MICROVISION INC

(Unaudited)

1. DESCRIPTION OF BUSINESS

MicroVision, Inc. (“MicroVision” or “the Company”) delivers safe mobility at the speed of life through its hardware and software solutions focused primarily on advanced driver-assistance systems (“ADAS”) and autonomous vehicle (“AV”) applications. The Company is a global developer and supplier of light detection and ranging (“lidar”) sensors and perception and validation software. With the acquisition of the experienced team from Ibeo Automative Systems GmbH (“Ibeo”) in January 2023, MicroVision has combined a long history of developing and commercializing the core components of its lidar hardware and related software with experience in automotive-grade qualification.

Liquidity

The Company has incurred significant losses since inception. Operations to date have been funded 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. In addition, the Company has approximately $122.6 million availability under its current at-the-market (“ATM”) facility as of September 30, 2024. Subsequent to the date of these financial statements, on October 23, 2024, the Company issued $45.0 million in senior secured convertible notes for gross proceeds of $41.4 million. See Note 14. Subsequent Events for detail. After giving effect to the net proceeds from the first $45.0 million tranche of the financing transaction, the Company expects to have approximately $81.2 million in cash and cash equivalents and access to $152.6 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 facility. Based on the current operating plan, the Company anticipates having sufficient cash and cash equivalents to fund operations for at least the next 12 months from the issuance of these condensed consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes include the accounts of the Company and its wholly owned subsidiaries, after elimination of all intercompany balances and transactions. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2023. The information as of December 31, 2023 included in the condensed consolidated balance sheets was derived from those audited financial statements.

The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial information for the interim periods presented. The unaudited condensed consolidated results of operations for the interim period are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other future annual or interim period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts therein. The most significant estimates and assumptions relate to business combinations, valuation of intangibles, revenue recognition, inventory valuation, valuation of share-based payments, income taxes, depreciable lives assessment and related disclosure of contingent assets and liabilities. Due to the inherent uncertainty involved, actual results reported in future periods could differ from those estimates.

Foreign Currency Translation

Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. Realized gains and losses on those foreign currency transactions are included in determining net loss for the period of exchange and are recorded in other income in the condensed consolidated statements of operations.

***Segment Information ***

The Company determines operating segments based on how the chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. The CODM is the Executive Management team. The Company has determined that it operates in one operating segment and one reportable segment, relating to the sale and servicing of lidar hardware and software, as the CODM regularly reviews financial information presented on a consolidated basis.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash, cash equivalents, and investment securities. As of September 30, 2024, cash and cash equivalents are comprised of operating checking accounts and short-term highly rated money market savings accounts. Short-term investments are comprised of highly rated corporate bonds and U.S. Treasury securities.

For the three months ended September 30, 2024, three customers accounted for 65%,16%, and 11% of total revenue, respectively. For the same period in 2023, one customer accounted for 71% of total revenue.

For the nine months ended September 30, 2024, three customers accounted for 55%,20%, and 10% of total revenue, respectively. For the same period in 2023, four customers accounted for 38%,17%,11%, and 10% of total revenue, respectively.

As of September 30, 2024, accounts receivable related to these customers accounted for 92% of total accounts receivable, net of allowances on the condensed consolidated balance sheets.

Typically, a significant concentration of components and the products sold are manufactured and obtained from single or limited-source suppliers. The loss of any single or limited-source supplier, the failure of any of these suppliers to perform as expected, or the disruption in the supply chain of components from these suppliers could subject the Company to risks and uncertainties including, but not limited to, increased cost of sales, possible loss of revenues, or significant delays in product development or product deliveries, any of which could adversely affect the Company’s financial condition and operating results.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this update expand annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. All disclosure requirements under this standard will also be required for public entities with a single reportable segment. ASU 2023-07 is effective for the Company for annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The ASU is not expected to have a material impact on the Company’s financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted. The ASU is expected to result in incremental disclosures to the Company’s financial statements.

In March 2024, the FASB issued ASU No. 2024-01,*Compensation: Stock Compensation (Topic 718).*The amendments in this ASU clarify existing guidance related to profits interest and similar awards. ASU 2024-01 is effective for annual and interim periods for the Company beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact this ASU may have on its financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this ASU require additional disclosure of specified information about certain costs and expenses in the notes to the financial statements. ASU 2024-03 is effective for annual periods for the Company beginning January 1, 2027, with early adoption permitted. The Company is currently evaluating the impact this ASU may have on its financial statement disclosures.

