8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________

Form 8-K
______________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): August 6, 2019  

MOSYS, INC.
(Exact Name of Registrant as Specified in Charter)

000-32929
(Commission File Number)

Delaware	77-0291941
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification Number)

2309 Bering Dr.
San Jose, California 95131

(Address of principal executive offices, with zip code)

(408) 418-7500
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
	[   ]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
	[   ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
	[   ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
	[   ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MOSY	NASDAQ

Item 2.02. Results of Operations and Financial Condition.

On August 6, 2019, the Company issued a press release announcing its financial results for the three and six months ended June 30, 2019. A copy of this press release is furnished as Exhibit 99.1 to this report. The press release should be read in conjunction with the statements regarding forward-looking statements, which are included in the text of the release.

In addition to disclosing financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), management also presents information regarding the Company’s performance over comparable periods based on gross margin, operating expenses (research and development and sales, general and administrative), operating income (loss), net income (loss) and net income (loss) per share, exclusive of stock-based compensation, restructuring and impairment charges, and amortization of intangibles. Because management discloses financial measures calculated without taking into account these items, these financial measures are characterized as "non-GAAP financial measures" under Securities and Exchange Commission rules.

Stock-based compensation charges represent non-cash charges related to equity awards granted by the Company. Although these are recurring charges to the Company’s operations, management believes the measurement of these amounts can vary considerably from period to period and depend substantially on factors that are not a direct consequence of operating performance that is within management’s control. Thus, management believes that excluding these charges facilitates comparisons of the Company’s operational performance in different periods, as well as with similarly determined non-GAAP financial measures of comparable companies.

Amortization of intangible assets results from the value recorded for a license the Company retained to patents sold in 2011. The license was fully amortized as of December 31, 2018. The amortization does not represent operating expenses ordinarily incurred by the Company with respect to its primary business activities of selling integrated circuit products. Thus, these charges are excluded from the Company’s non-GAAP financial measures to provide another basis for evaluating and comparing the Company’s performance.

The Company’s non-GAAP financial measures also exclude restructuring charges related to reductions in workforce and associated operating expenses to reduce net loss and cash burn and to realign resources. The Company has incurred restructuring charges in prior periods and may do so in the future, and such charges should be considered in evaluating the performance of the Company and its management. However, management believes that presenting financial measures that exclude these charges facilitates comparisons with the Company’s ongoing operating results as well as those of other companies in its business sector.

Adjusted EBITDA is GAAP net income (loss), as reported on the Company’s condensed consolidated statements of operations, excluding stock-based compensation, restructuring and impairment charges, amortization of intangibles, interest expense, depreciation, and the provision (benefit) for income taxes.

Management and the Company’s board of directors will continue to analyze the historical consolidated results of operations and comprehensive income (loss) (revenue, gross margin, research and development expenses, selling, general and administrative expenses, operating income (loss), net income (loss) and net income (loss) per share), and adjusted EBITDA to assess the business and compare operating results to the Company's performance objectives. For example, the Company's budgeting and planning process utilizes these non-GAAP financial measures.

The Company discloses these non-GAAP financial measures to the public as an additional means by which investors can assess the Company's performance and to identify the Company's operating results for investors on the same basis applied by management. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and, therefore, may not be comparable to, similarly titled measures used by other companies. The Company has furnished reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures in the press release furnished as Exhibit 99.1.

Moreover, although these non-GAAP financial measures adjust expense, they should not be viewed as a pro-forma presentation reflecting the elimination of the underlying share-based compensation programs, which are an important element of the Company's compensation structure. GAAP requires that all forms of share-based payments should be valued and included, as appropriate, in results of operations. Management believes these expenses are a material part of the Company's operating results.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release by MoSys, Inc. dated August 6, 2019

SIGNATURE

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

	MOSYS, INC.
Date: August 6, 2019	By:	/s/ James W. Sullivan
		James W. Sullivan
		Vice President of Finance and Chief Financial Officer

EXHIBIT INDEX 

Exhibit Number	Description
99.1	Press Release by MoSys, Inc. dated August 6, 2019

EX-99.1

EXHIBIT 99.1

MoSys, Inc. Reports Second Quarter 2019 Financial Results

Records Positive Cash Flow

SAN JOSE, Calif., Aug. 06, 2019 (GLOBE NEWSWIRE) -- MoSys, Inc. (NASDAQ: MOSY), a provider of semiconductor solutions that enable fast, intelligent data access for cloud networking, security, test and video systems, today reported financial results for the quarter ended June 30, 2019.  

