-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P6H6AeUy6F7tEFcj4Yo1mzWeFA1kLf+Mqd5p9Z8JJsbbIG7wD6OdY6kYAJCc0e6c FJudbYNKFTY03+oLOjwV1Q== 0001104659-08-031990.txt : 20080509 0001104659-08-031990.hdr.sgml : 20080509 20080509172013 ACCESSION NUMBER: 0001104659-08-031990 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20080331 FILED AS OF DATE: 20080509 DATE AS OF CHANGE: 20080509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MoSys, Inc. CENTRAL INDEX KEY: 0000890394 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770291941 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-32929 FILM NUMBER: 08819724 BUSINESS ADDRESS: STREET 1: 755 N MATIHILDA AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94085 BUSINESS PHONE: 408 731 1800 MAIL ADDRESS: STREET 1: 755 N MATIHILDA AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94085 FORMER COMPANY: FORMER CONFORMED NAME: MONOLITHIC SYSTEM TECHNOLOGY INC DATE OF NAME CHANGE: 19960613 10-Q 1 a08-11315_110q.htm 10-Q

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q

 

(Mark one)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2008

 

OR

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                to

 

Commission file number 000-32929

 


 

MOSYS, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

77-0291941

(State or other jurisdiction

 

(I.R.S. Employer

of Incorporation or organization)

 

Identification Number)

 

755 N. Mathilda Avenue

Sunnyvale, California, 94085

(Address of principal executive office and zip code)

 

(408) 731-1800

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.       YES  x        NO  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No x

 

As of May 1, 2008, 31,914,847 shares of the Registrant’s common stock, $0.01 par value, were outstanding.

 

 



 

MOSYS, INC.

 

FORM 10-Q
March 31, 2008

 

TABLE OF CONTENTS

 

PART I —

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited):

3

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007

3

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

 

 

 

Item 3.

Qualitative and Quantitative Disclosures About Market Risk

19

 

 

 

Item 4.

Controls and Procedures

19

 

 

 

PART II —

OTHER INFORMATION

19

 

 

 

Item 1A

Risk Factors

19

 

 

 

Item 6.

Exhibits

20

 

 

 

 

Signatures

21

 

2



 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

MOSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value)

 

 

 

March 31,

 

December 31,

 

 

 

2008

 

2007

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

41,319

 

$

37,673

 

Short-term investments

 

18,381

 

27,288

 

Accounts receivable, net

 

1,260

 

895

 

Unbilled contracts receivable

 

260

 

518

 

Prepaid expenses and other current assets

 

2,141

 

2,393

 

Total current assets

 

63,361

 

68,767

 

Long-term investments

 

17,569

 

13,693

 

Property and equipment, net

 

1,281

 

1,396

 

Goodwill

 

12,326

 

12,326

 

Intangible assets, net

 

1,969

 

2,166

 

Other assets

 

217

 

449

 

Total assets

 

$

96,723

 

$

98,797

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

478

 

$

146

 

Accrued expenses and other liabilities

 

2,497

 

2,158

 

Deferred revenue

 

832

 

201

 

Total current liabilities

 

3,807

 

2,505

 

 

 

 

 

 

 

Commitment and contingencies (Note 2)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.01 par value; 20,000 shares authorized; none issued and outstanding at March 31, 2008 and December 31, 2007

 

 

 

Common stock, $0.01 par value; 120,000 shares authorized; 31,884 shares and 31,889 shares issued and outstanding at March 31, 2008 and December 31, 2007

 

319

 

319

 

Additional paid-in capital

 

111,880

 

110,631

 

Accumulated other comprehensive income (loss)

 

(306

)

35

 

Accumulated deficit

 

(18,977

)

(14,693

)

Total stockholders’ equity

 

92,916

 

96,292

 

Total liabilities and stockholders’ equity

 

$

96,723

 

$

98,797

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3



 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
(In thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

Net revenue

 

 

 

 

 

Licensing

 

$

432

 

$

1,158

 

Royalty

 

2,385

 

1,979

 

Total net revenue

 

2,817

 

3,137

 

 

 

 

 

 

 

Cost of net revenue

 

 

 

 

 

Licensing

 

480

 

564

 

Total cost of net revenue

 

480

 

564

 

 

 

 

 

 

 

Gross profit

 

2,337

 

2,573

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

Research and development

 

4,296

 

2,078

 

Selling, general and administrative

 

3,356

 

2,580

 

Total operating expenses

 

7,652

 

4,658

 

 

 

 

 

 

 

Loss from operations

 

(5,315

)

(2,085

)

Interest, other income and expense

 

1,074

 

1,064

 

Loss before income taxes

 

(4,241

)

(1,021

)

Income tax benefit (provision)

 

(43

)

52

 

 

 

 

 

 

 

Net loss

 

$

(4,284

)

$

(969

)

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

Basic and diluted

 

$

(0.14

)

$

(0.03

)

Shares used in computing net loss per share

 

 

 

 

 

Basic and diluted

 

31,673

 

31,689

 

 

 

 

 

 

 

Allocation of stock-based compensation to cost of net revenue and operating expenses included above:

 

 

 

 

 

Cost of net revenue

 

$

80

 

$

100

 

Research and development

 

373

 

250

 

Selling, general and administrative

 

813

 

412

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4



 

MOSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

 

$

(4,284

)

$

(969

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

167

 

112

 

Amortization of intangible assets

 

197

 

 

Stock-based compensation

 

1,266

 

762

 

Changes in current assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(365

)

1,419

 

Unbilled contracts receivable

 

258

 

(26

)

Prepaid expenses and other assets

 

484

 

439

 

Deferred revenue

 

631

 

305

 

Accounts payable

 

332

 

(76

)

Accrued expenses and other liabilites

 

322

 

(269

)

Net cash provided by (used in) operating activities

 

(992

)

1,697

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of property and equipment

 

(52

)

(87

)

Proceeds from sales and maturity of marketable securities

 

31,932

 

64,173

 

Purchase of marketable securities

 

(27,242

)

(63,736

)

Net cash provided by investing activities

 

4,638

 

350

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of common stock

 

 

303

 

Net cash provided by financing activities

 

 

303

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

3,646

 

2,350

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

37,673

 

11,118

 

Cash and cash equivalents at end of period

 

$

41,319

 

$

13,468

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5



 

MOSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. The Company and Summary of Significant Accounting Policies

 

The Company

 

MoSys, Inc. (the Company) was incorporated in California in September 1991, and reincorporated in Delaware in September 2000. The Company designs, develops, markets and licenses high performance semiconductor memory and analog/mixed-signal intellectual property used by the semiconductor industry and communications, networking and storage equipment manufacturers.

 

The accompanying condensed consolidated financial statements of the Company have been prepared without audit in accordance with the rules and regulations of the Securities and Exchange Commission (SEC).  The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date. Certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted in accordance with these rules and regulations. The information in this report should be read in conjunction with the Company’s financial statements and notes thereto included in its most recent annual report on Form 10-K filed with the SEC.

 

In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments (consisting only of normal recurring adjustments) necessary to summarize fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. The operating results for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008 or for any other future period.

 

Basis of Presentation

 

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material intercompany transactions and balances have been eliminated in consolidation. The Company reports financial results on a calendar fiscal year basis.

 

Use of Estimates

 

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues under the percentage of completion method and expenses during the reported period. Actual results could differ from those estimates.

 

Revenue Recognition

 

General

 

The Company generates revenue from the licensing of its intellectual property, or IP, and customers pay fees for licensing, non-recurring engineering services, royalties and maintenance and support. The Company applies the principles of SEC Staff Accounting Bulletin (SAB) No. 104 (SAB 104), “Revenue Recognition,” and recognizes revenue when persuasive evidence of an arrangement exists, delivery or performance has occurred, the sales price is fixed or determinable, and collectibility is reasonably assured. Evidence of an arrangement generally consists of signed agreements. When sales arrangements contain multiple elements (e.g., license and services), the Company applies the provisions of Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21 (EITF 00-21), “Revenue Arrangements with Multiple Deliverables,” to determine the separate units of accounting that exist within the agreement. If more than one unit of accounting exists, the consideration payable to us under the agreement is allocated to each unit of accounting using either the relative fair value method or the residual fair value method as prescribed by EITF 00-21. Revenue is recognized for each unit of accounting when the revenue recognition criteria of SAB 104 have been met for that unit of accounting.

 

6



 

Licensing

 

Licensing revenue consists of fees earned from license agreements, development services and support and maintenance. For license agreements that do not require significant development, modification or customization, revenues are generally recognized when the criteria of SAB 104 have been met. If any of these criteria are not met, revenues are deferred until such time as all criteria have been met.

 

For license agreements that include deliverables requiring significant production, modification or customization, the Company applies American Institute of Certified Public Accountants Statement of Position 81-1 (SOP 81-1), “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” When the Company has significant experience in meeting the design specification involved in the contract and the direct labor hours related to services under the contract can be reasonably estimated, the Company recognizes revenue over the period in which the contract services are performed. For these arrangements, the Company recognizes revenue using the percentage of completion method. Revenue recognized in any period is dependent on the Company’s progress toward completion of projects in progress.  Significant management judgment and discretion are used to estimate total direct labor hours. These judgemental elements include determining that the Company has the experience to meet the design specifications and estimation of the total direct labor hours. The Company follows this method because it can obtain reasonably dependable estimates of the direct labor hours to perform the contract services. The direct labor hours for the development of the licensee’s design are estimated at the beginning of the contract. As these direct labor hours are incurred, they are used as a measure of progress towards completion. The Company has the ability to reasonably estimate the direct labor hours on a contract-by-contract basis based on its experience in developing prior licensees’ designs. During the contract performance period, the Company reviews estimates of direct labor hours to complete the contracts as the contract progresses to completion and will revise its estimates of revenue and gross profit under the contract if the Company revises the estimations of the direct labor hours to complete. The Company’s policy is to reflect any revision in the contract gross profit estimate in reported income in the period in which the facts giving rise to the revision become known. Under the percentage of completion method, provisions for estimated losses on uncompleted contracts are recorded in the period in which the likelihood of such losses is determined. If the amount of revenue recognized under the percentage of completion accounting method exceeds the amount of billings to a customer, then the excess amount is recorded as an unbilled contracts receivable.

 

For contracts involving design specifications that the Company has not previously met or if inherent risks make estimates doubtful, the contract is accounted for under the completed contract method, and the Company defers the recognition of all revenue until the design meets the contractual design specifications.  In this event, the cost of revenue is expensed as incurred. When the Company has experience in meeting design specifications but does not have significant experience to reasonably estimate the direct labor hours related to services to meet a design specification, the Company defers both the recognition of revenue and the cost. In the first three months of 2008 and 2007, none of the Company’s license revenue was recognized under the completed contract method.

 

The Company provides support and maintenance under many of its license agreements. Under these arrangements, the Company provides unspecified upgrades, design rule changes and technical support. No other upgrades, products or other post-contract support are provided. Support and maintenance revenue is recognized at its fair value established by objective evidence, ratably over the period during which the obligation exists, typically 12 months. These arrangements are renewable annually by the customer. Revenue from support and maintenance was $68,000 and $95,000 for the three months ended March 31, 2008 and 2007, respectively, and was included in licensing revenue.

 

From time to time, a licensee may cancel a project during the development phase. Such a cancellation is not within the Company’s control and is often caused by changes in market conditions or the licensee’s business. Cancellations of this nature are an aspect of the Company’s licensing business, and, in general, its license contracts allow the Company to retain all payments that the Company has received or is entitled to collect for items and services provided before the cancellation occurs. Typically under the Company’s license agreements, the licensee is obligated to complete the project within a stated timeframe, including assisting the Company in completing the final milestone. If the Company performs the contracted services, the licensee is obligated to pay the license fees even if the licensee fails to complete verification or cancels the project prior to completion. For accounting purposes the Company will consider a project to have been canceled even in the absence of specific notice from its licensee, if there has been no activity under the contract for six months or longer, and the Company believes that completion of the contract is unlikely. In this event, the Company recognizes revenue in the amount of cash received, if the Company has performed a sufficient portion of the development services. If a cancelled contract had been entered into before the establishment of technological feasibility, the costs associated with the contract would have been expensed prior to the recognition of revenue. In that case, there would be no costs associated with that revenue recognition, and gross margin would increase for the corresponding period. During the three months ended March 31, 2008 and 2007, the Company recorded  no revenue from cancelled contracts.

 

7



 

Royalty

 

The Company’s licensing contracts also provide for royalty reporting and payments at a stated rate based on actual units manufactured or sold by licensees for products that include the Company’s technologies. The Company generally recognizes royalties in the quarter in which the Company receives the licensee’s report. In addition, in the first quarter of 2006, the Company began recognizing revenue from two types of prepaid royalties: pre-production royalties, which cover a fixed number of future unit shipments and are paid in a lump sum when the Company enters into the licensing contract, and post-production royalties, which are paid in a lump sum after the licensee commences production of the royalty-bearing product and applied against future unit shipments. In both cases, these prepaid royalties are non-refundable, and revenue is recognized upon execution of the contract provided that no further performance obligations exist. The Company records pre-production, prepaid royalties as license revenues and post-production, pre-paid royalties as royalty revenues.

