UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20222023

OR

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 001-34170

 

MicroVision, Inc.

(Exact name of registrant as specified in its charter)

Delaware91-1600822
  (State

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

18390 NE 68th Street

6244 185th Avenue NE, Suite 100
Redmond, Washington 98052

(Address of Principal Executive Offices, including Zip Code)

(425) 936-6847

(Registrant'sRegistrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, $0.001 par value per shareMVISThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☒   Accelerated filer ☐   Non-accelerated filer ☐ ☒Accelerated filer ☐
Non-accelerated filer ☐Smaller reporting company ☐   Emerging growth company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ ☐NO NO    ☒

The number of shares of the registrant’s common stock outstanding as of October 24, 2022November 3, 2023 was 166,035,291189,985,743.

 

 

TABLE OF CONTENTS

TABLE OF CONTENTSPage
PART I. FINANCIAL INFORMATION
  
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page3
Condensed Consolidated Balance Sheets as of September 30, 20222023 and December 31, 2021202223
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 20222023 and 2021  202234
Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 20222023 and 2021  202245
Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 20222023 and 2021202256
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20222023 and 2021     202267
Notes to Condensed Consolidated Financial Statements78
Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations1723
Item 3. Quantitative and Qualitative Disclosures About Market Risk2126
Item 4. Controls and Procedures27
22PART II. OTHER INFORMATION
  
PART II. OTHER INFORMATION
Item 1. Legal Proceedings2227
Item 1A. Risk Factors2227
Item 5. Other information36
Item 6. Exhibits3136
Signatures3237

 12

PART I.

ITEM 1. FINANCIAL STATEMENTS

MicroVision, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

  September 30,  December 31, September 30, December 31, 
 2022 2021 2023  2022 
Assets          
Current assets         
Cash and cash equivalents  $

  21,977

 $  82,647 $49,366  $20,536 
Investment securities, available-for-sale  61,281  32,720  28,677   62,173 
Restricted cash, current  3,263   - 
Accounts receivable, net  740   - 
Inventory         1,762  1,780  3,616   1,861 
Advance to Ibeo  -   4,132 
Other current assets        2,832        2,283  5,765   2,306 
Total current assets   87,852   119,430  91,427   91,008 
            
Property and equipment, net     4,545     3,026  9,461   6,830 
Operating lease right-of-use asset        14,486        5,577  14,223   14,579 
Restricted cash        1,418        1,092  961   1,418 
Intangible assets, net        85        115  17,766   75 
Other assets         1,005 985  2,110   1,086 
Total assets $  109,391 $  130,225 $135,948  $114,996 
            
Liabilities and shareholders' equity     
Liabilities and shareholders’ equity        
Current liabilities            
Accounts payable $       1,519 $       3,584 $2,294  $2,061 
Accrued liabilities        1,588        1,170  7,204   2,058 
Accrued liability for Ibeo business combination  6,118   - 
Contract liabilities     4,601     5,265  4,958   4,601 

Other current liabilities

 1,459 1,181
Current portion of long-term debt      -        392
Current portion of operating lease liability        769        849  2,432   1,846 
Current portion of finance lease obligations 25 21  2   21 
Other current liabilities  1,058   839 
Total current liabilities   9,961   12,462  24,066   11,426 
            
Operating lease liability, net of current portion        13,803        4,983  13,027   13,829 
Finance lease obligations, net of current portion 2 26
Other long-term liabilities  597   - 
Total liabilities   23,766   17,471  37,690   25,255 
            
Commitments and contingencies (Note 9)    
Commitments and contingencies (Note 10)  -     
            
