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Microvision Announces Fourth Quarter/Fiscal Year 2006 Results and Goals for 2007

March 13, 2007 By JSMT Media

Microvision Announces Fourth Quarter/Fiscal Year 2006 Results and Goals for 2007
3/13/2007 4:06:00 PM
<![CDATA[

Microvision Completes Its 2006 Turnaround, Sets Foundation for
Growth in 2007

REDMOND, Wash.–(BUSINESS WIRE)–March 13, 2007–Microvision, Inc.
(NASDAQ:MVIS), a global leader in light scanning technologies, today
reported operating and financial results for the fourth quarter and
fiscal year of 2006 and announced its operating goals for 2007.

Operating Results

“In 2006, we completed a successful turnaround of Microvision as
we reinvented the Company around the primary goal of accelerating the
path to market for high volume consumer and automotive products while
lowering operating costs,” said President and CEO Alexander Tokman.

“Signing two strategic development agreements with major high
volume manufacturing partners and the rapid advancement of the
Integrated Photonics Module (IPM(TM)) roadmap during the fourth
quarter of 2006 continued our strong operational momentum started in
the second half of 2006.

“Throughout the year, we attained most of the significant
objectives established and communicated earlier in the year,
including:

  • Completing the definition and implementation of a new business
    strategy centered around our proprietary IPM platform;

  • Restructuring and realignment of the Company to improve focus,
    execution and reduce operating costs;

  • Building a new senior management team;
  • Reconstituting the Board of Directors;
  • Simplifying the Company’s capital structure and completing a
    significant financing; and

  • Setting new standards for strategic planning, execution and
    accountability.

“Our most notable achievement for 2006 was the product definition,
accelerated design and commercial development of the IPM(TM), a tiny
display engine suitable for a variety of OEM products targeted at high
volume consumer and automotive applications. Our rapid progress
towards this new goal was validated in early January 2007 when we
received significant attention from global OEMs, as well as extensive
industry and media coverage at the Consumer Electronics Show in Las
Vegas where we demonstrated PicoP(TM), an ultra-thin, miniature
full-color projection display small enough to be embedded in portable
hand-held devices such as mobile phones. This advanced miniature
projector prototype was developed in collaboration with a high volume
manufacturing partner to better position us to meet the potential
worldwide demand by mobile users for a large screen viewing experience
inside a thin sleek portable package,” continued Tokman.

Potential applications for the IPM platform include tiny
projection displays embedded inside cell phones or other mobile
devices; ultra-miniature projection displays used as accessories to
personal media players, personal gaming devices, laptops, DVD players
and other video output devices; personal color eyewear; and head-up
and other displays for automobiles and airplanes.

Other significant accomplishments for 2006 include:

  • Entered into an agreement with Visteon, a major global Tier 1
    automotive supplier, to develop a commercial scanned-beam head-up
    display (HUD) product for automotive applications;

  • General Dynamics C4 Systems awarding Microvision a $5.95 million
    contract to develop and deliver full-color, daylight readable,
    see-through helmet-mounted displays for the U.S. Army. This effort
    includes strategic elements consistent with the development of the
    IPM and personal color eyewear application;

  • Announced a strategic relationship with Fraunhofer Institute of
    Photonic Microsystems that augments Microvision’s world-leading
    expertise in the design and production of small MEMS scanning
    mirrors, a key component of Microvision’s IPM platform strategy;

  • Made significant progress in building supply chain infrastructure
    to accelerate the commercialization of the IPM:

    • Funded a green laser development partner to accelerate its
      solid-state green laser development while aligning our
      development roadmap with two other green laser development and
      supply chain partners; and

    • Entered into joint development agreements with both a large
      Asian consumer electronics manufacturer and a global optical
      manufacturing partner to develop high-volume designs for
      manufacturing of Microvision’s proprietary IPM.
  • Improved the design and streamlined the supply chain through a Lean
    initiative to improve performance, quality and capacity of Flic,
    resulting in the following second half of 2006 improvements:

    • Reduced field returns by 85% from earlier periods;
    • Increased capacity by 300% from earlier periods; and
    • Released new connectivity software that we expect will grow the
      mobility segment.
  • To improve IPM focus in Redmond and reduce the bar code segment
    operating costs, signed agreement with Network Systems &
    Technologies (P) Ltd (NeST) in Trivandrum, India to establish an
    offshore development center for the engineering design, development
    and support of the Company’s laser barcode scanner product. NeST
    has a strong history of delivering quality products to companies
    like GE, Hitachi, Toshiba and Mitsubishi.