 

Cost of Revenue

 

Cost of licensing revenue consists primarily of engineering personnel and overhead allocation costs directly related to development services specified in agreements. These services typically include customization of the Company’s technologies for the licensee’s particular integrated circuit design and may include engineering support to assist in the commencement of production of a licensee’s products. The Company recognizes cost of licensing revenue in the following manner:

 

·     If licensing revenue is recognized using the percentage of completion method, the associated cost of licensing revenue is recognized in the period in which the Company incurs the engineering costs.

 

·     If licensing revenue is recognized using the completed contract method, and to the extent that the amount of engineering cost does not exceed the amount of the related licensing revenue, this cost is deferred on a contract-by-contract basis from the time the Company has established technological feasibility of the product to be developed under the license contract. Technological feasibility is established when the Company has completed all activities necessary to demonstrate that the licensee’s product can be produced to meet the performance specifications when incorporating its technology. Deferred costs are charged to cost of licensing revenue when the related revenue is recognized.

 

·     For contracts entered into prior to establishing technological feasibility, the Company does not defer related development costs, but rather expenses them in the period in which they are incurred. Consequently, upon completion of these contracts, the Company recognizes the related revenues without any corresponding costs.

 

In addition, cost of licensing revenue includes costs related to support and maintenance services.

 

Purchased Intangible Assets

 

Intangible assets acquired by direct purchase are accounted for based on the fair value of assets received and are amortized over the period in which economic benefit is estimated to be received. Identifiable intangible assets are as follows (in thousands):

 

 

 

 

 

March 31, 2008

 

December 31, 2007

 

 

 

Life
(years)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Value

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Value

 

Developed technology

 

3

 

$

1,559

 

$

390

 

$

1,169

 

$

1,559

 

$

260

 

$

1,299

 

Patents

 

5

 

496

 

75

 

421

 

496

 

50

 

446

 

Assembled workforce

 

3

 

493

 

123

 

370

 

493

 

82

 

411

 

Business permits

 

3

 

12

 

3

 

9

 

12

 

2

 

10

 

Total

 

 

 

$

2,560

 

$

591

 

$

1,969

 

$

2,560

 

$

394

 

$

2,166

 

 

Amortization expense was $0.2 million for the three months ended March 31, 2008 and has been included in research and development expense.  There was no amortization expense for the three months ended March 31, 2007.  The estimated aggregate amortization expense to be recognized in future years is approximately $0.6 million for 2008, $0.8 million for 2009, $0.4 million for 2010 and $0.1 million for 2011.

 

8



 

Investments

 

The Company accounts for investments in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Management determines the appropriate classification of securities at the time of purchase. All securities are classified as available-for-sale. The Company’s short-term and long-term investments are carried at fair value, with the unrealized holding gains and losses reported in accumulated other comprehensive income. The Company evaluates declines in market value for potential impairment if the decline results in a value below cost and is determined to be other than temporary. Realized gains and losses and declines in the value judged to be other than temporary are included in other income and expenses. The cost of securities sold is based on the specific identification method.

 

The Company invests its excess cash in money market accounts, auction rate securities, corporate debt, commercial paper and government agency debt securities and considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Investments with original maturities greater than three months and remaining maturities less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments.

 

As of March 31, 2008, the Company had classified $8.7 million (net of $0.4 million in temporary unrealized losses) of its auction rate securities as long-term investments due to the disruption in the credit markets that resulted in widespread failed auctions.  Those failed auctions resulted in a loss of liquidity for sellers but did not constitute a default by the issuer of the underlying security.  All of the Company’s auction rate securities have AAA credit ratings, are collaterized by student loans substantially guaranteed by the U.S. government, and continue to pay interest in accordance with their contractual terms.  The unrealized loss was determined in accordance with SFAS No. 157 (SFAS 157), “Fair Value Measurements,” which was adopted by the Company on January 1, 2008. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The auction rate securities in the Company’s portfolio had successful auctions until January 2008 and as such, their fair value would have been measured using Level 2 inputs at January 1, 2008. However, since February 2008, there has not been a successful auction in that there were insufficient buyers for these auction rate securities, therefore the Company transferred them from the Level 2 to Level 3 category as of March 31, 2008. In accordance with SFAS 157, the Company used the concepts of fair value based on estimated discounted future cash flows of interest income including assumptions for interest rates, timing and amount of cash flows and expected holding periods.

 

SFAS 157 establishes a three-level hierarchy for disclosure to show the extent and level of judgment used to estimate fair value measurements.

 

Level 1 – Inputs used to measure fair value are unadjusted quoted prices that are available in active markets for the identical assets or liabilities as of the reporting date.

 

Level 2 – Inputs used to measure fair value, other than quoted prices included in Level 1, are either directly or indirectly observable as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active.  Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

 

Level 3 – Inputs used to measure fair value are unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.  These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

 

9



 

In accordance with SFAS 157, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents and available for sale investments) as of March 31, 2008 (in thousands):

 

 

 

March 31, 2008

 

 

 

Fair Value

 

Level 1

 

Level 2

 

Level 3

 

Money market funds

 

$

36,934

 

$

36,934

 

$

 

$

 

Commercial paper

 

9,093

 

 

9,093

 

 

Corporate debt securities

 

15,892

 

 

15,892

 

 

Government agency debt securities

 

4,248

 

 

4,248

 

 

Auction rate securities

 

8,708

 

 

 

8,708

 

Total

 

$

74,875

 

$

36,934

 

$

29,233

 

$

8,708

 

 

The following table provides a summary of changes in fair value of the Company’s auction rate securities under SFAS 157 as of March 31, 2008 (in thousands):

 

 

 

March 31, 2008

 

 

 

Fair Value

 

Balance at December 31, 2007

 

$

11,600

 

Settlements

 

(2,450

)

Unrealized loss included in accumulated other comprehensive loss

 

(442

)

Balance at March 31, 2008

 

$

8,708

 

 

Per Share Amounts

 

Basic net loss per share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Potential common shares are composed of incremental shares of common stock issuable upon the exercise of stock options or restricted stock awards. For the three months ended March 31, 2008 and 2007, stock options to purchase 7.5 million and 6.1 million shares, respectively, were excluded from computation of diluted net loss per share as their inclusion would be anti-dilutive.

 

Comprehensive Loss

 

Comprehensive loss, as defined, includes all changes in equity (net assets) during a period from non-owner sources. The components of other comprehensive loss for the three months ended March 31, 2008 and 2007 were as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

Net loss

 

$

(4,284

)

$

(969

)

Change in net unrealized loss on available-for-sale securities

 

(341

)

32

 

Comprehensive loss

 

$

(4,625

)

$

(937

)

 

Recent Accounting Pronouncements

 

In February 2008, the FASB issued FASB Staff Position No. 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2) , to partially defer SFAS 157. FSP 157-2 defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. The Company is currently evaluating the impact FSP 157-2 will have on its consolidated financial statements.

 

Note 2. Commitments and Contingencies

 

Indemnifications

 

In the ordinary course of business, the Company enters into contractual arrangements under which the Company may agree to indemnify the counter-party from any losses incurred relating to breach of representations and warranties, failure to perform certain covenants, or claims and losses arising from certain events as outlined within the particular contract, which may include, for example, losses arising from litigation or claims relating to past performance. Such indemnification clauses may not be

 

10



 

subject to maximum loss limits. The Company has entered into indemnification agreements with its officers and directors. No amounts are reflected in our condensed consolidated financial statements as of March 31, 2008 and December 31, 2007 related to these indemnifications.

 

The Company has not estimated the maximum potential amount of indemnification liability under these agreements due to the limited history of prior claims and the unique facts and circumstances applicable to each particular agreement. To date, the Company has not made any payments related to these indemnification agreements.

 

Legal Matters

 

The Company is not a party to any material legal proceeding that would have a material adverse effect on its condensed consolidated financial position or results of operations. From time to time the Company may be subject to legal proceedings and claims in the ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financial resources and diversion of management efforts.

 

Note 3. Business Segments and Significant Customers

 

The Company operates in one business segment and uses one measurement of profitability for its business. Revenue attributed to the United States and to all foreign countries is based on the geographical location of the customer. The Company sold its products and licensed its technologies to customers in North America, Asia and Europe as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2008

 

2007

 

Japan

 

$

1,864

 

$

2,296

 

United States

 

314

 

743

 

Asia

 

446

 

98

 

Europe

 

193

 

 

Total

 

$

2,817

 

$

3,137

 

 

Customers who accounted for at least 10% of total revenues were as follows:

 

 

 

Three Months Ended
March 31,

 

 

 

2008

 

2007

 

Customer A

 

58

%

65

%

Customer B

 

10

%

 

 

Note 4. Provision for Income Taxes

 

The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes.” Under this method, the Company determines deferred tax assets and liabilities based upon the differences between the financial statement and tax bases of the Company’s assets and liabilities using tax rates in effect for the year in which the Company expects the differences to affect taxable income. A valuation allowance is established for any deferred tax assets for which realization is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company recorded a provision for income taxes of $43,000 and a benefit of $52,000 for the three months ended March 31, 2008 and 2007, respectively. On January 1, 2007, the Company adopted the provisions of FASB Financial Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes - an interpretation of SFAS 109.”   FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company believes that any income tax filing positions and deductions not sustained on audit will not result in a material change to its financial position or results of operations. The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations.  The Company is not currently under examination by income tax authorities in federal, state or other foreign jurisdictions.  The 2004 through 2007 tax years generally remain subject to examination by federal, state, and foreign tax authorities.  As of March 31, 2008, the Company did not have any unrecognized tax benefits and did not expect its unrecognized tax benefits to change significantly over the next twelve months. The Company recognizes interest related to unrecognized tax benefits in its income tax

 

11



 

expense and penalties related to unrecognized tax benefits as other income and expenses. During the three months ended March 31, 2008 and 2007, the Company did not recognize any interest or penalties related to unrecognized tax benefits.

 

Note 5. Stock-Based Compensation

 

In accordance with SFAS No. 123 (revised 2004) (SFAS 123(R)), “Share-Based Payment,” the Company recorded $1.3 million and $0.8 million of stock-based compensation expense for the three months ended March 31, 2008 and 2007, respectively. The expense of these awards is recognized on a straight-line basis over the requisite service period, usually the vesting period, based on the grant-date fair value. The total compensation cost of options granted, but not yet vested, as of March 31, 2008 was $10.5 million and is expected to be recognized as expense over a weighted average period of approximately 2.77 years.

 

SFAS 123(R) requires the Company to present the tax benefits resulting from tax deductions in excess of the compensation cost recognized from the exercise of stock options as financing cash flows in the consolidated statement of cash flows. For each of the quarters ended March 31, 2008 and 2007, there were no such tax benefits associated with the exercise of stock options due to the Company’s loss position.

 

Valuation Assumptions and Expense Information under SFAS 123(R)

 

As prescribed in SFAS 123(R), the fair value of the Company’s share-based payment awards for three months ended March 31, 2008 and 2007 was estimated on the grant date using a Black-Scholes valuation method and an option-pricing model with the following assumptions:

 

 

 

Three Months Ended
March 31,

 

Employee stock options:

 

2008

 

2007

 

Risk-free interest rate

 

1.9% - 2.7

%

 

4.5% - 4.8

%

 

Volatility

 

48.5% - 53.6

%

 

45.5% - 47.7

%

 

Expected life (years)

 

4.0

 

 

4.0

 

 

Dividend yield

 

0

%

 

0

%

 

 

The risk-free interest rate was derived from the Daily Treasury Yield Curve Rates as published by the U.S. Department of the Treasury as of the grant date for terms equal to the expected terms of the options. The expected volatility was based on the combination of historical volatility, excluding the volatility during the period of a one time non-recurring event, which was the aborted acquisition of the Company by Synopsys, Inc. in 2004, and the expected future volatility of the Company’s stock price. The expected term of options granted was derived from historical data based on employee exercises and post-vesting employment termination behavior. A dividend yield of zero is applied since the Company has never paid dividends and has no intention to pay dividends in the near future.

 

As required by SFAS 123(R), the stock-based compensation expense is calculated based on estimated forfeiture rate. An annualized forfeiture rate of 15% has been used as a best estimate of future forfeitures based on the Company’s historical forfeiture experience. Under the true-up provisions of SFAS 123(R), the stock-based compensation expense will be adjusted in later periods if the actual forfeiture rate is different from the estimate.

