SecProbe.io

CORRESP
1
filename1.htm

prso-corresp.htm

Confidential Treatment Requested by Peraso Inc. pursuant to 17 C.F.R. 200.83 (“Rule 83”)

PERASO INC.

Certain portions of this letter for which confidential treatment has been requested pursuant to Rule 83 have been omitted from the version filed via EDGAR. Information that has been omitted in the EDGAR-filed version has been noted in this letter with a placeholder identified by the mark “[***]” and has been delivered to the Securities and Exchange Commission.

VIA EDGAR SUBMISSION

November 15, 2022

U.S. Securities & Exchange Commission
Division of Corporation Finance

Office of Energy & Transportation

100 F Street, NE

Washington, D.C. 20549

Attn:  Jenifer Gallagher and Karl Hiller

Re: Peraso Inc.

       Form 10-K for the Fiscal Year Ended December 31, 2021

       Filed March 31, 2022

       File No. 000-32929

Ladies and Gentlemen:

Peraso Inc. (the “Company,” “we,” “our” or “us”) hereby transmits our response to the comment letter received from the staff (the “Staff,” “you” or “your”) of the U.S. Securities and Exchange Commission (the “SEC” or “Commission”), on November 4, 2022, regarding the Annual Report on Form 10-K for the year ended December, 31, 2021, filed with the Commission on March 31, 2022, and the Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022, filed with the Commission on May 13, 2022 and August 15, 2022, respectively. In response to the Staff’s comment letter, the Company is submitting via EDGAR this response letter. For your convenience, we have repeated below your comments, and have followed it with our response.

Form 10-K for the Fiscal Year ended December 31, 2021

Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations, page 31

1.

We note your response to prior comment one and the type of disclosure that you have proposed, including a comparison of total revenues for the most recent quarter and cumulative interim period to the corresponding periods of the preceding fiscal year, along with percentages of product revenues to total revenues.

You state that revenues increased "primarily due to the timing of the reverse acquisition," though do not explain how the acquisition contributed to revenues, either in terms of product lines acquired or facilitating your development of the mmWave module products. You also state that the comparative periods of the preceding fiscal year "exclude all sales attributable to our memory IC products, resulting in a 100% increase in sales volumes," implying there had been sales of these products, perhaps by the business acquired in the reverse merger, though without providing this clarification or explaining how the apparent trend would be tempered when considering historical sales, also without addressing the reasonably possible effects of your decision to not develop new memory products.

We do not see quantification of volumes of products sold or of changes in the volumes of products sold among the product categories, as may be necessary to provide context for understanding the offsetting effects and trends exhibited in your financial results.

Please further explain how you have considered your current discussion and analysis as providing sufficient insight on material trends and uncertainties, the reasons underlying intermediate effects, and for a reader to see the business through the eyes of management, particularly given the absent of such volumetric measures and reflecting changes in the mix of products sold. Please include along with your reply a schedule identifying for each product category described on pages 6, 7 and 8 (e.g. mmWave ICs based on the IEEE 802.11ad standard, mmWave ICs based on the 3GPP Release 15-17 standard, mmWave modules, memory Accelerator Engine IC products - Bandwidth Engine and Programmable HyperSpeed Engine, and QPR SRAM memory devices), the volumes sold for each quarter covered by your annual and subsequent interim financial statements, along with the dollar values ascribed during these periods, reconciled to total revenues reported for the quarterly, cumulative and annual periods.

Provide us with an explanation for changes in volumes sold each period including your assessment of the changes for disclosure, addressing the materiality of the change in both volumes and prices, and considering the significance of the product line.

Response: We respectfully acknowledge the Staff’s comment, and we can expand our disclosures to provide further input on trends and uncertainties. The tables below set forth our volumes and revenue by product for the current and prior year interim and year-to-date periods and reconcile to total product revenues reported in the financial statements.

