It costs MVIS "X" dollars to produce the components and it sells those components to Sony for that same amount (ie. "X"). MVIS doesn't receive any real net cash inflow until it receives the downstream royalties from Sony for it's sale of the engines built with those components. In the meantime it cost MVIS 3.8M in negative cash flow to fund it's operations in Q2. That 3.8M in cash has to come from somewhere so we used the ATM to raise 1.8M and we also got 900K from the exercise of warrants and the rest came from the cash we had on hand at 3/31/2015.
Hi Microwishin, yes I do I think our ship is finally leaving port and our near term and extended future is very bright.
and it is designed to provide us with some cash flow during the time between selling our components to Sony at cost and the delayed gratification of receiving our cash in the form of downstream royalties from Sony's subsequent sale of engines to it's external and internal customers. Otherwise it makes zero sense to sell stk when we have 15M of cash on hand and have a number of near term probable positive announcements from Sony and others which will cause our stk price to rise.
The ATM plus the selling of our components to Sony at cost has one other other positive business purpose. It allows us to seed the final market place with our (ie. Sony manufactured) engines as soon as possible and thereby plant our flag even though we can't currently manufacture the components at any real GP. In other words we are concentrating on volume now in order to get as many engines into the hands of the ultimate customers as we can and then we will work on the GPM of those components later. This will accelerate the day when the Apples and Samsungs of this world will see the products of Sony and it's customers and say to themselves Gee maybe I better get me one of those engines or in AT speak become pigs at the trough.
Snow for GPM on product sales the CFO is quite possibly not comparing apples to apples. We will have to wait for the Q2 10Q to see I there were any write offs to the cost of product sales in Q2. If there were such write offs then there was indeed an improvement in GPM Qtr over Qtr. If not then you have to back out the 2 write offs to cost of product sales in Q1 for excess capacity and obsolete inventory in order to compare apples to apples. In fact since we started selling components to Sony in Q4 of 2014 the 2 Q1 write offs arguably should have been taken in Q4 of 2014. They hired the contract employee who spent all day looking thru his microscope and binoculars in early January I believe it was. The write off for obsolete inventory in Q1was greater than the book value of the entire ending inventory on 12/31/2014. So it looks like the auditors gave MVIS a pass in letting them take the write down in Q1 instead of Q4 of 2014. In any case the bottom line is that there looks like there was no improvement in GPM on product sales in Q2 over Q1. We will have to look at the 2Qtr 10 Q to say definitely.
Co3aii AT has always talked in term of a 40% GPM for years & years and he confirmed it again today. For the intermediate future It will always consist of some combination of GP on product sales, upfront licensing fees or royalty payments, and downstream royalties which in the aggregate will give us a 40% GP. In the case of our arrangement with Sony the lack of an improvement in GPM on product sales in Q2 is making me wonder if that portion of our revenue mix with Sony is designed to be very modest under our licensing agreement with Sony. We can't tell yet and once we start selling components to the 2nd engine manufacturer we are never going to be able to see very clearly the breakdown of our various revenue streams from Sony.
Snow AT has always aimed at a 40% GPM even going back many years and he confirmed it again today on the blended mix between product sales and royalty. We will have to see if the low GPM on the product sales to Sony are just a part of this start up phase or if it is a feature of our arrangement with Sony. I fully expect that we will always try to obtain a 40% GPM on all revenue streams taken together from Sony, from our 2nd engine manufacturer, and from future OEMs and deals.
I hope you are right Astockjoc and once we start selling components to our second engine manufacturer I am sure the whole picture will change. The best thing in this whole CC was AT saying he expected an order from the F500 customer by year end. When we start selling the components to that 2nd engine manufacturer to fill the F500 order that will muddy the water and we will no longer have as clear a picture of what our arrangement with Sony is looking like. Two Qtrs don't make a trend but if the GPM on product sales is still basically breakeven for Q3 then I think we would have to conclude that we are giving sweetheart pricing on product sales to Sony. It is also quite possible that our GPM on product sales to Sony in Q2 was deliberately reduced because they were subsumed or absorbed into the 1.5M support services contract to help Sony launch their engine sales and all of which we booked as income in Q2.
Hi Microwishin I don't have the time these days to post very often but I am trying to keep up with what is going on and I think our future is very bright. I can remember back even in the days of the Motorola PR the AT was always talking in terms of a 40% GPM.
in order to get our upfront 8M licensing payment. In other words we may have agreed to take our real profit in the form of the delayed gratification from our royalties on the sales of engines by Sony to its customers and in return we have agreed to sell our components to Sony at just slightly over cost. We will have wait to see what the Q2 10Q says but it looks like there was no improvement in GPM on product sales in Q2 over Q1. Either we are doing a very poor job of controlling the costs and in improving the efficiency in our ramp up of the production of our components or we may have agreed to lowball the price at which we sell those components to Sony.