 

A summary of the option and restricted stock award (RSA) activity under the 1996 Stock Plan and the Amended and Restated 2000 Stock Option and Equity Incentive Plan (Amended 2000 Plan) plans is presented below (in thousands, except exercise price):

 

 

 

Options Outstanding

 

 

 

Available
for Grant

 

Number of
Shares

 

Weighted
Average
Exercise
Prices

 

Balance at December 31, 2007

 

1,062

 

5,411

 

$

6.80

 

Additional authorized under the Amended 2000 Plan

 

500

 

 

 

Options granted

 

(188

)

188

 

$

3.59

 

Options cancelled

 

518

 

(518

)

$

7.74

 

Awards retired

 

(11

)

 

 

Options exercised

 

 

 

 

Options expired

 

 

(40

)

$

8.00

 

Balance at March 31, 2008

 

1,881

 

5,041

 

$

6.57

 

 

12



 

The Company may also award shares to new employees as a material inducement to the acceptance of employment with the Company, and such awards are not made under the Amended 2000 Plan. These grants must be approved by the compensation committee of the board of directors, a majority of the independent directors or an authorized executive officer, as determined under the Marketplace Rules of the Nasdaq Stock Market.

 

A  summary of the inducement grant option activity is presented below (in thousands, except exercise price):

 

 

 

Options Outstanding

 

 

 

Number of
Shares

 

Weighted
Average
Exercise
Prices

 

Balance at December 31, 2007

 

1,619

 

$

5.92

 

Granted

 

965

 

$

4.00

 

Cancelled

 

(137

)

$

7.52

 

Exercised

 

 

 

Balance at March 31, 2008

 

2,447

 

$

5.08

 

 

A summary of the restricted stock award activity is presented below (in thousands, except fair value):

 

 

 

Number of
Shares

 

Weighted
Average
Grant-Date
Fair Value

 

Non-vested shares at December 31, 2007

 

539

 

$

6.99

 

Granted

 

 

 

Vested

 

(19

)

$

5.91

 

Cancelled

 

(7

)

$

5.91

 

Non-vested shares at March 31, 2008

 

513

 

$

6.99

 

 

The following table summarizes significant ranges of outstanding and exercisable options and inducement grants as of March 31, 2008 (in thousands, except contractual life and exercise price):

 

 

 

Options Outstanding

 

Options Exercisable

 

Range of Exercise Price

 

Number
Outstanding

 

Weighted
Average
Remaining
Contractual
Life
(in Years)

 

Weighted
Average
Exercise
Price

 

Aggregate
Intrinsic
value

 

Number
Exercisable

 

Weighted
Average
Remaining
Contractual
Life (in Years)

 

Weighted
Average
Exercise
Price

 

Aggregate
Intrinsic
value

 

$1.00 - $4.09

 

1,494

 

6.52

 

$

3.77

 

$

878

 

663

 

6.08

 

$

3.85

 

$

341

 

$4.10 - $8.00

 

4,447

 

5.87

 

$

5.78

 

$

34

 

1,789

 

4.42

 

$

5.78

 

$

20

 

$8.01 - $10.00

 

1,260

 

4.62

 

$

8.77

 

 

482

 

3.87

 

$

9.32

 

 

$10.01 - $15.69

 

287

 

3.84

 

$

11.04

 

 

287

 

3.84

 

$

11.04

 

 

 

 

7,488

 

5.71

 

$

6.08

 

$

912

 

3,221

 

4.63

 

$

6.38

 

$

361

 

 

As of March 31, 2008, the Company had 6,472,548 shares fully vested and expected to vest, after estimated forfeitures, with a remaining contractual life of 5.62 years, weighted average exercise price of $6.11 and aggregate intrinsic value of  $0.8 million.

 

The total fair value of shares vested using the Black-Scholes method during the three months ended March 31, 2008 and 2007 were $0.8 million and $0.8 million, respectively. The total intrinsic value of employee stock options exercised during the three months ended March 31, 2008 and 2007 were $0 and $0.7 million, respectively.

 

Options exercisable were 3.2 million and 2.8 million at March 31, 2008 and 2007, respectively.

 

13



 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this report. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which include, without limitation, statements about the market for our technology, our strategy, competition, expected financial performance, all information disclosed under Item 3 of this Part I, and other aspects of our business identified in the Company’s most recent annual report on Form 10-K filed with the Securities and Exchange Commission on March 17, 2008 and in other reports that we file from time to time with the Securities and Exchange Commission. Any statements about our business, financial results, financial condition and operations contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words “believes,” “anticipates,” “expects,” “intends,” “plans,” “projects,” or similar expressions are intended to identify forward-looking statements. Our actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described in Risk Factors and elsewhere in this report. We undertake no obligation to update publicly any forward-looking statements for any reason, except as required by law, even as new information becomes available or events occur in the future.

 

Overview

 

We design, develop, market and license memory intellectual property, or IP, used by the semiconductor industry. Our patented memory solutions include 1T-SRAM and 1T-FLASH high-density alternatives to traditional volatile and non-volatile embedded memory. We license these technologies to companies that incorporate, or embed, memory on complex integrated circuits, such as Systems on Chips, or SoCs.

 

Our customers include semiconductor companies, integrated device manufacturers (IDMs), and foundries. We generate revenue from the licensing of our IP, and our customers pay us fees for licensing, non-recurring engineering services, royalties and maintenance and support. Royalty revenues are typically earned under our license agreements when our licensees manufacture or sell products that incorporate any of our technologies. Generally, we expect our total sales cycle, or the period from our initial discussion with a prospective licensee to our receipt of royalties from the licensee’s use of our technologies, to run from 18 to 24 months. The portion of our sales cycle from the initial discussion to the receipt of license fees may run from 6 to 12 months, depending on the complexity of the proposed project and degree of development services required.

 

In 2005, we began delivering our 1T-SRAM CLASSIC Memory Macro products to licensees. These macros are silicon-proven, high-density solutions offering customers rapid memory block integration into their SoC designs. They are pre-configured and require minimal additional customization, and we believe they will enable us to increase our penetration of the market for very dense, low power, high speed embedded memory applications.

 

In July 2007, we entered into an asset purchase agreement and a transition services agreement with Atmel Corporation (Atmel) with respect to the purchase of several analog/mixed-signal integrated circuit designs and related assets from Atmel, including the rights to acquire an Atmel subsidiary located in Romania that employed 58 people and another Atmel subsidiary located in Shanghai, China that employed 45 people at the time of purchase. Under the agreement, we made a cash payment of $1.0 million, assumed net liabilities of acquired subsidiaries, and agreed to reimburse certain pre-closing operating expenses for a total purchase price of approximately $1.4 million.

 

In August 2007, we acquired intellectual property and other assets from LSI Design and Integration Corporation (LDIC) in a transaction related to the Atmel acquisition. We acquired this technology and related assets in exchange for 500,000 shares of the Company’s common stock with an issuance date fair value of $7.07 per share. Of the 500,000 shares issued by us for the LDIC acquisition, 300,000 shares valued at $7.07, or $2.1 million, were recorded as purchase price of intangible assets and the other 200,000 shares have been reserved for future distribution to employees and are being recognized as compensation expense over the two-year vesting period. In addition, the agreement calls for an earn-out payment equal to 25% of the license and royalty revenues generated by us from the integrated circuit designs acquired from Atmel and LDIC that are recognized for financial accounting purposes in the first 12 calendar months following the closing date.  Any such payments will be recorded as additional purchase consideration when earned.

 

Sources of Revenue

 

We generate two types of revenue: licensing and royalties.

 

14



 

Licensing.  Our license agreements involve long sales cycles, which makes it difficult to predict when the agreements will be signed. In addition, our licensing revenues fluctuate from period-to-period, and it is difficult for us to predict the timing and magnitude of such revenue from quarter-to-quarter. Moreover, we believe that the amount of licensing revenue for any period is not necessarily indicative of results in any future period.

 

Our licensing revenue consists of fees for providing circuit design, layout and design verification and granting a license to a customer for embedding our technology into its product. License fees generally range from $100,000 to several million dollars per contract, depending on the scope and complexity of the development project, and the extent of the licensee’s rights. The licensee generally pays the license fees in installments at the beginning of the license term and upon the attainment of specified milestones. The vast majority of our contracts allow for milestone billing based on work performed. Fees billed prior to revenue recognition are recorded as deferred revenue.

 

Royalty.  Each of our license agreements provides for royalty payments at a stated rate. We negotiate royalty rates by taking into account such factors as the anticipated volume of the licensee’s sales of products utilizing our technologies and the cost savings to be achieved by the licensee through the use of our technology. Our license agreements generally require the licensee to report the manufacture or sale of products that include our technology after the end of the quarter in which the sale or manufacture occurs.

 

As with our licensing revenue, the timing and level of royalties are difficult to predict. They depend on the licensee’s ability to market, produce and sell products incorporating our technology. Many of the products of our licensees that are currently subject to licenses from us are consumer products, such as electronic game consoles, for which demand can be seasonal and generally highest in the fourth quarter.

 

Critical Accounting Policies and Estimates

 

The discussion and analysis of our financial condition and results of operation are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis we make these estimates based on our historical experience and on assumptions that we consider reasonable under the circumstances. Actual results may differ from these estimates, and reported results could differ under different assumptions or conditions. Our significant accounting policies and estimates are disclosed in Note 1 of the “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2007.  As of March 31, 2008, there have been no material changes to our significant accounting policies and estimates.

 

Recent Accounting Pronouncements

 

In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (FSP 157-2), to partially defer FASB Statement No. 157, “Fair Value Measurements” (SFAS 157). FSP 157-2 defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. We are currently evaluating the impact FSP 157-2 will have on our consolidated financial statements.

 

Results of Operations

 

Three Months Ended March 31, 2008 and 2007

 

Revenues.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Licensing

 

$

432

 

$

1,158

 

$

(726

)

(63

)%

Percentage of total revenues

 

15

%

37

%

 

 

 

 

 

15



 

Licensing revenue consists of fees earned from license agreements, development services and support and maintenance.

 

Licensing revenue decreased for the three months ended March 31, 2008 compared with the same period a year ago primarily due to a significant decline in new customers and agreements for our 1T-SRAM technology licenses.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Royalty

 

$

2,385

 

$

1,979

 

$

406

 

21

%

Percentage of total revenues

 

85

%

63

%

 

 

 

 

 

Royalty revenue represents amounts earned under provisions in our licensing contracts that require our licensees to report royalties and make payments at a stated rate based on actual units manufactured or sold by licensees for products that include our technologies. We generally recognize royalties in the quarter in which we receive the licensee’s report.

 

Royalty revenue increased for the three months ended March 31, 2008 compared with the same period a year ago primarily due to an increase in royalties earned on the sale of the Nintendo Wii game console and increased  royalties from a foundry partner, which had an increase in the number of products incorporating our technologies that were manufactured on its 90nm and 65nm processes.

 

Cost of net revenue and gross profit.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Cost of net revenue

 

$

480

 

$

564

 

$

(84

)

(15

)%

Percentage of total revenues

 

17

%

18

%

 

 

 

 

 

Cost of net revenue consists of personnel costs for engineers assigned to revenue-generating licensing arrangements and related overhead allocation costs.

 

Cost of net revenue decreased for the three months ended March 31, 2008 compared with the same period a year ago primarily due to fewer license arrangements for our 1T-SRAM technology requiring significant engineering services.  We expect that cost of licensing revenues will continue to grow in absolute dollars and will be higher as a percentage of net revenue for 2008 because we anticipate entering into license agreements requiring more complete development services due to the shift by many licensees to smaller process geometries, including 65nm and below. Cost of net revenue included stock-based compensation expense of $0.1 million for each of the three months ended March 31, 2008 and 2007.

 

Gross profit decreased to $2.3 million for the three months ended March 31, 2008 from $2.6 million from the year ago quarter mainly due to a decrease in our licensing revenue, although that decrease was partially offset by the increase in royalty revenue, which has no related costs.  Therefore, gross margin percentage increased to 83% for the three months ended March 31, 2008 from 82% in the same quarter of the prior year.

 

Research and Development.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Research and development

 

$

4,296

 

$

2,078

 

$

2,218

 

107

%

Percentage of total revenues

 

153

%

66

%

 

 

 

 

 

Our research and development expenses include development and design of variations of the 1T-SRAM technologies for use in different manufacturing processes used by licensees, development of our 1T-FLASH technology solution and costs related to our analog/mixed-signal design technology, including the subsidiaries in China and Romania, and amortization of acquired intangible assets. We expense research and development costs as they are incurred.

 

16



 

Research and development expense increased for the three months ended March 31, 2008 compared with the same period a year ago primarily due to a $1.4 million increase in costs, primarily personnel-related, attributable to the analog and mixed signal technology and personnel acquired in the third quarter of 2007, a $0.2 million increase in amortization of purchased intangible assets from the Atmel and LDIC acquisitions, a $0.2 million increase in costs attributable to the expansion of our engineering team working on our non-volatile 1T-FLASH memory technology and 1T-SRAM display driver applications and a $0.1 million increase in stock-based compensation expense.

 

Research and development expenses included stock-based compensation expense of $0.4 million and $0.3 million for the three months ended March 31, 2008 and 2007, respectively.

 

Selling, General and Administrative.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Selling, general and administrative

 

$

3,356

 

$

2,580

 

$

776

 

30

%

Percentage of total revenues

 

119

%

82

%

 

 

 

 

 

Selling, general and administrative expenses consist primarily of personnel and related overhead costs for sales, marketing, customer support, finance, human resources and general management.

