SOURCE: Spectra7 Microsystems Inc.

Spectra7 Microsystems Inc.

August 24, 2015 07:45 ET

Spectra7 Announces Financial Results for the Three and Six Months Ended June 30, 2015

Revenue Increases 48% Over Q1 -- Revenue for Wearable/Virtual Reality Products on the Rise

TORONTO, ON and PALO ALTO, CA--(Marketwired - August 24, 2015) - Spectra7 Microsystems Inc. (TSX: SEV) ("Spectra7" or the "Company") today announced its unaudited financial results for the three and six month periods ended June 30, 2015. A copy of the unaudited condensed interim consolidated financial statements for the three and six month periods ended June 30, 2015 prepared in accordance with International Financial Reporting Standards (the "Financial Statements") and the corresponding management's discussion and analysis ("MD&A") will be available under the Company's profile on www.sedar.com. All amounts are in US dollars unless otherwise noted.

Q2 2015 Highlights

  • Revenue for the three months ended June 30, 2015 was $1.0 million, an increase of 48% compare to the three months ended March 31, 2015;
  • Revenue from new Virtual Reality ("VR") products for the three months ended June 30, 2015 represents a significant portion of the revenue and increased over 500% from the previous three month period;
  • Continued design win momentum in the AR/VR market segments by adding five new customers and design-in programs during the quarter and four new customer design-in programs since the end of the quarter
  • Received $1.4 million of orders for the three months ended June 30, 2015, up 150% from the prior quarter, with the majority for new VR and Augmented Reality ("AR") products;
  • Gross margins, although lower for the three and six months ended June 30, 2015 as compared to the same periods the previous year, remain strong at 73% for the six months ended June 30, 2015;
  • Received aggregate gross proceeds of $7.222 million ($6.431 million net of proceeds) as a result of a bought deal private placement of 12,322,250 special warrants and a non-brokered private placement of 172,515 special warrants; and
  • Granted Patents increased to 44 as technology development extends into new applications and vertical markets.

Subsequent Events

  • Graduated from the TSX Venture Exchange to the Toronto Stock Exchange on July 23, 2015.

"We are very pleased with the increasing demand for the Company's new wearable VR/AR products indicating strong acceptance of our technology in the market place ahead of commercial product launches expected later this year and through 2016. The recently completed financing further strengthens our balance sheet as we expand our existing patented technology into additional vertical markets," commented Tony Stelliga, CEO of the Company.

Financial Summary

The following table is a summary of the financial information presented in the Financial Statements:

       
   Three months ended   Six months ended  
   June 30, 2015 (unaudited) $   June 30, 2014 (unaudited) $   June 30, 2015 (unaudited) $   June 30, 2014 (unaudited) $  
Revenue  1,038,464   1,145,992   1,740,406   2,007,734  
Cost of Sales  325,734   272,156   475,845   481,112  
Gross Margin  712,730   873,836   1,264,561   1,526,622  
Gross Margin %  69 % 76 % 73 % 76 %
Operating Expense  3,072,022   3,314,661   5,683,408   5,690,976  
Other expense (1)  867,955   806,514   2,180,904   1,861,192  
Total Comprehensive loss  (3,227,247 ) (3,247,339 ) (6,599,751 ) (6,025,546 )
Loss per share                 
 Basic and Diluted  (0.028 ) (0.041 ) (0.063 ) (0.090 )
(1) includes unrealized foreign currency translation                 
             

Revenue

Revenue for the three months ended June 30, 2015 increased 48% over the three months ended March 31, 2015 to $1.0 million and decreased 9% over the same period the previous year. Revenue for the six months ended June 30, 2015 was $1.7 million, 13% lower than the same period the previous year.

Interconnect revenue for the three months ended June 30, 2015 increased 61% over the three months ended March 31 2015 due mainly to demand for the new VR and AR products. Interconnect revenue for the six months ended June 30, 2015 decreased slightly by 5% compared to the same period the previous year due to our customers transitioning to our new technology products.

Wireless revenue for the three and six month periods ended June 30, 2015 decreased 81% and 61% respectively as a result of lower royalty payments as per a long-term contract.

Gross Margins

Gross margins for the three and six month periods ending June 30, 2015 were 69% and 73% respectively. Gross margins decreased mainly due to the lower proportion of wireless revenue, which is close to 100% gross margin, and higher initial production costs for VR products.