  • Raised over $35 million including the largest financing transaction
    in the Company’s history. The Company will also retire the last of
    its debt this week by making the final payment on its outstanding
    notes.
    </ul

    Financial Results

    For the three months ended December 31, 2006, the Company reported
    revenue of $1.8 million compared to $2.7 million for the same period
    in 2005, and $7.0 million for the full year ended December 31, 2006
    compared to $14.7 million for 2005. The Company ended the year with a
    backlog of $7.1 million compared to $3.4 million at December 31, 2005.

    Revenue for the year was lower than previous guidance of $8 to $9
    million primarily due to management’s decision to temporarily
    reallocate critical engineering resources from several revenue
    generating programs in order to accelerate PicoP development and
    achieve the Company’s key objective of successfully demonstrating to
    global OEMs an ultra-thin, miniature full-color projection display
    small enough to be embedded in portable hand-held devices at the
    Consumer Electronics Show in early January 2007. A second factor was
    lower than expected Flic revenue for the quarter due to longer
    qualifying cycles in the mobility segment. Revenue in 2006 included
    the recognition of $806,000 from a contract with Ethicon compared to
    $4.9 million in 2005. In 2005, the Company recognized $1.2 million
    from sales of the Nomad system to the U.S. government and no revenue
    in 2006 as a result of the Company’s discontinuation of the Nomad
    product.

    The Company reported an operating loss for the fourth quarter of
    $7.9 million compared to $9.0 million in the same period in 2005. The
    Company reported an operating loss for the year ended December 31,
    2006 of $29.0 million compared to $27.3 million in 2005. The operating
    loss for the fourth quarter and full year of 2006 includes severance
    cost of $114,000 and $842,000, respectively, and share based
    compensation costs associated with the adoption of FAS 123(R) of
    $371,000 and $1.8 million, respectively. Neither cost was included in
    2005 results.

    The Company reported a net loss available for common shareholders
    of $8.7 million for the three months ended December 31, 2006 compared
    to $5.6 million for the same period in 2005 and $27.3 million for 2006
    compared to $30.3 million in 2005. The net loss per share was $(0.21)
    for the three months ended December 31, 2006 compared to $(0.23) for
    the same period in 2005 and $(0.81) for 2006, compared to $(1.35) for
    2005. The net loss available for common shareholders in 2006 includes
    a one-time $3.1 million charge associated with the conversion of the
    Company’s preferred stock in May 2006.

    The Company ended the year with $14.6 million in cash, cash
    equivalents and investment securities. The Company continues to own
    1,750,000 shares of Lumera common stock with a market value of
    approximately $7.5 million as of February 28, 2007. The shares are
    pledged as collateral for the Company’s notes that are scheduled to be
    retired this month.

    “Consistent with our strategic and operating plan, we were able to
    reduce the year-over-year operating loss (adjusted for severance and
    FAS 123(R) expenses) through restructuring of the business and very
    rigorous cost controls, despite 2006 revenue being half of the amount
    of 2005. In addition, we made several important mid-year strategic
    cash investments in external green laser and MEMS developments that we
    expect will better position Microvision for growth in 2007,” continued
    Tokman. “We’ve also made great strides in building the revenue backlog
    in the second half of 2006 and, as a result, we entered 2007 with a
    backlog 210% of the previous year end.

    2007 Focus Areas

    “In 2007 we expect to continue the focus on our primary goal of
    accelerating the path to market for high volume consumer and
    automotive products while reducing operating costs and continuing to
    execute a detailed operating plan that provides focus and
    accountability for everyone within the organization,” Tokman
    continued.

    “During 2007 our primary goals include:

    1) Developing new business growth opportunities with global
    consumer OEMs, Tier 1 suppliers and the U.S. government;

    2) Continuing the rapid advancement of the integrated photonics
    module platform and roadmap;

    3) Delivering on customer commitments on key existing commercial
    contract and government programs; and

    4) Completing transformation of the bar code business segment.

    “We believe that the 2006 turnaround results have significantly
    improved the Company’s credibility with existing customers,
    prospective partners and the investment community. Now we are primed
    for growth in 2007 and we are ready to take the next step toward
    achieving our vision of becoming an indispensable source for
    illuminating information,” concluded Tokman.

