Filing identity and reporting period
Important: The supplied filing is MoSys, Inc.’s Form 10-K, not a Peraso Inc. filing. It reports the fiscal year ended December 31, 2018—not a standalone fourth quarter. The summary below is for MoSys; verify the issuer and period before relying on it.
Business context
MoSys was a fabless semiconductor company selling high-speed networking and data-processing ICs, principally Bandwidth Engine products, alongside LineSpeed PHY products and a smaller stream of IP royalties. Product sales accounted for 91% of 2018 revenue. Revenue depended on a small number of customers and on customers putting designs into production.
Financial results and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Total revenue | $16.600 million | $8.842 million |
| Product revenue | $15.053 million | $7.833 million |
| Royalty and other revenue | $1.547 million | $1.009 million |
| Gross profit / margin | $10.254 million / 62% | $4.148 million / 47% |
| Operating loss | $10.826 million | $10.033 million |
| Net loss | $11.409 million | $10.668 million |
| Operating cash flow | $0.335 million provided | $7.579 million used |
| Cash and cash equivalents, year-end | $7.104 million | $3.868 million |
| Current assets / current liabilities, year-end | $10.797 million / $1.911 million | $8.662 million / $6.615 million |
| Convertible notes payable, year-end | $2.671 million | $9.160 million |
Revenue rose approximately 88% year over year, driven mainly by higher IC shipments. Gross margin improved with greater shipments, manufacturing efficiencies, lower material prices, and royalty revenue. Research and development expense fell 49% to $4.129 million, primarily following workforce reductions; SG&A fell 13% to $4.095 million. The company remained unprofitable, and its accumulated deficit was $235.867 million.
Material changes and unusual items
- MoSys recorded $12.856 million of non-cash goodwill impairment in 2018: $3.2 million in the third quarter and $9.7 million in the fourth quarter, associated with reduced share price and market capitalization.
- Operating cash flow improved from $7.579 million used in 2017 to $0.335 million provided in 2018. The filing attributes this to non-cash adjustments and changes in working capital; cash flow should not be read as evidence of operating profitability.
- In October 2018, MoSys raised approximately $11.1 million gross, or $10.362 million net, through an offering of stock and warrants; $7.4 million was used to repay convertible debt. Shares outstanding increased from 8.068 million at year-end 2017 to 42.967 million at year-end 2018.
- At year-end, 36.911 million common-stock warrants and 2.311 million pre-funded warrants remained outstanding and exercisable. The filing also reports up to 4.671 million shares issuable upon conversion of notes, subject to applicable terms and limits.
- ASC 606 adoption had no material overall effect on 2018 results; the cumulative-effect adjustment to accumulated deficit was $0.230 million.
- A dispute with former sales representative Trinity Technologies was settled in April 2018. MoSys paid approximately $0.450 million and recognized approximately $0.250 million of 2018 expense.
Outlook, management commentary, and risks
- Management expected 2019 revenue to decline, citing the end-of-life of first-generation Bandwidth Engine products, the planned phase-out of a large Bandwidth Engine 2 customer, and declining royalties. That customer’s phase-out was expected over 18 months.
- Management expected cash expenditures to exceed receipts in 2019 and said additional capital would be needed, with no assurance it would be available on acceptable terms. The filing warns of potential further cost reductions if financing cannot be obtained.
- Management expected Bandwidth Engine 3 and PHE to begin generating meaningful revenue in the second half of 2019; elsewhere, the filing says production revenue from Bandwidth Engine 3 was not anticipated before then. LineSpeed shipments to a lead customer were in production quantities, with meaningful recurring revenue expected in 2019.
- The company cited long design-to-volume sales cycles, customer and revenue concentration, dependence on adoption of its GigaChip Interface, limited engineering resources, and reliance on TSMC as its sole foundry. Its 1T-SRAM technology was not available below 40 nanometers, creating product-roadmap and future-development risks.
- Senior secured convertible notes carried an 8% interest rate and were due August 15, 2023 after amendments. They were secured by company assets and restricted additional borrowing, subject to stated exceptions.
- MoSys disclosed a Nasdaq minimum-bid-price deficiency notice received in September 2018, with a compliance deadline of March 20, 2019; the board had authority to effect a reverse stock split. The filing also described a stockholder rights plan that could deter a change of control.
- The independent auditor issued an unqualified opinion on the financial statements. Management reported disclosure controls and internal control over financial reporting were effective as of December 31, 2018; the auditor did not express an opinion on internal controls.
Most important facts for investors to verify
- Confirm the issuer: the provided 10-K is for MoSys, Inc., not Peraso Inc., and covers the full 2018 fiscal year.
- Check subsequent filings for actual 2019 revenue, cash burn, financing, customer phase-out, and production timing for Bandwidth Engine 3, PHE, and LineSpeed.
- Review the current share count and the terms, exercise prices, and potential dilution from the large warrant and convertible-note overhang.
- Confirm the notes’ remaining balance, maturity, interest treatment, collateral, and any covenant or repayment developments.
- Check Nasdaq listing compliance and any reverse-split or other corporate actions after the filing date.