Filing summary
Important filing-identity discrepancy: The request identifies Peraso Inc., but the supplied Form 10-Q is for MoSys, Inc. Investors should verify the company and filing before relying on this summary.
Business context and reporting period
MoSys reported unaudited results for the quarter and six months ended June 30, 2018; the filing was signed August 8, 2018. It describes MoSys as a fabless semiconductor company whose principal product line is Bandwidth Engine ICs, alongside technology licensing. After 2017 restructuring, the company said it was focused mainly on selling existing products and had substantially curtailed new product development.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data and percentages.
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Net revenue | $4.598 | $1.384 | $8.806 | $2.596 |
| Gross profit / margin | $2.765 / 60% | $0.652 / 47% | $5.372 / 61% | $1.262 / 49% |
| Operating income (loss) | $0.525 | $(3.764) | $1.092 | $(7.953) |
| Net income (loss) | $0.315 | $(3.994) | $0.663 | $(8.399) |
| Diluted earnings (loss) per share | $0.04 | $(0.60) | $0.08 | $(1.26) |
- Q2 product revenue was $4.051 million, up 265% year over year; royalty and other revenue was $0.547 million, up 100%. Management attributed growth primarily to higher Bandwidth Engine shipment volumes and average selling prices, plus non-recurring license and engineering services revenue.
- Operating expenses were $2.240 million in Q2 versus $4.416 million a year earlier; the prior-year period included $1.002 million of restructuring charges. R&D fell substantially following workforce and cost reductions.
- Cash and cash equivalents were $3.595 million at June 30, down from $3.868 million at year-end 2017. Working capital was $4.0 million. Operating cash use was $0.198 million for the first half, compared with $7.003 million in the prior-year period.
- Convertible notes payable were $9.647 million, due August 15, 2019. The notes are secured by the company’s assets and bear 8% interest; interest had been paid in kind. Total liabilities were $13.456 million.
Material changes and unusual items
- Revenue and profitability improved materially versus 2017, while operating cash use declined. Product shipments and reduced manufacturing costs contributed to the higher gross profit.
- Deferred revenue declined to $1.576 million from $3.938 million at December 31, 2017. The company recognized $2.6 million of revenue during the first half that had been included in year-end deferred revenue.
- Two customers accounted for 55% of Q2 revenue; three named customers together accounted for 76%. Two customers represented 76% of accounts receivable at June 30, 2018.
- A former sales representative’s commission lawsuit was settled in April 2018 and dismissed. The company recorded about $250,000 of commission expense and paid about $450,000 in Q2.
- Adoption of ASC 606 on January 1, 2018 resulted in a $0.2 million adjustment to opening accumulated deficit; management reported no material effect on the June 30 balance sheet or 2018 interim statements.
Outlook, risks, and contingencies
- Management said a large customer would phase out Bandwidth Engine products over the next 24 months. MoSys expected to complete remaining shipments to that customer in the first half of 2019 and warned that the loss was expected to materially reduce its revenue outlook beginning in Q4 2018.
- Management expected royalty and other revenue to decline in the remainder of 2018 as non-recurring development-project revenue tapered off. It expected R&D and SG&A expenses to remain at approximately then-current levels for the rest of 2018.
- Management stated existing cash should cover anticipated needs for the next 12 months, but also expected to raise additional capital for working capital and repayment of some or all of the notes. It cautioned that financing might not be available on acceptable terms, or at all. Failure to repay the secured notes when due could allow creditors to pursue collateral, potentially impairing continued operations and recoveries for other creditors and shareholders.
- The filing said Bandwidth Engine 3 production was expected to begin in late 2018, with meaningful revenue expected in late 2019. These expectations are subject to the company’s development and funding risks.
- After quarter-end, effective August 8, 2018, CEO Leonard Perham resigned and director Daniel Lewis became president and CEO. The filing reported no material impairment of goodwill in its June 30 test.
Facts investors should verify
- Whether this MoSys filing is the intended filing, given the request’s Peraso Inc. identification.
- The customer phase-out’s timing, expected revenue impact, and the extent to which other customers or products can replace that business.
- Cash needs, availability and terms of potential financing, and the company’s ability to repay the secured notes due August 2019.
- Revenue quality and concentration, including the sustainability of product shipments and non-recurring licensing and engineering revenue.
- Post-quarter leadership changes and any subsequent updates to management’s product, funding, and outlook statements.