 

Selling, general and administrative expenses increased for the three months ended March 31, 2008 compared with the same period a year ago primarily due to a $0.4 million increase in stock-based compensation expense and a $0.2 million increase in personnel and related expenses as we expanded our sales and marketing organizations to enhance our analog/mixed-signal expertise.

 

Selling, general and administrative expenses included stock-based compensation expense of $0.8 million and $0.4 million for the three months ended March 31, 2008 and 2007, respectively.

 

Interest, Other Income and Expense.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Interest, other income and expense

 

$

1,074

 

$

1,064

 

$

10

 

1

%

Percentage of total revenues

 

38

%

34

%

 

 

 

 

 

Interest, other income and expense was primarily comprised of interest income on our investments, which declined by $0.1 million for three months ended March 31, 2008 due to lower interest rates earned and lower average investment balances than during the comparable quarter in 2007.  The decline was offset by an increase in non-investment interest income of $0.1 million attributable to an income tax refund received in the first quarter of 2008 resulting from an amended tax return.

 

Provision for Income Taxes.

 

 

 

Three Months Ended
March 31,

 

Year-Over-Year
Change

 

 

 

2008

 

2007

 

2007 to 2008

 

 

 

(dollar amounts in thousands)

 

Income tax benefit (provision)

 

$

(43

)

$

52

 

$

95

 

(183

)%

Percentage of total revenues

 

(2

)%

2

%

 

 

 

 

 

Our income tax provisions were primarily attributable to foreign jurisdictions.

 

Provision for Income Taxes.  A (provision) benefit for income taxes of ($43,000) and $52,000 was recorded for the three months ended March 31,  2008 and 2007, respectively.  The provision for the three months ended March 31, 2008 was primarily

 

17



 

attributable to taxes for our foreign subsidiaries and branches and minimum U.S. state income tax liabilities. We believe that, based on the history of our operating losses and other factors, the weight of available evidence indicates that it is more likely than not that we will not be able to realize the benefit of our net operating losses. Accordingly, a full valuation reserve has been recorded against our net deferred tax assets.

 

Liquidity and Capital Resources; Changes in Financial Condition

 

Cash Flows

 

As of March 31, 2008, we had cash and cash equivalents and long and short-term investments of $77.3 million and had total working capital of $59.6 million. Our primary capital requirements are for working capital needs.

 

Net cash used in operating activities was $1.0 million for the first three months of 2008 and primarily consisted of the net loss of $4.3 million and an increase in accounts receivable of $0.4 million, offset by non-cash charges, including stock-based compensation expense of $1.3 million and depreciation and amortization of $0.4 million, increases in prepaid expenses and other assets of $0.5 million and deferred revenues of $0.6 million.

 

Net cash provided by operating activities was $1.7 million for the first three months of 2007 and primarily consisted of the net loss of $1.0 million, offset by non-cash charges, including stock-based compensation expense of $0.8 million and depreciation and amortization expense of $0.1 million, and a decrease in accounts receivable.

 

Net cash provided by investing activities was $4.6 million for the first three months of 2008 and was primarily attributable to $4.7 million of net proceeds from sales and purchases of marketable securities, partially offset by $0.1 million of expenditures for property and equipment.

 

Net cash provided by investing activities was $0.4 million for the first three months of 2007 and was primarily attributable to $0.4 million of net proceeds from the sales and purchases of marketable securities, offset by  purchases of computer equipment and software upgrades of $0.1 million.

 

There was no cash impact from financing activities for the first three months of 2008.

 

Net cash provided by financing activities was $0.3 million in the first three months of 2007 due to proceeds received from the exercise of stock options.

 

Our future liquidity and capital requirements are expected to vary from quarter-to-quarter, depending on numerous factors, including:

 

·                  level and timing of licensing and royalty revenues;

 

·                  cost, timing and success of technology development efforts, including meeting customer design specifications;

 

·                  market acceptance of our existing and future technologies and products;

 

·                  competing technological and market developments;

 

·                  cost of maintaining and enforcing patent claims and intellectual property rights;

 

·                  variations in manufacturing yields, materials costs and other manufacturing risks;

 

·                  costs of acquiring other businesses and integrating the acquired operations; and

 

·                    profitability of our business.

 

We expect that our existing cash, cash equivalents, and investments along with our existing capital and cash generated from operations, if any, will be sufficient to meet our capital requirements for the foreseeable future. We expect that a licensing business such as ours generally will require less cash to support operations.

 

18



 

However, we cannot be certain that we will not require additional financing at some point in time. Should our cash resources prove inadequate, we may need to raise additional funding through public or private financing. There can be no assurance that such additional funding will be available to us on favorable terms, if at all. The failure to raise capital when needed could have a material, adverse effect on our business and financial condition.

 

ITEM 3. Qualitative and Quantitative Disclosures About Market Risk

 

Our investment portfolio consists of money market accounts, auction rate securities, corporate debt, commercial paper and government agency debt obligations. The portfolio dollar-weighted average maturity of these investments is within 12 months.  Our primary objective with this investment portfolio is to invest available cash while preserving principal and meeting liquidity needs. No single security should exceed 5% of the portfolio at the time of purchase. In accordance with our investment policy, we place investments with high credit quality issuers and limit the amount of credit exposure to any one issuer. These securities, which approximated $36.0 million as of March 31, 2008 and earned an average interest rate of approximately 3.0% during the first three months of 2008, are subject to interest rate and credit risks. We do not have any investments denominated in foreign country currencies, and therefore are not subject to foreign currency risk on such investments.

 

As of March 31, 2008, the Company had classified $8.7 million (net of $0.4 million in temporary unrealized losses) of its auction rate securities as long-term investments due to the disruption in the credit markets that resulted in widespread failed auctions.  Those failed auctions resulted in a loss of liquidity for sellers but did not constitute a default by the issuer of the underlying security.  All of the Company’s auction rate securities have AAA credit ratings, are collaterized by student loans substantially guaranteed by the U.S. government, and continue to pay interest in accordance with their contractual terms.  The unrealized loss was determined in accordance with SFAS No. 157 (SFAS 157), “Fair Value Measurements,” which was adopted by the Company on January 1, 2008. SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The auction rate securities in the Company’s portfolio had successful auctions until January 2008 and as such, their fair value would have been measured using Level 2 inputs at January 1, 2008. However, since February 2008, there has not been a successful auction in that there were insufficient buyers for these auction rate securities, therefore the Company transferred them from the Level 2 to Level 3 category as of March 31, 2008. In accordance with SFAS 157, the Company used the concepts of fair value based on estimated discounted future cash flows of interest income including assumptions for interest rates, timing and amount of cash flows and expected holding periods.

 

ITEM 4. Controls and Procedures

 

Disclosure Controls and Procedures.  Our management is responsible for establishing and maintaining adequate internal control over our financial reporting. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as required by SEC Rule 13a-15(b). Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2008 to ensure that information required to be disclosed by us in the reports filed or submitted by us with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

 

Changes in Internal Control over Financial Reporting.  During the first three months of 2008, there was no material change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II—OTHER INFORMATION

 

ITEM 1A. Risk Factors

 

We face many significant risks in our business, some of which are unknown to us and not presently foreseen.  These risks could have a material adverse impact on our business, financial condition and results of operations in the future.  We have disclosed a number of material risks under Item 1A of our annual report on Form 10-K for the year ended December 31, 2007, which we filed with the Securities and Exchange Commission on March 17, 2008.  The following discussion is of material changes to the risk factors disclosed in that report.

 

19



 

Our revenue has been highly concentrated among a small number of licensees and customers, and our results of operations could be harmed if we lose a key revenue source and fail to replace it.

 

Our overall revenue has been highly concentrated, with a few customers accounting for a significant percentage of our total revenue. For the three months ended March 31, 2008, two customers represented 58% and 10% of total revenue and for the three months ended March 31, 2007, one customer represented 65% of total revenue. We expect that a relatively small number of licensees will continue to account for a substantial portion of our revenue for the foreseeable future.

 

Our royalty revenue also has been highly concentrated among a few licensees, and we expect this trend to continue for the foreseeable future. In particular, a substantial portion of our licensing and royalty revenue in the three months ended March 31, 2008 and 2007 has come from the licenses for integrated circuits used by one electronics manufacturing company. Royalties earned from the production of this company’s gaming devices incorporating our 1T-SRAM technology represented 56% and 41% of total revenue for the three months ended March 31, 2008 and 2007, respectively. This manufacturer faces intense competitive pressure in the video game market, which is characterized by extreme volatility, costly new product introductions and rapidly shifting consumer preferences, and we cannot be certain whether their sales of products incorporating our technology will increase or decrease beyond prior or current levels.

 

As a result of this revenue concentration, our results of operations could be impaired by the decision of a single key licensee or customer to cease using our technology or products or by a decline in the number of products that incorporate our technology that are sold by a single licensee or customer or by a small group of licensees or customers.

 

Our revenue concentration may also pose credit risks, which could negatively affect our cash flow and financial condition.

 

We might also face credit risks associated with the concentration of our revenue among a small number of licensees and customers. As of March 31, 2008, four customers represented 50%, 16%, 14% and 13% of total trade receivables, respectively. Although the majority of the trade receivables from these customers were subsequently collected, our failure to collect receivables from any customer that represents a large percentage of receivables on a timely basis, or at all, could adversely affect our cash flow or results of operations and might cause our stock price to fall.

 

Our investments in adjustable rate securities are subject to risks which may cause losses and affect the liquidity of these investments.

 

As of March 31, 2008, we held $8.7 million of municipal notes investments, classified as long-term investments, with an auction reset feature (auction rate securities) whose underlying assets were primarily in student loans. All our auction rate securities have a AAA credit rating. Auctions for all of these securities have failed during the quarter ended March 31, 2008. An auction failure means that the parties wishing to sell their securities could not do so as a result of a lack of buying demand. As a result of auction failures, our ability to liquidate and fully recover the carrying value of our auction rate securities in the near term has been limited, therefore as of March 31, 2008, we recognized $0.4 million in unrealized losses related to these securities.  Although we consider these unrealized losses to be temporary, there is a risk that we may incur other-than-temporary impairment charges on the value of these if the issuers are unable to successfully close future auctions and their credit ratings deteriorate. We may be required to wait until market stability is restored for these instruments or until the final maturity of the underlying notes (up to 40 years) to realize our investments’ recorded value.

 

ITEM 6. Exhibits

 

(a)   Exhibits

 

10.25.1 (10)*

New Employee Inducement Grant Stock Option Agreement between Registrant and Leonard Perham dated as of November 8, 2007

10.25.2(10)*

New Employee Inducement Grant Stock Option Agreement between Registrant and Leonard Perham dated as of November 8, 2007

10.25.3(10)*

New Employee Inducement Grant Stock Option Agreement between Registrant and Leonard Perham dated as of November 8, 2007

31.1

Rule 13a-14 certification

31.2

Rule 13a-14 certification

32

Section 1350 certification

 

(10)         Exhibit is refiled to incorporate typographical corrections.  Exhibit number is the same as the exhibit originally filed with the Form 10-K filed by the Company on March 17, 2008 (Commission File No. 000-32929).

 


* Management compensatory plan

 

20



 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: May 9, 2008

 

 

 

 

 

 

/s/ Leonard Perham

 

Leonard Perham

 

President and Chief Executive Officer

 

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EX-10.25.1 2 a08-11315_1ex10d25d1.htm EX-10.25.1

Exhibit 10.25.1

 

NEW EMPLOYEE INDUCEMENT GRANT STOCK OPTION AGREEMENT

 

TO:  Leonard Perham (the “Optionee”):

 

MoSys, Inc., a Delaware corporation (the “Company”), hereby grants to Optionee an option (“Option”) to purchase a total of Eight Hundred Thousand (800,000) shares of Common Stock, $0.01 par value per share (“Shares”), of the Company, at the price set forth herein.

 

DEFINITIONS FOR CERTAIN DEFINED TERMS ARE AS FOLLOWS:

 

“Agreement” means this Stock Option Incentive Grant Agreement.

 

“Board of Directors” means the Board of Directors of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock of the Company, par value $.01 per share.

 

“Committee” means the Compensation Committee of the Board of Directors.

 

“Consultant” means any independent contractor retained to perform services for the Company or a Subsidiary.

 

“Continuous Service” means the absence of any interruption or termination of service as an Employee, Director or Consultant by the Company, a Parent, or any Subsidiary. Continuous Service shall not be considered interrupted during any period of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and any Parent, Subsidiary or successor of the Company. A leave of absence approved by the Company shall include sick leave, military leave or any other personal leave approved by an authorized representative of the Company.

