SUNNYVALE, Calif.–(BUSINESS WIRE)–Jul. 28, 2009–
MoSys, Inc., (NASDAQ: MOSY), a leading provider of differentiated,
high-density memory and high-speed interface (I/O) intellectual property
(IP) for the consumer, communications, networking, storage and
high-performance computing markets, today reported financial results for
the second quarter ended June 30, 2009. Second quarter results include
financials from Prism Circuits, Inc. following the closing of the
acquisition on June 5, 2009.

Second Quarter Key Points

  • Reported second quarter total revenue of $2.0 million
  • Ended quarter with total cash and investments of $45.4 million
  • Completed acquisition of Prism Circuits and expanded product portfolio
    with the addition of silicon-proven, differentiated, high speed
    interface IP
  • Expanded growth opportunity in the networking and communications
    markets

Management Commentary

Commenting on the Company’s second quarter, Len Perham, MoSys’ President
and Chief Executive Officer, stated, “While the second quarter was
challenging due to continued instability in the macroeconomic
environment, we achieved major progress towards positioning MoSys for
future growth through our acquisition of Prism Circuits, a leader in
high-speed parallel and serial interface IP. The acquisition
significantly expands our total addressable market, accelerates our
growth opportunities in networking and communications applications and
brings us a world class team of experts in high speed SerDes and DDR
interface technology. We’ve already made great progress integrating the
teams and we recorded our first interface IP revenue during the second
quarter and expect this new revenue stream to contribute significantly
in the second half of 2009 and beyond. The combination of our proven
1T-SRAM memory with high speed serial I/O IP will enable us to provide a
more compelling and comprehensive solution for next generation SoCs and
ASICs targeted for the networking and communications markets. We are
confident in our forward direction and believe this acquisition will be
a catalyst to drive the company towards growth and profitability.”

Second Quarter Results

Total net revenue for the second quarter of 2009 was $2.0 million,
compared with $2.6 million for the first quarter of 2009 and $3.2
million
for the second quarter of 2008.

Second quarter total revenue included licensing revenue of $306,000,
compared with $524,000 for the first quarter of 2009 and $667,000 for
the second quarter of 2008. Royalty revenue for the second quarter was
$1.7 million, which includes royalties associated with the Nintendo Wii
game console. Royalty revenue decreased from the previous quarter
primarily due to lower shipment volumes as inventory levels were
reduced. Additionally, most production by one of our major licensees is
now subject to a license agreement that provides for royalties to be
reported and recognized in the quarter subsequent to shipment of the
licensee’s products, instead of the shipment quarter, as was the case
under the previous agreement. This has reduced the comparability of our
current royalty revenue to the previous quarter’s royalty revenue of
$2.0 million and the royalty revenue of $2.5 million for the second
quarter of 2008.

Gross margin as determined in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) was 86 percent, compared with 88 percent
for the first quarter of 2009 and 74 percent for the second quarter of
2008.

Total operating expenses on a GAAP basis for the second quarter were
$7.0 million, compared with $6.5 million for the previous quarter and
$7.5 million for the second quarter of 2008. Second quarter operating
expenses included acquisition-related costs, including legal and
accounting transaction fees, amortization of intangible assets and
contingent compensation expense, which totaled $611,000, a restructuring
charge of $431,000 and stock-based compensation expense of $788,000.

GAAP net loss for the second quarter of 2009 was $5.1 million, or
($0.16) per share, compared with a net loss of $4.1 million, or ($0.13)
per share, for the first quarter of 2009 and a net loss of $4.6 million,
or ($0.14) per share, for the second quarter of 2008.

The non-GAAP net loss for the second quarter was $3.3 million, or
($0.11) per share, excluding charges related to the acquisition,
restructuring and stock-based compensation. A reconciliation of GAAP
results to non-GAAP results is provided in the financial statement
tables following the text of this press release.

Earnings per share for the quarter on both a GAAP and non-GAAP basis
were computed using 31,198,000 shares.