    Conference Call

    Microvision will host a conference call to discuss its fourth
    quarter and full year 2006 financial results at 4:30 p.m. ET on March
    13, 2007. Participants may join the conference call by dialing (800)
    259-0251 (for U.S. participants) or (617) 614-3671 (for International
    participants) ten minutes prior to the start of the conference. The
    conference pass-code number is 34669293. Additionally, the call will
    be broadcast over the Internet and can be accessed from the Company’s
    web site at www.microvision.com. The web cast and information needed
    to access the telephone replay will be available through the same link
    following the conference call.

    About Microvision: www.microvision.com

    Headquartered in Redmond, Wash., Microvision Inc. is the world
    leader in the development of high-resolution displays and imaging
    systems based on the Company’s proprietary silicon micro-mirror
    technology. The Company’s technology has applications in a broad range
    of military, medical, industrial, professional and consumer products.

    Forward-Looking Statements Disclaimer

    Certain statements contained in this release, including those
    relating to expected results, projections of future operations, plans
    for product development and commercialization, future commercial
    arrangements, growth in demand, future product applications and
    benefits, as well as statements containing words like “goals,”
    “believes,” “expects,” “anticipates,” and other similar expressions,
    are forward-looking statements that involve a number of risks and
    uncertainties. Factors that could cause actual results to differ
    materially from those projected in the Company’s forward-looking
    statements include the following: our ability to raise additional
    capital when needed; risks related to Lumera’s business and the market
    for its equity, market acceptance of our technologies and products;
    our financial and technical resources relative to those of our
    competitors; our ability to keep up with rapid technological change;
    our dependence on the defense industry and a limited number of
    government development contracts; government regulation of our
    technologies; our ability to enforce our intellectual property rights
    and protect our proprietary technologies; the ability to obtain
    additional contract awards; the timing of commercial product launches
    and delays in product development; the ability to achieve key
    technical milestones in key products; dependence on third parties to
    develop, manufacture, sell and market our products; potential product
    liability claims and other risk factors identified from time to time
    in the Company’s SEC reports, including the Company’s Annual Report on
    Form 10-K filed with the SEC. Except as expressly required by the
    federal securities laws, we undertake no obligation to publicly update
    or revise any forward-looking statements, whether as a result of new
    information, future events, changes in circumstances or any other
    reason.

    
                              Microvision, Inc.
    
                          Consolidated Balance Sheet
                                (In thousands)
                                 (Unaudited)
                                                        December  December
                                                           31,       31,
                                                         2006      2005
                                                       --------- ---------
    
    Assets
    Current Assets
       Cash and cash equivalents                        $14,552    $6,860
       Accounts receivable, net of allowances             1,166     1,380
       Costs and estimated earnings in excess of
        billings on uncompleted contracts                   565     1,204
       Inventory                                          1,043       759
       Current restricted investments                         -     1,856
       Current restricted investment in Lumera           10,693         -
       Other current assets                               1,986     1,512
                                                       --------- ---------
          Total current assets                           30,005    13,571
    
    Investment in Lumera                                      -     3,582
    Property and equipment, net                           4,011     2,902
    Restricted investments                                1,268     1,000
    Restricted investment in Lumera                           -     2,184
    Other assets                                             41       124
                                                       --------- ---------
         Total assets                                   $35,325   $23,363
                                                       ========= =========
    
    
    Liabilities, Mandatorily Redeemable Convertible
     Preferred Stock and Shareholders' Equity
     (Deficit)
    Current Liabilities
       Accounts payable                                  $1,785    $2,328
       Accrued liabilities                                3,698     4,513
       Billings in excess of costs and estimated
        earnings on uncompleted contracts                   200        51
       Liability associated with common stock warrants    2,572     3,452
       Liability associated with embedded derivative
        feature                                              68         -
       Current portion of notes payable                   2,418     7,896
       Current portion of capital lease obligations          45        32
       Current portion of long-term debt                     59        22
                                                       --------- ---------
            Total current liabilities                    10,845    18,294
    
    Notes payable, net of current portion                     -     1,447
    Liability associated with embedded derivative
     feature                                                  -     1,368
    Capital lease obligations, net of current portion       132       105
    Long-term debt, net of current portion                  457         -
    Deferred rent, net of current portion                 2,027     1,492
                                                       --------- ---------
            Total liabilities                            13,461    22,706
                                                       --------- ---------
    
