MicroVision, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter filing; unaudited Q4 figures are noted below. MicroVision develops and commercializes PicoP laser beam scanning technology for projection, 3D LiDAR sensing, and augmented-reality applications.
Financial performance and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $17.607 million | $9.634 million |
| Gross profit (loss) | $6.969 million | $(0.228) million |
| Gross margin | 39.6% | (2.4)% |
| Operating expenses | $34.189 million | $25.252 million |
| Net loss | $(27.250) million | $(25.486) million |
| Basic and diluted loss per share | $(0.31) | $(0.35) |
| Cash used in operating activities | $22.572 million | $15.479 million |
Revenue rose 82.7%, driven mainly by a $10.0 million upfront license fee recognized under a five-year exclusive display-only technology license signed in May 2018. Development-contract revenue was $7.596 million; product revenue was zero, compared with $2.300 million in 2017. Two customers represented 57% and 42% of 2018 revenue, respectively.
R&D expense increased 63.4% to $24.666 million, reflecting higher subcontractor costs, headcount, and personnel expenses. SG&A declined 6.2% to $9.523 million. Product costs included $4.414 million of inventory write-downs, versus $1.004 million in 2017.
At year-end, cash and cash equivalents were $13.766 million, total assets $23.033 million, total liabilities $18.916 million, and shareholders’ equity $4.117 million. Working capital was a deficit of $0.539 million. The filing reports no material conventional debt; capital-lease obligations were $54,000, including $21,000 current. Cash, cash equivalents, and restricted cash totaled $14.201 million.
Financing activities provided $20.490 million in 2018, principally from public stock offerings. The company issued 21.4 million shares during the year; common shares outstanding were 100.105 million at year-end. Operating and investing cash outflows exceeded financing inflows, reducing cash and restricted cash by $3.200 million.
Q4 2018 (unaudited): Revenue was $1.833 million, gross loss $2.606 million, net loss $11.948 million, and loss per share $0.13. The quarterly table reports a Q3 profit of $0.289 million, largely reflecting the timing of revenue recognition; annual net loss remained $27.250 million.
Material changes, outlook, and risks
- Management said year-end cash was expected to fund operations through June 2019, assuming receipt of milestone-based proceeds under a major technology-company development contract. Additional capital would be needed thereafter; availability and terms were uncertain. Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern.
- The April 2017 development program could provide up to $14.6 million in development fees, contingent on milestones; $10.7 million had been received by year-end and $2.5 million remained in backlog, with completion expected in Q2 2019. A separate $10.0 million upfront payment is recorded as a liability and may be applied to future component purchases if the customer proceeds to manufacture. It is subject to repayment if the customer terminates for missed milestones.
- Ragentek did not accept the remaining engines from its 2017 order. MicroVision was pursuing enforcement and, in March 2019, filed for arbitration seeking $4.0 million plus interest and costs; the company said the outcome could not be predicted.
- Other major risks include continuing losses and negative cash flow, dependence on a small number of customers, product-market adoption and long sales cycles, competition, reliance on single- or limited-source suppliers, and potential dilution from future financing. Open purchase obligations were $6.184 million; total contractual obligations were $9.220 million.
- In January 2019, the company sold 2.0 million shares at $0.60 per share for gross proceeds of $1.2 million. The filing gives no assurance that further financing will be available on acceptable terms. FY 2018 financial statements were audited with an unqualified opinion; the auditor also highlighted the going-concern uncertainty.
- During 2018, MicroVision adopted Topic 606 using full retrospective application, changing timing of certain license and product revenue recognition. The filing states that adoption did not affect cash flows. Management expected adoption of the lease standard in 2019 to add about $1.6 million in right-of-use assets and $2.5 million in lease liabilities.
Key facts for investors to verify
- Whether development-contract milestones were completed, the remaining fees collected, and the major customer’s manufacturing plans and use of the $10.0 million upfront payment.
- Current cash runway, subsequent financing, share count, and the company’s ability to fund operations beyond the stated June 2019 horizon.
- Outcome and collectability of the Ragentek arbitration claim and status of the unaccepted product order.
- Commercial traction, customer diversification, product shipments, and conversion of the license and development relationships into recurring sales or royalties.
- Inventory valuation and further write-down risk, supplier continuity, and obligations under purchase commitments.