Business context and reporting period
The supplied filing is MoSys, Inc.’s Form 10-K for the fiscal year ended December 31, 2015, filed March 15, 2016—not a Peraso Inc. filing or a standalone Q4 filing. The company is a fabless semiconductor business focused on Bandwidth Engine memory ICs and LineSpeed signal-integrity ICs for networking and data-center markets. Its strategy has shifted from IP licensing toward IC sales.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. Annual results are for fiscal 2015; Q4 figures are unaudited.
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $4.390 | $5.380 |
| Product revenue | $2.400 | $2.280 |
| Royalty and other revenue | $1.990 | $3.100 |
| Gross profit / margin | $1.916 / 44% | $3.062 / 57% |
| Operating loss | $(31.491) | $(32.718) |
| Net loss / diluted loss per share | $(31.483) / $(0.50) | $(32.682) / $(0.66) |
| Cash used in operating activities | $(27.474) | $(26.307) |
| Cash, cash equivalents and investments at year-end | $20.238 | $25.794 |
| Working capital at year-end | $19.661 | $22.649 |
At December 31, 2015, current liabilities were $3.604 million, total assets $48.692 million, and stockholders’ equity $44.841 million. The filing reports no material debt at year-end; it subsequently discloses $8 million of secured convertible notes issued in March 2016.
Q4 2015 revenue was $1.598 million, gross profit $0.717 million, operating loss $6.504 million, and net loss $6.507 million, or $(0.10) per share. Q4 2014 revenue was $1.146 million and net loss $8.951 million, or $(0.18) per share.
Material changes versus the prior comparable period
- Annual revenue fell 18% as royalty and other revenue declined 36% to $1.990 million. Product revenue increased 5% to $2.400 million, but did not offset the royalty decline.
- Gross margin fell from 57% to 44%, primarily because product sales carry costs while royalty revenue has no associated cost of revenue.
- Operating loss narrowed by $1.227 million, while net loss narrowed by $1.199 million. Operating expenses declined $2.373 million, including a $2.153 million reduction in research and development expense.
- Operating cash use increased $1.167 million. Year-end cash and investments fell $5.556 million; the company raised $21.368 million net from a common-stock offering during 2015.
- Common shares outstanding increased from 49.793 million to 65.496 million during 2015, mainly reflecting the offering.
Outlook, commentary and risks
- Management expected 2016 product revenue to increase, mainly as existing customers ramp Bandwidth Engine 2 systems. It expected royalty revenue to decline and did not expect IC revenue to support profitability in 2016.
- Management forecast lower operating expenses after a 2016 workforce reduction, closure of the Hyderabad subsidiary, and reduced software costs. It estimated annual savings of about $3.2 million and termination-related charges of up to $0.8 million.
- The company had more than 85 design wins and approximately 25 existing customers, but cautioned that design wins do not ensure production volume or revenue. LineSpeed revenue was not expected to be significant until 2017 or later.
- Customer concentration is high: three customers accounted for 77% of 2015 revenue, and three customers represented 94% of year-end trade receivables. The filing identifies Alcatel-Lucent, TSMC and Kogent as the largest 2015 revenue sources.
- MoSys reported a $182.0 million accumulated deficit and expected continuing operating losses and cash outflows. It cited dependence on IC adoption, long sales cycles, customer and royalty concentration, manufacturing yields, and reliance on sole foundry TSMC as key risks.
- On March 14, 2016, MoSys issued $8 million of 10% senior secured convertible notes due August 15, 2018, convertible at $0.90 per share, with interest payable in cash or in kind. The notes are secured by substantially all company assets and include potential 120% redemption upon specified fundamental changes.
- Nasdaq notified the company in March 2016 that it must meet the $1.00 minimum bid-price requirement for ten consecutive trading days by September 6, 2016 or risk delisting. The filing reports no material pending legal proceeding and states that internal controls were effective.
Important facts for investors to verify
- Confirm the issuer and period: the supplied document is MoSys’s FY2015 10-K, despite request metadata naming Peraso and “2015 Q4.”
- Review the March 2016 note purchase agreement and subsequent disclosures, including note principal, conversion and redemption terms, collateral, and dilution exposure.
- Track whether expected Bandwidth Engine production ramps translate into recurring sales, margins and lower cash burn, and whether royalty revenue declines as management expected.
- Assess liquidity against ongoing operating cash use, customer receivable concentration, and the company’s stated need for potential additional financing.
- Verify progress on workforce reductions, the Hyderabad closure, projected savings, and Nasdaq bid-price compliance.