MICROVISION INC

(Unaudited)

1. DESCRIPTION OF BUSINESS

MicroVision, Inc. is committed to driving the global adoption of proprietary products, which leverage deterministic AI at the edge with the Company’s innovative perception and application software running on diverse lidar sensors. The Company’s solutions enable ADAS and autonomy features for customers in a wide range of industries including robotics, automated warehouse, agriculture, mining, military, and automotive. The Company’s deterministic AI at the edge software running on sensors enables intelligent autonomous, active safety, and automation systems which depend on secure, cost-effective and energy-efficient solutions. This software has been developed in close collaboration with automotive customers and the Company is now rapidly expanding with it into new industrial and commercial vehicle sectors.

With engineering teams based in Redmond, Washington and Hamburg, Germany, the Company develops and supplies integrated solutions built on the perception software stack, incorporating application software and processing data from differentiated sensor systems. The Company’s extensive experience in developing and productizing core lidar hardware and software components, along with expertise in edge computing, positions the Company as a valuable commercial partner capable of delivering high-value, low-power products.

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 March 31, 2025, the Company had total liquidity of $69.0 million including $51.9 million in cash and cash equivalents and $17.1 million in short-term investment securities. In addition, the Company has approximately $113.4 million availability under its current at-the-market (“ATM”) facility as of March 31, 2025, subject to certain market conditions, such as trading prices and volumes. On October 23, 2024, the Company issued $45.0 million in senior secured convertible notes for gross proceeds of $41.4 million and has a remaining commitment pursuant to the convertible note facility of $30.0 million, subject to certain limitations, including sufficient authorized capital (seeNote 6. Notes Payable and Derivative Liability). On February 4, 2025, the Company sold shares of common stock and warrants to purchase common stock for net proceeds of approximately $7.8 million (seeNote 7. Warrant Liability). 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, 2024. The information as of December 31, 2024 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, 2025 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 valuations of intangibles, derivatives, and warrants, 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 inone operating segment andone 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. Financial information regularly reviewed by the CODM includes revenue, income or loss from operations, and net income or loss.

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 March 31, 2025, 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 March 31, 2025, a leading manufacturer of agricultural equipment and an automotive supplier accounted for $0.5 million and $0.1 million of total revenue, respectively, representing 80% and 14% of total revenue, respectively. For the same period in 2024, a major global commercial trucking OEM accounted for $0.5 million in revenue, representing 52% of total revenue, and a leading manufacturer of agricultural equipment accounted for $0.3 million in revenue, representing 33% of total revenue.

As of March 31, 2025, accounts receivable related to these customers accounted for 41% of total accounts receivable, net of allowances on the condensed consolidated balance sheets. Also as of March 31, 2025, the Company’s contract liability with one customer accounted for 55% of total accounts receivable, net of allowances.

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.

Warrant Liability

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance included in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent reporting period end date while the warrants are outstanding.

Warrants that meet all of the criteria for equity classification are required to be recorded as a component of additional paid-in capital at the time of issuance, or when the conditions for equity classification are met, and are not remeasured. Warrants that do not meet the required criteria for equity classification are classified as liabilities. The Company adjusts such warrants to fair value at each reporting period until the warrants are exercised or expire. Changes in fair value are recognized in the Company’s condensed consolidated statements of operations.

Recently Adopted Accounting Pronouncements

In March 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 was adopted by the Company beginning January 1, 2025. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

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 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.

In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20). The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The ASU is not expected to have a material impact on the Company’s financial statements or 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 months ended March 31, 2025 and 2024, we excluded the following securities from net loss per share as the effect of including them would have been anti-dilutive: outstanding options exercisable into a total of 0.7 million and 0.7 million shares of common stock, respectively, and 12.4 million and 9.2 million nonvested restricted stock units, respectively;20.5 million and 0.0 million shares of common stock that may be issued through conversion of the derivative liability, respectively (see Note 6. Notes Payable and Derivative Liability); and 5.8 million and 0.0 million shares of common stock that may be issued through the exercise of warrants, respectively (seeNote 7. Warrant Liability).

4. REVENUE RECOGNITION

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 March 31, 2025.

Transaction Price Allocated to the Remaining Performance Obligations

The remaining balance of the contract liabilities was approximately $0.3 million as of March 31, 2025. The Company expects to recognize 100% of this revenue over the next 12 months.

5. 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 March 31, 2025 and December 31, 2024 (in thousands). These tables do not include cash held in money market savings accounts.

