’ equity.
As of December 31, 2025, 700,000 shares of the Issuable Shares with a fair value of $0.8 million had been issued and 137,380 shares with
a fair value of $0.2 million remained under abeyance.

In relation to the above warrant inducement offering,
the Company engaged Ladenburg as placement agent and paid cash compensation of 9% of the gross proceeds. In addition, the Company issued
Ladenburg and its designees warrants to purchase up to an aggregate of 66,667 shares of common stock at an exercise price of $1.475,
which will be exercisable on the six-month anniversary of the date of issuance, expire on the five-year anniversary of the date of issuance,
and include piggyback registration rights that are triggered if there is not an effective registration statement covering the resale
of all of the shares issuable upon the exercise of the warrants while the warrants are outstanding. The remaining material terms of the
warrants issued to Ladenburg and its designees are substantially similar to those of the Series E Warrants.

Warrants Classified as Liabilities

The securities purchase agreements governing warrants
issued in registered direct offerings completed in November 2022 and June 2023 (collectively, the Purchase Warrants) provide for a value
calculation for such warrants using the Black-Scholes model in the event of certain fundamental transactions. The fair value calculation
provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision
introduces leverage to the holders of the Purchase Warrants that could result in a value that would be greater than the settlement amount
of a fixed-for-fixed option on the Company’s own equity shares. Therefore, pursuant to ASC 815, the Company has classified the
Purchase Warrants as liabilities in its consolidated balance sheet. The classification of the Purchase Warrants, including whether the
Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each reporting period with changes in the
fair value reported in other income (expense) in the consolidated statements of operations.

As of December 31, 2025, the Company had the following
liability-classified warrants outstanding (share amounts in thousands):

Number of

Shares Exercise Price Expiration Date

Warrants issued - November 2022 92 $40.00 May 29, 2028

Warrants issued - June 2023 143 $28.00 June 2, 2028

235

F-29

The following table sets forth changes in the fair
value of the Purchase Warrants outstanding (amounts in thousands):

Number of

warrants on

common shares
Amount

Balance as of December 31, 2023
235
$1,748

Change in fair value of warrants

—

(1,693)

Balance as of December 31, 2024
235
55

Change in fair value of warrants

—

(31)

Balance as of December 31, 2025
235
$24

The outstanding liability-classified warrants had
no intrinsic value at December 31, 2025.

The fair value of the Purchase Warrants at December
31, 2025 was determined using the Black-Scholes model with the assumptions in the following table. The table also includes the total
fair value determined as of December 31, 2025 based on these assumptions.

2022 Purchase

Warrant
2023 Purchase

Warrant

Expected term based on contractual term
2.4 years
2.4 years

Interest rate (risk-free rate):
3.71%
3.71%

Expected volatility
129%
129%

Expected dividend

—

—

Fair value of warrants (in thousands)
$11
$13

The fair value of the Purchase Warrants at December
31, 2024 was determined using the Black-Scholes model with the assumptions in the following table. The table also includes the total
fair value determined at December 31, 2024 based on these assumptions.

2022 Purchase

Warrant
2023 Purchase

Warrant

Expected term based on contractual term
3.4 years
3.4 years

Interest rate (risk-free rate):
4.38%
4.38%

Expected volatility
115%
117%

Expected dividend

—

—

Fair value of warrants (in thousands)
$25
$30

F-30

Warrants Classified as Equity

As of December 31, 2025, the Company had the following
equity-classified warrants outstanding (share amounts in thousands):

Warrant Type Number of Shares Exercise Price Expiration

Common stock warrants 7 $28.00 June 2, 2028

Series A warrants issued 3,975 $2.250 February 8, 2029

Series A warrants issued 139 $2.625 February 8, 2029

Series C warrants issued 2,246 $1.610 January 7, 2026

Series C warrants exercised (952) $1.610
—

Series C warrants issued 157 $1.625 November 6, 2029

Series D warrants issued 2,246 $1.610 November 6, 2029

Series E warrants issued 952 $1.250 September 12, 2031

Series E warrants issued 67 $1.475 September 12, 2030

Balance as of December 31, 2025 8,837

The outstanding equity-classified warrants had no intrinsic value at December
31, 2025.