Second Quarter 2019 Financial Results
Total net revenue for the second quarter of 2019 was $3.1 million, compared with $3.5 million for the previous quarter and $4.6 million for the second quarter of 2018. Product revenue for the second quarter was $2.8 million, compared with $3.4 million in the first quarter of 2019 and $4.1 million in the year ago period, primarily reflecting reduced shipments of Bandwidth Engine® products.

GAAP gross margin for the second quarter of 2019 was 60%, compared with 62% for the first quarter of 2019 and 60% for the second quarter of 2018. Gross margin continues to remain at the Company’s corporate target of 60%.

Total operating expenses on a GAAP basis for the second quarter of 2019 were $1.9 million, compared with $2.1 million in the first quarter of 2019 and $2.2 million in the second quarter of 2018. Total operating expenses, excluding stock-based compensation expenses and amortization of intangible assets, for the second quarter of 2019 were $1.8 million, compared with $2.1 million in the first quarter of 2019 and $2.1 million in the second quarter of 2018.

GAAP net loss for the second quarter of 2019 was $0.1 million, or $0.00 per share, compared with net income of $10,000, or $0.00 per diluted share, for the previous quarter and net income of $0.3 million, or $0.04 per diluted share, for the second quarter of 2018.

Non-GAAP net income for the second quarter of 2019 was $16,000, or $0.00 per diluted share, compared with non-GAAP net income of $6,000, or $0.00 per diluted share, during the prior quarter and non-GAAP net income of $0.5 million, or $0.04 per diluted share, in the second quarter of 2018. Adjusted EBITDA for the second quarter of 2019 was a positive $0.1 million, compared with a positive $0.1 million for the previous quarter and a positive $0.9 million for the second quarter of 2018. A reconciliation of GAAP results to non-GAAP results is provided in the financial statement tables following the text of this press release.

At June 30, 2019, the Company had $7.4 million in cash and investments, a $1.1 million increase from March 31, 2019. The increase in cash was primarily due to the timing of collections of customer receivables and reduced inventory expenditures combined with lower operating expenses.

At June 30, 2019, the Company had 43,233,396 shares of common stock outstanding, which excludes 2,310,776 shares of common stock issuable upon the exercise of pre-funded warrants.

Management Commentary
“We recorded a solid second quarter, as we achieved non-GAAP profitability, met our gross margin target of 60% and generated positive cash flow of $1.1 million,” said Dan Lewis, chief executive officer and president of MoSys®. “We continued to closely manage our operating expenses and balance sheet, while monetizing our receivables and inventory during the quarter. Shipments of last-time buy orders for our first-generation Bandwidth Engine products is complete, and this was a major contributor to the decline in second quarter product revenue, as we manage customer transitions.  

“There are multiple events that will impact our third quarter. A large networking equipment customer is reducing inventory levels, which represents a decrease in buffer inventory of our products that the customer had accumulated over the last few quarters. Though we have multiple new design wins at this customer, the initial production orders for these new design wins are unlikely to offset the adjustment to inventory over the second half of 2019. In addition, new platform design wins at two other major customers are delayed in transitioning to production. Despite reasons for optimism, the net effect is there will be a significant reduction of revenue in the third quarter. However, we expect marked improvement with revenue growth in the fourth quarter continuing into 2020.

“Also, on the positive side, during the quarter, a large customer that had previously said it was phasing out use of the Bandwidth Engine IC in its products, recently told us that it now intends to extend use of our ICs and has placed new orders.  We expect shipments to this customer to resume in the fourth quarter of 2019 and to extend into 2020.”

Mr. Lewis concluded, “I believe the growing pipeline of new design wins we have secured with our major customers sets the stage for a return to growth later this year and into 2020 as these designs transition to production.  Customer platform designs take time and delays to production often occur, however, production life cycles typically last for many years, as evidenced by our current customer base.  We continue to actively engage with new customers for our products, as evidenced by our growing opportunity pipeline.