Expenses

Operating expenses are incurred by the Company in its pursuit of developing products and growing revenue. Most operating expenses are incurred in cash. Other expenses relate to financing costs and accounting and reporting requirements many of which are non-cash.

Operating expenses for the three and six months ended June 30, 2015 were $3.072 million and $5.683 million respectively, a reduction of $0.243 and $0.008 million (-7% and 0%) respectively compared to the same periods the previous year.

Operating expenses for the three months ended June 30, 2015 were lower than the same period the previous year due to lower headcount and contracted support costs and lower expenses in most other categories including travel, listing expenses advertising and promotion and legal and audit costs.

Operating expenses for the six months ended June 30, 2015 were basically unchanged ($-0.008 million) compared to the same period the previous year. Lower headcount and contracted support service costs were lower as were other categories including travel, listing expenses advertising and promotion and legal and audit costs offset by higher costs for consumable materials such as test boards, and tape-out costs for the production of prototypes due to the high level of product development and support to advance and produce design-ins.

Other expenses for the three and six months ended June 30, 2015 were $0.868 million and $2.181 million an increase of $0.061 and $0.320 million compared to the same periods the previous year. A large portion of the increase was due to currency exchange devaluation of the Canadian dollar in 2015 and higher share-based compensation due to higher share price, offset by a gain on sale of older electronic capital test equipment.

During the three month period ended June 30, 2015, the Company received $7.222 million ($6.206 million net of transaction costs) and issued 12,494,765 special warrants ("Special Warrants") pursuant to a bought deal private placement led by Mackie Research Capital Corporation and including Global Maxfin Capital Inc. and PI Financial Corp. Each Special Warrant was deemed exercised on June 5, 2015, for no additional consideration into one (1) unit consisting of one common share in the capital of the Company and one-half (1/2) of one common share purchase warrant.

Product and Customer Development

The Company continued its push on research and development to accelerate product development of the Company's VR, AR, Home Theater™ and DisplayDirect™ products. The focus during the three months ended June 30, 2015 was to move the customer product design-ins to mass production. The Company added five new customers and design-in programs in the three months ended June 30, 2015 to its over 20 design-ins with leading original equipment manufacturers for active, ultra-thin interconnects utilizing the Company's recently announced products. Another four new customers and design-in programs were added after the end of the quarter. These design wins span multiple market segments including VR, wearable computing, home entertainment and mobile, ultra-thin notebook and tablet devices.

On June 4, 2015, the Company announced AR-Connect™, its new AR interconnect product line powered by the Company's patented wearable network signal processing technology. The Company believes its patented AR-Connect™ is the industry's first integrated cable, connector and embedded chipset product line for AR vision systems and wearable computing devices.

ABOUT SPECTRA7 MICROSYSTEMS INC.

Spectra7 Microsystems Inc. is a high performance consumer connectivity company delivering unprecedented bandwidth, speed and resolution to enable disruptive industrial design for leading consumer electronics manufacturers in virtual reality, wearable computing and ultra-HD 4K/8K displays. Spectra7 is based in Palo Alto, California with design centers in Markham, Ontario and Cork, Ireland. For more information, please visit www.spectra7.com.

CAUTIONARY NOTES

Certain statements contained in this press release constitute "forward-looking statements". All statements other than statements of historical fact contained in this press release, including, without limitation, those regarding the Company's future financial position and results of operations, strategy, proposed acquisitions, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words "believe", "expect", "aim", "intend", "plan", "continue", "will", "may", "would", "anticipate", "estimate", "forecast", "predict", "project", "seek", "should" or similar expressions or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements. Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to the risk factors discussed in the Company's annual MD&A for the year ended December 31, 2014 and the interim MD&A for the six months ended June 30, 2015. Management provides forward-looking statements because it believes they provide useful information to investors when considering their investment objectives and cautions investors not to place undue reliance on forward-looking information. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law.

Contact Information

  • For more information, please contact:

    Spectra7 Microsystems Inc.
    Sean Peasgood
    Investor Relations
    416-565-2805
    ir@spectra7.com

    Spectra7 Microsystems Inc.
    Rob Bosomworth
    Chief Financial Officer
    905-480-9109
    pr@spectra7.com
    www.spectra7.com