Shareholders' equity    
Shareholders’ equity        
Preferred stock, par value $0.001; 25,000 shares authorized; no and
no shares issued and outstanding		    -    -  -   - 
Common stock, par value $0.001; 210,000 shares authorized;
165,885 and 164,363 shares issued and outstanding at September 30,
2022 and December 31, 2021, respectively		        166        164
Common stock, par value $0.001; 310,000 shares authorized; 189,829 and 170,503 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively  190   171 
Additional paid-in capital 754,702 742,042  843,975   772,221 
Accumulated other comprehensive loss (194) (19)
Subscriptions receivable  (323)  - 
Accumulated other comprehensive gain (loss)  45   (127)
Accumulated deficit        (669,049)        (629,433)  (745,629)  (682,524)
Total shareholders' equity   85,625     112,754
Total liabilities and shareholders' equity $  109,391 $  130,225
Total shareholders’ equity  98,258   89,741 
Total liabilities and shareholders’ equity $135,948  $114,996 

The accompanying notes are an integral part of these financial statements.


 23

 

MicroVision, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)
(Unaudited)

             
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2022  2021  2022  2021
             
Product revenue $- $        - $- $        -
License and royalty revenue         -        718         664         1,943
Contract revenue     -  -     -  -
Total revenue         -      718         664      1,943
             
Cost of product revenue  45  (10)  67  (46)
Cost of contract revenue     -    -     -    -
Total cost of revenue  45      (10)  67      (46)
             
Gross profit        (45)         728        597         1,989
             
Research and development expense      7,535      5,791      22,828     17,629
Sales, marketing, general and administrative expense      5,522      5,006      17,664      15,608
Total operating expenses      13,057      10,797      40,492      33,237
             
Loss from operations  (13,102)  (10,069)  (39,895)  (31,248)
Gain on debt extinguishment  -  692  -  692
Other income (expense), net  251  (5)  279  (19)
             
Net loss $(12,851) $(9,382) $(39,616) $(30,575)
             
Net loss per share - basic and diluted $    (0.08) $    (0.06) $    (0.24) $    (0.19)
             
Weighted-average shares outstanding - basic and diluted  165,687  163,985  165,167  159,452

(Unaudited)

             
  2023  2022  2023  2022 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2023  2022  2023  2022 
             
Revenue $1,047  $-  $2,158  $664 
                 
Cost of Revenue  625   45   1,870   67 
                 
Gross profit  422   (45)  288   597 
                 
Research and development expense  15,584   7,535   42,127   22,828 
Sales, marketing, general and administrative expense  8,743   5,522   27,172   17,664 
Gain on disposal of fixed assets  (10)  -   (25)  - 
Total operating expenses  24,317   13,057   69,274   40,492 
                 
Loss from operations  (23,895)  (13,102)  (68,986)  (39,895)
                 
Bargain purchase gain, net of tax  -   -   1,706   - 
Other income  637   251   4,846   279 
                 
Net loss before taxes  (23,258)  (12,851)  (62,434)  (39,616)
                 
Income tax expense  (211)  -   (671)  - 
Net loss $(23,469) $(12,851) $(63,105) $(39,616)
                 
Net loss per share - basic and diluted $(0.12) $(0.08) $(0.35) $(0.24)
                 
Weighted-average shares outstanding - basic and diluted  188,306   165,687   180,156   165,167 

The accompanying notes are an integral part of these financial statements.

 34

 

MicroVision, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

             
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2023  2022  2023  2022 
Net loss $(23,469) $(12,851) $(63,105) $(39,616)
                 
Other comprehensive loss:                
Unrealized gain (loss) on investment securities, available-for-sale  22   (16)  117   (175)
Foreign currency translation adjustments  31   -   55   - 
Total comprehensive income (loss)  53   (16)  172   (175)
Comprehensive loss $(23,416) $(12,867) $(62,933) $(39,791)

             
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
   2022  2021  2022  2021
Net loss $(12,851) $(9,382) $(39,616) $(30,575)
            

Other comprehensive loss 

            
    Unrealized loss on investment securities, available-for-sale  (16)   -  (175)   -
Comprehensive loss $(12,867) $(9,382) $(39,791) $(30,575)

The accompanying notes are an integral part of these financial statements.

