Business context and reporting period
The supplied filing is MoSys, Inc.’s Form 10-K for the fiscal year ended December 31, 2013, filed March 14, 2014. This does not match the request metadata naming Peraso Inc.; the filing itself identifies MoSys, Inc. as the registrant. It reports annual results, with unaudited quarterly data including the three months ended December 31, 2013.
MoSys was shifting from IP licensing and royalties toward fabless IC development and sales for networking and communications markets. Its principal product lines were Bandwidth Engine memory ICs and the newly introduced LineSpeed SerDes devices. The company reported approximately 20 Bandwidth Engine design wins, but said volume production and significant IC revenue had not yet materialized.
Financial results and liquidity
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $4.398 million | $6.082 million |
| Gross profit / margin | $3.924 million / 89% | $5.748 million / 95% |
| Operating loss | $24.932 million | $27.659 million |
| Net loss | $24.794 million | $27.614 million |
| Net loss per share | $0.55 | $0.70 |
| Cash, cash equivalents and investments | $50.482 million | $40.710 million |
| Working capital | $36.020 million | $30.155 million |
| Net cash used in operating activities | $22.645 million | $22.016 million |
Revenue comprised $3.617 million of royalties and $781,000 of licensing and other revenue; IC product revenue was not significant. Royalties represented 82% of revenue. R&D expense was $23.325 million, down from $28.480 million, and SG&A was $6.161 million, down from $8.218 million. The reported operating loss includes a $630,000 gain on asset sales; excluding that gain, the operating loss was approximately $25.6 million.
For Q4 2013, revenue was $986,000, operating loss was $6.496 million and net loss was $6.456 million. Q4 2012 revenue was $1.595 million and net loss was $7.773 million.
The company raised $27.746 million net from a 2013 common-stock offering, issuing 7.475 million shares. The balance sheet showed $2.355 million of current liabilities and $216,000 of long-term liabilities; no material borrowing or debt balance is disclosed. Operating cash outflow remained substantial. Management said cash expenditures were expected to exceed receipts in 2014, while believing existing resources sufficient for the foreseeable future; it also said additional capital would be needed before positive operating cash flow.
Material changes versus the prior comparable period
- Revenue fell 28% year over year, from $6.082 million to $4.398 million. Royalties declined 24% and licensing and other revenue declined 42%, reflecting lower licensee production and no new IP license agreements.
- Gross margin decreased from 95% to 89%, principally as IC-related costs increased. Gross profit fell 32%.
- Net loss narrowed by approximately $2.8 million, while operating cash use increased slightly.
- Cash, cash equivalents and investments rose by $9.8 million, largely supported by the public equity offering; common shares outstanding increased to 48.894 million at year-end from 40.054 million.
Outlook, risks and unusual items
- Management expected royalties and licensing revenue to decline in 2014 as legacy products approached end of life, including the end of royalties associated with Nintendo Wii-related shipments. It anticipated IC revenue growth but did not expect it to replace lost IP revenue or deliver profitability in 2014.
- Management expected 2014 R&D expense to rise with mask and fabrication costs, and SG&A to increase slightly as sales and marketing expanded. LineSpeed was not expected to generate significant revenue before 2015 or later.
- Major risks include customer adoption and GigaChip Interface protocol acceptance, long sales and design cycles, uncertain product margins and volumes, revenue concentration, and reliance on TSMC and other suppliers without long-term supply contracts. Two customers represented 96% of year-end trade receivables; the largest customer contributed 41% of annual revenue.
- Cash burn could require further financing. The company stated that financing might not be available on acceptable terms; equity financing would dilute shareholders.
- FY 2013 results included a $630,000 final payment from the 2012 sale of high-speed I/O technology. Earlier, the 2011 patent sale generated a $35.6 million gain, materially affecting that year’s reported result; the 2012 asset sale generated a $3.291 million gain.
- No material legal proceeding was reported as likely to adversely affect financial position or results. An India tax examination was noted. Management and the auditor reported effective internal controls, and the auditor gave unqualified opinions on the financial statements and internal control.
Important facts for investors to verify
- Confirm the issuer identity: this source is MoSys, Inc., not Peraso Inc., and covers FY 2013 rather than a standalone Q4 filing.
- Track actual IC revenue, customer production ramps, realized pricing and gross margins against management’s transition expectations.
- Monitor royalty declines, especially concentration in major licensees and end-of-life products, and whether new IC sales offset those declines.
- Assess cash burn, available liquidity, commitments of $10.772 million for leases and purchases, and the timing and terms of any additional financing.
- Verify supplier continuity and product qualification, including second-generation Bandwidth Engine certification and dependence on TSMC.