3. NET LOSS PER SHARE

Basic net loss per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated using the weighted-average number of common shares outstanding and the dilutive effect of all potentially dilutive securities, including common stock equivalents and convertible securities. As the effect of dilutive securities outstanding during the period is anti-dilutive, diluted net loss per share is equal to basic net loss per share.

The components of basic and diluted net loss per share are as follows (in thousands, except loss per share data):

For the three and nine months ended September 30, 2024 and 2023, the following securities from net loss per share have been excluded as the effect of including them would have been anti-dilutive: outstanding options exercisable into a total of 0.7 million and 0.8 million shares of common stock, respectively, and 12.7 million and 10.3 million nonvested restricted and performance stock units, respectively.

4. BUSINESS COMBINATION

On January 31, 2023, the Company completed the acquisition of certain net assets of Ibeo, a lidar hardware and software provider based in Hamburg, Germany. The purpose of the acquisition was to acquire certain Ibeo assets, primarily intellectual property and personnel, which enabled the Company to expand their technology and product portfolio and diversify revenue streams.

Total consideration related to this transaction was approximately EUR 20.0 million or $21.6 million, consisting of approximately (i) EUR 7.0 million or $7.6 million in cash paid at closing, (ii) EUR 6.6 million or $7.1 million in cash advanced to Ibeo prior to closing, (iii) EUR 3.0 million or $3.3 million released from escrow during the quarter ended March 31, 2024, (iv) EUR 0.6 million or $0.7 million in costs paid on behalf of the seller, and (v) EUR 2.7 million or approximately $3.0 million after calculating the deduction in purchase price agreed between both the parties. The remaining balance of approximately EUR 2.7 million was paid during the three months ended June 30, 2024 and was previously recorded as an accrued liability for Ibeo business combination on the condensed consolidated balance sheet. In addition, the Company incurred $0.6 million of acquisition-related costs associated with the acquisition during the three months ended March 31, 2023, which were included in Sales, marketing, general and administrative expense.

The transaction was accounted for as a business combination. The results of operations for the acquisition are included in the condensed consolidated financial statements from the date of acquisition onwards.

The following table summarizes the final purchase price allocation to assets acquired and liabilities assumed (in thousands):

The estimated fair value of acquired technology was calculated through the income approach using the multi-period excess earnings and relief from royalty methodologies. The estimated fair value of the order backlog was calculated through the income approach using the multi-period excess earnings methodology.

5. REVENUE RECOGNITION

The following is a description of principal activities from which the Company generates revenue. Revenues are recognized when control of the promised goods or services are transferred to customers, in an amount that reflects the consideration that the Company expect to receive in exchange for those goods or services.

The Company evaluates contracts based on the 5-step model as stated in Topic 606 as follows: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognize revenue when (or as) performance obligations are satisfied.

A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct, as defined in the revenue standard.

The transaction price is the amount of consideration an entity expects to be entitled to from a customer in exchange for providing the goods or services. A number of factors should be considered to determine the transaction price, including whether there is variable consideration, a significant financing component, noncash consideration, or amounts payable to the customer. The determination of variable consideration will require a significant amount of judgment. In estimating the transaction price, the Company will use either the expected value method or the most likely amount method.

The transaction price is allocated to the separate performance obligations in the contract based on relative standalone selling prices. Determining the relative standalone selling price can be challenging when goods or services are not sold on a standalone basis. The revenue standard sets out several methods that can be used to estimate a standalone selling price when one is not directly observable. Allocating discounts and variable consideration must also be considered. Allocating the transaction price can require significant judgement on the Company’s part.

Revenue is recognized when (or as) the customer obtains control of the good or service/performance obligations are satisfied. Topic 606 provides guidance to help determine if a performance obligation is satisfied at a point in time or over time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.

Disaggregation of Revenue

The following table provides information about disaggregated revenue by timing of revenue recognition (in thousands):

Contract Balances

Under Topic 606, the Company’s rights to consideration are presented separately depending on whether those rights are conditional or unconditional. Unconditional rights to consideration are included within accounts receivable, net of allowances in the condensed consolidated balance sheets.

Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands, except percentages):

Contract Acquisition Costs

The Company is required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. As the Company currently does not pay any commissions upon the signing of a contract, no commission cost has been incurred as of September 30, 2024.