 

“Corporate Transaction” means:

 

(a)  an acquisition after the Grant Date by an individual, an entity or a group in one or more related transactions (excluding the Company or an employee benefit plan of the Company or a corporation controlled by the Company’s stockholders) of beneficial ownership of 45 percent or more of the Company’s common stock or voting securities; or

 

(b)  consummation of a complete liquidation or dissolution of the Company or a merger, consolidation, reorganization or sale of all or substantially all of the Company’s assets (collectively, a “Business Combination”) after the Grant Date, other than a Business Combination in which (A) the stockholders of the Company receive beneficial ownership of 50 percent or more of the stock of the corporation resulting from the Business Combination and (B) at least a majority of the board of directors of such resulting corporation were incumbent directors of the Company immediately prior to the consummation of the Business Combination, and (C) after which no individual, entity or group (excluding any corporation or other entity

 



 

resulting from the Business Combination or any employee benefit plan of such corporation or of the Company) who did not have beneficial ownership of 45 percent or more of the stock of the resulting corporation or other entity immediately before the Business Combination has beneficial ownership of 45 percent or more of the stock of such resulting corporation or other entity.

 

For this purpose, “beneficial ownership” refers to ownership of a security, directly or indirectly, by any person or entity who through any contract, arrangement, understanding, relationship or otherwise has or shares (1) voting power, which includes the power to vote, or to direct the voting of, such security, and/or (2) investment power, which include the power to dispose, or to direct the disposition of, such security, and shall be determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

“Director” means a director of the Company.

 

“Employee” means any person, including officers (whether or not they are directors), employed by the Company, a Parent or any Subsidiary.

 

“Exchange Act” means Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” of Common Stock as of any date is the closing price for the Common Stock as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported.

 

“Grant Date” means, with respect to the Option, November 8, 2007.

 

“Non-Employee Director” means a Director of the Company who qualifies as a Non-Employee Director as such term is defined in Section 240.16b-3(b)(3) of the General Rules and Regulations promulgated under the Exchange Act.

 

“Parent” means a parent corporation of the Company, whether now or hereafter existing, as defined by Section 424(e) of the Code.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subsidiary” means a subsidiary corporation of the Company, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

“Termination of Service” means (a) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary; (b) in the case of a Consultant, a cessation of the service relationship between the Consultant and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such termination where there is a simultaneous re-

 

2



 

engagement of the Consultant by the Company or a Parent or Subsidiary; and (c) in the case of a Director, a cessation of the Director’s service on the Board of Directors for any reason, including, for example, but not by way of limitation, a termination by resignation, removal, death, disability, expiration of the term of directorship, but excluding any such termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary.

 

THE DETAILS OF YOUR OPTION ARE AS FOLLOWS:

 

1.             Nature Of The Option

 

The Option is intended to be a “Nonstatutory Stock Option” subject to the provisions of Section 1.83-7 of the Treasury Regulations promulgated under Section 83 of the Code.

 

The Option Price is $5.61 for each Share.

 

2.             Vesting And Exercise Of Option

 

(a)  During the term of this Option, it will vest and become exercisable while the Optionee remains in Continuous Service (except as otherwise provided in this Section 2) as to 1/24 of the Shares at the end of each successive calendar month following the Grant Date (with November 30, 2007 being the first such date); provided that in the event of a Corporate Transaction, this Option automatically will vest and become exercisable in full immediately prior to the consummation of the Corporate Transaction.

 

(b)  In the event of the Optionee’s death, disability or other termination of employment, the Option shall be exercisable in the manner and to the extent provided below:

 

(i)  Termination of Status as Employee, Director or Consultant.  If the Optionee’s Continuous Service shall cease for any reason other than permanent and total disability or death, the Optionee may, but only within 90 days after the date of Termination of Service, exercise the Option to the extent that the Optionee was entitled to exercise it at the date of Termination of Service, subject to the condition that no Option shall be exercised after the expiration of the Term (as defined in Section 6) of the Option.

 

(ii)  Disability of the Optionee.  If the Optionee’s Continuous Service shall cease due to disability, and the Optionee was in Continuous Service as an Employee, Director or Consultant from the Grant Date until the date of Termination of Service, the Option may be exercised at any time within 12 months following the date of Termination of Service, but only to the extent that the Optionee was entitled to exercise the Option at the time of Termination of Service, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

(iii)  Death of the Optionee.  In the event of the death of the Optionee during the Term of the Option while the Optionee is an Employee, Non-Employee Director or Consultant and in Continuous Service from the Grant Date until the date of death, the Option may be exercised at any time within six months

 

3



 

following the date of death by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest, inheritance or otherwise as a result of the Optionee’s death, but only to the extent that the Optionee would have been entitled to exercise the Option at the date of death, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

(c)  No fraction of a Share shall be purchasable or deliverable upon exercise, but in the event any adjustment of the number of Shares covered by the Option shall cause such number to include a fraction of a Share, such number of Shares shall be adjusted to the nearest smaller whole number of Shares.

 

(d)  In order to exercise any portion of this Option that has vested, the Optionee shall notify the Company in writing of the election to exercise the Option and the number of Shares in respect of which the Option is being exercised, by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Appendix I.  The certificate or certificates representing Shares as to which this Option has been exercised shall be registered in the name of the Optionee. Or, the optionee shall notify the Company through his broker if he chooses to exercises the Option through a brokerage firm.

 

3.             Non-Transferability Of Option

 

As approved by the Committee, any vested portion of the Option may be transferred by the Optionee through a gift or domestic relations order in settlement of marital property rights to the following donees or transferees:

 

(a)  any “family member,” which includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including adoptive relations, and any person sharing the employee’s household (other than a tenant or employee);

 

(b)  a trust in which “family members” have more than 50% of the beneficial interest;

 

(c)  a foundation in which “family members” or the employee control the management of assets; and

 

(d)  any other entity in which the “family members” (or the employee) own more than 50% of the voting interests;

 

provided that (x) there may be no consideration for any such transfer, (y) this Agreement, and any amendment hereto, must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this Section 3, and (z) subsequent transfers of the Option or transferred portion shall be prohibited except transfers effected in accordance with this Section 3.  Following the transfer, the Option or transferred portion shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that the term “Optionee” shall be deemed to refer to the transferee in lieu of or in addition to the transferor. Any Termination of Service of the Optionee shall be applied with respect to the original Optionee,

 

4



 

following which the Options shall be exercisable by the transferee only to the extent and for the periods specified in this Agreement.

 

Otherwise, this Option may be transferred only by will or by the law of descent and distribution.  The terms of this Option shall be binding upon the executors, administrators, heirs and successors of the Optionee.

 

4.             Method Of Payment

 

Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Optionee:

 

(a)  cash;

 

(b)  check, cashier’s check, certified check or wire transfer;

 

(c)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by delivery of a sell order to a broker for the Shares being purchased and an agreement to pay (or have the broker remit payment for) the purchase price of the shares being purchased on or before the settlement date for the sale of such Shares to the broker; or

 

(d)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by surrender of shares of the Company’s Common Stock.  In this case payment shall be made as follows:

 

(i)  the Optionee shall deliver to the Secretary of the Company a written notice which shall set forth the portion of the purchase price the Optionee wishes to pay with Common Stock, and the number of shares of Common Stock the Optionee intends to surrender upon the exercise of this Option, which shall be determined by dividing the aforementioned portion of the purchase price by the closing price per share of the Common Stock of the Company, as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed), on the last business day immediately preceding the date of exercise of the Option, as determined by the Committee;

 

(ii)  fractional shares shall be disregarded and the Optionee shall pay in cash an amount equal to such fraction multiplied by the price determined under subparagraph i above;

 

(iii)  the written notice shall be accompanied by a duly endorsed blank stock power with respect to the number of shares of Common Stock set forth in the notice, and the certificate(s) representing said shares shall be delivered to the Company at its principal offices within three working days from the date of the notice of exercise;

 

(iv)  the Optionee hereby authorizes and directs the Secretary of the Company to transfer so many of the shares of Common Stock represented by such

 

5



 

certificate(s) as are necessary to pay the purchase price in accordance with the provisions herein; and

 

(v)  notwithstanding any other provision herein, the Optionee shall only be permitted to pay the purchase price with shares of Common Stock owned by him as of the exercise date in the manner and within the time periods allowed under 17 CFR Section 240.16b-3 promulgated under the Exchange Act, as such regulation is presently constituted, as it is amended from time to time, and as it is interpreted now or hereafter by the Securities and Exchange Commission.

 

(vi)  the Optionee may elect to pay the exercise price by authorizing a third party to sell Shares subject to the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise.

 

5.             Adjustments Upon Changes In Capitalization

 

(a)  Recapitalization.  Subject to any required action by the stockholders of the Company, the number of Shares covered by the Option and the per share exercise price of the Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, combination, reclassification, the payment of a stock dividend on the Common Stock or any other increase or decrease in the number of such shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Such adjustment shall be made by the Board of Directors, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

 

(b)  Corporate Transaction.  In the event of a proposed Corporate Transaction, the Board of Directors shall notify the Optionee at least 10 calendar days prior to such proposed Corporate Transaction.  To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed Corporate Transaction (but subsequent to the full vesting acceleration provided in Section 2(a)), unless the Option is assumed or an equivalent option is substituted by the successor corporation or a parent or subsidiary of such successor corporation. For the purposes of this subsection, the Option shall be considered assumed if, following the Corporate Transaction, the Option confers the right to purchase, for each Share subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each Share subject to the Option held on the effective date of the Corporate Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Corporate Transaction was not solely common stock of the successor corporation or its parent or subsidiary, the Board of Directors may, with the consent of the successor corporation, provide for the consideration to be

 

6



 

received upon the exercise of the Option for each Share subject to the Option to be solely common stock of the successor corporation or its parent or subsidiary equal in fair market value to the per share consideration received by the Company’s holders of Common Stock in the Corporate Transaction.

 

6.             Term Of Option

 

This Option may not be exercised more than seven years from the date of grant of this Option (the “Term”), as set forth below, and may be exercised during such term only in accordance with  the terms of this Option.

 

7.             Not Employment Contract

 

Nothing in this Agreement shall confer upon the Optionee any right to continue in the employ or other service with the Company or any Parent or Subsidiary or shall interfere with or restrict in any way the rights of the Company (or any Parent or Subsidiary), which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause, subject to the provisions of applicable law.  This is not an employment contract.

 

8.             Income Tax Withholding

 

(a)  Whenever Shares are issued or to be issued pursuant to the Option, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under this Agreement shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee. However, in such cases the Optionee may elect, subject to the approval of the Board of Directors, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. The Optionee may only elect to have shares withheld having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Board of Directors deems appropriate.

 

In the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the exercise of this Option, the Optionee agrees to pay the Company the amount of such deficiency in cash within five days after receiving a written demand from the Company to do so, whether or not Optionee is an employee of the Company at that time.

 

(b)  At such time as the Optionee is required to pay to the Company an amount with respect to tax withholding obligations as set forth in Section 8(a), the Optionee may elect prior to the date the amount of such withholding tax is determined to make such payment, or such increased payment as the Optionee elects to make up to the maximum federal, state and

 

7



 

local marginal tax rates (including any related FICA obligation) applicable to the Optionee and the particular transaction in accordance with the provisions of Section 8(a).

 

(c)  Any adverse consequences incurred by an Optionee with respect to the use of shares of Common Stock to pay any part of the Option Price or of any tax in connection with the exercise of an Option shall be the sole responsibility of the Optionee.

 

9.             Conditions Upon Issuance of Shares.

 

Shares shall not be issued with respect to the Option unless the exercise of the Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or public trading market upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of the Option, the Company may require the Optionee to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

 

10.          Notices and Other Communications.

 

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the Optionee, at his residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Chief Executive Officer or Secretary, or to such other address or telecopier number or electronic mail address, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; (iii) in the case of facsimile transmission, when confirmed by facsimile machine report; and (iv) in the case of electronic mail, when directed to an electronic mail address at which the receiving party has consented to receive notice, provided, that such consent is deemed revoked if the sender is unable to deliver by electronic transmission two consecutive notices and such inability becomes known to the secretary or assistant secretary of the Company or to the transfer agent, or other person responsible for giving notice.

 

Dated as of the 28th day of November 2007.

 

 

MOSYS, INC.

 

 

 

 

By:

/s/ Mehdi Bathaee

 

Its:

Chief Operating Officer

 

8



 

ACKNOWLEDGEMENT BY OPTIONEE

 

The Optionee acknowledges receipt of copies of the Agreement and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions of the Agreement.  The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions arising under the Agreement.

 

 

/s/ Leonard Perham

 

Optionee

 

 

Date: December 4, 2007

 

 

[CONSENT OF SPOUSE/DOMESTIC PARTNER

 

I, ___________________________, spouse/domestic partner of the Optionee who executed the foregoing Agreement, hereby agree that my spouse’s/domestic partner’s interest in the shares of Common Stock subject to said Agreement shall be irrevocably bound by the Agreement’s terms.  I further agree that my community property interest in such shares, if any, shall similarly be bound by said Agreement and that such consent is binding upon my executors, administrators, heirs and assigns.  I agree to execute and deliver such documents as may be necessary to carry out the intent of said Agreement and this consent.

 

 

]

 

Spouse/Domestic Partner

 

9



 

APPENDIX I

 

MOSYS, INC.

 

NOTICE OF EXERCISE OF STOCK OPTION

 

I _____________________________________ (print legibly) hereby elect to exercise the following stock options(s) granted to me by MOSYS, INC. (the “Company”).  All shares being purchased are fully vested and exercisable pursuant to Section 3 of the listed Option Agreement.