If you take the cost of product sales in Q1 of 1,037M and back out the write down for excess production capacity of 221K and the inventory write down of 139K we get a net cost of product sales of 677K. And if you subtract that net 677K cost from the Q1 product sales of 741K it gives us a net GP of 64K or about a 8.6% GPM. In Q2 we had about a 3 fold increase in product sales to 2,182M and a cost of product sales of 2,074M which gives us a GP of 108K. Unless the Q2 10Q shows that the 2,074M cost of product sales included some write downs, it looks like our GPM in Q2 actually declined to 4.9%. That is not what I would call six sigma performance by management.
So it may very well be that we have agreed to take little or no profit on our product sales to Sony in return for our royalty on Sony's sales of it's engines and in return for our upfront 8M license payment. AT says that we are aiming for a blended mix of 40% GPM on the two together so in the Qtrs to come we are either going to have to do a lot better job of ramping up production or book some very substantial royalties on Sony's engine sales.
and it is moderately positive. The bogus 333,000 sh quote on the ask at 2.93 was posted about 15 to 20 minutes later. Don't know if the institutional short was trying to put a negative spin on the article or just trying to scare additional sellers into selling going into the close. The short interest for 4-30-2015 will come out on Monday. If it is up substantially from the 7,131,931 shs outstanding on 4-15-2015 and after our stk had already fallen almost $1/sh from 4.23 high following the announcement of Sony's 14.5M order, then some of the shorts knew about the financing and were trading on insider knowledge, In which case the CFO should ask the SEC to look into the trading in or stk for the 3 or 4 weeks preceding the ATM announcement.
Spot On best post of the day. No way that the short interest goes up 1M shs in 15 days in the face of the best news in the company's history without the financing having leaked. The American financial markets are a cesspool.
Hi Geo you are right, we did indeed sell 300K shs at an average price of 3.33/sh so it had to be after the 14.5M order was announced.
Kabu we received 1M from the ATM financing in Q1 and that financing was completed in Q1 (ie. prior to 3-31-2015). I suspect that was most likely done early in Q1 while we were still negotiating the licensing terms with Sony and before we knew for sure that we were going to be getting the up front 8M payment.
With regard to Ben Farhi you are right we don't know what he did with the 1M shs he got from exercising his warrants, he could very well have sold them at a good profit. His 2-14-2015 SEC filing says that at 12-31-2014 he still had 755,157 shs left from what his father gave him and what he bought on his own. We will have to wait for his SEC filings in Feb / March next year to see what he actually did with his shs.
In Q1 we received 2.3M from the exercise of warrants to purchase 1.1M shs of stk. If you remember in the 5-22-2012 financing with Shmuel Farhi & Salvatore Pacifico they bought 3,012M shs & 346K shs respectively and they received 3yr warrants to buy 1,000,000 additional shs at 2.125/sh. Those warrants would have expired on 5-22-2015 if they had not been exercised. So 2.125M of the 2.3M came from the exercise of their warrants and 175K came from someone else who most likely exercised 100K warrants for 100K shs at 1.75/sh, probably someone we contracted with for goods or services in prior years. Shmuel gave his shs to his son Ben and I presume his warrants as well. In his 2-17-2015 SC 13G/A Ben said he sold 2M shs on 12-30-2014 at 1.78 and that he still had 755.157 shs at 12-31-2014 So it looks like he bought back 1M of the 2M shs he sold..
On 12-31-2014 the 10K says that in addition to the Farhi / Pacifico 1M warrants at 2.13 we also had additional outstanding warrants of :
2.1M exercisable at 2.24/sh,
2.148 M exercisable at 2.47/sh, and
1.278 M exercisable at 6.24/sh
I haven't tried to go back and see who originally bought the 2.24/sh warrants but the 2.47 warrants were issued in the March 2014 Oppy financing and Capital Ventures International bought 1/2 of that financing. In their 2-13-2015 SC 13G/A they said that they still owned 1,580,813 of those warrants. Their 1/2 of the warrants issued in the 3-18-2014 financing was 1.074M so somewhere along the line they bought some additional warrants from someone else who participated in that financing.
On 3-31-2015 our Q1 10Q says we had 46,177,000 shs outstanding and the Q1 10Q also says that on 4-27-2015 we had 46,591,000 shs outstanding. So an additional 414,000 shs were issued between 3-31-2015 and 4-27-2015. We will have to wait for the Q2 10Q to see if we are having additional warrant conversions or are issuing additional stk for other corporate purposes. GLTA