Transaction Price Allocated to the Remaining Performance Obligations

The remaining balance of the contract liabilities was approximately $0.2 million as of September 30, 2024. The Company expects to recognize 100% of this revenue over the next 12 months.

6. INVESTMENT SECURITIES, AVAILABLE-FOR-SALE AND FAIR VALUE MEASUREMENTS

Investment securities, available-for-sale is comprised of corporate and government debt securities. The principal markets for the debt securities are dealer markets which have a high level of price transparency. The market participants for debt securities are typically large money center banks and regional banks, brokers, dealers, pension funds, and other entities with debt investment portfolios.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three level fair value inputs hierarchy and requires an entity to maximize the use of observable valuation inputs and minimize the use of unobservable inputs. The Company uses market data, assumptions, and risks that market participants would use in measuring the fair value of the asset or liability, including the risks inherent in the inputs and the valuation techniques. The hierarchy is summarized below.

Level 1 - Quoted prices in active markets for identical assets and liabilities at the measurement date that the reporting entity has the ability to access.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs for which there is little or no market data, which requires us to develop our own assumptions, which are significant to the measurement of the fair values.

The valuation inputs hierarchy classification for assets measured at fair value on a recurring basis are summarized below as of September 30, 2024 and December 31, 2023 (in thousands). These tables do not include cash held in money market savings accounts.

Short-term investments are summarized below as of September 30, 2024 and December 31, 2023 (in thousands).

The maturities of the investment securities, available-for-sale as of September 30, 2024 and December 31, 2023 are shown below (in thousands):

The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of September 30, 2024 and December 31, 2023 (in thousands):

7. FINANCIAL STATEMENT COMPONENTS

The following financial statement components have significant balances as of September 30, 2024.

Restricted Cash

During the nine months ended September 30, 2024, Restricted cash, current decreased largely due to a $3.3 million release of escrow in connection with the Asset Purchase Agreement with Ibeo. In addition, Restricted cash, net of current portion increased by approximately $1.0 million related to cash that is held as collateral for a Hamburg, Germany lease.

Inventory

Inventory consists of the following:

Inventory is computed using the first-in, first-out (FIFO) method and is stated at the lower of cost and net realizable value. Management periodically assesses the need to account for obsolescence of inventory and adjusts the carrying value of inventory to its net realizable value when required.

Property and Equipment

Property and equipment consists of the following:

Depreciation expense was $0.6 million and $1.1 million for the three months ended September 30, 2024 and 2023, respectively, and $1.7 million and $2.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Intangible Assets

The components of intangible assets were as follows:

Amortization expense was $0.5 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and $1.6 million for the nine months ended September 30, 2024 and 2023.

During the quarter ended June 30, 2024, management identified various factors related to the 2024 restructuring events (seeNote 13. Restructuring Charges) that collectively indicated that it is more-likely-than-not that the fair value of the Company’s Reference software intangible asset was less than its carrying amount as of June 30, 2024. As of June 30, 2024, prior to impairment, the fair value was $4.5 million. As a result, the Company performed an impairment assessment for intangibles in accordance with ASC 360,Property, Plant and Equipment. The June 30, 2024 impairment test indicated a decline in the carrying amount of the Reference software intangible asset and a reduction in the asset’s useful life, resulting in a non-cash impairment charge of $3.0 million, which is included in impairment loss on intangible assets on the condensed consolidated statement of operations. The fair value of the Reference software subsequent to impairment was $1.4 million and is included within intangible assets, net on the condensed consolidated balance sheets. No further indicators of impairment related to intangible assets were identified during the three months ended September 30, 2024.

The following table outlines estimated future amortization expense related to intangible assets held as of September 30, 2024 (in thousands):

**8. SHARE-BASED COMPENSATION **

The Company issues share-based compensation to employees in the form of restricted stock units (RSUs), performance stock units (PSUs), and stock options. Share-based awards are accounted for by recognizing the fair value of share-based compensation expense on a straight-line basis over the service period of the award, net of estimated forfeitures. The fair value of RSUs and PSUs is determined by the closing price of common stock on the date of grant. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model. Changes in estimated inputs or using other option valuation methods may result in materially different option values and share-based compensation expense.

