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MicroVision 3Q19 results ?4

MicroVision has reported its third quarter results:

The company has completed its April 2017 development contract and $1M of this quarter's revenue was from that.  The $10M royalty prepayment will now be applied to shipments and a new order received in the past month brings the backlog to just over that amount.  Management expects $800K to $1M of royalty prepayment to be applied by the end of 1Q20.  The end product has been gradually recognized as MicroSoft's Hololens 2, and management did confirm its logo in this presentation.  As a result, management expects production to ramp in the fourth quarter for sales of $2.4-4.4M.

The company also expects to announce an interactive display order this year, after completing due diligence with a new customer, who should ship product in the second half of next year.  However, it was unconvincing when asked why it expects that time frame.  LiDAR is still in the works as well, with engineering sample predicted to ship a year from now.

All of that sounds exciting, and would represent a complete turnaround from the current state of affairs.  $174K for this quarter was product revenue, with the remainder being licensing and royalties.  However, the product volume was so low that MicroVision has negative gross margin!  It also wrote off $1.3M of MEMs that were incompatible with new class 1 laser solution.

MicroVision has $6.6M in cash on the books, which is enough for about 1 quarter, or less assuming OpEx ramps to support production.  There is $2.7M left on ATM with Lincoln Park and the share count has inflated to 119M as the company has sold $8.3M worth under the facility this year.

The takeaway is that MicroVision is at a pivotal moment.  The Hololens 2 was supposed to have gone on sale in September, but no new release date is available.  Since every AR device to date has been a flop, it's likely that the actual ramp will be gradual, which is just as well since MicroVision doesn't have the finances to support immediate high-volume production.  Regardless of how the market reacts, MicroVision's historical disregard for shareholder value makes me unwilling to take a chance on the stock now.  However, I can't rule out a change in fortunes and will begin monitoring and reporting on the progress of the Hololens 2.