Business context and reporting period
The supplied filing is MoSys, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2017. This conflicts with the request metadata identifying Peraso Inc.; the filing itself names MoSys, Inc. as the registrant. MoSys describes itself as a fabless semiconductor company selling Bandwidth Engine and LineSpeed ICs for networking and communications markets, alongside legacy IP licensing.
Financial results and position
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Revenue | $1.212 | $1.451; down 16% |
| Product revenue | $0.955 | $1.120; down 15% |
| Royalty and other revenue | $0.257 | $0.331; down 22% |
| Gross profit / margin | $0.610 / 50% | $0.588 / 41% |
| Operating expenses | $4.799 | $7.424 |
| Operating loss | $(4.189) | $(6.836) |
| Net loss / loss per share | $(4.405) / $(0.66) | $(6.865) / $(1.05) |
| Cash used in operating activities | $(4.178) | $(7.218) |
At March 31, cash and cash equivalents were $5.330 million and short-term investments were $0.240 million. Working capital was approximately $5.341 million. Total assets were $22.328 million; total liabilities were $11.240 million. Convertible notes had a carrying amount of $8.699 million; approximately $8.8 million face amount, including in-kind interest notes, was due in August 2018. The notes carry 10% interest and are secured by company assets. Basic and diluted weighted-average shares were 6.647 million. The company effected a one-for-ten reverse stock split in February 2017; share and per-share data reflect the split.
Material changes versus the prior comparable period
- Revenue declined, primarily because of lower Bandwidth Engine shipments and lower shipment volumes by licensees.
- Gross margin improved to 50% from 41%, mainly due to lower product manufacturing costs.
- Operating expenses fell by $2.625 million, including lower R&D and SG&A costs and no repeat of the $0.676 million Q1 2016 restructuring charge. Net loss and operating cash use also narrowed.
- Interest expense increased to $0.224 million from $0.033 million, principally reflecting the secured convertible notes.
- Cash and cash equivalents declined by $3.436 million from year-end 2016. The company issued $0.420 million of additional notes in February to pay interest in kind.
Outlook, risks, contingencies and unusual items
Management expects operating losses and cash expenditures in excess of receipts to continue in 2017 and expects further losses while commercializing its IC products. It stated that substantially higher revenue or additional capital would be needed to reach sustainable profitability. The filing says recurring losses, cash burn, and the 2018 note repayment raise substantial doubt about the company’s ability to continue as a going concern within one year; additional financing may not be available on acceptable terms.
As a subsequent event, in April 2017 MoSys committed to reduce its workforce by up to 60%, focus on selling existing products, and substantially curtail new-product development. It expected to complete the reductions by the end of Q2 2017 and incur approximately $0.6 million in severance and other one-time costs, mostly recognized and paid in Q2. Management warned that further cost reductions could be needed if these efforts fail.
Revenue and receivables are concentrated: one customer represented 46% of Q1 revenue, and one customer accounted for 76% of accounts receivable at March 31. Contractual obligations included $2.616 million of operating leases and $0.883 million of software licenses. The filing reports no material pending legal proceeding believed likely to adversely affect financial position or results. It also reports no goodwill impairment at quarter-end, while noting stock-price volatility could affect future impairment assessments. Management concluded disclosure controls were effective as of March 31, 2017.
Important facts for investors to verify
- Confirm issuer identity: the filing is for MoSys, Inc., not Peraso Inc., as stated in the request metadata.
- Review available liquidity, cash burn, financing prospects, and the going-concern warning, including the August 2018 secured note maturity and interest terms.
- Track execution and costs of the announced workforce reduction, and the effect of curtailed development on future product prospects.
- Assess revenue trajectory, gross-margin sustainability, customer concentration, and collection risk.
- Reconcile investment disclosures: the balance sheet reports $0.240 million of short-term investments, while the fair-value hierarchy table lists $4.213 million of securities at March 31, 2017; the filing text does not provide a clear reconciliation.