Cash, cash equivalents and investments totaled approximately $45.4
million
as of June 30, 2009, compared with approximately $67.5 million
as of December 31, 2008. The year to date decrease in cash and
investments included a $13.6 million cash payment related to the
acquisition of Prism Circuits in the second quarter, as well as first
quarter expenditures of approximately $1.0 million related to the exit
of the analog/mixed-signal product lines and approximately $0.9 million
of stock repurchases.

Second Quarter Financial Results Webcast / Conference Call

MoSys will host a conference call and webcast with investors today at
1:30 p.m. Pacific time (4:30 p.m. Eastern time) to discuss the second
quarter 2009 financial results and the business outlook. Investors and
other interested parties may access the call by dialing 888-713-4215
in the U.S. (617-213-4867 outside of the U.S.), and entering the pass
code 65553669 at least 10 minutes prior to the start of the call.
In addition, an audio webcast will be available through the MoSys Web
site at http://www.mosys.com.
A telephone replay will be available for 2 business days following the
call at 888-286-8010 in the U.S. (617-801-6888 outside of the U.S.),
pass code of 97669678.

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 income statement the effects of restructuring and asset
impairment charges, stock-based compensation and the effects of certain
acquisition-related charges, including amortization of acquired
intangible assets, transaction costs and contingent compensation
charges. 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. MoSys
believes that the presentation of non-GAAP financial measures that
exclude these items is useful to investors because MoSys 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 reconciliation of these non-GAAP
financial measures to the comparable GAAP results, which is provided in
a table immediately 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 July
28, 2009
, 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, benefits and performance
expected from use of the Company’s embedded memory and interface
technologies, the Company’s execution and results, improving operational
efficiencies, expense and revenue synergies from the acquisition of
Prism Circuits, growth of the business and future business prospects and
the estimated cost savings from restructuring plans.

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, customer acceptance of our proprietary embedded
memory and interface technologies, the timing and nature of the license
agreements to be entered into with our customers and their requests for
our services under existing license agreements, the timing of customer
acceptance of our work under such agreements, the level of commercial
success of licensees’ products, ease of manufacturing and yields of
devices incorporating our proprietary technologies, our ability to
enhance our existing proprietary technologies and develop new
technologies, the 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, the vigor and growth of
markets served by our licensees and customers and operations of the
Company and other risks identified in the Company’s most recent reports
on form 10-K and form 10-Q 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.

Founded in 1991, MoSys (NASDAQ: MOSY), develops, markets and licenses
differentiated embedded memory and high speed parallel and serial
interface IP for advanced SoC designs. MoSys’ patented 1T-SRAM and
1T-FLASH memory technologies offer a combination of high density, low
power consumption, high speed and low cost advantages that are unmatched
by other available memory technologies for a variety of home
entertainment, mobile consumer, networking and storage applications.
MoSys’ silicon-proven interface IP portfolio includes DDR3/2 Combo PHYs,
as well as SerDes IP that support data rates from 1 Gigabit per second
(Gbps) to 10 Gbps, across a wide range of standards, including
PCI-Express, XAUI, SATA, USB and 10G KR. MoSys is headquartered at 755
N. Mathilda Avenue
, Sunnyvale, California 94085. More information is
available on MoSys’ website at http://www.mosys.com.

MoSys and 1T-SRAM are registered trademarks of MoSys, Inc. 1T-FLASH™
is a trademark of MoSys, Inc.

 
MOSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)
       
Three Months Ended Six Months Ended
June 30, June 30,
  2009     2008     2009     2008  
 
Net Revenue
Licensing $ 306 $ 667 $ 830 $ 1,099
Royalty   1,675     2,528     3,717     4,913  
Total net revenue 1,981 3,195 4,547 6,012
 
Cost of Net Revenue
Licensing   276     833     596     1,313  

Total cost of net revenue

276 833 596 1,313
 
Gross Profit 1,705 2,362 3,951 4,699
 
Operating Expenses
Research and development 4,072 4,541 7,901 8,837
Selling, general and administrative 2,461 2,926 4,878 6,282
Restructuring charge   431         706      
Total operating expenses 6,964 7,467 13,485 15,119
 
Loss from operations (5,259 ) (5,105 ) (9,534 ) (10,420 )
 
Other income, net   151     561     354     1,635  
Loss before income taxes (5,108 ) (4,544 ) (9,180 ) (8,785 )
 