Note 11. Stock-Based Compensation

Common Stock Equity Plans

In 2010, the Company adopted the 2010 Equity Incentive
Plan and later amended it in 2014, 2017 and 2018 (the Amended 2010 Plan). The Amended 2010 Plan was terminated in August 2019 and remains
in effect as to outstanding equity awards granted prior to the date of expiration. No new awards may be made under the Amended 2010 Plan.

In August 2019, the Company’s stockholders
approved the 2019 Stock Incentive Plan (the 2019 Plan) to replace the Amended 2010 Plan. The 2019 Plan authorizes the board of directors
or the compensation committee of the board of directors to grant a broad range of awards including stock options, stock appreciation
rights, restricted stock, performance-based awards, and restricted stock units. Under the 2019 Plan, 4,563 shares were initially reserved
for issuance. In November 2021, December 2024 and December 2025, the Company’s stockholders approved amendments increasing the
number of shares reserved for issuance under the 2019 Plan by 77,674, 1,500,000 and 1,000,000 shares, respectively.

Under the 2019 Plan, the term of all incentive stock
options granted to a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the
Company’s stock may not exceed five years. The exercise price of stock options granted under the 2019 Plan must be at least equal
to the fair market value of the shares on the date of grant. Generally, awards under the 2019 Plan will vest over a three to four-year
period, and options will have a term of 10 years from the date of grant. In addition, the 2019 Plan provides for automatic acceleration
of vesting for options granted to non-employee directors upon a change of control of the Company.

In December 2021, the Company assumed the Peraso
Technologies Inc. 2009 Share Option Plan (the 2009 Plan) and all outstanding options granted pursuant to the terms of the 2009 Plan.
Each outstanding, unexercised and unexpired option under the 2009 Plan, whether vested or unvested, was assumed by the Company and converted
into options to purchase shares of the Company’s common stock and became exercisable by the holder of such option in accordance
with its terms. No further awards will be made under the 2009 Plan.

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

F-31

Stock-Based Compensation Expense

The Company reflected compensation costs related to the vesting of
stock options of approximately $488,600 and $2.8 million during the years ended December 31, 2025 and 2024, respectively. At December
31, 2025, the unamortized compensation cost was approximately $0.6 million related to stock options and is expected to be recognized as
expense over a weighted average period of approximately 2.0 years. The Company reflected compensation costs of approximately $32,500 and
$0.8 million related to the vesting of restricted stock units during the years ended December 31, 2025 and 2024, respectively. The unamortized
compensation cost at December 31, 2025 was approximately $2,000 related to restricted stock units and is expected to be recognized as
expense over a weighted average period of less than 1.0 year. No stock options were granted or exercised during the year ended December
31, 2024.

Valuation Assumptions and Expense Information for Stock-Based Compensation

The fair value of the Company’s share-based
payment awards granted during the year ended December 31, 2025 was estimated on the grant dates using the Black-Scholes model with the
following assumptions:

Option Grants

Grant Date 02/11/25 08/07/25

Interest rate (risk-free rate) 4.34 % 3.79 %

Expected volatility 119 % 118 %

Expected term 4.38 years 4.75 years

Expected dividend 0 % 0 %

Fair value (in thousands) $ 832 $ 69

The risk-free interest rate was derived from the
U.S. Treasury Yield Curve Rates as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected
terms of the options. The expected volatility was based on the historical volatility of the Company’s stock price over the expected
term of the options. The expected term of options granted was derived from historical data based on employee exercises and post-vesting
employment termination behavior. A dividend yield of zero is applied because the Company has never paid dividends and has no intention
to pay dividends in the near future. The Company accounts for forfeitures as they occur.

