MicroVision, Inc. — Q2 2016 Form 10-Q
Reporting period: Three and six months ended June 30, 2016. The unaudited consolidated statements are prepared on a going-concern basis. MicroVision develops and commercializes its PicoP laser beam scanning technology through licensing and sales of components to manufacturers.
Financial performance
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Revenue | $4.16M | $4.04M | $7.86M | $4.94M |
| Gross profit | $1.56M | $1.19M | $2.68M | $1.04M |
| Gross margin | 37.6% | 29.4% | 34.1% | 21.1% |
| Operating expenses | $5.05M | $3.96M | $9.72M | $7.78M |
| Net loss | $(3.48)M | $(2.77)M | $(7.03)M | $(6.73)M |
| Net loss per share | $(0.07) | $(0.06) | $(0.14) | $(0.15) |
- Product revenue was $3.53M for Q2 and $6.69M for the six months; royalty revenue was $0.61M and $1.15M, respectively. Contract revenue fell to $16,000 for Q2 and $20,000 for the half-year.
- Revenue growth reflected higher component sales to Sony and increased Sony royalties. Product backlog was $5.3M at June 30, down from $15.0M a year earlier; contract backlog was $45,000.
- Research and development expense increased 43% in Q2 and 40% for the half-year year over year. Management attributed the increase mainly to internal development work and higher personnel costs. SG&A also increased, primarily from non-cash compensation, professional fees, and business development costs.
- Cash and cash equivalents were $7.19M at June 30, 2016, versus $7.89M at year-end 2015. Six-month operating cash use was $7.10M, compared with $1.46M provided in 2015; the prior-year period benefited from an $8.0M upfront license payment. Investing used $0.19M and financing provided $6.59M, including proceeds from equity issuance.
- Current assets were $11.02M and current liabilities $7.55M at June 30. Total liabilities were $13.47M and shareholders’ equity was $0.11M. The balance sheet lists no debt balance.
Changes, outlook, and risks
- Management expected available cash to fund operations through December 2016, assuming some further sales under the ATM facility, and said additional capital would be required beyond then. Financing availability and terms are not assured; failure to raise capital could lead to substantial operating reductions. Management expected significant losses in 2016 and likely thereafter.
- March 2016 public offering raised $6.9M gross from 4.1M shares; ATM sales added $0.35M gross during the half-year. Shares outstanding increased to 51.76M from 47.42M at year-end 2015.
- Customer concentration is substantial: one customer represented 87% of six-month revenue and a second 11%. One customer accounted for all net receivables at June 30. MicroVision also relies on single- or limited-source suppliers, creating potential delivery, cost, and revenue risks.
- A supplier arbitration claim seeks $3.6M plus fees, interest, and costs. The company contests the claim; it could not predict the likelihood or range of loss. The company also accrued $0.5M for adverse purchase commitments related to SHOWWX pico projectors.
- Other key risks include uncertain market adoption and long commercialization cycles for PicoP, competition, manufacturing and supply constraints, potential dilution from future financing, and continued operating losses. The filing reports effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether MicroVision secured financing beyond the stated December 2016 cash runway, and the resulting dilution or debt burden.
- Whether Sony-related shipments and royalties continued, and how customer concentration and the lower product backlog evolved.
- The status and potential financial exposure of the Asia Optical arbitration and the SHOWWX purchase commitment.
- Whether operating cash burn, gross margins, and spending on research and development developed in line with management’s plan.