Provision for income taxes   (26 )   (46 )   (33 )   (89 )
 
Net loss $ (5,134 ) $ (4,590 ) $ (9,213 ) $ (8,874 )
 
Net loss per share
Basic and diluted ($0.16 ) ($0.14 ) ($0.29 ) ($0.28 )
 
Shares used in computing net loss per share
Basic and diluted 31,198 31,703 31,261 31,690
 
 
MOSYS, INC.
Reconciliation of GAAP to Non-GAAP Net Loss and Net Loss Per Share
(In thousands, except per share amounts; unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
  2009     2008     2009     2008  
 
GAAP net loss $ (5,134 ) $ (4,590 ) $ (9,213 ) $ (8,874 )
Stock-based compensation expense

– Cost of net revenue

40 151 72 231

– Research and development

279 356 453 729

– Selling, general and administrative

  469     826     710     1,639  
Total stock-based compensation expense 788 1,333 1,235 2,599
 
Restructuring charge (1) 431 706
Amortization of intangible assets (2) 177 197 177 394
Acquisition-related transaction costs (3) 300 300
Acquisition-related contingent compensation charges (4)   134         134      
 
Non-GAAP net loss $ (3,304 ) $ (3,060 ) $ (6,661 ) $ (5,881 )
 
GAAP net loss per share ($0.16 ) ($0.14 ) ($0.29 ) ($0.28 )
Reconciling items

– Stock-based compensation expense

0.03 0.03 0.04 0.08

– Restructuring charge (1)

0.01 0.02

– Amortization of intangible assets (2)

0.01 0.01 0.01

– Acquisition-related transaction costs (3)

0.01 0.01

– Acquisition-related contingent compensation charges (4)

               
 
Non-GAAP net loss per share: Basic and diluted   ($0.11 )   ($0.10 )   ($0.21 )   ($0.19 )
 
Shares used in computing non-GAAP net loss per share
Basic and diluted 31,198 31,703 31,261 31,690
 
(1) Q2 09 charges, included in research and development expenses,
related to the closure of the Korea office and lease contract
termination costs.
(2) Non-cash charges for amortization of intangibles arising from
acquired assets, included in research and development expenses.

(3) Charges primarily related to legal and accounting fees
incurred from the acquisition of Prism Circuits, Inc. These
charges are included in selling, general and administrative
expenses.

(4) Compensation charges, included in research and development
expenses, were for contingent compensation arising from the
acquisition of Prism Circuits, Inc.
 
MOSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, unaudited)
   
June 30, December 31,
2009 2008
 
Assets
Current assets:
Cash, cash equivalents and investments $ 25,055 $ 44,075
Accounts receivable, net 1,030 688
Unbilled contract receivables 2,515 428
Prepaid expenses and other assets 2,236 2,158
Total current assets 30,836 47,349
 
Long-term investments 20,385 23,395
Property and equipment, net 1,097 958
Goodwill (1) 22,584 12,326
Intangible assets, net (2) 5,903
Other assets 1,507 1,905
Total assets $ 82,312 $ 85,933
 
 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 401 $ 167
Accrued expenses and other liabilities 1,914 2,235
Accrued restructuring liabilities 473 1,004
Deferred revenue 1,937 639

Total current liabilities

4,725 4,045
 
Long-term liabilities (3) 4,684
 
Stockholders’ equity 72,903 81,888
   
Total liabilities and stockholders’ equity $ 82,312 $ 85,933
 
(1) Includes $10.3 million arising from the acquisition of Prism
Circuits, Inc.
(2) Represents intangible assets, net of amortization, recorded from
the acquisition of Prism Circuits, Inc.

(3) Represents the liability for future payment of the earn-out
from the acquisition of Prism Circuits, Inc., reduced by $1.9
million that will be recognized as compensation expense over 12
months, if the applicable earn-out provisions are met.

Source: MoSys, Inc.

MoSys, Inc.
Jim Sullivan, CFO, 408-731-1800
jsullivan@mosys.com
or
Shelton
Group, Investor Relations
Beverly Twing, 972-239-5119 ext. 126
Sr.
Acct. Manager
btwing@sheltongroup.com