Filing summary
Entity discrepancy: The supplied filing is MoSys, Inc.’s Form 10-Q, not a Peraso Inc. filing. This summary reflects MoSys’s unaudited results for the quarter and nine months ended September 30, 2013; dollar amounts are in millions unless noted.
Business context and reporting period
MoSys was shifting from licensing semiconductor IP toward developing and selling Bandwidth Engine and LineSpeed integrated circuits for networking and communications markets. IC product revenue remained insignificant. The company said future profitability depended on establishing a market for its IC products.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $0.957 | $1.327 | $3.412 | $4.487 |
| Gross profit / margin | $0.799 / 83% | $1.274 / 96% | $3.158 / 93% | $4.198 / 94% |
| Operating loss | $7.039 | $6.055 | $18.436 | $19.823 |
| Net loss | $6.945 | $6.073 | $18.338 | $19.841 |
| Loss per share, diluted | $0.14 | $0.15 | $0.42 | $0.51 |
- Revenue was predominantly royalties: $0.816 million in Q3 and $2.862 million for nine months. Licensing and other revenue was $0.141 million and $0.550 million, respectively.
- Research and development was $6.243 million in Q3 and $17.546 million for nine months; SG&A was $1.595 million and $4.678 million.
- Operating cash use was $17.717 million for the first nine months, versus $17.484 million in the prior-year period. Cash and cash equivalents were $2.174 million; short- and long-term investments totaled $51.080 million. Management reported combined cash, cash equivalents and investments of $53.3 million and working capital of $35.4 million.
- No borrowings are listed on the balance sheet. Current liabilities were $2.042 million. Operating lease and purchase commitments totaled $11.401 million, including $3.450 million due within one year.
- Total assets were $81.031 million and stockholders’ equity was $78.781 million at September 30, 2013.
Material changes versus the prior comparable period
- Q3 revenue declined 28% year over year; nine-month revenue declined 24%. Licensing and other revenue fell 43% and 51%, respectively, while royalties fell 24% and 15%.
- Q3 net loss increased from $6.073 million to $6.945 million, while nine-month net loss improved from $19.841 million to $18.338 million. The prior-year periods included gains from asset sales—$1.435 million in Q3 and $3.291 million for nine months—whereas 2013 included a $0.630 million gain for nine months and none in Q3.
- Gross margin fell to 83% in Q3, primarily due to higher IC material costs. The company reported negative gross margins on IC product activity.
- A second-quarter 2013 public offering generated $27.7 million in net proceeds from approximately 7.5 million shares, increasing shares outstanding. September 30 shares outstanding were 48.322 million.
Outlook, commentary, risks and unusual items
- Management expected 2013 cash expenditures to exceed receipts by $18–$20 million and believed available cash and investments were sufficient for the foreseeable future, while cautioning that funding might be needed and might not be available on favorable terms.
- Management estimated approximately $14 million of quarterly IC product revenue would be needed to achieve positive cash flows, subject to significant assumptions and variability. It expected licensing and royalty revenue to continue declining over time as the business transitions toward IC sales; it did not expect to sign new license agreements during the rest of 2013.
- SG&A was expected to rise in Q4 2013 versus Q3 due to year-end compliance costs. In October, MoSys agreed to pay Credo an additional $0.6 million for product development.
- Revenue and receivables were concentrated: two customers represented 52% of Q3 revenue, and two customers accounted for all net receivables at quarter-end. India tax years were under examination; no material legal proceeding was identified as likely to adversely affect results.
- Investment portfolio risks included interest-rate and credit exposure. The company reported no goodwill impairment in its September 2013 annual test. Disclosure controls were assessed as effective, with no material change in internal control reported for the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied document identifies MoSys, Inc., not Peraso Inc.
- Track IC design wins, shipments, customer adoption, product margins, and progress toward the stated cash-flow revenue threshold.
- Assess ongoing royalty declines, customer concentration, and the rate of operating cash use against available liquidity and commitments.
- Review dilution from the 2013 offering and equity compensation, as well as the Credo development and profit-sharing arrangements.
- Check subsequent filings for updates to liquidity expectations, capital needs, tax examination, and customer or product risks.