 45

 

MicroVision, Inc.

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands)
(Unaudited)

  
(Unaudited)

                                  
     Accumulated         Accumulated     
Common Stock Additional  other Total Common Stock  Additional     other     Total 
   Par paid-in Subscriptions 

comprehensive 

 Accumulated shareholders'    Par paid-in Subscriptions comprehensive Accumulated shareholders’ 
Shares value capital receivable loss deficit equity Shares  value  capital  receivable  loss  deficit  equity 
Balance at June 30, 2023  187,620  $188  $835,410  $     (925) $        (8) $(722,160) $112,505 
Share-based compensation expense  411   -   4,343   -   -   -   4,343 
Exercise of options  11   -   7   -   -   -   7 
Sales of common stock, net  1,787   2   4,215   602   -   -   4,819 
Net loss  -   -   -   -   -   (23,469)  (23,469)
Other comprehensive loss  -   -   -   -   53   -   53 
Balance at September 30, 2023  189,829  $190  $843,975  $(323) $45  $(745,629) $98,258 
                            
Balance at January 1, 2023  170,503  $171  $772,221  $-  $(127) $(682,524) $89,741 
Share-based compensation expense  1,410   1   10,769   -   -   -   10,770 
Exercise of options  191   -   175   -   -   -   175 
Sales of common stock, net  17,725   18   60,810   (323)  -   -   60,505 
Net loss  -   -   -   -   -   (63,105)  (63,105)
Other comprehensive income  -   -   -   -   172       172 
Balance at September 30, 2023  189,829  $190  $843,975  $(323) $45  $(745,629) $98,258 
                             
Balance at June 30, 2022165,438 $165 $750,311 $-  $(178) $(656,198) $94,100   165,438  $165  $750,311  $-  $(178) $(656,198) $94,100 
Share-based compensation expense240 - 4,081 -  -  -  4,081   240   -   4,081   -   -   -   4,081 
Exercise of options207 1 310 - - -  311   207   1   310   -   -   -   311 
Net loss - - - -  -  (12,851) (12,851)  -   -   -   -   -   (12,851)  (12,851)
Other comprehensive loss- - - - (16) - (16)  -   -   -   -   (16)  -   (16)
Balance at September 30, 2022165,885 $166 $754,702 $-  $

(194) 

 $(669,049) $85,625  165,885  $166  $754,702  $-  $(194) $(669,049) $85,625 
                             
Balance at January 1, 2022164,363 $164 $742,042 $-  $(19)  $(629,433) $112,754   164,363  $164  $742,042  $-  $(19) $(629,433) $112,754 
Share-based compensation expense997 1 11,934 -  -  -  11,935   997   1   11,934   -   -   -   11,935 
Exercise of options525 1 726 -  -  -  727  525   1   726   -   -   -   727 
Net loss- - - -  -  (39,616) (39,616)  -   -   -   -   -   (39,616)  (39,616)
Other comprehensive loss- - - - (175) - (175)  -   -   -   -   (175)  -   (175)
Balance at September 30, 2022165,885 $166 $754,702 $-  $(194) $(669,049) $85,625   165,885  $166  $754,702  $-  $(194) $(669,049) $85,625 
   
   
Balance at June 30, 2021163,960 $    164 $736,159 $        - $        - $       (607,426) $        128,897
Share-based compensation expense   95 -    2,810   -         -   -         2,810
Exercise of options   49 -    30   -         -   -         30
Sales of common stock   - -    (8)   -         -   -         (8)
Net loss    - -    -   -         -   (9,382)   (9,382)
Balance at September 30, 2021164,104 $    164 $738,991 $  - $  - $       (616,808) $        122,347
            
Balance at January 1, 2021152,926 $    153 $601,224 $  (6,135) $- $       (586,233) $ 9,009
Share-based compensation expense       2,235 2    12,343   - -   -  12,345
Exercise of options    1,389         1     2,539   - -   -  2,540
Sales of common stock    7,554         8   122,885     6,135 -   -         129,028
Net loss   - -    - - -   (30,575)         (30,575)
Balance at September 30, 2021164,104 $    164 $738,991 $- $- $       (616,808) $        122,347
 

The accompanying notes are an integral part of these financial statements.