“On a final note, we also continue to make progress developing software-defined, hardware-accelerated solutions to expand our technology solution offerings to our customers. Feedback on these new solutions has been positive, and we expect to formally launch these solutions in the second half of 2019.”

Nasdaq Compliance
In accordance with a notification letter received in March 2019 from The NASDAQ Stock Market (“Nasdaq”), the Company has until September 16, 2019 to regain compliance with Nasdaq’s minimum bid price requirement. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company can regain compliance if, at any time prior to September 16, 2019, the closing bid price of the Company’s common stock is at least $1.00 for a minimum of 10 consecutive business days. The Company expects to effect a reverse stock split during the third quarter of 2019 to regain compliance with Nasdaq’s minimum bid price requirement.

Business Outlook
The Company expects total net revenue for the second half of 2019 to be in the range of $3.1 million to $3.4 million.

Use of Non-GAAP Financial Measures 
To supplement MoSys’ consolidated financial statements presented in accordance with GAAP, MoSys uses non-GAAP financial measures that exclude from the statement of operations the effects of stock-based compensation and intangible asset amortization. MoSys’ management believes that the presentation of these non-GAAP financial measures is useful to investors and other interested persons because they are one of the primary indicators that MoSys’ management uses for planning and forecasting future performance. The press release also makes reference to and reconciles GAAP net income (loss) and adjusted EBITDA, which the Company defines as GAAP net income (loss) before interest expense, income tax provision, and depreciation and amortization, as well as stock-based compensation and intangible asset amortization. Management believes that the presentation of non-GAAP financial measures that exclude these items is useful to investors because management does not consider these charges part of the day-to-day business or reflective of the core operational activities of the Company that are within the control of management or that would be used to evaluate management’s operating performance.

Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the comparable GAAP results, which are provided in tables below the Condensed Consolidated Statements of Operations. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. For additional information regarding these non-GAAP financial measures, and management’s explanation of why it considers such measures to be useful, refer to the Form 8-K dated August 6, 2019 that the Company filed with the Securities and Exchange Commission.

Forward-Looking Statements 
This press release may contain forward-looking statements about the Company, including, without limitation, anticipated benefits and performance expected from its IC products and the Company’s future markets and future business prospects. Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited, to the following:             

• a lack of working capital to aggressively fund product development and growth;
• the timing of customer orders and product shipments;
• customer concentration;
• lengthy sales cycle;
• ability to enhance our existing proprietary technologies and develop new technologies;
• achieving additional design wins for our IC products through the acceptance and adoption of our IC architecture and interface protocols by potential customers and their suppliers;
• difficulties and delays in the development, production, testing and marketing of our ICs;
• reliance on our manufacturing partners to assist successfully with the fabrication of our ICs;
• availability of quantities of ICs supplied by our manufacturing partners at a competitive cost;
• level of intellectual property protection provided by our patents, the expenses and other consequences of litigation, including intellectual property infringement litigation, to which we may be or may become a party from time to time;
• vigor and growth of markets served by our customers and our operations; and

other risks identified in the company’s most recent report on Form 10-K filed with the Securities and Exchange Commission, as well as other reports that MoSys files from time to time with the Securities and Exchange Commission. MoSys undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

About MoSys, Inc.
MoSys, Inc. (NASDAQ: MOSY) is a provider of semiconductor solutions that enable fast, intelligent data access for cloud networking, security, test and video systems. More information is available at www.mosys.com.

Bandwidth Engine and MoSys are registered trademarks of MoSys, Inc. in the US and/or other countries. The MoSys logo is a trademark of MoSys, Inc. All other marks mentioned herein are the property of their respective owners.