Common Stock Options and Restricted Stock

The term of all incentive stock options granted to
a person who, at the time of grant, owns stock representing more than 10% of the voting power of all classes of the Company’s stock
may not exceed five years. The exercise price of stock options granted under the 2019 Plan must be at least equal to the fair market
value of the shares on the date of grant. Generally, options granted under the 2019 Plan will vest over a three to four-year period and
have a term of 10 years from the date of grant. In addition, the 2019 Plan provides for automatic acceleration of vesting for options
granted to non-employee directors upon a change of control (as defined in the 2019 Plan) of the Company.

F-32

The following table summarizes the activity in the
shares available for grant under the Plans during the years ended December 31, 2025 and 2024 and options outstanding as of December 31,
2025 and 2024 (in thousands, except exercise price):

Options Outstanding

Weighted

Shares

Average

Available
Number of
Exercise

for Grant
Shares
Prices

Balance as of December 31, 2023
39
36
$127.00

Additional shares authorized under the 2019 Plan
1,500

—

—

RSUs granted
(2)

—

—

RSUs cancelled and returned to the 2019 Plan
7

—

—

Options cancelled

—

(6)
$110.88

Balance as of December 31, 2024
1,544
30
$130.14

Additional shares authorized under the 2019 Plan
1,000

—

—

RSUs granted
(2)

—

—

RSUs cancelled and returned to the 2019 Plan
1

—

—

Options granted
(1,450)
1,450
$0.78

Options exercised

—

(37)
$0.78

Options cancelled and returned to the 2019 Plan
96
(96)
$0.78

Balance as of December 31, 2025
1,189
1,347
$3.34

The following table summarizes significant ranges of outstanding and exercisable
options as of December 31, 2025 (in thousands, except contractual life and exercise price):

Options Outstanding Options Exercisable

Weighted

Average

Remaining Weighted Weighted

Contractual Average Average Aggregate

Number Life Exercise Number Exercise Intrinsic

Range of Exercise Price Outstanding (in Years) Price Exercisable Price value

$0.00 - $1.00 1,317 9.16 $0.78 326 $0.78 $31

$1.01 - $62.90 2 3.89 $62.80 2 $62.80 $
—

$62.81 - $599.60 28 4.93 $110.17 28 $110.17 $
—

$0.00 - $599.60 1,347 9.06 $3.34 356 $10.44 $31

F-33

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

Weighted

Average

Number of
Grant-Date

Shares
Fair Value

Non-vested shares as of December 31, 2023
15
$69.63

Granted
2
$1.55

Vested
(12)
$1.24

Cancelled
(3)
$63.10

Non-vested shares as of December 31, 2024
2
$37.69

Granted
2
$1.00

Vested
(3)
$15.40

Cancelled
(1)
$65.20

Non-vested shares as of December 31, 2025

—

Note 12. Related Party Transactions

A family member of one of the Company’s executive officers is
an employee of the Company. During the years ended December 31, 2025 and 2024, the Company paid the family member approximately $129,300
and $113,800, respectively, which includes the aggregate grant date fair values, as determined pursuant to FASB ASC Topic 718, of any
stock options during each period.

Note 13. Memory IC Product End-of-Life

Taiwan Semiconductor Manufacturing Corporation, the
sole foundry that manufactured the wafers used to produce the Company’s memory IC products, discontinued the foundry process used
to produce such wafers. As a result, the Company commenced an end-of-life (EOL) of its memory products in 2023. In March 2025, the Company
fulfilled all then-outstanding EOL orders for its memory IC products. Since March 2025, the Company received additional purchase orders
totaling approximately $452,800 from customers for remaining inventory. The Company recorded approximately $72,200 and $380,600 of product
revenue from these purchase orders during the three months ended September 30, 2025 and the three months ended December 31, 2025, respectively.

Note 14. Subsequent Events

Issuance of Common Stock under ATM Offering Program

Subsequent to December 31, 2025, the Company sold
2,371,943 shares of common stock for net proceeds of approximately $2,303,000 pursuant to the Sales Agreement (see Note 9).

F-34

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