Business Context and Reporting Period
Company: MICROVISION, INC.
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended March 31, 2002
Business Overview: Microvision develops retinal scanning display technology, image capture devices, and electro-optical materials. The company operates through two segments: Microvision (retinal displays) and Lumera Corporation (optical systems components, a consolidated subsidiary). As of March 31, 2002, Microvision owned 76% of Lumera.
Key Financial Metrics
| Metric | Q1 2002 | Q1 2001 |
|---|---|---|
| Revenue | $3,804,000 | $2,337,000 |
| Gross Margin | $1,993,000 (52.4%) | $775,000 (33.2%) |
| Operating Loss | $(10,400,000) | $(11,456,000) |
| Net Loss | $(8,226,000) | $(10,220,000) |
| Net Loss Per Share (Basic/Diluted) | $(0.63) | $(0.86) |
| Cash and Cash Equivalents | $14,039,000 | $22,290,000 |
| Total Liquid Assets (Cash + Investments) | $30,400,000 | Filing text does not provide a clear combined total for Q1 2001 |
| Total Debt (Current + Long-term) | $324,000 | Filing text does not provide a clear combined total for Q1 2001 |
| Accumulated Deficit | $(109,157,000) | Filing text does not provide a clear value for Q1 2001 |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 63% to $3.8 million, driven primarily by a 140% increase in direct labor costs associated with higher volumes of development contract work. 96% of revenue was derived from development contracts.
- Expense Reductions: Research and Development (R&D) expenses decreased 8% to $7.4 million, largely due to the absence of a $1.0 million stock-based license fee paid to the University of Washington in the prior year.
- Operating Expenses: Marketing, General, and Administrative (MG&A) expenses increased 22% to $4.5 million due to higher compensation and support costs.
- Financing Activity: The company raised approximately $6.0 million in March 2002 through the sale of 524,000 shares of common stock at $11.50 per share. This contrasts with Q1 2001, where the subsidiary Lumera raised $21.4 million via preferred stock issuance.
- Cash Flow: Net cash used in operating activities was $8.3 million, consistent with the prior year's $8.5 million usage. Net cash provided by financing activities dropped significantly to $5.8 million from $21.4 million in the prior year.
Guidance, Outlook, and Risks
Outlook and Guidance:
- Liquidity: With $30.4 million in cash and investments, management believes funds will meet requirements through the end of 2002. However, additional financing will be required within the next twelve months to implement the 2003 operating plan.
- Product Roadmap: The company plans to introduce "Flic," a handheld barcode scanner, in mid-2002. It continues to commercialize the "Nomad" retinal display for defense, medical, and industrial sectors.
- Profitability: The company expects to incur significant losses in the future and cannot assure it will ever become profitable. High R&D spending is anticipated to continue.
Risks and Contingencies:
- Market Acceptance: Success depends on the commercial acceptance of retinal scanning and optical materials technologies, which face competition from established display manufacturers.
- Manufacturing: The company currently lacks the capability to manufacture products in commercial quantities and relies on contract manufacturers.
- Intellectual Property: Risks include potential patent infringement lawsuits and the need to maintain exclusive licenses with the University of Washington.
- Industry Sensitivity: Revenues are highly sensitive to defense sector funding and the downturn in the telecommunications sector (affecting Lumera).
Investor Verification Checklist
- Financing Needs: Verify the timeline and terms for the additional financing required for 2003 operations.
- Contract Backlog: Confirm the $4.5 million backlog of development contracts and product orders and the schedule for completion.
- Product Costs: Review the cost structure of the "Nomad" product, as production costs currently exceed revenue, with excess costs classified as R&D.
- Subsidiary Status: Monitor the financial performance and ownership structure of Lumera Corporation, which contributes significantly to the consolidated loss.
- Patent Litigation: Assess the status of any pending patent challenges or infringement claims regarding retinal scanning technology.