The following table summarizes the amount of share-based compensation expense by line item on the statements of operations:

Options Activity and Positions

The following table summarizes shares, weighted-average exercise price, weighted-average remaining contractual term, and aggregate intrinsic value of options outstanding and options exercisable as of September 30, 2024 (in thousands, except per share data):

As of September 30, 2024, there is no unrecognized share-based employee compensation related to stock options.

Restricted Stock Activity and Positions

The following table summarizes activity and positions with respect to RSUs and PSUs for the nine months ended September 30, 2024 (in thousands, except per share data):

During the nine months ended September 30, 2024, the Company granted 4,170,000 shares to non-executive employees for annual and short-term incentive awards. Additionally, the Company granted 80,000 shares to non-executive employees for new hire grants. These shares are valued based on the closing price of common stock on the dates of grant and vest immediately or over three or four years.

During the nine months ended September 30, 2024, the Company granted 3,771,000 shares to executive employees and directors for annual, short-term incentive, and long-term incentive awards. These shares are valued based on the closing price of common stock on the dates of grant and vest immediately, over one year, or over three years.

As of September 30, 2024, unrecognized share-based compensation related to RSUs was $7.5 million, which will be expensed over the next 2.1 years. Unrecognized share-based compensation related to executive PSUs was $3.6 million, which will be expensed over the next 1.1 years. Unrecognized share-based compensation related to the non-executive PSUs was $0.6 million, which will be expensed over the next 0.8 years.

9. LEASES

The Company leases office space and certain equipment under operating and finance leases. All leases have remaining lease terms of one to eight years. Office lease agreements include both lease and non-lease components, which are accounted for separately. Finance leases contain options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless the Company is reasonably certain to exercise the purchase option.

In September 2021, the Company entered into a lease agreement for office space in Redmond, Washington which commenced in November 2021. In addition to base rent, the Company pays additional rent comprised of a proportionate share of any operating expenses, real estate taxes, and management fees. The lease, which expires in July 2032, includes an option to extend the term for one ten-year renewal period.

In September 2021, the Company entered into a lease agreement for product testing and lab space in Redmond, Washington which commenced in December 2022. In addition to base rent, the Company will pay additional rent comprised of a proportionate share of any operating expenses, real estate taxes, and management fees. During the quarter ended June 30, 2023, a payment of $3.0 million was received as an incentive to terminate the Company’s previous lease. The gain is recorded as other income in the condensed consolidated statement of operations. The lease, which expires in December 2032, contains an option to extend the term for one ten-year renewal period.

In April 2022, the Company entered into a lease agreement for product testing for engineering and development activities in Nuremberg, Germany which commenced in May 2022. In June 2024, the Company abandoned the space prior to itsexpiration of November 2027. During the quarter ended June 30, 2024, impairment expense of $0.2 million was incurred and is recorded within sales, marketing, general and administrative expense on the condensed consolidated statement of operations.

In September 2022, the Company entered into a lease agreement for office space in Nuremberg, Germany which commenced in November 2022. In June 2024, the Company entered into an early termination agreement to decrease theexpiration from April 2027 to April 2025, resulting in an insignificant early termination fee. During the quarter ended June 30, 2024, impairment expense of $0.1 million was incurred and is recorded within sales, marketing, general and administrative expense on the condensed consolidated statement of operations.

Additionally, in connection with the January 2023 acquisition of assets from Ibeo, the Company assumed three leases in Hamburg, Germany. The first lease, which is for space for IT network equipment, will be abandoned prior to itsexpiration date of December 2026 in November 2024. During the quarter ended June 30, 2024, impairment expense of $0.1 million was incurred is recorded within sales, marketing, general and administrative expense on the condensed consolidated statement of operations. The second lease, which is for office space and long-range laser testing space, originally expired in August 2023 and was extended during the quarter ended September 30, 2023 to August 2024. In July 2024, the lease was further extended to October 2024 and in September 2024 was again extended until November 2024. Subsequent to the date of these financial statements, in October 2024, the lease for certain portions of the office space were further extended to February 2025. The third lease, which was for garage space to house the Company’s test and demonstration vehicles, expired in July 2024.

In December 2023, the Company entered into a lease agreement in Hamburg, Germany for office space to replace the existing Hamburg, Germany leases. The lease, which is expected to commence in November 2024, provides for a term of 60 months. The lease liability associated with this forward-starting lease are excluded from the tables below.

