Filing summary: MoSys, Inc. (not Peraso Inc.)
Entity mismatch: The supplied filing is MoSys, Inc.’s Form 10-Q for the quarter ended March 31, 2020, filed May 8, 2020. It does not appear to be a Peraso Inc. filing.
Business context and reporting period
MoSys describes itself as an IP-focused fabless semiconductor company selling integrated circuits and licensing technology. Its Accelerator Engine products include Bandwidth Engine ICs. The company said Bandwidth Engine 2 products were expected to remain its primary revenue source through at least 2021, and that it was not developing new IC products. It expected initial products in a newer Software Accelerator line to be available for license in the first half of 2020. Results are unaudited and cover the three months ended March 31, 2020; comparisons are with the same 2019 period.
Key financial metrics
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Total revenue | $1.260 million | $3.520 million; down 64% |
| Product revenue | $1.068 million | $3.386 million; down 68% |
| Royalty and other revenue | $192,000 | $134,000; up 43% |
| Gross profit / margin | $730,000 / 58% | $2.166 million / 62% |
| Operating expenses | $2.096 million | $2.125 million |
| Operating loss | $1.366 million | Operating income of $41,000 |
| Net loss | $1.405 million; $0.61 per share | Net income of $10,000 |
| Cash used in operations | $708,000 | $726,000 |
At March 31, cash and cash equivalents were $5.640 million, with no short-term investments, versus combined cash and investments of $6.353 million at December 31, 2019. Current assets were $7.851 million and current liabilities $1.670 million, implying working capital of approximately $6.181 million and a current ratio of about 4.7x. Total assets were $8.140 million and stockholders’ equity was $3.500 million. Convertible notes payable were $2.970 million; the secured notes bear 8% interest, mature in 2023, and accrued interest has been paid in kind. Cash decreased by $413,000 during the quarter. These figures are in U.S. dollars; financial statement amounts are generally reported in thousands.
Material changes and management commentary
- Management attributed lower product revenue primarily to lower Bandwidth Engine sales; approximately $700,000 of shipments were pushed from Q1 into Q2 because of COVID-19 shelter-in-place orders. Royalty revenue rose on increased shipments by licensees using MoSys IP.
- Gross margin declined to 58% from 62%, reflecting lower product margins, partly offset by a greater contribution from royalties, which generally have no associated cost.
- R&D expense declined 17% to $961,000, mainly due to lower material costs. SG&A increased 17% to $1.135 million, mainly due to personnel costs and stock-based compensation. Management expected both expense categories to remain relatively consistent for the rest of 2020.
- Management expected 2020 cash expenditures to exceed receipts and said revenue would not cover working-capital needs. It stated that COVID-19 was expected to negatively affect revenue for the remainder of 2020, but that the impact could not be quantified.
- On April 21, 2020, after quarter-end, MoSys raised approximately $1.6 million net by selling 1.218 million shares at $1.56 per share. The offering reduced the exercise price on approximately 1.846 million warrants from $6.00 to $2.40 per share, creating potential dilution.
Risks, contingencies, and unusual items
- COVID-19 and related vendor closures disrupted production and shipments in March. Shipments resumed in April, but restrictions impaired some testing and development activities. Further supply-chain disruption, lower demand, delayed customer payments, and limited access to capital markets were identified as risks.
- Revenue and receivables were concentrated: five customers each represented at least 10% of Q1 revenue, together accounting for 82%; three customers represented 81% of receivables at March 31.
- The company reported an accumulated deficit of approximately $239.9 million and a history of losses and negative cash flow, stating it may need to raise additional capital. Equity financing may dilute shareholders; unavailable or unfavorable financing could constrain operations and product development.
- The convertible notes are secured by company assets and include default remedies that may allow noteholders to pursue those assets. No material legal proceedings or material indemnification amounts were reported.
- The company reported disclosure controls were effective as of March 31, 2020 and no material change in internal control over financial reporting during the quarter. No numerical full-year revenue or earnings guidance was provided.
Important facts for investors to verify
- Confirm the issuer identity: this filing is for MoSys, Inc. (ticker MOSY), not Peraso Inc.
- Track whether the approximately $700,000 of delayed shipments occurred in Q2 and how COVID-19 affected subsequent revenue, margins, and cash flow.
- Assess the company’s cash runway, operating cash burn, need for further financing, and dilution from the April offering and repriced warrants.
- Review the secured $2.970 million convertible-note balance, in-kind interest accrual, 2023 maturity, conversion terms, and potential default or asset-security implications.
- Monitor customer and receivables concentration, as well as progress and licensing demand for the Software Accelerator products.