 

1. ____________ Shares at $ ____________ per share (Grant date): ____________ )

2. ____________ Shares at $ ____________ per share (Grant date): ____________ )

3. ____________ Shares at $ ____________ per share (Grant date): ____________ )

4. ____________ Shares at $ ____________ per share (Grant date): ____________ )

 

Cash exercise in the amount of $ ____________________

Shares should be issued to me as follows:

                Name: ________________________________________________

 

 

If you choose to include your spouse, you must designate below how you wish your shares to be registered by checking the appropriate box.  If we receive no designation, the shares will be designated as Joint Tenants.

 

                                                ________ Joint Tenants                                                                                    60;                                                                                                                        ________ Community Property

                                                ________ Tenants in Common                                                                                    ;                                                                                       ________ Tenancy by Entirety

 

 

Verification by__________________________________________Stock Administration

 

Certificate to be delivered to (complete item 1 or 2 below)

1.               Employee ________                                                         Home Address:    __________________________________________________________

                                                                                                                                                                                                                                                                                                 __________________________________________________________

2.               (Insert Name of Second Broker)  ________________________________________________

                                                Acct #:  ________________________________________________

                Contact Name & Number: ________________________________________________

 

 

Signature: ________________________________________ Date: ________________________________________

Social Security No.: ___________________________________________

[For Company Use Only]

 

As of the date set forth above, the above named person has the vested right to exercise the number of shares set forth above.

Date: ____________________________                                                            ____________________________________________

 

Amount due Company: $ ____________

 

 

MoSys, Inc.

 

755 N. Mathilda Avenue

 

Sunnyvale, California 94085

 

(408) 731-1800

 

Attn: Stock Administration

 

 


EX-10.25.2 3 a08-11315_1ex10d25d2.htm EX-10.25.2

Exhibit 10.25.2

 

NEW EMPLOYEE INDUCEMENT GRANT STOCK OPTION AGREEMENT

 

TO:  Leonard Perham (the “Optionee”):

 

MoSys, Inc., a Delaware corporation (the “Company”), hereby grants to Optionee an option (“Option”) to purchase a total of Three Hundred Fifty Thousand (350,000) shares of Common Stock, $0.01 par value per share (“Shares”), of the Company, at the price set forth herein.

 

DEFINITIONS FOR CERTAIN DEFINED TERMS ARE AS FOLLOWS:

 

“Agreement” means this Stock Option Incentive Grant Agreement.

 

“Board of Directors” means the Board of Directors of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock of the Company, par value $.01 per share.

 

“Committee” means the Compensation Committee of the Board of Directors.

 

“Consultant” means any independent contractor retained to perform services for the Company or a Subsidiary.

 

“Continuous Service” means the absence of any interruption or termination of service as an Employee, Director or Consultant by the Company, a Parent, or any Subsidiary. Continuous Service shall not be considered interrupted during any period of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and any Parent, Subsidiary or successor of the Company. A leave of absence approved by the Company shall include sick leave, military leave or any other personal leave approved by an authorized representative of the Company.

 

“Corporate Transaction” means:

 

(a)  an acquisition after the Grant Date by an individual, an entity or a group in one or more related transactions (excluding the Company or an employee benefit plan of the Company or a corporation controlled by the Company’s stockholders) of beneficial ownership of 45 percent or more of the Company’s common stock or voting securities; or

 

(b)  consummation of a complete liquidation or dissolution of the Company or a merger, consolidation, reorganization or sale of all or substantially all of the Company’s assets (collectively, a “Business Combination”) after the Grant Date, other than a Business Combination in which (A) the stockholders of the Company receive beneficial ownership of 50 percent or more of the stock of the corporation resulting from the Business Combination and (B) at least a majority of the board of directors of such resulting corporation were incumbent directors of the Company immediately prior to the consummation of the Business Combination, and (C) after which no individual, entity or group (excluding any corporation or other entity resulting from the Business Combination or any employee benefit plan of such corporation or of the Company) who did not have beneficial ownership of 45 percent or more of the stock of the

 

1



 

resulting corporation or other entity immediately before the Business Combination has beneficial ownership of 45 percent or more of the stock of such resulting corporation or other entity.

 

For this purpose, “beneficial ownership” refers to ownership of a security, directly or indirectly, by any person or entity who through any contract, arrangement, understanding, relationship or otherwise has or shares (1) voting power, which includes the power to vote, or to direct the voting of, such security, and/or (2) investment power, which include the power to dispose, or to direct the disposition of, such security, and shall be determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

“Director” means a director of the Company.

 

“Employee” means any person, including officers (whether or not they are directors), employed by the Company, a Parent or any Subsidiary.

 

“Exchange Act” means Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” of Common Stock as of any date is the closing price for the Common Stock as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported.

 

“Grant Date” means, with respect to the Option, November 8, 2007.

 

“Non-Employee Director” means a Director of the Company who qualifies as a Non-Employee Director as such term is defined in Section 240.16b-3(b)(3) of the General Rules and Regulations promulgated under the Exchange Act.

 

“Parent” means a parent corporation of the Company, whether now or hereafter existing, as defined by Section 424(e) of the Code.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Price” means the average closing price of a share of the Common Stock on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed) during a consecutive 90-calendar day period within the first two years following the Grant Date; provided that in the case of a Corporate Transaction such determination shall be made as of the 90-calendar day period ending on the third business day immediately preceding the date on which the Corporation Transaction is consummated.

 

“Subsidiary” means a subsidiary corporation of the Company, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

“Termination of Service” means (a) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation,

 

2



 

discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary; (b) in the case of a Consultant, a cessation of the service relationship between the Consultant and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such termination where there is a simultaneous re-engagement of the Consultant by the Company or a Parent or Subsidiary; and (c) in the case of a Director, a cessation of the Director’s service on the Board of Directors for any reason, including, for example, but not by way of limitation, a termination by resignation, removal, death, disability, expiration of the term of directorship, but excluding any such termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary.

 

THE DETAILS OF YOUR OPTION ARE AS FOLLOWS:

 

1.                                      Nature Of The Option

 

The Option is intended to be a “Nonstatutory Stock Option” subject to the provisions of Section 1.83-7 of the Treasury Regulations promulgated under Section 83 of the Code.

 

The Option Price is $5.61 for each Share.

 

2.                                      Vesting And Exercise Of Option

 

(a)  During the term of this Option, it will vest and become exercisable while the Optionee remains in Continuous Service (except as otherwise provided in this Section 2) as to 280,000 Shares if the Stock Price is $10.00 and ratably as to the remaining 70,000 of the Shares for each one cent increase in the Stock Price up to $12.00 per share (which equals 350 Shares for each one cent increase).  By way of example, if the Stock Price is $11.75, the Option would vest and become exercisable with respect to 341,250, or 97.5%, of the Shares.

 

(b)  In the event of the Optionee’s death, disability or other termination of employment, the Option shall be exercisable in the manner and to the extent provided below:

 

(i)  Termination of Status as Employee, Director or Consultant.  If the Optionee’s Continuous Service shall cease for any reason other than permanent and total disability or death, the Optionee may, but only within 90 days after the date of Termination of Service, exercise the Option to the extent that the Optionee was entitled to exercise it at the date of Termination of Service, subject to the condition that no Option shall be exercised after the expiration of the Term (as defined in Section 6) of the Option.

 

(ii)  Disability of the Optionee.  If the Optionee’s Continuous Service shall cease due to disability, and the Optionee was in Continuous Service as an Employee, Director or Consultant from the Grant Date until the date of Termination of Service, the Option may be exercised at any time within 12 months following the date of Termination of Service, but only to the extent that the Optionee was entitled to exercise the Option at the time of Termination of Service, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

3



 

(iii)  Death of the Optionee.  In the event of the death of the Optionee during the Term of the Option while the Optionee is an Employee, Non-Employee Director or Consultant and in Continuous Service from the Grant Date until the date of death, the Option may be exercised at any time within six months following the date of death by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest, inheritance or otherwise as a result of the Optionee’s death, but only to the extent that the Optionee would have been entitled to exercise the Option at the date of death, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

(c)  No fraction of a Share shall be purchasable or deliverable upon exercise, but in the event any adjustment of the number of Shares covered by the Option shall cause such number to include a fraction of a Share, such number of Shares shall be adjusted to the nearest smaller whole number of Shares.

 

(d)  In order to exercise any portion of this Option that has vested, the Optionee shall notify the Company in writing of the election to exercise the Option and the number of Shares in respect of which the Option is being exercised, by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Appendix I.  The certificate or certificates representing Shares as to which this Option has been exercised shall be registered in the name of the Optionee. Or, the optionee shall notify the Company through his broker if he chooses to exercises the Option through a brokerage firm.

 

3.                                      Non-Transferability Of Option

 

As approved by the Committee, any vested portion of the Option may be transferred by the Optionee through a gift or domestic relations order in settlement of marital property rights to the following donees or transferees:

 

(a)  any “family member,” which includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including adoptive relations, and any person sharing the employee’s household (other than a tenant or employee);

 

(b)  a trust in which “family members” have more than 50% of the beneficial interest;

 

(c)  a foundation in which “family members” or the employee control the management of assets; and

 

(d)  any other entity in which the “family members” (or the employee) own more than 50% of the voting interests;

 

provided that (x) there may be no consideration for any such transfer, (y) this Agreement, and any amendment hereto, must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this Section 3, and (z) subsequent transfers of the Option or transferred portion shall be prohibited except transfers effected in accordance with this Section 3.  Following the transfer, the Option or transferred portion shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that the term “Optionee” shall be deemed to refer to the transferee in lieu of or in addition to the transferor. Any Termination of Service of the Optionee shall be applied with respect to the original Optionee,

 

4



 

following which the Options shall be exercisable by the transferee only to the extent and for the periods specified in this Agreement.

 

Otherwise, this Option may be transferred only by will or by the law of descent and distribution.  The terms of this Option shall be binding upon the executors, administrators, heirs and successors of the Optionee.

 

4.                                      Method Of Payment

 

Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Optionee:

 

(a)  cash;

 

(b)  check, cashier’s check, certified check or wire transfer;

 

(c)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by delivery of a sell order to a broker for the Shares being purchased and an agreement to pay (or have the broker remit payment for) the purchase price of the shares being purchased on or before the settlement date for the sale of such Shares to the broker; or

 

(d)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by surrender of shares of the Company’s Common Stock.  In this case payment shall be made as follows:

 

(i)  the Optionee shall deliver to the Secretary of the Company a written notice which shall set forth the portion of the purchase price the Optionee wishes to pay with Common Stock, and the number of shares of Common Stock the Optionee intends to surrender upon the exercise of this Option, which shall be determined by dividing the aforementioned portion of the purchase price by the closing price per share of the Common Stock of the Company, as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed), on the last business day immediately preceding the date of exercise of the Option, as determined by the Committee;

 

(ii)  fractional shares shall be disregarded and the Optionee shall pay in cash an amount equal to such fraction multiplied by the price determined under subparagraph i above;

 

(iii)  the written notice shall be accompanied by a duly endorsed blank stock power with respect to the number of shares of Common Stock set forth in the notice, and the certificate(s) representing said shares shall be delivered to the Company at its principal offices within three working days from the date of the notice of exercise;

 

(iv)  the Optionee hereby authorizes and directs the Secretary of the Company to transfer so many of the shares of Common Stock represented by such certificate(s) as are necessary to pay the purchase price in accordance with the provisions herein; and

 

5



 

(v)  notwithstanding any other provision herein, the Optionee shall only be permitted to pay the purchase price with shares of Common Stock owned by him as of the exercise date in the manner and within the time periods allowed under 17 CFR Section 240.16b-3 promulgated under the Exchange Act, as such regulation is presently constituted, as it is amended from time to time, and as it is interpreted now or hereafter by the Securities and Exchange Commission.

 

(vi)  the Optionee may elect to pay the exercise price by authorizing a third party to sell Shares subject to the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise.

 

5.                                      Adjustments Upon Changes In Capitalization

 

(a)  Recapitalization.  Subject to any required action by the stockholders of the Company, the number of Shares covered by the Option and the per share exercise price of the Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, combination, reclassification, the payment of a stock dividend on the Common Stock or any other increase or decrease in the number of such shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Such adjustment shall be made by the Board of Directors, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

 

(b)  Corporate Transaction.  In the event of a proposed Corporate Transaction, the Board of Directors shall notify the Optionee at least 10 calendar days prior to such proposed Corporate Transaction.  To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed Corporate Transaction (but subsequent to the full vesting acceleration provided in Section 2(a)), unless the Option is assumed or an equivalent option is substituted by the successor corporation or a parent or subsidiary of such successor corporation. For the purposes of this subsection, the Option shall be considered assumed if, following the Corporate Transaction, the Option confers the right to purchase, for each Share subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each Share subject to the Option held on the effective date of the Corporate Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Corporate Transaction was not solely common stock of the successor corporation or its parent or subsidiary, the Board of Directors may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option for each Share subject to the Option to be solely common stock of the successor corporation or its parent or subsidiary equal in fair market value to the per share consideration received by the Company’s holders of Common Stock in the Corporate Transaction.

