MicroVision, Inc. — FY2014 Form 10-K
Business context and reporting period. The filing covers the fiscal year ended December 31, 2014; quarterly figures are unaudited. MicroVision develops and licenses PicoP miniature laser display technology, targeting consumer electronics and automotive applications. Its business model depends on partners integrating the technology into products, with potential revenue from licenses, royalties, components, and development work.
Financial performance and liquidity
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | $3.485 million | $5.852 million |
| Gross margin | $2.441 million (70.1% of revenue) | $4.051 million (69.2%) |
| Operating loss | $13.168 million | $15.094 million |
| Net loss | $18.120 million | $13.178 million |
| Net loss per share | $0.44 | $0.47 |
| Cash used in operating activities | $12.952 million | $12.657 million |
| Cash and cash equivalents at year-end | $8.349 million | $5.375 million |
| Working capital | $5.040 million | $(3.878) million |
- Revenue fell 40.5%. Development revenue declined 41.9% to $1.691 million, product revenue fell 83.3% to $392,000, and contract revenue rose 132.9% to $1.402 million.
- Research and development expense was $9.067 million, down 14.0%; sales, marketing, general and administrative expense was $7.005 million, down 20.0%.
- The net loss widened despite lower operating loss, primarily reflecting a $4.967 million loss on warrant exchange, versus a $1.900 million gain in 2013.
- Financing activities provided $16.099 million, principally through stock and warrant offerings. The company issued 8.871 million shares in stock-and-warrant sales and another 3.713 million shares in a warrant exchange during 2014.
- Year-end total assets were $11.945 million; total liabilities were $5.073 million, including $488,000 of long-term deferred rent. The filing does not show material outstanding long-term debt at year-end.
- Year-end backlog was $5.1 million: $3.6 million in component orders and $1.5 million in contract backlog, all expected to be completed within one year.
- Fourth-quarter 2014 revenue was $687,000 and net loss was $3.346 million, compared with $1.217 million revenue and $2.421 million net loss in fourth-quarter 2013.
Outlook, risks, contingencies, and unusual items
- Management expected available cash, including an $8.0 million license payment received in March 2015, to fund operations through December 2015. The company said it would need additional cash thereafter and gave no assurance that financing would be available on acceptable terms.
- The auditor’s report included an explanatory paragraph expressing substantial doubt about the company’s ability to continue as a going concern. Management expected substantial losses and negative cash flow at least through 2015 and likely thereafter.
- In March 2015, MicroVision signed a multi-year, non-exclusive PicoP license, received an $8.0 million upfront fee, and became eligible for royalties on the customer’s module sales. It also received $14.5 million in component orders, with shipments expected to begin in the second half of 2015 and continue into 2016.
- A supplier, Asia Optical, sought $3.6 million plus fees and interest in arbitration over allegedly undelivered and unpaid products. MicroVision contested the claim; the company said it could not predict the likelihood or range of loss.
- Other significant risks include customer and revenue concentration (two commercial customers generated 65% of 2014 revenue), reliance on third-party manufacturers and suppliers, uncertain product adoption, competition, and the need for additional capital. One customer represented 80% of year-end accounts receivable.
- Other items: a $500,000 accrual for excess SHOWWX material purchase commitments; a $40,000 impairment of abandoned patents; and $341.5 million of federal net operating loss carryforwards, subject to expiration and possible ownership-change limitations.
- The company reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls.
Key facts for investors to verify
- Whether the license customer launches products and generates royalty-bearing module sales, and whether the $14.5 million component orders ship and are collected as planned.
- Whether additional financing is secured before the stated cash runway ends, and how financing terms or operating cuts may affect shareholders and product development.
- The status and potential financial exposure of the Asia Optical arbitration.
- Whether backlog converts to revenue and cash on schedule, given customer concentration and execution risks.
- How continued losses, cash burn, and reliance on partners affect the company’s ability to commercialize PicoP technology and sustain operations.