MicroVision(MVIS) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (unaudited) The company reported a net loss of $13.6 million for Q2 2022, with revenue from Microsoft at $0.3 million, and total assets at $107.2 million Condensed Balance Sheets Total assets decreased to $107.2 million from $130.2 million due to reduced cash and cash equivalents Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $36,964 | $82,647 | | Investment securities, available-for-sale | $55,926 | $32,720 | | Total current assets | $95,750 | $119,430 | | Total assets | $107,192 | $130,225 | | Liabilities & Equity | | | | Total current liabilities | $8,055 | $12,462 | | Total liabilities | $13,092 | $17,471 | | Total shareholders' equity | $94,100 | $112,754 | | Total liabilities and shareholders' equity | $107,192 | $130,225 | Condensed Statements of Operations Q2 2022 revenue was $314 thousand, down from $746 thousand, resulting in a net loss of $13.6 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $314 | $746 | $664 | $1,225 | | Gross profit | $296 | $777 | $642 | $1,261 | | Research and development expense | $7,700 | $7,376 | $15,293 | $11,838 | | Sales, marketing, general and administrative expense | $6,265 | $8,355 | $12,142 | $10,602 | | Loss from operations | $(13,669) | $(14,954) | $(26,793) | $(21,179) | | Net loss | $(13,597) | $(14,962) | $(26,765) | $(21,193) | | Net loss per share | $(0.08) | $(0.09) | $(0.16) | $(0.13) | Condensed Statements of Cash Flows Net cash used in operating activities increased to $20.6 million, reducing total cash by $45.4 million to $38.4 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,604) | $(11,277) | | Net cash used in investing activities | $(24,762) | $(1,884) | | Net cash provided by financing activities | $9 | $131,587 | | Change in cash, cash equivalents, and restricted cash | $(45,357) | $118,426 | | Cash, cash equivalents, and restricted cash at end of period | $38,382 | $135,723 | Notes to Condensed Financial Statements The company shifted to automotive Lidar for ADAS, with Microsoft as its sole customer, maintaining $92.9 million liquidity - The company has shifted its strategic focus to developing Lidar sensors and software for the L2+ and L3 Advanced Driver-Assistance Systems (ADAS) market[29][31] - As of June 30, 2022, the company had $92.9 million in total liquidity ($37.0 million in cash and cash equivalents and $55.9 million in short-term investments) and anticipates this is sufficient to fund operations for at least the next 12 months[33] - Microsoft Corporation is the company's sole customer, accounting for 100% of revenue for the three and six months ended June 30, 2022 and 2021[60] - In June 2022, the company issued 6.0 million Performance Stock Units (PSUs) to its executive officers, which are subject to stock price performance goals and time-based vesting through December 31, 2025[66] - The company entered into a 120-month lease for approximately 36,062 square feet of office space in Redmond, WA, with total minimum lease payments of $13.0 million[73] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's automotive Lidar focus, with Microsoft revenue down 57.9% and R&D expenses up 29.2% Year-over-Year Financial Changes (in thousands) | Metric | Six Months 2022 | Six Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | License and royalty revenue | $664 | $1,225 | $(561) | (45.8)% | | Research and development expense | $15,293 | $11,838 | $3,455 | 29.2% | | Sales, marketing, general and administrative expense | $12,142 | $10,602 | $1,540 | 14.5% | - The decrease in license and royalty revenue was due to a lower number of royalty-bearing products being distributed by the company's customer, Microsoft[97] - The increase in R&D expense was primarily due to increased salary and benefits from higher headcount of approximately $2.4 million for the six-month period[102] - At June 30, 2022, the company had total liquidity of $92.9 million and anticipates sufficient cash to fund operations for at least the next 12 months[105][106] - Cash used in operating activities increased to $20.6 million in the first six months of 2022 from $11.3 million in the prior-year period, primarily due to increased operating expenses to support Lidar sensor development[107] Quantitative and Qualitative Disclosures About Market Risk The company assesses market, interest rate, and foreign exchange risks as not material due to short-term, highly rated investments - Management believes the company's exposure to market and interest rate risk is not material due to the short-term maturities of its investment securities[114] - Foreign exchange rate risk is considered not material as major contracts are currently in U.S. dollars, though this could change with future international expansion[116] Cash and Investment Holdings as of June 30, 2022 (in thousands) | Category | Amount | Percent | | :--- | :--- | :--- | | Cash and cash equivalents | $36,964 | 39.8% | | Investments (Less than one year) | $55,926 | 60.2% | | Total | $92,890 | 100.0% | Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[118] PART II. OTHER INFORMATION Legal Proceedings The company is not currently party to any legal proceedings expected to materially affect its financial position or results - The company is not currently party to any legal proceedings that are expected to have a material adverse effect on its financials[120] Risk Factors Significant risks include substantial operating losses ($656.2 million accumulated deficit), single customer reliance, and stock volatility Risks Related to Our Business Business risks include substantial operating losses ($656.2 million accumulated deficit), potential need for additional capital - The company has a history of substantial losses, with an accumulated deficit of $656.2 million as of June 30, 2022, and expects to incur significant losses in the future[122][126] - The company may require additional capital to fund operations beyond the next 12 months, and there is no assurance that such capital will be available on acceptable terms[127][129] - The COVID-19 pandemic continues to pose risks, including potential delays in technology development, supply chain disruptions, and challenges in engaging with potential customers[125][133] Risks Related to our Financial Statements and Results Financial risks include 100% revenue concentration from Microsoft, high stock price volatility, and Nasdaq listing challenges - For the six months ended June 30, 2022, one customer, Microsoft, accounted for 100% of total revenue[130] - The company's stock price is highly volatile, and investors could incur substantial losses, with the price fluctuating between $2.50 and $16.38 in the preceding 52-week period[132] - There is a risk that the company may be unable to maintain its listing on The Nasdaq Global Market if it fails to meet continued listing standards, which could harm stock liquidity[136][138] Risks Related to Our Operations Operational risks include reliance on single-source suppliers, dependence on third-party OEMs/ODMs, and customer negotiating power - The company relies on single or limited-source suppliers, and the loss or failure of any such supplier could cause significant delays and damage customer relationships[141] - The business strategy depends on third parties (OEMs, ODMs) to develop, manufacture, and sell products incorporating its technology, and the success of these arrangements is not guaranteed[142][144] - Potential customers are large, multinational companies with substantial negotiating power and may have competitive internal solutions, which could adversely affect sales prospects[149] - The company's success depends on protecting its intellectual property through patents and trade secrets, but it cannot be certain of the extent of this protection[158][160] Risks Related to Development for the Automotive Industry Automotive risks include long OEM qualification, potential ADAS product defects, and competition from alternative technologies - Failure to be selected for inclusion in ADAS systems by automotive OEMs (a "series production win") would materially and adversely affect future prospects, as design cycles are long (5-7+ years)[167] - The complexity of the company's products could lead to undetected defects or reliability issues, which is a particular risk in the ADAS market and could lead to litigation and reputational damage[168] - Significant developments in alternative technologies, such as cameras and radar, may emerge as an OEM's preferred solution, adversely affecting demand for the company's Lidar technology[171] - Because the Lidar and ADAS markets are rapidly evolving, it is difficult to forecast customer adoption rates, demand, and selling prices for the company's products[173] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with XBRL data files[176] Signatures The report was signed and authorized on July 29, 2022, by Sumit Sharma (CEO) and Anubhav Verma (CFO) - The report was signed on July 29, 2022 by Sumit Sharma (CEO) and Anubhav Verma (CFO)[181]