Microvision Inc (MVIS)

[Slojab]

In April 2017, we signed a contract with a major technology company to develop an LBS display system. Under this agreement, we are working to develop a new generation of MEMS, ASICs and related firmware for a high resolution, LBS-based product that the technology company is planning to produce. We may receive up to $24.0 million, including $14.0 million in fees for development work that is expected to span 21 months and an upfront payment of $10.0 million, which payment has been received. Our receipt of the development fees is contingent on completion of milestones in 2017 and 2018. As of June 30, 2017, our balance sheet includes $3.2 million of billings in excess of costs incurred on this contract. Upon successful completion of the development program, if the major technology company decides to manufacture the product with the MicroVision display components, the $10.0 million upfront payment would be applied as a discount to future component purchases from us. If the contract is terminated by the technology company for our failure to meet milestones, the $10.0 million upfront payment is subject to repayment. We are recognizing revenue on the $14.0 million in development fees under the percentage-of-completion method of accounting. For the three and six months ended June 30, 2017, we have recognized $761,000 of contract revenue from development fees on this agreement. The $10.0 million upfront payment is classified within other current liabilities on the balance sheet.