MICROVISION INC

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 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.

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 $5.8 million in expenses through the nine months ended September 30, 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

To date, we have been unable to secure customers at the scale needed to successfully launch our products. We have incurred significant losses since inception and we expect to continue to incur significant losses in the near term. We have funded our 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.

Current wording

To date, we have been unable to secure customers at the scale needed to successfully launch our products. We have incurred significant losses since inception and we expect to continue to incur significant losses in the near term. We have funded our 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. In October 2024, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Holder”) for the purchase of a senior secured convertible note (the “Convertible Note”) up to $75.0 million. SeeItem 1, Note 14. Subsequent Events.

Previous wording

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that materially affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We evaluate our estimates on a continuous basis. We base our estimates on historical data, terms of existing contracts, our evaluation of trends in the consumer display and 3D sensing industries, information provided by our current and prospective customers and strategic partners, information available from other outside sources and on various other assumptions we believe to be reasonable under the circumstances. The results form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Except for changes in accounting for business combinations associated with our acquisition of Ibeo assets, there have been no significant changes to our critical accounting judgments, policies, and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that materially affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We evaluate our estimates on a continuous basis. We base our estimates on historical data, terms of existing contracts, our evaluation of trends in the consumer display and 3D sensing industries, information provided by our current and prospective customers and strategic partners, information available from other outside sources and on various other assumptions we believe to be reasonable under the circumstances. The results form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes to our critical accounting judgments, policies, and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Previous 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.

Current wording

The increase in revenue for the nine months ended September 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 related to an OEM for our MOSAIK software.

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 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.

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 nine months ended September 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 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.

Current wording

The decrease in research and development expense during the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to lower salary and benefits expense and non-cash compensation of $4.8 million as a result of 2024 restructuring events, lower subcontractor fees of $1.6 million primarily related to subcontractors used in 2023 on our MOVIA lidar sensors, lower direct materials and equipment costs of $0.2 million, and lower depreciation expense of $0.1 million. The decrease was partially offset by higher IT and software costs of $0.2 million.

Previous wording

The decrease during the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to lower professional fees of $1.5 million, lower purchased services of $0.5 million, a lower corporate allocation of $0.5 million, and lower business insurance fees of $0.4 million. These decreases were partially offset by higher software supply expenses of $0.8 million, restructuring charges of $0.7 million, and higher trade show expense of $0.2 million.

Current wording

The decrease during the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to lower salary and benefits expense and non-cash compensation of $5.9 million as a result of 2024 restructuring events, lower depreciation expense of $0.7 million, lower freight costs of $0.2 million, and lower direct materials and equipment costs of $0.2 million. These decreases were partially offset by restructuring charges of $5.1 million, higher IT and software costs of $0.7 million, and higher subcontractor fees of $0.2 million.

Previous 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.

Current wording

The decrease in sales, marketing, general and administrative expense during the three months ended September 30, 2024 compared to the same period in 2023 was primarily due to lower salary and benefits expense and non-cash compensation of $1.5 million as a result of 2024 restructuring events, lower advertising costs of $0.3 million, lower subcontractor fees of $0.2 million, lower professional fees of $0.1 million, lower depreciation expense of $0.1 million, and lower business insurance fees of $0.1 million due to favorable rates obtained. These decreases were partially offset by higher IT and software costs of $0.1 million.

Previous wording

Impairment loss on intangible assets includes impairment charges on intangible assets. During the three months ended June 30, 2024, management identified impairment indicators related to MOSAIK software. We performed an assessment of projected future cash flows which resulted in a $3.0 million impairment charge and reduction in the estimated useful life of the asset. SeeItem 1, Note 7. Financial Statement Components for additional discussion.

Current wording

Impairment loss on intangible assets includes impairment charges on intangible assets. During the nine months ended September 30, 2024, management identified impairment indicators related to MOSAIK software. We performed an assessment of projected future cash flows which resulted in a $3.0 million impairment charge and reduction in the estimated useful life of the asset. SeeItem 1, Note 7. Financial Statement Components for additional discussion.

Previous 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.

Current wording

During the nine months ended September 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

The decrease in other income during the three and six months ended June 30, 2024 compared to the same period in 2023 is primarily due to a payment received in 2023 of $3.0 million as an incentive to terminate our previous building lease.

Current wording

The decrease in other income during the nine months ended September 30, 2024 compared to the same period in 2023 is primarily due to a payment received in 2023 of $3.0 million as an incentive to terminate our previous building lease.

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. 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.

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 September 30, 2024, the Company had total liquidity of $43.2 million including $16.5 million in cash and cash equivalents and $26.7 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. After giving effect to the net proceeds of $38.0 million from the first $45.0 million tranche of the Convertible Note, the Company expects to have approximately $81.2 million in cash and cash equivalents and access to $153 million of additional capital, including $122.6 million under its existing ATM facility and $30.0 million from the remaining commitment pursuant to the Convertible Note. SeeItem 1. Note 14, Subsequent Events. 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 $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.

Current wording

Cash used in operating activities totaled $53.5 million during the nine months ended September 30, 2024 compared to cash used in operating activities of $50.5 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, intangible impairment expense, depreciation and amortization charges and changes in operating assets and liabilities. The changes in cash used in operating activities are primarily attributable to severance payments related to the 2024 restructuring events and timing of customer payments in 2024.

Previous 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.

Current wording

During the nine months ended September 30, 2024, net cash used in investing activities was $3.8 million compared to net cash provided by investing activities of $21.4 million during the same period in 2023. During the nine months ended September 30, 2024, we purchased short-term investment securities totaling $25.6 million and sold short-term investment securities totaling $28.3 million, compared to purchases of $27.1 million and sales of $61.7 million in the same period of 2023. During the nine months ended September 30, 2024, we purchased property and equipment totaling $0.3 million compared to $2.0 million in the same period in 2023. During the nine months ended September 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

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.

Current wording

Net cash provided by financing activities totaled $26.2 million during the nine months ended September 30, 2024, compared to net cash provided by financing activities of $60.8 million during the same period of 2023. Proceeds received from stock option exercises totaled $0.1 million during the nine months ended September 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 nine months ended September 30, 2024 compared to $60.6 million during the same period in 2023.