PALO ALTO, CALIFORNIA and TORONTO, ONTARIO — (Marketwired) — 11/20/14 — Spectra7 Microsystems Inc. (“Spectra7” or the “Company”) (TSX VENTURE: SEV) today announced its unaudited financial results for the three and nine months ended September 30, 2014. A copy of the unaudited condensed interim consolidated financial statements for the three and nine month periods ended September 30, 2014 prepared in accordance with International Financial Reporting Standards and the corresponding Management–s Discussion and Analysis will be available under the Company–s profile on . All amounts are in US dollars unless otherwise noted.
Q3 Highlights
Shortly after the end of the quarter, the Company announced the VR7050, the industry–s first chip capable of enabling lightweight, ultra-thin interconnects that achieve the requisite high speed and low latency for gesture recognition processing and motion control featured in the latest gaming and Virtual Reality products.
“Spectra7–s success with our new and existing customers reflects the unique value of our products including virtual reality, wearable computing and consumer interconnects and has resulted in record revenue and gross margins for the second consecutive quarter,” said Tony Stelliga, CEO of Spectra7. “The momentum in revenue, combined with the commencement of warrants being exercised has strengthened the capital structure of the Company.”
Financial Summary
The following table is a summary of the financial information presented in the financial statements:
Revenue
Revenue for the three months ended September 30, 2014 was a record $1.7 million and reached $3.7 million for the nine months ended September 30, 2014, up 49% and 83% respectively over the same periods the previous year. Interconnect product revenue increased by 129% for both the three and nine months ended September 30, 2014 compared to the same periods the previous year and 25% over the previous quarter. The growth was driven by demand for active cable products used with high resolution HD displays and by market availability of the Company–s Virtual Reality products in market-leading VR platforms that commenced volume production in the second quarter and continued in the third quarter of 2014. Revenue for Wireless products for the three months ended September 30, 2014 increased by 135% compared to the previous quarter to $483 thousand due mainly to a milestone license payment in the quarter.
Gross Margins
Product gross margins topped a record 81% in the quarter, up 12% year-over-year as a result of improved product mix and higher margins for Interconnect products with orders placed from the Company–s new and existing customers.
Expenses
Operating expenses, including research and development, sales and marketing and general and administrative, for the three month period ended September 30, 2014 were $2.3 million or 31% lower than the previous quarter and 17% lower than the three month period ended September 30, 2013. The main reasons for these decreases were a reduction in headcount in part due to the closure of the Irvine office, a reduction in contracted personnel and lower legal costs. Operating expenses for the nine month period ended September 30, 2014 was $8.0 million or 1% lower than the same period the previous year. Although headcount and contracted personnel are significantly lower, the loss of the Scientific Research and Development investment tax credit and the increase in new product development costs such as tape-out costs offset the savings.
Other expense in 2013 included significant costs related to the Company–s qualifying transaction completed in the first quarter of 2013. These expenses do not repeat in 2014.
Product and Customer Highlights
During the three month period ended September 30, 2014, the Company made significant progress to towards the completion of development on key products and growing demand of leading Virtual Reality platforms with the Company–s technology framework, including:
Appointment of New Director
The Company also announces that it has appointed Mr. John Vettese as a director of the Board, effective immediately. Mr. Vettese is a corporate finance and M&A lawyer and is the Deputy Managing Partner of Cassels Brock & Blackwell LLP.
Option Grants and RSU Awards to Officers and Employees
On November 17, 2014, options to purchase up to 564,776 common shares (“Options”) were granted to certain officers of the Company pursuant to the Company–s stock option plan. The Options are subject to vesting provisions in accordance with the stock option plan and are exercisable at a price equal to the greater of CDN $0.92 and the closing price of the Company–s common shares on the TSX Venture Exchange on November 20, 2014. In addition, 564,776 restricted share units were awarded to certain officers of the company pursuant to the Company–s restricted share unit plan, with such restricted share units subject to vesting provisions in accordance with the restricted share unit plan.
Cancellation of Subordinated Secured Loan Facility
The Company also announces that due to the recent exercise of warrants resulting in proceeds to the Company of approximately CDN $4.6 million, the Company shall not be drawing down on the previously announced CDN $4.75 million subordinate secured non-revolving loan facility based on the facility–s terms and the facility will be cancelled.
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 and Markham, Ontario with a Design Center in Cork, Ireland. For more information, please visit .
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release constitute “forward-looking statements” within the meaning of applicable securities laws. 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 which are made in good faith and reflect the Company–s current judgment regarding the direction of the business. These statements and assumptions 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. 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.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Contacts:
Spectra7 Microsystems Inc.
Sean Peasgood
Investor Relations
416.565.2805
Spectra7 Microsystems Inc.
Melissa Chee
Vice-President, Product Management and Corporate Marketing
647.472.2468
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