MICROVISION INC

Previous wording

The information set forth in this report in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 3, “Quantitative and Qualitative Disclosures about Market Risk,” includes “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. Such statements may include, but are not limited to, projections of revenues and expenses, and measures of income or loss, status of product development and performance, market opportunity and future demand, partner and customer engagement, cooperative arrangements, strategic plans, future operations, financing needs or plans of MicroVision, Inc. (“we,” “our,” or “us”), as well as assumptions relating to the foregoing. The words “anticipate,” “could,” “believe,” “estimate,” “expect,” “goal,” “may,” “plan,” “will” and similar expressions identify forward-looking statements. Factors that could cause actual results to differ materially from those projected in our forward-looking statements include risk factors identified below in Item 1A.

Current wording

The informationset forth in this report in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Item 3, “Quantitative and Qualitative Disclosures about Market Risk,” includes “Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is subject to the safe harbor created by those sections. Such statements may include, but are not limited to, projections of revenues and expenses, and measures of income or loss, status of product development and performance, market opportunity and future demand, partner and customer engagement, cooperative agreements, strategic plans, future operations, financing needs or plans of MicroVision, Inc. (“we,” “our,” or “us”), as well as assumptions relating to the foregoing. The words “anticipate,” “could,” “believe,” “estimate,” “expect,” “goal,” “may,” “plan,” “will,” and similar expressions identify forward-looking statements. Factors that could cause actual results to differ materially from those projected in our forward-looking statements include risk factors identified below in Item 1A.

Previous wording

Founded in 1993, MicroVision, Inc. is a pioneer in laser beam scanning, or LBS technology, which is based on our patented expertise in micro-electromechanical systems, or MEMS, laser diodes, opto-mechanics, electronics, algorithms and software and how those elements are packaged into a small form factor. Throughout our history, we have combined our proprietary technology with our development expertise to create innovative solutions to address existing and emerging market needs, such as augmented reality microdisplay engines; interactive display modules; consumer lidar components; and, most recently, automotive lidar sensors and software solutions for the automotive market.

Current wording

Founded in 1993, MicroVision, Inc. is a pioneer in laser beam scanning, or LBS technology, which is based on our patented expertise in micro-electromechanical systems, or MEMS, laser diodes, opto-mechanics, electronics, algorithms and software and how those elements are packaged into a small form factor. Throughout our history, we have combined our proprietary technologies with our development expertise to create innovative solutions to address existing and emerging market needs, such as augmented reality microdisplay engines; interactive display modules; consumer lidar components; and, most recently, automotive lidar sensors and software solutions for the automotive market.

Previous wording

In addition to our dynamic-range and long-range MAVIN sensor and perception software solution for the automotive market, our product suite includes our short-range flash-based MOVIA lidar sensor, for automotive and industrial applications, including smart infrastructure, robotics, and other commercial segments. Also, our validation software tool, the MOSAIK suite, is used by OEMs and other customers including Tier 1s for validating vehicle sensors for ADAS and AV applications. The tool includes software that automates the manual data classification or annotation process, significantly reducing the time and resources required by OEMs to validate their ADAS and AV systems.

Current wording

In addition to our dynamic-range and long-range MAVIN sensor and perception software solution for the automotive market, our product suite includes our short-range flash-based MOVIA lidar sensor as well as perception software, for automotive and industrial applications, including smart infrastructure, robotics, and other commercial segments. Also, our validation software tool, the MOSAIK suite, is targeted for use by OEMs and Tier 1s for validating vehicle sensors for ADAS and AV applications, but we have reduced our development and sales efforts on this product. As such, in the first half of 2024, in an effort to better align our resources away from MOSAIK, we performed a restructuring and reorganization to focus on MAVIN and MOVIA driven by perception software. While this 37% reduction in workforce resulted in approximately $5.7 million in expenses during the first half of 2024, we expect this to extend our financial runway through reduced personnel expenses and provide operational efficiencies that will streamline cash burn. SeeItem 1, Note 13. Restructuring Charges for additional discussion.

Previous wording

In the recent past, we developed micro-display concepts and designs for use in head-mounted augmented reality, or AR, headsets and developed a 1440i MEMS module supporting AR headsets. We also developed an interactive display solution targeted at the smart speakers market and a small consumer lidar sensor for use indoors with smart home systems.

Current wording

In the recent past, we developed micro-display concepts and designs for use in head-mounted augmented reality, or AR, headsets and developed a 1440i MEMS module supporting AR headsets. We also developed an interactive display solution targeted at the smart speaker market and a small consumer lidar sensor for use indoors with smart home systems.

Previous wording

Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We recognize revenue either at a point in time, or over time, depending upon the characteristics of the individual contract. If control of the deliverable(s) occur over time, the revenue is recognized in proportion to the transfer of control. If control passes to the customer only upon completion and transfer of the asset, revenue is recognized at the completion of the contract.