 

6



 

6.                                      Term Of Option

 

This Option may not be exercised more than seven years from the date of grant of this Option (the “Term”), as set forth below, and may be exercised during such term only in accordance with  the terms of this Option.

 

7.                                      Not Employment Contract

 

Nothing in this Agreement shall confer upon the Optionee any right to continue in the employ or other service with the Company or any Parent or Subsidiary or shall interfere with or restrict in any way the rights of the Company (or any Parent or Subsidiary), which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause, subject to the provisions of applicable law.  This is not an employment contract.

 

8.                                      Income Tax Withholding

 

(a)  Whenever Shares are issued or to be issued pursuant to the Option, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under this Agreement shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee. However, in such cases the Optionee may elect, subject to the approval of the Board of Directors, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. The Optionee may only elect to have shares withheld having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Board of Directors deems appropriate.

 

In the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the exercise of this Option, the Optionee agrees to pay the Company the amount of such deficiency in cash within five days after receiving a written demand from the Company to do so, whether or not Optionee is an employee of the Company at that time.

 

(b)  At such time as the Optionee is required to pay to the Company an amount with respect to tax withholding obligations as set forth in Section 8(a), the Optionee may elect prior to the date the amount of such withholding tax is determined to make such payment, or such increased payment as the Optionee elects to make up to the maximum federal, state and local marginal tax rates (including any related FICA obligation) applicable to the Optionee and the particular transaction in accordance with the provisions of Section 8(a).

 

(c)  Any adverse consequences incurred by an Optionee with respect to the use of shares of Common Stock to pay any part of the Option Price or of any tax in connection with the exercise of an Option shall be the sole responsibility of the Optionee.

 

7



 

9.                                      Conditions Upon Issuance of Shares.

 

Shares shall not be issued with respect to the Option unless the exercise of the Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or public trading market upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of the Option, the Company may require the Optionee to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

 

10.                               Notices and Other Communications.

 

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the Optionee, at his residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Chief Executive Officer or Secretary, or to such other address or telecopier number or electronic mail address, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; (iii) in the case of facsimile transmission, when confirmed by facsimile machine report; and (iv) in the case of electronic mail, when directed to an electronic mail address at which the receiving party has consented to receive notice, provided, that such consent is deemed revoked if the sender is unable to deliver by electronic transmission two consecutive notices and such inability becomes known to the secretary or assistant secretary of the Company or to the transfer agent, or other person responsible for giving notice.

 

Dated as of the 28th day of November 2007.

 

 

 

MOSYS, INC.

 

 

 

 

 

 

 

By:

/s/ Mehdi Bathaee

 

 

 

 

 

 

 

Its:

Chief Operating Officer

 

8



 

ACKNOWLEDGEMENT BY OPTIONEE

 

The Optionee acknowledges receipt of copies of the Agreement and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions of the Agreement.  The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions arising under the Agreement.

 

 

/s/ Leonard Perham

 

Optionee

 

 

Date: December 4, 2007

 

 

[CONSENT OF SPOUSE/DOMESTIC PARTNER

 

I, ___________________________, spouse/domestic partner of the Optionee who executed the foregoing Agreement, hereby agree that my spouse’s/domestic partner’s interest in the shares of Common Stock subject to said Agreement shall be irrevocably bound by the Agreement’s terms.  I further agree that my community property interest in such shares, if any, shall similarly be bound by said Agreement and that such consent is binding upon my executors, administrators, heirs and assigns.  I agree to execute and deliver such documents as may be necessary to carry out the intent of said Agreement and this consent.

 

 

]

 

Spouse/Domestic Partner

 

9



 

APPENDIX I

 

MOSYS, INC.

 

NOTICE OF EXERCISE OF STOCK OPTION

 

I _____________________________________ (print legibly) hereby elect to exercise the following stock options(s) granted to me by MOSYS, INC. (the “Company”).  All shares being purchased are fully vested and exercisable pursuant to Section 3 of the listed Option Agreement.

 

1. ____________ Shares at $ ____________ per share (Grant date): ____________ )

2. ____________ Shares at $ ____________ per share (Grant date): ____________ )

3. ____________ Shares at $ ____________ per share (Grant date): ____________ )

4. ____________ Shares at $ ____________ per share (Grant date): ____________ )

 

Cash exercise in the amount of $ ____________________

Shares should be issued to me as follows:

                Name: ________________________________________________

 

 

If you choose to include your spouse, you must designate below how you wish your shares to be registered by checking the appropriate box.  If we receive no designation, the shares will be designated as Joint Tenants.

 

                                                ________ Joint Tenants                                                                                         0;                                                                                                                   ________ Community Property

                                                ________ Tenants in Common                                                                                                                                                                           ________ Tenancy by Entirety

 

 

Verification by__________________________________________Stock Administration

 

Certificate to be delivered to (complete item 1 or 2 below)

1.               Employee ________                                                         Home Address:    __________________________________________________________

                                                                                                                                        & #160;                                                                                                                                                       __________________________________________________________

2.               (Insert Name of Second Broker)  ________________________________________________

                                                Acct #:  ________________________________________________

                Contact Name & Number: ________________________________________________

 

 

Signature: ________________________________________ Date: ________________________________________

Social Security No.: ___________________________________________

[For Company Use Only]

 

As of the date set forth above, the above named person has the vested right to exercise the number of shares set forth above.

Date: ____________________________                                                            ____________________________________________

 

Amount due Company: $ ____________

 

 

MoSys, Inc.

 

755 N. Mathilda Avenue

 

Sunnyvale, California 94085

 

(408) 731-1800

 

Attn: Stock Administration

 

 


 

EX-10.25.3 4 a08-11315_1ex10d25d3.htm EX-10.25.3

Exhibit 10.25.3

 

NEW EMPLOYEE INDUCEMENT GRANT STOCK OPTION AGREEMENT

 

TO:  Leonard Perham (the “Optionee”):

 

MoSys, Inc., a Delaware corporation (the “Company”), hereby grants to Optionee an option (“Option”) to purchase a total of One Hundred Thousand (100,000) shares of Common Stock, $0.01 par value per share (“Shares”), of the Company, at the price set forth herein.

 

DEFINITIONS FOR CERTAIN DEFINED TERMS ARE AS FOLLOWS:

 

“Agreement” means this Stock Option Incentive Grant Agreement.

 

“Board of Directors” means the Board of Directors of the Company.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Common Stock” means the common stock of the Company, par value $.01 per share.

 

“Committee” means the Compensation Committee of the Board of Directors.

 

“Consultant” means any independent contractor retained to perform services for the Company or a Subsidiary.

 

“Continuous Service” means the absence of any interruption or termination of service as an Employee, Director or Consultant by the Company, a Parent, or any Subsidiary. Continuous Service shall not be considered interrupted during any period of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company and any Parent, Subsidiary or successor of the Company. A leave of absence approved by the Company shall include sick leave, military leave or any other personal leave approved by an authorized representative of the Company.

 

“Corporate Transaction” means:

 

(a)  an acquisition after the Grant Date by an individual, an entity or a group in one or more related transactions (excluding the Company or an employee benefit plan of the Company or a corporation controlled by the Company’s stockholders) of beneficial ownership of 45 percent or more of the Company’s common stock or voting securities; or

 

(b)  consummation of a complete liquidation or dissolution of the Company or a merger, consolidation, reorganization or sale of all or substantially all of the Company’s assets (collectively, a “Business Combination”) after the Grant Date, other than a Business Combination in which (A) the stockholders of the Company receive beneficial ownership of 50 percent or more of the stock of the corporation resulting from the Business Combination and (B) at least a majority of the board of directors of such resulting corporation were incumbent directors of the Company immediately prior to the consummation of the Business Combination, and (C) after which no individual, entity or group (excluding any corporation or other entity resulting from the Business Combination or any employee benefit plan of such corporation or of the Company) who did not have beneficial ownership of 45 percent or more of the stock of the

 

1



 

resulting corporation or other entity immediately before the Business Combination has beneficial ownership of 45 percent or more of the stock of such resulting corporation or other entity.

 

For this purpose, “beneficial ownership” refers to ownership of a security, directly or indirectly, by any person or entity who through any contract, arrangement, understanding, relationship or otherwise has or shares (1) voting power, which includes the power to vote, or to direct the voting of, such security, and/or (2) investment power, which include the power to dispose, or to direct the disposition of, such security, and shall be determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

 

“Director” means a director of the Company.

 

“Employee” means any person, including officers (whether or not they are directors), employed by the Company, a Parent or any Subsidiary.

 

“Exchange Act” means Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” of Common Stock as of any date is the closing price for the Common Stock as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed) for that date or, if no closing price is reported for that date, the closing price on the next preceding date for which a closing price was reported.

 

“Grant Date” means, with respect to the Option, November 8, 2007.

 

“Non-Employee Director” means a Director of the Company who qualifies as a Non-Employee Director as such term is defined in Section 240.16b-3(b)(3) of the General Rules and Regulations promulgated under the Exchange Act.

 

“Parent” means a parent corporation of the Company, whether now or hereafter existing, as defined by Section 424(e) of the Code.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Price” means the average closing price of a share of the Common Stock on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed) during a consecutive 90-calendar day period within the first two years following the Grant Date; provided that in the case of a Corporate Transaction such determination shall be made as of the 90-calendar day period ending on the third business day immediately preceding the date on which the Corporation Transaction is consummated.

 

“Subsidiary” means a subsidiary corporation of the Company, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

“Termination of Service” means (a) in the case of an Employee, a cessation of the employee-employer relationship between the Employee and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such

 

2



 

termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary; (b) in the case of a Consultant, a cessation of the service relationship between the Consultant and the Company or a Parent or Subsidiary for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability, or the disaffiliation of a Parent or Subsidiary, but excluding any such termination where there is a simultaneous re-engagement of the Consultant by the Company or a Parent or Subsidiary; and (c) in the case of a Director, a cessation of the Director’s service on the Board of Directors for any reason, including, for example, but not by way of limitation, a termination by resignation, removal, death, disability, expiration of the term of directorship, but excluding any such termination where there is a simultaneous reemployment by the Company or a Parent or Subsidiary.

 

THE DETAILS OF YOUR OPTION ARE AS FOLLOWS:

 

1.                                      Nature Of The Option

 

The Option is intended to be a “Nonstatutory Stock Option” subject to the provisions of Section 1.83-7 of the Treasury Regulations promulgated under Section 83 of the Code.

 

The Option Price is $5.61 for each Share.

 

2.                                      Vesting And Exercise Of Option

 

(a)  During the term of this Option, it will vest and become exercisable while the Optionee remains in Continuous Service (except as otherwise provided in this Section 2) as to 50,000 Shares if the Stock Price is $13.00 and ratably as to the remaining 50,000 of the Shares for each one cent increase in the Stock Price up to $15.00 per share (which equals 250 Shares for each one cent increase).  By way of example, if the Stock Price is $13.75, the Option would vest and become exercisable with respect to 68,750, or 68.75%, of the Shares.

 

(b)  In the event of the Optionee’s death, disability or other termination of employment, the Option shall be exercisable in the manner and to the extent provided below:

 

(i)  Termination of Status as Employee, Director or Consultant.  If the Optionee’s Continuous Service shall cease for any reason other than permanent and total disability or death, the Optionee may, but only within 90 days after the date of Termination of Service, exercise the Option to the extent that the Optionee was entitled to exercise it at the date of Termination of Service, subject to the condition that no Option shall be exercised after the expiration of the Term (as defined in Section 6) of the Option.

 

(ii)  Disability of the Optionee.  If the Optionee’s Continuous Service shall cease due to disability, and the Optionee was in Continuous Service as an Employee, Director or Consultant from the Grant Date until the date of Termination of Service, the Option may be exercised at any time within 12 months following the date of Termination of Service, but only to the extent that the Optionee was entitled to exercise the Option at the time of Termination of Service, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

(iii)  Death of the Optionee.  In the event of the death of the Optionee during the Term of the Option while the Optionee is an Employee, Non-Employee

 

3



 

Director or Consultant and in Continuous Service from the Grant Date until the date of death, the Option may be exercised at any time within six months following the date of death by the Optionee’s estate or by a person who acquired the right to exercise the Option by bequest, inheritance or otherwise as a result of the Optionee’s death, but only to the extent that the Optionee would have been entitled to exercise the Option at the date of death, subject to the condition that no option shall be exercised after the expiration of the Term of the Option.

 

(c)  No fraction of a Share shall be purchasable or deliverable upon exercise, but in the event any adjustment of the number of Shares covered by the Option shall cause such number to include a fraction of a Share, such number of Shares shall be adjusted to the nearest smaller whole number of Shares.