($$ in thousands)

Product Revenue

1Q21

2Q21

3Q21

4Q21

YTD 2021

1Q22

2Q22

YTD 2022

Bandwidth Engine ICs

 $             -

$             -

$              -

 $         148

 $         148

 $      1,725

 $     1,749

 $     3,474

Programmable HyperSpeed Engine ICs/QPR SRAM ICs/Other

                  -

                  -

                  -

                   1

                   1

              183

              123

              306

mmWave Modules

                  -

                  -

                  290

              807

              1,097

              808

           1,552

           2,360

mmWave ICs - 802.11AD

           1,042

              576

           1,033

           915

           3,566

              488

              678

           1,166

mmWave ICs - 3GPP

                  -

                  -

                  -

                  -

                  -

                  -

                  -

                  -

mmWave - Other

                   9

                  -

                66

                19

                94

                   0

                18

                18

Total Product Revenue

 $      1,051

 $       576

 $     1,389

 $      1,890

 $      4,906

 $      3,204

 $     4,120

 $     7,324

As noted in our disclosure, the 100% increase in shipment volumes and revenue from our memory products is because no sales of our memory products were included in our historical financial statements due to the business combination. From a trend perspective, we note that sales of memory ICs are expected to increase over the prior-year levels because of the inclusion of these sales in 2022, when there were none in 2021. Separately, but not previously disclosed, we do expect increases in 2023 volumes and revenues based on our current backlog, customer forecasts and modest contribution (~5%) from price increases that we have begun implementing in October 2022. As noted in our disclosures, the Company ceased development of new memory IC products in 2017, and it has been selling its available products. Historically, it has been difficult for the Company to identify trends with its memory customers, as these customers purchase based on purchase orders rather than long-term supply agreements. In some cases, the customers provide non-binding forecasts, and purchase orders on the Company’s backlog may be delayed or cancelled. Given that, it has been difficult to project an outlook and trend for out memory products.  However, we are in a position to comment on trends for the next 12 months, and we will include increased disclosure, as contemplated below.

With regard to our mmWave products, we have disclosed that the Company’s primary sales focus is its mmWave modules, which we began selling during the three months ended September 30, 2021. We have explained the commencement of mmWave module sales during 2021 was the primary driver of the increase in units shipped and revenue in 2022 compared with 2021.  We have initiated price increases on certain of our mmWave modules products in the second quarter of 2022, and we expect the impacts of these price increases will marginally contribute to product revenue growth in the fourth quarter of 2022 and on a go forward basis into 2023. However, we expect the primarily driver of mmWave module sales in the future to be increased unit shipments, and we have disclosed this expectation.  We will clarify our disclosure, as contemplated below.

In addition, we have disclosed that the Company’s sales of stand-alone mmWave IC products have declined during 2022. The decline in mmWave IC sales has been driven by i) reduced distributor purchases on behalf of our largest IC customer and ii) the shift in our sales focus to mmWave modules, which comprise our mmWave ICs in a chipset combined with an antenna. When considering shipments

of modules, which include our mmWave ICs, sales of our mmWave ICs within the mmWave module have increased significantly over the prior year. We sell the majority of our stand-alone mmWave ICs to two distributors that purchase on behalf of a large customer. We do not have visibility to demand from this large end-customer, as the customer does not provide forecasts to us. Sales on behalf of this customer decreased during 2022, which we believe is attributable to timing of the customer’s product cycles. Recently, we have seen increased purchasing volume in the form of new purchase orders from the customer’s distributors, but it is difficult for us to identify and disclose an intermediate trend for revenue from sales of our ICs on a stand-alone basis.

We believe that providing both revenue and volume information by category would place us at a competitive disadvantage. As a very small company, we have a limited number of products and customers, and, by disclosing both revenue and volume information, our competitors and prospective customers would be able to calculate our current product pricing. For example, we sell over 98% of our module products to a single customer, and our competitors and prospective customers will be able to calculate the price we charge that module customer. Similarly, we sell over 90% of our mmWave ICs to two distributors that purchase on behalf of an end customer. As a result, we request that the Staff consider our request to only disclose revenue by product category without the corresponding volumetric data.

The following is the Company’s proposed type of disclosure related to product revenue using the three and six months ended June 30, 2022 and 2021 as an example (based on the proposed disclosure we provided to the staff in our response letter dated October 14, 2022) to provide further trend disclosure. This represents the level of detail we plan to include in future filings, beginning with our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022.

