MicroVision, Inc. — Q1 2012 Form 10-Q
Reporting period: Three months ended March 31, 2012; unaudited consolidated financial statements. Dollar amounts below are in millions unless stated otherwise.
Business context and reporting period
MicroVision develops miniature laser display and imaging engines based on its PicoP technology, and sells SHOWWX accessory pico projectors and performs development work. In February 2012, it announced a shift to an “Image by PicoP” ingredient-brand model: licensing technology and selling key components to OEMs. The company expected to make its next-generation HD PicoP engine using direct green lasers available to OEMs in 2012.
Financial results and liquidity
| Metric | Q1 2012 | Q1 2011 or prior period |
|---|---|---|
| Total revenue | $1.730 | $1.119 |
| Product revenue | $1.529 | $0.886 |
| Contract revenue | $0.201 | $0.233 |
| Gross loss | $(2.600); gross margin about (150%) | $(1.420); gross margin about (127%) |
| Operating expenses | $7.228 | $7.619 |
| Operating loss | $(9.828) | $(9.039) |
| Net loss | $(9.803) | $(9.037) |
| Net loss per share | $(0.58) | $(0.70) |
| Cash used in operating activities | $(6.191) | $(8.141) |
At March 31, cash and cash equivalents were $6.808 million, available-for-sale securities were $0.013 million, and restricted investments were $0.436 million. Working capital was in deficit by $2.9 million. Current liabilities were $12.175 million and total liabilities were $12.396 million. Long-term debt was $0.137 million in total, including a $0.095 million current portion; capital lease obligations totaled $0.101 million.
Cash fell from $13.075 million at year-end 2011. Investing cash use was $0.043 million, including $0.393 million in capital expenditures; financing cash use was $0.033 million. Total assets declined to $13.773 million from $23.870 million, and shareholders’ equity fell to $1.377 million from $10.802 million. The accumulated deficit was $424.641 million.
Material changes and unusual items
- Revenue increased 54.6% year over year, primarily from higher PicoP engine sales; product revenue rose 72.6%. Contract revenue declined 13.7% as fewer prototype units and evaluation kits were sold.
- Gross loss widened despite higher revenue. Product costs were 273.1% of product revenue, including a $1.094 million inventory write-down tied to lower sales forecasts and reduced marketing of first-generation products. Excess-capacity manufacturing overhead was $0.244 million.
- Research and development expense decreased 8.9%, principally reflecting lower payroll costs; sales, marketing, general and administrative expense was essentially unchanged.
- Product-order backlog was $0.305 million versus $0.591 million a year earlier. Development-contract and prototype backlog was $1.2 million versus $0.895 million. The filing says both were scheduled for delivery or completion within one year.
- A one-for-eight reverse stock split became effective February 17, 2012; share and per-share figures are adjusted for it. Weighted-average shares were 17.027 million versus 12.837 million a year earlier.
Outlook, financing, and risks
Management expected available cash to fund operations through June 2012. A May 2012 agreement provided for approximately $5.0 million from the sale of 3,346,048 shares at $1.494 per share and warrants for 1.0 million shares at $2.125 per share, subject to customary closing conditions and expected to close by May 29. Assuming completion, management estimated cash would fund operations through October 2012; further funding would be needed thereafter. The financing would dilute existing shareholders if completed, and closing was not assured.
In April 2012, the company reduced its workforce and expected about $0.304 million in severance expense in Q2. Management said the ingredient-brand model was intended to reduce cash use in the second half of 2012 and lower future R&D and sales, marketing and administrative spending. The filing does not provide quantified expense-reduction targets.
The company reported substantial doubt about its ability to continue as a going concern, referencing its independent auditor’s report on the 2011 financial statements. It warned that financing may not be available on acceptable terms or in time; if needed, it may reduce operations and staff. Other significant risks include continuing losses and negative cash flow, uncertain market acceptance and customer demand, reliance on third parties and limited suppliers, technology and product-development risks, competition, intellectual-property disputes, and potential order or delivery failures. Management reported no pending or threatened litigation it believed reasonably likely to materially affect the company. It also stated disclosure controls were effective and that no material change in internal control occurred during the quarter.
Important facts for investors to verify
- Whether the May financing closed on the stated terms and whether proceeds and warrant dilution matched expectations.
- Actual cash burn, available liquidity, and financing needs relative to the stated June and October 2012 runway estimates.
- Whether the ingredient-brand transition and Gen2 launch produced OEM agreements, product demand, and revenue.
- Whether inventory write-downs, negative gross margins, backlog conversion, or customer and supplier concentration changed materially.
- Whether the April workforce reduction delivered expected cost savings and what severance expense was ultimately recorded.