Filing identity and reporting period
Important identity mismatch: The request identifies Peraso Inc., but the supplied filing is MoSys, Inc.’s Form 10-Q for the quarter ended March 31, 2012. The figures below summarize the supplied MoSys filing, not Peraso.
MoSys develops and licenses semiconductor memory and interface intellectual property (IP) and was shifting its focus toward developing and selling Bandwidth Engine integrated circuits (ICs). Financial amounts below are in U.S. dollars; “million” is used for readability.
Financial performance
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $1.424 million | $3.539 million |
| Gross profit / gross margin | $1.367 million / 96% | $2.849 million / 81% |
| Operating loss | $7.209 million | $6.020 million |
| Net loss | $7.215 million | $6.029 million |
| Net loss per share | $0.19 | $0.16 |
| Cash used in operating activities | $6.228 million | $3.923 million |
Licensing and other revenue was $0.221 million, down 84%; royalty revenue was $1.203 million, down 45%. Research and development expense rose 22% to $7.506 million, while selling, general and administrative expense increased 8% to $2.926 million. The higher gross margin reflected royalties’ larger share of revenue and their lack of associated cost, not revenue growth.
Financial position and liquidity
- At March 31, cash and cash equivalents were $9.420 million, short-term investments $23.368 million, and long-term investments $21.908 million, totaling approximately $54.7 million in cash and investments. Working capital was $29.4 million.
- Cash and cash equivalents fell from $40.025 million at year-end 2011, largely as funds were transferred into marketable securities; the company reported $27.3 million of net transfers from cash to marketable securities during the quarter.
- Total current liabilities were $5.696 million. The filing reports a $0.104 million capital lease obligation due within one year and no material conventional borrowing balance is presented.
- Net cash used in investing activities was $25.177 million, including purchases of marketable securities, partly offset by $2.187 million of net proceeds from an asset sale. Financing activities provided $0.800 million.
Material changes, outlook, and risks
- Management said no new license agreements were signed in Q1 and did not expect new agreements during the remainder of 2012. It expected licensing and royalty revenue to decline as the company redirected resources from IP to IC products.
- MoSys did not expect significant Bandwidth Engine IC revenue until 2013 and expected IC revenue growth not to offset declining IP revenue until at least 2013. Management anticipated near-term operating losses and cash expenditures exceeding receipts in 2012.
- Management believed existing cash, investments, and any operating cash generation would fund requirements through the rest of 2012 and the foreseeable future. It also disclosed a shelf registration allowing sales of up to approximately $30 million of securities through November 2013; additional financing availability and terms were not assured.
- In March, MoSys agreed to grant an exclusive license to part of its high-speed serial I/O IP for approximately $4.3 million. It received about $2.2 million net of transaction costs at signing and recognized a $1.9 million gain. Approximately $1.9 million remained subject to technology-transfer services, development milestones, and an indemnity period.
- An April 3 arbitration decision awarded a claimant approximately $1.4 million, payable in Q2 2012. The filing recorded $0.6 million as SG&A expense and $0.8 million as a reduction to equity for shares to be returned and retired.
- A development and marketing agreement with Credo Semiconductor, in which two MoSys executive officers were investors, provided for up to approximately $1.4 million of milestone payments. MoSys paid $0.2 million in Q1 as R&D expense; the companies will share gross profits after MoSys retains the first $1.2 million.
- Revenue and receivables were concentrated: three customers represented 73% of Q1 revenue and 88% of accounts receivable at quarter-end. Other risks include dependence on successful IC development and commercialization, manufacturing costs and yields, and market acceptance. Management reported disclosure controls were effective as of March 31, 2012.
Most important facts for investors to verify
- Confirm the intended company: the supplied filing is for MoSys, not Peraso.
- Track whether Bandwidth Engine products reach commercialization and generate material revenue on management’s stated timeline.
- Monitor continuing declines in licensing and royalty revenue, cash burn, and the adequacy of liquidity against contractual obligations.
- Verify receipt of the asset-sale holdback after milestones and the indemnity period, and the Q2 payment of the arbitration award.
- Assess customer concentration and the related-party Credo arrangement, including milestone payments and profit-sharing terms.