The following table details revenue by product category for the three and six months ended June 30, 2022 ($ in 000s):

Product revenue increased for the three months ended June 30, 2022 compared with the same period of 2021 primarily due to the increase in the memory IC sales volumes due to the acquisition of this product line in December 2021 and the increase of the mmWave module sales volumes due to the roll-out of this product line in August of 2021. As discussed elsewhere in this Report, for reverse-acquisition accounting

purposes, Peraso Tech, was treated as the accounting acquirer, and MoSys was treated as the accounting acquiree. Accordingly, the results of operations discussed herein are a continuation of Peraso Tech’s historical financial results and exclude the results of operations of MoSys prior to December 17, 2021. The increase in memory IC sales volumes due to the acquisition of this product line, resulted in a $1.9 million increase to revenue for the three months ended June 30, 2022, as compared to the prior year due to a 100% increase in sales volumes in 2022. Additionally, we began selling our mmWave module products during the second half of 2021, representing a 100% increase in sales volumes for the first six half of 2022, which contributed $1.5 million in revenue for the three months ended June 30, 2022. We did not have any sales of the mmWave module products during the first half of 2021. We have initiated price increases on certain of our module products in 2022. However, through June 30, 2022, we had not realized any material increase in revenue as a result of those price increases.

Product revenue increased for the six months ended June 30, 2022 compared with the same period of 2021 primarily due increase in the memory IC sales volumes due to the acquisition of this product line in December 2021 and the increase of mmWave module sales volumes due to the roll-out of this new product line in August of 2021. The increase in memory IC sales volumes due to the acquisition of this product line in December 2021 resulted in a $3.8 million increase in revenues for the six months ended June 30, 2022 as compared to prior year due to a 100% increase in sales volumes in 2022. Additionally, we began selling our mmWave module products during the second half of 2021 and realized a 100% increase in sales volumes in 2022, which contributed $2.3 million of increased revenue for the six months ended June 30, 2022 These revenue increases were partially offset by a decrease of $0.5 million in sales of our mmWave IC products due to a 33% reduction in volumes shipped during the six months ended June 30, 2022, compared with the same period in 2021. Although, stand-alone mmWave IC volumes decreased, shipments of our mmWave modules that include the mmWave ICs have increased, as each module we ship includes our mmWave ICs.  We began shipping modules, which include our mmWave IC in a chipset with an antenna, as it provides an integrated solution that we believe can shorten our revenue cycle by enabling our customers to accelerate time to production. In addition, we generate higher revenue from the sale of modules compared to sales of stand-alone ICs. Going forward, we expect sales of our mmWave ICs on a stand-alone basis to decline as a percentage of total product revenue, as we expect sales of our modules to be our primary source of revenue growth.

We expect revenues to increase for the remainder of 2022 and in 2023, as we expect increased sales of our mmWave products, including the benefits of price increases implemented in 2022, and will experience a full-year contribution of revenues from our memory products. We expect sales of our memory products to increase from a volume and revenue perspective over the next 12 months. However, our memory products have been in production since 2014, and, given that we have not developed new products, the long-term outlook for these products is uncertain. We have implemented modest price increases on our memory products that we expect to begin taking effect in the first half of 2023, and we expect these price increases to contribute to revenue growth in 2023. We expect sales of our mmWave modules to increase from a volume and revenue perspective over the next 12 months, as our primary sales focus is on obtaining new module customers. Our lead module customer has provided purchase orders and forecasts, which support our expected increases in volume and revenue from module shipments.  In addition, we expect meaningful contribution in 2023 from price increases that we implemented in 2022 on our module products.

Financial Statements

Note 2 - Business Combination Securities Conversion, page 75

2.

We understand from your response to prior comment 3 that you intend to cease reporting the Series A Special Voting Preferred Stock in your financial statements because you no longer regard the instrument as equity, notwithstanding its legal designation as equity and instrumentality in supporting your classification of the Canco subsidiary exchangeable shares as permanent equity in your financial statements.

We also note that you did not consider such instrumentality in your assessment although did consider such instrumental