(Financial Tables to Follow)

Contacts:
Jim Sullivan, CFO
MoSys, Inc.
+1 (408) 418-7500
jsullivan@mosys.com

MOSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)
				Three Months Ended						Six Months Ended
				June 30,						June 30,
					2019			2018			2019			2018
Net Revenue
	Product			$	2,810		$	4,051		$	6,196		$	7,755
	Royalty and other				256			547			390			1,051
		Total net revenue			3,066			4,598			6,586			8,806
Cost of Net Revenue					1,228			1,833			2,582			3,434
Gross Profit					1,838			2,765			4,004			5,372
Operating Expenses
	Research and development				981			990			2,134			2,041
	Selling, general and administrative				932			1,250			1,904			2,239
		Total operating expenses			1,913			2,240			4,038			4,280
	Income (loss) from operations				(75	)		525			(34	)		1,092
	Other expense, net				(28	)		(210	)		(59	)		(429	)
Net Income (loss)				$	(103	)	$	315		$	(93	)	$	663
Net Income (loss) per share
	Basic			$	(0.00	)	$	0.04		$	(0.00	)	$	0.08
	Diluted			$	(0.00	)	$	0.04		$	(0.00	)	$	0.08
Shares used in computing net income (loss) per share
	Basic				43,171			8,171			43,115			8,151
	Diluted				43,171			8,409			43,115			8,378
MOSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
				June 30,			December 31,
					2019			2018
Assets
	Current assets:
		Cash, cash equivalents and investments		$	7,444		$	7,104
		Accounts receivable, net			1,355			1,622
		Inventories			601			1,148
		Prepaid expenses and other			944			923
			Total current assets		10,344			10,797
	Property and equipment, net				223			279
	Goodwill				420			420
	Other				510			260
			Total assets	$	11,497		$	11,756
Liabilities and Stockholders’ Equity
	Current liabilities:
		Accounts payable		$	88		$	236
		Deferred revenue			103			273
		Accrued expenses and other			1,311			1,402
			Total current liabilities		1,502			1,911
	Convertible notes payable				2,749			2,671
	Other long-term liabilities				67			17
			Total liabilities		4,318			4,599
	Stockholders' equity				7,179			7,157
			Total liabilities and stockholders’ equity	$	11,497		$	11,756
MOSYS, INC.
Reconciliation of GAAP to Non-GAAP Net Income and Net Income Per Share
(In thousands, except per share amounts; unaudited)
				Three Months Ended						Six Months Ended
				June 30,						June 30,
					2019			2018			2019			2018
	GAAP net income (loss)			$	(103	)	$	315		$	(93	)	$	663
		Stock-based compensation expense
		-	Research and development		67			83			40			89
		-	Selling, general and administrative		52			76			75			164
			Total stock-based compensation expense		119			159			115			253
		Amortization of intangible assets			-			28			-			55
	Non-GAAP net income			$	16		$	502		$	22		$	971
	GAAP net income (loss) per share, basic			$	(0.00	)	$	0.04		$	(0.00	)	$	0.08
		Reconciling items
		-	Stock-based compensation expense		-			0.02			-			0.03
		-	Amortization of intangible assets		-			-			-			0.01
	Non-GAAP net income per share, basic			$	0.00		$	0.06		$	0.00		$	0.12
	GAAP net income (loss) per share, diluted			$	(0.00	)	$	0.04		$	(0.00	)	$	0.08
		Reconciling items
		-	Stock-based compensation expense		-			0.02			-			0.03
		-	Amortization of intangible assets		-			-			-			0.01
	Non-GAAP net income per share, diluted			$	0.00		$	0.06		$	0.00		$	0.12
	Shares used in computing non-GAAP net income per share
		Basic			43,171			8,171			43,115			8,151
		Diluted			45,710			8,409			45,516			8,378
MOSYS, INC.
Reconciliation of GAAP and Non-GAAP Financial Information
(In thousands; unaudited)
				Three Months Ended						Six Months Ended
				June 30,						June 30,
					2019			2018			2019			2018
	Reconciliation of GAAP net income (loss) and adjusted EBITDA
	GAAP net income (loss)			$	(103	)	$	315		$	(93	)	$	663
		Stock-based compensation expense
		-	Research and development		67			83			40			89
		-	Selling, general and administrative		52			76			75			164
		Stock-based compensation expense			119			159			115			253
		Amortization of intangible assets			-			28			-			55
	Non-GAAP net income				16			502			22			971
		EBITDA adjustments:
		Depreciation			39			171			111			340
		Interest expense			56			206			110			427
		Provision for income taxes			-			1			-			2
	Adjusted EBITDA			$	111		$	880		$	243		$	1,740