Business context and reporting period
Important entity discrepancy: The request identifies Peraso Inc., but the supplied Form 10-Q is for MoSys, Inc. (Nasdaq: MOSY), filed May 13, 2021, for the quarter ended March 31, 2021. The summary below reflects the supplied filing, not Peraso.
MoSys sells integrated circuits and licenses intellectual property for high-performance data processing. Its Bandwidth Engine 2 products were expected to remain its primary revenue source through at least 2021; it is also developing Virtual Accelerator Engine software, firmware and IP products for licensing. Financial amounts below are in U.S. dollars; statement amounts are generally in millions unless noted.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $1.338 million | $1.260 million; up 6% |
| Product revenue | $1.178 million | $1.068 million; up 10% |
| Royalty and other revenue | $160,000 | $192,000; down 17% |
| Gross profit / margin | $843,000 / 63% | $730,000 / 58% |
| Operating expenses | $2.230 million | $2.096 million |
| Operating loss | $1.387 million | $1.366 million |
| Net loss | $1.369 million | $1.405 million |
| Basic and diluted loss per share | $0.28 | $0.61 |
| Cash used in operating activities | $1.013 million | $708,000 |
Research and development expense increased 21% to $1.159 million, mainly from personnel and consulting costs associated with VAE development. Selling, general and administrative expense declined 6% to $1.071 million. Gross margin improved, reflecting higher product margins and royalty revenue, which generally has no associated cost.
At March 31, 2021, cash and cash equivalents were $9.529 million and short-term investments were $1.610 million, for combined liquidity of $11.139 million. Working capital was $10.9 million. Total assets were $13.287 million and total liabilities were $2.224 million. The approximately $3.0 million balance of secured convertible notes was repaid in full during the quarter. The company also had approximately $579,000 of PPP debt outstanding; forgiveness had been requested but was not assured.
Cash increased by $3.640 million during the quarter. Financing provided $6.266 million net, including $6.817 million from a registered stock offering and $2.478 million from warrant exercises; approximately $3.0 million was used to repay convertible notes. Investing used $1.613 million, primarily to purchase short-term investments.
Material changes versus the prior comparable period
- Revenue rose 6%, led by Bandwidth Engine 2 sales; LineSpeed sales declined. Royalty and other revenue fell, primarily because of lower royalties from one licensee.
- Gross profit increased 15% and gross margin rose five percentage points to 63%.
- Operating expenses increased 6%, as higher R&D more than offset lower SG&A. Operating loss widened slightly, while net loss decreased modestly.
- Operating cash outflow increased to $1.013 million from $708,000.
- Liquidity increased substantially after the stock offering and warrant exercises, and the secured convertible notes were fully repaid. Common shares outstanding rose from 3.554 million at year-end to 6.134 million at quarter-end.
Outlook, risks and contingencies
- Management said cash expenditures were expected to exceed receipts in 2021, but believed available liquidity would meet short- and long-term working-capital and capital-expenditure needs for the foreseeable future. No quantified cash runway or revenue forecast was provided.
- The company expected COVID-19 to continue negatively affecting revenue for the remainder of 2021, but could not quantify the impact. It reported longer lead times for some IC components and risks to shipments, customer programs and supply chains.
- Management expected R&D expense to increase in 2021 as VAE development costs rise, while SG&A was expected to remain relatively consistent. It did not expect further interest expense on the repaid convertible notes during 2021.
- MoSys had a history of operating losses and an accumulated deficit of approximately $244.0 million. Management noted that sustainable profitability requires substantially higher revenue; future financing, if needed, could dilute shareholders or be unavailable on acceptable terms.
- Three customers represented 76% of Q1 revenue (38%, 20% and 18%); three customers represented 74% of accounts receivable at quarter-end.
- PPP loan forgiveness was pending, with no assurance of full or partial forgiveness. The filing reported no legal proceeding believed likely to materially adversely affect financial position or results.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is MoSys, Inc., not Peraso Inc.
- Review subsequent disclosures on revenue, customer concentration, Bandwidth Engine demand and VAE commercialization.
- Check whether the PPP loan was forgiven and whether additional financing was required after quarter-end.
- Assess the effects of COVID-19-related component lead times and other supply-chain constraints on shipments and cash burn.
- Track share-count changes and potential dilution from equity issuance, warrants and equity awards.