The components of lease expense are as follows:

Supplemental cash flow information related to leases is as follows:

Supplemental balance sheet information related to leases is as follows:

As of September 30, 2024, maturities of lease liabilities are as follows:

10. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

During the quarter ended September 30, 2023, the Company entered into a $9.3 million purchase commitment with a contract manufacturing partner for the production of MOVIA sensor inventory to support direct sales to both automotive and non-automotive customers. Remaining future payments of approximately $4.8 million are expected to be made by the Company through 2025.

Litigation

The Company is subject to various claims and pending or threatened lawsuits in the normal course of business. The Company is not currently party to any legal proceedings that management believes are reasonably possible to have a material adverse effect on financial position, results of operations, or cash flows.

11. COMMON STOCK

In March 2024, the Company entered into a $150 million ATM equity offering agreement with Deutsche Bank Securities, Inc., Mizuho Securities USA LLC, and Craig-Hallum Capital Group LLC (collectively, the “Agents”). Under the agreement, the Company is able, with discretion, to offer and sell shares of common stock having an aggregate value of up to $150.0 million through or directly to the Agents. As of September 2024, the sale of 15.0 million shares for net proceeds of $26.1 million had been completed. As of September 30, 2024, approximately $122.6 million is available under this sales agreement.

In June 2023, the Company entered into a $45.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, the Company wasable, with discretion, to offer and sell shares of common stock having an aggregate value of up to $45.0 million through Craig-Hallum. As of June 30, 2023, the Company had completed sales under such sales agreement, having sold 10.9 million shares for net proceeds of $43.9 million. No further shares are available for sales under this agreement.

In June 2021, the Company entered into a $140.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, the Company was able, with discretion, to offer and sell shares of common stock having an aggregate value of up to $140.0 million through Craig-Hallum. As of December 31, 2022, the Company had issued 8.3 million shares of common stock for net proceeds of $81.8 million under the agreement. During the quarter ended March 31, 2023, the Company issued 5.0 million shares of common stock for net proceeds of $12.5 million under the agreement. The sales agreement was terminated in June 2023.

12. INCOME TAXES

The Company recognized income tax expense of $0.1 million and $0.2 million during the three months ended September 30, 2024 and 2023, respectively, and $0.4 million and $0.7 million during the nine months ended September 30, 2024 and 2023, respectively. Income tax expense for the nine months ended September 30, 2024 was largely the result of income in foreign jurisdictions, partially offset by a deferred income tax benefit generated by the reduction to a deferred tax liability created as a result of the acquisition of Ibeo assets in the first quarter of 2023.

As of September 30, 2024, the Company continues to haveno unrecognized tax positions.

13. RESTRUCTURING CHARGES

In the first half of 2024, to better align the Company’s resources to support business needs, the Company reduced the global workforce by approximately 37%. The Company recognized approximately $5.8 million in restructuring and related reorganization charges during the nine months ended September 30, 2024 which is recorded within research and development expense and sales, marketing, general and administrative expense on the condensed consolidated statement of operations. The charges were predominately related to employee severance and benefit costs and approximately $0.1 million was unpaid and included in accrued liabilities as of September 30, 2024. Consistent with the impairment analysis for the three months ended June 30, 2024, the workforce reduction and restructuring included, among other things, impacts from the de-emphasis on the Company’s MOSAIK software business.

14. SUBSEQUENT EVENTS

On October 14, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) for the purchase of senior secured convertible notes (the “Convertible Note”) with an institutional investor (the “Holder”). The principal amount for the initial note is $45.0 million (the “Initial Principal Amount”), with an option for the Company to issue additional principal amount of $30.0 million (the “Additional Principal Amount” and, together with the Initial Principal Amount, the “Principal Amount”) of convertible notes to the Holder, subject to certain limitation.

The Convertible Note will rank senior to all outstanding and future indebtedness of the Company. Beginning on January 1, 2025, the Holder may elect to require the Company to partially repay the Notes up to $1.8 million monthly prior to April 1, 2025 and up to $3.5 million monthly on and after April 1, 2025, plus a 10% premium. The Holder has the right to optionally convert the Note to shares of the Company’s common stock subject to certain conditions. If not converted, the end of term maturity balance is the outstanding principal balance of the Note multiplied by 110% and matures on October 1, 2026. The Convertible Note bears zero coupon.

On October 23, 2024, the Purchase Agreement closed and the Convertible Note was issued for net proceeds of approximately $38.0 million, inclusive of all discounts, fees, and expenses related to the transaction.