Filing summary
Issuer and period: The supplied filing is MoSys, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2011—not a Peraso Inc. filing. Figures below are in U.S. dollars; financial statement amounts are in millions unless noted.
Business context
MoSys designs and licenses embedded memory and high-speed interface intellectual property. It was also developing Bandwidth Engine integrated circuits for networking applications; samples had begun shipping in December 2010, but the company did not expect significant product revenue until 2012 or later.
Financial results
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Revenue | $3.292 | $4.269 | $6.831 | $7.819 |
| Gross profit / margin | $2.823 / 86% | $3.728 / 87% | $5.672 / 83% | $6.496 / 83% |
| Operating loss | $(5.660) | $(5.484) | $(11.680) | $(11.287) |
| Net loss | $(5.652) | $(5.427) | $(11.681) | $(11.153) |
| Basic and diluted loss per share | $(0.15) | $(0.17) | $(0.31) | $(0.35) |
- Q2 revenue fell 23% year over year, mainly as licensing revenue declined 40% to $1.216 million; royalties decreased 8% to $2.076 million. First-half revenue declined 13%; royalties were nearly flat at $4.268 million.
- For the first six months, operating cash use was $7.286 million versus $6.765 million a year earlier. Investing activities used $5.006 million, including a $1.0 million MagnaLynx earn-out payment and net transfers into marketable securities. Financing provided $2.372 million, largely from stock issuance.
- At June 30, cash and cash equivalents were $4.420 million; short- and long-term investments totaled $26.900 million. Working capital was $22.9 million. Current liabilities were $5.598 million. The filing reports capital-lease obligations but no conventional borrowings; total capital-lease obligations were $0.252 million.
- Total assets were $65.192 million, compared with $73.966 million at year-end 2010. Stockholders’ equity was $59.539 million, down from $67.057 million.
Changes, outlook, and risks
- Q2 licensing was lower partly because the prior-year quarter included significant customized-license activity and a Japanese IDM technology agreement. Q2 royalties also declined with lower shipments from a licensee whose product was used in Nintendo Wii consoles. First-half royalty stability reflected higher royalties from a major foundry offsetting lower gaming-related shipments.
- Research and development was $12.721 million in the first half, essentially unchanged year over year; management expected R&D to increase as it continued developing Bandwidth Engine and other technologies. SG&A was lower, but management expected increased sales and marketing spending for Bandwidth Engine.
- Management expected cash expenditures to exceed receipts in 2011, but believed cash, investments, and any operating cash generation would fund requirements for the foreseeable future. It noted that additional financing might be needed and was not assured on favorable terms. A $30 million shelf registration was available.
- Revenue depended heavily on a small number of customers: three customers contributed 58% of Q2 revenue, and five customers represented all net accounts receivable at quarter-end. Gaming-related royalties were 15% of Q2 revenue. Customer shipment volatility, long sales cycles, and product-development and manufacturing costs were key risks.
- Contractual obligations totaled $11.677 million, including $6.900 million of operating leases, $4.525 million of purchase commitments, and $0.252 million of capital leases. The $0.5 million MagnaLynx indemnification holdback was expected to be paid in Q4 2011. No material legal proceeding or material subsequent event was reported.
- MoSys adopted a revised multiple-deliverable revenue allocation method in Q1 2011. Management said Q2 revenue would have been about $0.2 million higher under the previous guidance; first-half revenue would have been unchanged.
Investor verification points
- Confirm issuer identity: this filing is for MoSys, Inc., not Peraso Inc.
- Review customer and royalty concentration, especially the gaming-related licensee and the five customers comprising all receivables.
- Track operating cash burn, investment balances, and progress toward Bandwidth Engine commercialization and revenue.
- Assess the assumptions behind management’s liquidity outlook and the timing of contractual payments, including the acquisition holdback.
- Check the effects of the revenue-recognition change and ongoing amortization and stock-based compensation on reported results.