Current wording

Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We recognize revenue either at a point in time, or over time, depending upon the characteristics of the individual contract. If control of the deliverable(s) occurs over time, the revenue is recognized in proportion to the transfer of control. If control passes to the customer only upon completion and transfer of the asset, revenue is recognized at the completion of the contract.

Previous wording

The increase in revenue for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to an increase in shipments of MOVIA L sensors to Daimler Truck North America and affiliates as part of their RFQ evaluation process, the amortization of intangible assets and one-time license fees. The change in cost of revenue was driven primarily by the revenue mix as Q1 2023 had MOSAIK software revenue compared to MOVIA sensors in Q1 2024.

Current wording

The increase in revenue for the six months ended June 30, 2024 compared to the same period in 2024 primarily due to the sale of sensors to an existing industrial customer for agricultural equipment and service parts, an increase in shipments of MOVIA L sensors to Daimler Truck North America and affiliates as part of their RFQ evaluation process, and increased sales to a second industrial customer. These increases were partially offset by a decrease in sales in the first half of 2024 related to an OEM for the MOSAIK software.

Previous wording

Cost of revenue includes the direct and allocated indirect costs of products and services sold to customers. Direct costs include labor, materials, reserves for estimated warranty expenses, and other costs incurred directly, or charged to us by our contract manufacturers, in the manufacture of these products. Indirect costs include labor, overhead, and other costs associated with operating our manufacturing capabilities and our research and development department. Overhead includes the costs of procuring, inspecting and storing material, facility and other costs, and is allocated to cost of revenue based on the proportion of indirect labor which supported revenue activities.

Current wording

Cost of revenue includes both direct and allocated indirect costs of products and services sold to customers. Direct costs include labor, materials, reserves for estimated warranty expenses, and other costs incurred directly, or charged to us by our contract manufacturers, in the manufacture of these products. Indirect costs include labor, overhead, and other costs associated with operating our manufacturing capabilities and our research and development department. Overhead includes the costs of procuring, inspecting and storing material, facility and other costs, and is allocated to cost of revenue based on the proportion of indirect labor which supported revenue activities.

Previous wording

Cost of revenue can fluctuate significantly from period to period, depending on the product mix and volume, the level of overhead expense and the volume of direct material purchased. The increase in cost of revenue for the three months ended March 31, 2024 compared to the same period in 2023 was due to minimum license fees and the amortization of intangible assets.

Current wording

Cost of revenue can fluctuate significantly from period to period, depending on the product mix and volume, the level of overhead expense and the volume of direct material purchased. The increase in cost of revenue for the three and six months ended June 30, 2024 compared to the same period in 2023 was primarily due to an increase in revenue from sensors in 2024. The change in cost of revenue was driven primarily by the revenue mix as 2023 had higher MOSAIK software revenue compared to sale of sensors in 2024.

Previous wording

The increase in research and development expense during the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to restructuring charges of approximately $2.3 million, higher salary and benefits expenses of approximately $1.1 million and higher purchased services of $1.2 million.

Current wording

The increase in research and development expense during the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to restructuring charges of $2.6 million, higher purchased services of $0.5 million, and a higher corporate allocation of $0.3 million. These increases were partially offset by lower salary and benefits expense and non-cash compensation of $2.3 million and lower depreciation expense of $0.1 million.

Previous wording

The increase in sales, marketing, general and administrative expense during the three months ended March 31, 2024 compared to the same period in 2023 was primarily attributed higher salary and benefits expenses of approximately $0.9 million, higher non-cash compensation expense of $0.2 million, higher trade show expense of $0.2 million, offset by lower professional fees of $1.0 million.

Current wording

The decrease in sales, marketing, general and administrative expense during the three months ended June 30, 2024 compared to the same period in 2023 was primarily due to lower salary and benefits expense and non-cash compensation of $1.2 million, lower professional fees of $0.9 million, lower purchased services of $0.3 million, a lower corporate allocation of $0.3 million, and lower business insurance fees of $0.2 million. These decreases were partially offset by restructuring charges of $0.6 million, higher software supply expenses of $0.4 million, and higher depreciation of $0.3 million.

Previous wording

During the three months ended March 31, 2023, we recorded a bargain purchase gain related to the acquisition of assets from Ibeo. The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration paid in the transaction.

Current wording

During the six months ended June 30, 2023, we recorded a bargain purchase gain related to the acquisition of assets from Ibeo. The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration paid in the transaction.

