MicroVision, Inc. — FY2013 Form 10-K
Reporting period: Year ended December 31, 2013; filed March 6, 2014. The filing also reports unaudited fourth-quarter results. MicroVision is developing and commercializing its PicoP laser display technology, primarily through licensing, component sales, and development partnerships for consumer electronics and automotive applications.
Financial performance and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $5.852 million | $8.365 million |
| Gross margin dollars | $4.051 million | $1.441 million |
| Gross margin percentage | 69.2% | 17.2% |
| Operating loss | $15.094 million | $22.655 million |
| Net loss | $13.178 million | $22.693 million |
| Net loss per share, basic and diluted | $0.47 | $1.05 |
| Cash used in operating activities | $12.657 million | $20.621 million |
| Cash and cash equivalents at year-end | $5.375 million | $6.850 million |
| Working capital | Deficit of $3.878 million | $1.831 million |
Q4 2013 revenue was $1.217 million, gross margin was $1.164 million, net loss was $2.421 million, and basic and diluted loss per share was $0.08. Q4 2012 revenue was $2.727 million, gross margin was $1.238 million, net loss was $4.074 million, and loss per share was $0.16.
FY2013 revenue comprised $2.341 million of product sales, $602,000 of contract revenue, and $2.909 million of collaborative development revenue. Two commercial customers accounted for 86% of revenue. No long-term debt was reported at year-end; current capital lease obligations were $15,000. Total liabilities were $10.143 million, including a $4.902 million warrant liability, and shareholders’ equity was a deficit of $1.696 million.
Changes versus FY2012
- Revenue declined 30.0%, mainly because product revenue fell 65.5% to $2.341 million and contract revenue fell 62.0% to $602,000. A new collaborative agreement contributed $2.909 million of development revenue; it was entered into in March 2013 for up to $4.6 million.
- Gross margin improved substantially as product mix shifted away from lower-margin SHOWWX projectors toward components, and inventory write-downs and excess-capacity costs decreased. Product revenue cost included $303,000 of inventory write-downs in 2013 versus $1.1 million in 2012.
- Research and development expense fell 20.1% to $10.267 million; sales, marketing, general and administrative expense fell 21.9% to $8.792 million, largely due to staffing and other cost reductions.
- Net loss narrowed, but included a $1.801 million non-cash gain from changes in warrant liability. The accumulated deficit reached $450.709 million.
- Operating cash use decreased to $12.657 million. Financing activities provided $11.522 million, primarily from May and September 2013 stock-and-warrant offerings. Cash still declined by $1.475 million over the year.
Outlook, risks, and unusual items
- Management expected continued substantial losses and negative cash flow at least through 2014 and said existing cash was expected to fund operations only through March 2014. Additional equity or debt financing was required; availability and terms were uncertain. The independent auditor’s report highlighted substantial doubt about the company’s ability to continue as a going concern.
- MicroVision reported that it had fulfilled all open Pioneer orders and did not expect follow-on orders. Total backlog was $2.1 million at year-end, including $1.7 million under collaborative research and development agreements, scheduled for completion within one year subject to milestones and customer acceptance.
- In February 2014, warrant holders exchanged the remaining applicable warrants for 3,713,309 common shares, with no additional cash proceeds to the company. MicroVision expected to record a $5.0 million loss in Q1 2014 because the shares’ market value exceeded the recorded obligation. This followed 358,243 shares already issued under the exchange feature by year-end.
- NASDAQ had notified the company of a minimum-market-value listing deficiency in December 2013. As of the 10-K filing, MicroVision believed it had met the 10-day price test but had not received NASDAQ confirmation.
- Key risks include reliance on a small number of customers and partners, uncertain product adoption and commercialization, the need for additional capital, competition and rapid technological change, dependence on third-party manufacturers and suppliers, and intellectual-property and product-safety risks. Management reported that disclosure controls and internal control over financial reporting were effective as of December 31, 2013.
Important facts for investors to verify
- Whether financing was secured after the stated March 2014 cash runway, and on what dilution and warrant terms.
- NASDAQ’s confirmation of continued-listing compliance.
- Customer progress, revenue concentration, and whether the $1.7 million collaborative-development backlog converted to accepted work and cash.
- The actual Q1 2014 accounting impact of the warrant exchange and resulting share count and dilution.
- Cash burn, liquidity, and progress toward commercial launches that could support recurring revenue.