    Commitments and contingencies                             -         -
    
    Mandatorily redeemable convertible preferred stock        -     4,166
                                                       --------- ---------
    
    Shareholders' Equity (Deficit)
        Common stock at par value                            43        25
        Additional paid-in capital                      253,086   212,993
        Deferred compensation                                 -       (85)
        Receivables from related parties, net              (250)     (792)
        Accumulated other comprehensive income            8,619         -
        Accumulated deficit                            (239,634) (215,650)
                                                       --------- ---------
          Total shareholders' equity (deficit)           21,864    (3,509)
                                                       --------- ---------
          Total liabilities, mandatorily redeemable
           convertible preferred stock and
           shareholders' equity (deficit)               $35,325   $23,363
                                                       ========= =========
    
    
                              Microvision, Inc.
    
                     Consolidated Statement of Operations
                (In thousands, except earnings per share data)
                                 (Unaudited)
    
    
    
    
    
                                       Three months
                                           ended         Twelve months
                                       December 31,    ended December 31,
                                     -------------------------------------
                                      2006     2005      2006      2005
                                     -------- -------- --------- ---------
    
    
    Contract revenue                  $1,618   $2,142    $5,275   $11,386
    Product revenue                      224      567     1,768     3,360
                                     -------- -------- --------- ---------
       Total revenue                   1,842    2,709     7,043    14,746
                                     -------- -------- --------- ---------
    
    Cost of contract revenue             905    1,313     3,398     6,456
    Cost of product revenue            1,118    3,152     4,768     8,636
                                     -------- -------- --------- ---------
       Total cost of revenue           2,023    4,465     8,166    15,092
                                     -------- -------- --------- ---------
    
       Gross margin                     (181)  (1,756)   (1,123)     (346)
                                     -------- -------- --------- ---------
    
    
    Research and development expense   3,399      703    10,715     6,587
    Sales, marketing, general and
     administrative expense            4,296    6,522    17,362    20,352
    Gain on disposal of fixed assets       -        -      (198)        -
                                     -------- -------- --------- ---------
            Total operating expenses   7,695    7,225    27,879    26,939
                                     -------- -------- --------- ---------
    
    Loss from operations              (7,876)  (8,981)  (29,002)  (27,285)
    
    Interest income                      235       77       719       263
    Interest expense                    (949)  (1,186)   (5,753)   (3,253)
    (Loss) gain on derivative
     instruments, net                 (1,552)   4,306     1,627     5,975
    Loss on debt extinguishment            -        -         -    (3,313)
    Other expense                         (7)     (11)      (23)      (28)
                                     -------- -------- --------- ---------
    
    Net loss before minority
     interests and other Lumera
     transactions                    (10,149)  (5,795)  (32,432)  (27,641)
    
    Equity in losses of Lumera             -     (754)     (290)   (3,242)
    Gain on sale of investment in
     Lumera                            1,468    1,130     8,738     2,700
                                     -------- -------- --------- ---------
    
    Net loss                          (8,681)  (5,419)  (23,984)  (28,183)
    
    Stated dividend on mandatorily
     redeemable convertible
     preferred stock                       -      (44)      (59)     (280)
    Accretion to par value of
     preferred stock                       -     (103)     (138)     (637)
    Inducement for conversion of
     preferred stock                       -        -    (3,076)   (1,184)
                                     -------- -------- --------- ---------
    
    Net loss available for common
     shareholders                    $(8,681) $(5,566) $(27,257) $(30,284)
                                     ======== ======== ========= =========
    
    Net loss per share - basic and
     diluted                          $(0.21)  $(0.23)   $(0.81)   $(1.35)
                                     ======== ======== ========= =========
    
    Weighted-average shares
     outstanding - basic and diluted  41,214   24,347    33,572    22,498
                                     ======== ======== ========= =========
    

    CONTACT: Microvision, Inc.
    Jeff Wilson (investors), 425-882-6625
    Matt Nichols (media), 425-882-6657

    SOURCE: Microvision, Inc.

Filed Under: Uncategorized

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About MicroVision

MicroVision is the creator of PicoP® scanning technology, an ultra-miniature sensing and laser projection solution based on the laser beam scanning methodology pioneered by the company. MicroVision’s platform approach for this advanced sensing and display solution means that it can be adapted to a wide array of applications and form factors. It is an advanced solution for a rapidly evolving, always-on world.

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