Business context and reporting period
The supplied filing is MoSys, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2013; it does not identify Peraso Inc. as the registrant. MoSys was shifting from licensing semiconductor intellectual property toward developing and selling integrated circuits, including Bandwidth Engine and the LineSpeed Gearbox, announced in March 2013.
Financial performance and position
Amounts are in U.S. dollars; financial statement amounts below are in millions unless noted.
- Revenue: $1.335 million, down 6% from $1.424 million. Royalties were $1.086 million, down 10%, and licensing and other revenue was $249,000, up 13%; IC product revenue was not significant.
- Profitability: Gross profit was $1.316 million, with a 99% gross margin versus 96% a year earlier. Operating loss was $4.997 million versus $7.209 million; net loss was $4.997 million, or $0.12 per share, versus $7.215 million, or $0.19 per share.
- Expenses: Research and development was $5.320 million, down 29%; selling, general and administrative expense was $1.623 million, down 45%. Lower headcount and, for SG&A, the absence of prior-year arbitration and legal costs contributed to declines.
- Cash flow: Operating cash use was $4.987 million versus $6.228 million. Investing provided $6.729 million, including $6.2 million net transfers from investments to cash and $630,000 of asset-sale proceeds. Financing provided $1.008 million. Cash and cash equivalents increased to $5.279 million.
- Liquidity and obligations: Cash, cash equivalents, and short- and long-term investments totaled $37.308 million; working capital was $28.0 million. Current liabilities were $4.022 million and long-term liabilities $185,000. The filing does not provide a clear standalone borrowing or debt balance. Operating lease and purchase commitments totaled $8.885 million.
- Equity and other: Total assets were $65.687 million and stockholders’ equity $61.480 million. Accumulated deficit was $98.010 million. Shares outstanding were 40.464 million at quarter-end.
Material changes versus the prior-year quarter
- Revenue declined as royalties fell, primarily reflecting lower shipments of a licensee’s product used in Nintendo Wii and lower royalties from a fabless semiconductor company; another licensee partly offset the decline.
- Net loss narrowed by $2.218 million, alongside lower R&D and SG&A expenses. Gross profit fell $51,000 despite the higher gross-margin percentage.
- Cash from operations improved by $1.241 million. Cash and investments together decreased by about $2.9 million from year-end 2012, while cash alone rose largely because funds moved out of investments.
Outlook, risks, and unusual items
- Management expected cash expenditures to exceed receipts in 2013 and said additional capital would be needed before positive operating cash flows. It considered existing resources sufficient for foreseeable requirements and cited a shelf registration permitting sales of up to approximately $30 million through November 2013; availability of financing on favorable terms was not assured.
- Management did not expect new license agreements in the remainder of 2013 and expected licensing and royalty revenue to decline over time. Future success and profitability depended on developing a market for IC products. SG&A was expected to remain flat or decrease slightly.
- Customer concentration was significant: four customers represented 71% of quarterly revenue, and two customers accounted for all quarter-end accounts receivable. Revenue also depended on licensee shipments and could be seasonal.
- The final $600,000 holdback from the 2012 sale of serial I/O technology was received in March 2013; the filing says no further amounts were due. The proceeds were recorded as a gain on sale of assets and reduction of operating expenses.
- MoSys disclosed a related-party development and marketing agreement with Credo, in which two MoSys executive officers were investors. A $400,000 amount remained in current liabilities; product gross profits were to be shared equally after MoSys retained the first $1.2 million.
- The company reported an ongoing tax examination in India, but no material legal proceeding it believed likely to adversely affect its financial position or results. Management concluded disclosure controls were effective and reported no material first-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the intended issuer: the provided filing is for MoSys, Inc., not Peraso Inc.
- Track customer shipments, royalty trends, and whether IC products progress from prototypes to material commercial revenue.
- Assess cash burn against management’s expectation of needing additional capital, including the timing and terms of any financing.
- Review customer concentration, the Credo related-party arrangement, and the company’s remaining lease and purchase commitments.