Short-term investments are summarized below as of March 31, 2025 and December 31, 2024 (in thousands).

The maturities of the investment securities, available-for-sale as of March 31, 2025 and December 31, 2024 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 March 31, 2025 and December 31, 2024 (in thousands):

6. NOTES PAYABLE AND DERIVATIVE LIABILITY

Background

On October 14, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) for the purchase of senior secured convertible notes (the “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 in the 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 limitations. On October 23, 2024, the Purchase Agreement closed and the Note was issued for net proceeds of approximately $38.1 million, inclusive of all discounts, fees, and expenses related to the transaction.

On December 30, 2024, pursuant to the terms of the Note, the Holder elected to convert $1.8 million of outstanding principal into 2,345,068 shares of the Company’s common stock.

On February 3, 2025, the Company entered into a Letter Agreement with the Holder related to the Note. As a result of the Letter Agreement, the Holder elected to early convert $8.8 million of outstanding principal into 11,725,337 shares of the Company’s common stock. Additionally, as a result of the Letter Agreement, the Holder agreed to defer $11.6 million of principal repayments toseven monthly payments of $1.7 million beginning on September 1, 2025 and concluding on March 1, 2026. The Letter Agreement represents a modification requiring extinguishment accounting in accordance with ASC 470. As a result of the modification, a realized loss on debt modification of $4.7 million and interest expense of $2.1 million were recorded on the condensed consolidated statement of operations.

Components

The Note is a convertible debt instrument with multiple redemption, conversion, and put features. Certain features qualify as embedded derivatives requiring bifurcation. Therefore, the bifurcated features are accounted for separately as a compound embedded derivative in accordance with ASC 815, “Derivatives and Hedging” and are included in the derivative liability on the condensed consolidated balance sheets. The host contract, which represents the Note excluding the derivative liability, is accounted for as non-convertible debt under ASC 470, “Debt” and is included in notes payable, current and notes payable, net of current portion on the condensed consolidated balance sheets.

Notes Payable

Subsequent to the modification, the host contract is recorded at the total amount repayable at maturity of $36.0 million, less any unamortized debt discount. The debt discount is equal to the amount repayable at maturity, net of the initial fair value of the bifurcated derivative liability. There were no material qualifying debt issuance costs resulting from the modification.

Supplemental balance sheet information is as follows:

Interest expense related to the amortization of the debt discount and issuance costs was $3.5 million and $0.0 million for the three months ended March 31, 2025 and 2024, respectively. Total interest expense of $12.9 million for the three months ended March 31, 2025 is comprised of the following components:

The monthly effective interest rate implicit in the Note as of March 31, 2025 under the interest method was 2.34%.

Maturities of partial repayments, if elected by the Holder, are as follows:

Derivative Liability

As a result of the modification, one embedded feature previously accounted for within the derivative liability no longer required bifurcation and was recombined with the host contract at a fair value of $0.2 million. Subsequent to the modification, the derivative liability was initially recorded at its fair value of $7.2 million as of the modification date of February 3, 2025. The derivative liability is subsequently remeasured and reported at fair value each reporting period, with the changes in fair value recorded as an unrealized gain or loss and recognized in earnings.

The fair value of derivatives not designated as hedging instruments are as follows:

Unrealized gains and losses associated with derivatives not designated as hedging instruments are as follows:

Fair Value Measurements

The fair value of the derivative liability is determined utilizing a “with and without” method, in which the fair value is calculated as the difference in the fair value of the entire hybrid instrument and the fair value of the instrument excluding the bifurcated derivative features.

The valuation inputs hierarchy classification for liabilities measured at fair value on a recurring basis are summarized below as of March 31, 2025 and December 31, 2024 (in thousands). SeeNote 5. Investment Securities, Available-For-Sale and Fair Value Measurements, for discussion of the fair value level hierarchy.

The table below lists the inputs and assumptions for the Company’s valuations as of March 31, 2025 and December 31, 2024:

7. WARRANT LIABILITY

On February 3, 2025, the Company entered into a new Securities Purchase Agreement (the “2025 Purchase Agreement”) with an institutional investor. In exchange for $8.0 million, the Holder agreed to purchase 5,750,225 shares of common stock (the “closing shares”) and warrants to purchase up to 5,750,225 shares of common stock at an exercise price of $1.57 per share (the “warrants”). On February 4, 2025, the 2025 Purchase Agreement closed for net proceeds of approximately $7.8 million, inclusive of all fees and expenses related to the transaction. The warrants are exercisable beginning August 4, 2025 and expire on August 4, 2030.