 

(d)  In order to exercise any portion of this Option that has vested, the Optionee shall notify the Company in writing of the election to exercise the Option and the number of Shares in respect of which the Option is being exercised, by executing and delivering the Notice of Exercise of Stock Option in the form attached hereto as Appendix I.  The certificate or certificates representing Shares as to which this Option has been exercised shall be registered in the name of the Optionee. Or, the optionee shall notify the Company through his broker if he chooses to exercises the Option through a brokerage firm.

 

3.                                      Non-Transferability Of Option

 

As approved by the Committee, any vested portion of the Option may be transferred by the Optionee through a gift or domestic relations order in settlement of marital property rights to the following donees or transferees:

 

(a)  any “family member,” which includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law, including adoptive relations, and any person sharing the employee’s household (other than a tenant or employee);

 

(b)  a trust in which “family members” have more than 50% of the beneficial interest;

 

(c)  a foundation in which “family members” or the employee control the management of assets; and

 

(d)  any other entity in which the “family members” (or the employee) own more than 50% of the voting interests;

 

provided that (x) there may be no consideration for any such transfer, (y) this Agreement, and any amendment hereto, must be approved by the Committee, and must expressly provide for transferability in a manner consistent with this Section 3, and (z) subsequent transfers of the Option or transferred portion shall be prohibited except transfers effected in accordance with this Section 3.  Following the transfer, the Option or transferred portion shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that the term “Optionee” shall be deemed to refer to the transferee in lieu of or in addition to the transferor. Any Termination of Service of the Optionee shall be applied with respect to the original Optionee, following which the Options shall be exercisable by the transferee only to the extent and for the periods specified in this Agreement.

 

4



 

Otherwise, this Option may be transferred only by will or by the law of descent and distribution.  The terms of this Option shall be binding upon the executors, administrators, heirs and successors of the Optionee.

 

4.                                      Method Of Payment

 

Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Optionee:

 

(a)  cash;

 

(b)  check, cashier’s check, certified check or wire transfer;

 

(c)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by delivery of a sell order to a broker for the Shares being purchased and an agreement to pay (or have the broker remit payment for) the purchase price of the shares being purchased on or before the settlement date for the sale of such Shares to the broker; or

 

(d)  in the event there exists a public market for the Company’s Common Stock on the date of exercise, by surrender of shares of the Company’s Common Stock.  In this case payment shall be made as follows:

 

(i)  the Optionee shall deliver to the Secretary of the Company a written notice which shall set forth the portion of the purchase price the Optionee wishes to pay with Common Stock, and the number of shares of Common Stock the Optionee intends to surrender upon the exercise of this Option, which shall be determined by dividing the aforementioned portion of the purchase price by the closing price per share of the Common Stock of the Company, as reported on the NASDAQ Global Market (or on any other national securities exchange or other established market on which the Common Stock is then listed), on the last business day immediately preceding the date of exercise of the Option, as determined by the Committee;

 

(ii)  fractional shares shall be disregarded and the Optionee shall pay in cash an amount equal to such fraction multiplied by the price determined under subparagraph i above;

 

(iii)  the written notice shall be accompanied by a duly endorsed blank stock power with respect to the number of shares of Common Stock set forth in the notice, and the certificate(s) representing said shares shall be delivered to the Company at its principal offices within three working days from the date of the notice of exercise;

 

(iv)  the Optionee hereby authorizes and directs the Secretary of the Company to transfer so many of the shares of Common Stock represented by such certificate(s) as are necessary to pay the purchase price in accordance with the provisions herein; and

 

(v)  notwithstanding any other provision herein, the Optionee shall only be permitted to pay the purchase price with shares of Common Stock owned by him as of the exercise date in the manner and within the time periods allowed under 17 CFR Section 240.16b-3 promulgated under the Exchange Act, as such regulation

 

5



 

is presently constituted, as it is amended from time to time, and as it is interpreted now or hereafter by the Securities and Exchange Commission.

 

(vi)  the Optionee may elect to pay the exercise price by authorizing a third party to sell Shares subject to the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire exercise price and any tax withholding resulting from such exercise.

 

5.                                      Adjustments Upon Changes In Capitalization

 

(a)  Recapitalization.  Subject to any required action by the stockholders of the Company, the number of Shares covered by the Option and the per share exercise price of the Option, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, combination, reclassification, the payment of a stock dividend on the Common Stock or any other increase or decrease in the number of such shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been effected without receipt of consideration. Such adjustment shall be made by the Board of Directors, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

 

(b)  Corporate Transaction.  In the event of a proposed Corporate Transaction, the Board of Directors shall notify the Optionee at least 10 calendar days prior to such proposed Corporate Transaction.  To the extent it has not been previously exercised, the Option will terminate immediately prior to the consummation of such proposed Corporate Transaction (but subsequent to the full vesting acceleration provided in Section 2(a)), unless the Option is assumed or an equivalent option is substituted by the successor corporation or a parent or subsidiary of such successor corporation. For the purposes of this subsection, the Option shall be considered assumed if, following the Corporate Transaction, the Option confers the right to purchase, for each Share subject to the Option immediately prior to the Corporate Transaction, the consideration (whether stock, cash, or other securities or property) received in the Corporate Transaction by holders of Common Stock for each Share subject to the Option held on the effective date of the Corporate Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Corporate Transaction was not solely common stock of the successor corporation or its parent or subsidiary, the Board of Directors may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option for each Share subject to the Option to be solely common stock of the successor corporation or its parent or subsidiary equal in fair market value to the per share consideration received by the Company’s holders of Common Stock in the Corporate Transaction.

 

6.                                      Term Of Option

 

This Option may not be exercised more than seven years from the date of grant of this Option (the “Term”), as set forth below, and may be exercised during such term only in accordance with  the terms of this Option.

 

6



 

7.                                      Not Employment Contract

 

Nothing in this Agreement shall confer upon the Optionee any right to continue in the employ or other service with the Company or any Parent or Subsidiary or shall interfere with or restrict in any way the rights of the Company (or any Parent or Subsidiary), which are hereby expressly reserved, to discharge the Optionee at any time for any reason whatsoever, with or without cause, subject to the provisions of applicable law.  This is not an employment contract.

 

8.                                      Income Tax Withholding

 

(a)  Whenever Shares are issued or to be issued pursuant to the Option, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under this Agreement shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Optionee. However, in such cases the Optionee may elect, subject to the approval of the Board of Directors, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. The Optionee may only elect to have shares withheld having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Optionee, and shall be subject to any restrictions or limitations that the Board of Directors deems appropriate.

 

In the event of any determination that the Company has failed to withhold a sum sufficient to pay all withholding taxes due in connection with the exercise of this Option, the Optionee agrees to pay the Company the amount of such deficiency in cash within five days after receiving a written demand from the Company to do so, whether or not Optionee is an employee of the Company at that time.

 

(b)  At such time as the Optionee is required to pay to the Company an amount with respect to tax withholding obligations as set forth in Section 8(a), the Optionee may elect prior to the date the amount of such withholding tax is determined to make such payment, or such increased payment as the Optionee elects to make up to the maximum federal, state and local marginal tax rates (including any related FICA obligation) applicable to the Optionee and the particular transaction in accordance with the provisions of Section 8(a).

 

(c)  Any adverse consequences incurred by an Optionee with respect to the use of shares of Common Stock to pay any part of the Option Price or of any tax in connection with the exercise of an Option shall be the sole responsibility of the Optionee.

 

9.                                      Conditions Upon Issuance of Shares.

 

Shares shall not be issued with respect to the Option unless the exercise of the Option and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or public trading market upon which the Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of the Option, the

 

7



 

Company may require the Optionee to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned relevant provisions of law.

 

10.                               Notices and Other Communications.

 

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or telecopied with a confirmation copy by regular, certified or overnight mail, addressed or telecopied, as the case may be, (i) if to the Optionee, at his residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Chief Executive Officer or Secretary, or to such other address or telecopier number or electronic mail address, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; (iii) in the case of facsimile transmission, when confirmed by facsimile machine report; and (iv) in the case of electronic mail, when directed to an electronic mail address at which the receiving party has consented to receive notice, provided, that such consent is deemed revoked if the sender is unable to deliver by electronic transmission two consecutive notices and such inability becomes known to the secretary or assistant secretary of the Company or to the transfer agent, or other person responsible for giving notice.

 

Dated as of the 28th day of November 2007.

 

 

 

MOSYS, INC.

 

 

 

 

 

By:

/s/ Mehdi Bathaee

 

 

 

 

 

 

 

Its:

Chief Operating Officer

 

8



 

ACKNOWLEDGEMENT BY OPTIONEE

 

The Optionee acknowledges receipt of copies of the Agreement and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions of the Agreement.  The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board of Directors upon any questions arising under the Agreement.

 

 

/s/ Leonard Perham

 

Optionee

 

 

Date: December 4, 2007

 

 

[CONSENT OF SPOUSE/DOMESTIC PARTNER

 

I, ___________________________, spouse/domestic partner of the Optionee who executed the foregoing Agreement, hereby agree that my spouse’s/domestic partner’s interest in the shares of Common Stock subject to said Agreement shall be irrevocably bound by the Agreement’s terms.  I further agree that my community property interest in such shares, if any, shall similarly be bound by said Agreement and that such consent is binding upon my executors, administrators, heirs and assigns.  I agree to execute and deliver such documents as may be necessary to carry out the intent of said Agreement and this consent.

 

 

]

 

Spouse/Domestic Partner

 

9



 

APPENDIX I

 

MOSYS, INC.

 

NOTICE OF EXERCISE OF STOCK OPTION

 

I _____________________________________ (print legibly) hereby elect to exercise the following stock options(s) granted to me by MOSYS, INC. (the “Company”).  All shares being purchased are fully vested and exercisable pursuant to Section 3 of the listed Option Agreement.

 

1. ____________ Shares at $ ____________ per share (Grant date): ____________ )

2. ____________ Shares at $ ____________ per share (Grant date): ____________ )

3. ____________ Shares at $ ____________ per share (Grant date): ____________ )

4. ____________ Shares at $ ____________ per share (Grant date): ____________ )

 

Cash exercise in the amount of $ ____________________

Shares should be issued to me as follows:

                Name: ________________________________________________

 

 

If you choose to include your spouse, you must designate below how you wish your shares to be registered by checking the appropriate box.  If we receive no designation, the shares will be designated as Joint Tenants.

 

                                                ________ Joint Tenants                                                                                         0;                                                                                                                   ________ Community Property

                                                ________ Tenants in Common                                                                                                                                                                           ________ Tenancy by Entirety

 

 

Verification by__________________________________________Stock Administration

 

Certificate to be delivered to (complete item 1 or 2 below)

1.               Employee ________                                                         Home Address:    __________________________________________________________

                                                                                                                                        & #160;                                                                                                                                                       __________________________________________________________

2.               (Insert Name of Second Broker)  ________________________________________________

                                                Acct #:  ________________________________________________

                Contact Name & Number: ________________________________________________

 

 

Signature: ________________________________________ Date: ________________________________________

Social Security No.: ___________________________________________

[For Company Use Only]

 

As of the date set forth above, the above named person has the vested right to exercise the number of shares set forth above.

Date: ____________________________                                                            ____________________________________________

 

Amount due Company: $ ____________

 

 

MoSys, Inc.

 

755 N. Mathilda Avenue

 

Sunnyvale, California 94085

 

(408) 731-1800

 

Attn: Stock Administration

 

 


 

EX-31.1 5 a08-11315_1ex31d1.htm EX-31.1

Exhibit 31.1

 

CERTIFICATION PURSUANT TO

 

RULE 13a-14 THE SECURITIES EXCHANGE ACT OF 1934

 

I, Leonard Perham, certify that:

 

1.     I have reviewed this quarterly report on Form 10-Q of MoSys, Inc. for the period ended March 31, 2008;

 

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2008

 

/s/ Leonard Perham

 

Leonard Perham

President and Chief Executive Officer

 


EX-31.2 6 a08-11315_1ex31d2.htm EX-31.2

Exhibit 31.2

 

CERTIFICATION PURSUANT TO

 

RULE 13a-14 THE SECURITIES EXCHANGE ACT OF 1934

 

I, James W. Sullivan, certify that:

 

1.     I have reviewed this quarterly report on Form 10-Q of MoSys, Inc. for the period ended March 31, 2008;

 

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.     The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a)           Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)           Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)           Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d)           Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.     The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)           All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b)           Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2008

 

/s/ James W. Sullivan

 

James W. Sullivan

Vice President of Finance and Chief Financial Officer

 


EX-32 7 a08-11315_1ex32.htm EX-32

Exhibit 32

 

CERTIFICATION OF CEO AND CFO FURNISHED PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of MoSys, Inc. (the “Company”) for the quarterly period ended March 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of Leonard Perham, Chief Executive Officer of the Company and James W. Sullivan, Vice President of Finance and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge, that:

 

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

 

 

/s/ Leonard Perham

 

 

Leonard Perham

 

 

President and Chief Executive Officer

 

 

May 9, 2008

 

 

 

 

 

/s/ James W. Sullivan

 

 

James W. Sullivan

 

 

Vice President of Finance and Chief Financial Officer

 

 

May 9, 2008

 

This certification accompanies this Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, or otherwise required, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.

 


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