Previous wording

We have incurred significant losses since inception. We have funded operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales, and licensing activities. At March 31, 2024, we had $44.3 million in cash and cash equivalents and $28.8 million in short-term investment securities. We also have approximately $128.2 million availability left on our existing $150.0 million ATM facility that was put in place in the first quarter of 2024. Based on our current operating plan, we anticipate that we have sufficient cash and cash equivalents to fund our operations for at least the next 12 months.

Current wording

We have incurred significant losses since inception. We have funded operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales, and licensing activities. As of June 30, 2024, we had $26.8 million in cash and cash equivalents and $29.9 million in short-term investment securities. We also have approximately $122.6 million availability left on our existing $150.0 million ATM facility that was put in place in the first quarter of 2024. Based on our current operating plan, we anticipate that we have sufficient cash and cash equivalents to fund our operations for at least the next 12 months.

Previous wording

Cash used in operating activities totaled $20.8 million during the three months ended March 31, 2024 compared to cash used in operating activities of $13.5 million during the same period in 2023. Cash used in operating activities resulted primarily from cash used to fund our net loss, after adjusting for non-cash charges such as share-based compensation, depreciation and amortization charges and changes in operating assets and liabilities. The changes in cash used in operating activities were primarily attributed to increased operating expenses to support the development of our lidar sensor. During the second half of 2023, we made a payment of $3.1 million to our contract manufacturing partner in connection with the production of MOVIA sensor inventory for direct sales to both automotive and non-automotive customers, primarily as samples for evaluation. We expect to make remaining future payments to this manufacturing partner of approximately $5.7 million by the end of the year 2024 or in the first quarter of 2025.

Current wording

Cash used in operating activities totaled $39.4 million during the six months ended June 30, 2024 compared to cash used in operating activities of $30.1 million during the same period in 2023. Cash used in operating activities resulted primarily from cash used to fund our net loss, after adjusting for non-cash charges such as share-based compensation, intangible impairment expense, depreciation and amortization charges and changes in operating assets and liabilities. The changes in cash used in operating activities were primarily attributed to increased operating expenses to support the development of our lidar sensors. During the six months ended June 30, 2023, we made a payment of $3.1 million to our contract manufacturing partner in connection with the buildup of MOVIA sensor inventory for direct sales to both automotive and non-automotive customers. Moreover, we expect to make additional payments to this partner totaling approximately $5.2 million over the remainder of 2024 through 2025 in line with agreed-upon deliveries.

Previous wording

During the three months ended March 31, 2024, net cash used in investing activities was $3.3 million compared to net cash provided by investing activities of $6.3 million during the three months ended March 31, 2023. During the three months ended March 31, 2024, we purchased short-term investment securities totaling $7.8 million and sold short-term investment securities totaling $7.9 million. During the three months ended March 31, 2023, we purchased short-term investment securities totaling $3.9 million and sold short-term investment securities totaling $22.0 million. Purchases of property and equipment during the three months ended March 31, 2024 and 2023 were $0.1 million and $0.6 million, respectively. During the quarter ended March 31, 2023, we made payments totaling $11.2 million related to the acquisition of Ibeo assets. An additional $3.3 million was withheld from the Purchase Price and held in escrow for 13 months post-Closing as partial security for potential claims arising out of or in connection with the Asset Purchase Agreement and such amount was released from escrow in the first quarter of 2024. We expect to make the final payment related to the Ibeo acquisition of approximately $3.0 million in the second quarter of 2024.

Current wording

During the six months ended June 30, 2024, net cash used in investing activities was $7.4 million compared to net cash provided by investing activities of $18.7 million during the same period in 2023. During the six months ended June 30, 2024, we purchased short-term investment securities totaling $23.5 million and sold short-term investment securities totaling $22.7 million, compared to purchases of $17.3 million and sales of $48.7 million in the same period of 2023. During the six months ended June 30, 2024, we made payments totaling $6.3 million related to the acquisition of Ibeo assets compared to $11.2 million in the same period in 2023.

Previous wording

Cash provided by financing activities totaled $21.0 million during the three months ended March 31, 2024, compared to net cash provided by financing activities of $12.7 during the same period of 2023. Proceeds received from stock option exercises totaled $62,000 during the three months ended March 31, 2024. Principal payments under finance leases were $0 during the three months ended March 31, 2024 compared to $6,000 during the three months ended March 31, 2023. Net proceeds from issuance of common stock were $21.0 million during three months ended March 31, 2024 compared to $12.7 million during the three months ended March 31, 2023.

Current wording

Net cash provided by financing activities totaled $26.2 million during the six months ended June 30, 2024, compared to net cash provided by financing activities of $56.0 million during the same period of 2023. Proceeds received from stock option exercises totaled $0.1 million during the six months ended June 30, 2024 compared to $0.2 million during the same period in 2023. Net proceeds from issuance of common stock were $26.1 million during six months ended June 30, 2024 compared to $55.9 million during the same period in 2023.