The warrants are accounted for as a liability under ASC 480, Distinguishing Liabilities from Equity. Both the closing shares and the warrants are initially recorded at their fair values of $9.0 million and $6.3 million, respectively. The warrant liability is subsequently remeasured and reported at fair value each reporting period, with the changes in fair value recorded as an unrealized gain or loss and recognized in earnings.

The fair value of warrants are as follows:

Unrealized gains and losses associated with warrants are as follows:

Interest expense of $7.3 million representing the discount on the transaction was recorded on the condensed consolidated financial statements for the three months ended March 31, 2025.

The valuation inputs hierarchy classification for liabilities measured at fair value on a recurring basis are summarized below as of March 31, 2025 and December 31, 2024 (in thousands). SeeNote 5. Investment Securities, Available-For-Sale and Fair Value Measurements, for discussion of the fair value level hierarchy.

The fair value of the warrants is measured using the Black-Scholes option pricing model as of the measurement dates. The table below lists the inputs and assumptions for the Company’s valuations as of March 31, 2025 and upon initial measurement as of February 4, 2025:

8. FINANCIAL STATEMENT COMPONENTS

Inventory

Inventory consists of the following (in thousands):

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 (in thousands):

Depreciation expense was $0.4 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

Intangible Assets

The components of intangible assets were as follows (in thousands):

Amortization expense was $0.2 million and $0.6 million during the three months ended March 31, 2025 and 2024, respectively.

The following table outlines our estimated future amortization expense related to intangible assets held as of March 31, 2025 by line item on the condensed consolidated statement of operations (in thousands):

9. 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 condensed consolidated 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 March 31, 2025 (in thousands, except per share data):

As of March 31, 2025, 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 three months ended March 31, 2025 (in thousands, except per share data):

During the three months ended March 31, 2025, the Company granted 262,000 shares to non-executive employees. These shares were valued based on the closing price of our common stock on the dates of grant and vest immediately.

As of March 31, 2025, unrecognized share-based compensation related to RSUs was $5.5 million, which will be expensed over the next 1.8 years. Unrecognized share-based compensation related to executive PSUs was $1.8 million, which will be expensed over the next 0.8 years. Unrecognized share-based compensation related to the non-executive PSUs was $0.2 million, which will be expensed over the next 0.3 years.

10. LEASES

The Company leases office space and certain equipment under operating and finance leases. All leases have remaining lease terms of one toeight 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 product testing and lab 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 anoption to extend the term for one ten-year renewal period.

In September 2021, the Company entered into a lease agreement for office 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. The lease, which expires in December 2032, contains an option to extend the term for one ten-year renewal period. Subsequent to the date of these financial statements, on April 21, 2025, the Company signed an agreement with a third party to sublease a portion of this office space. The sublease, which is expected to commence on July 1, 2025, provides monthly rent of $0.1 million. The sublease expires on April 1, 2030 and contains one 32-month extension option.

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.

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.

In December 2023, the Company entered into a lease agreement for office space in Hamburg, Germany which commenced in November 2024. The lease, which expires in October 2029, includes an option to extend the term for two three-year renewal periods.

The components of lease expense are as follows:

Supplemental cash flow information related to leases was as follows:

Supplemental balance sheet information related to leases was as follows:

As of March 31, 2025, maturities of lease liabilities were as follows:

11. 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. During the quarter ended December 31, 2024, the Company entered into an additional purchase commitment with the existing contract manufacturing partner of $1.8 million. Remaining future minimum payments of approximately $2.6 million are expected to be made by the Company through the remainder of 2025 and 2026.

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.

12. 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 March 31, 2025, the sale of 23.5 million shares for net proceeds of $35.0 million had been completed. As of March 31, 2025, approximately $113.4 million is available under this sales agreement, subject to authorized shares available for sale.

13. INCOME TAXES

The Company recognized income tax expense of $0.1 million and $0.2 million during the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, the Company continues to haveno unrecognized tax positions.

14. RESTRUCTURING CHARGES

In the first quarter of 2024, to better align the Company’s resources to support business needs, the Company reduced the global workforce by approximately 18%. The Company recognized approximately $2.5 million in restructuring and related reorganization charges during the three months ended March 31, 2024, which is recorded within research and development expense and sales, marketing, general and administrative expense on the condensed consolidated statements of operations. The charges were predominately related to employee severance and benefit costs. There wereno restructuring charges during the three months ended March 31, 2025.