 56

 

MicroVision, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)
(Unaudited)

       
   Nine Months Ended
   September 30,
   2022  2021
Cash flows from operating activities      
Net loss $  (39,616) $  (30,575)
       
Adjustments to reconcile net loss to net cash used in operations:      
Depreciation and amortization         1,425         1,040

Impairment of property and equipment 

  60  664
Share-based compensation expense      11,935         12,345
Non-cash interest expense    -    (10)

Inventory write-downs

  60  -
Net accretion of premium on short-term investments  290  -
Gain on extinguishment of debt  -  (692)
       
Change in:      
Inventory     (42)  (1,182)
Other current and non-current assets         (662)         (3,038)
Accounts payable  (2,160)       573
Accrued liabilities         418    390
Contract liabilities and other current liabilities       (386)    (59)
Operating lease liabilities       (938)       (506)
Other long-term liabilities  -  (195)
Net cash used in operating activities    (29,616)    (21,245)
       
Cash flows from investing activities      

Sales of investment securities

  34,700  -
Purchases of investment securities  (63,726)  -
Purchases of property and equipment       (2,017)         (2,034)
Net cash used in investing activities       (31,043)         (2,034)
       
Cash flows from financing activities      
Principal payments under finance leases  (20)         (25)
Principal payments under long-term debt      (392)      -
Payments received on subscriptions receivable  -  6,135
Proceeds from stock option exercises  727  2,540
Net proceeds from issuance of common stock    -      122,902
Net cash provided by financing activities    315      131,552
       
Change in cash, cash equivalents, and restricted cash    (60,344)      108,273
Cash, cash equivalents, and restricted cash at beginning of period    83,739      17,297
Cash, cash equivalents, and restricted cash at end of period $  23,395 $    125,570
       
Supplemental schedule of non-cash investing and financing activities      
Non-cash additions to property and equipment $645 $298
       
       
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of September 30, 2022 and December 31, 2021:
   September 30,  December 31,
   2022  2021
Cash and cash equivalents $  21,977 $    82,647
Restricted cash         1,418         1,092
Cash, cash equivalents and restricted cash $  23,395 $   83,739

(Unaudited)

       
  Nine Months Ended 
  September 30, 
  2023  2022 
Cash flows from operating activities        
Net loss $(63,105)  (39,616)
         
Adjustments to reconcile net loss to net cash used in operations:        
Depreciation and amortization  6,288   1,425 
Bargain purchase gain, net of tax  (1,706)  - 
Gain on disposal of fixed assets  (25)  - 
Impairment of property and equipment  12   60 
Inventory write-downs  61   60 
Share-based compensation expense  11,506   11,935 
Net accretion of premium on short-term investments  (986)  290 
         
Change in:        
Accounts receivable  (740)  - 
Inventory  (619)  (42)
Other current and non-current assets  (3,214)  (662)
Accounts payable  896   (2,160)
Accrued liabilities  4,321   418 
Contract liabilities and other current liabilities  (1,405)  (386)
Operating lease liabilities  (1,813)  (938)
Other long-term liabilities  17   - 
Net cash used in operating activities  (50,512)  (29,616)
         
Cash flows from investing activities        
Sales of investment securities  61,700   34,700 
Purchases of investment securities  (27,101)  (63,726)
Cash paid for Ibeo business combination  (11,233)  - 
Purchases of property and equipment  (1,981)  (2,017)
Net cash provided by (used in) investing activities  21,385   (31,043)
         
Cash flows from financing activities        
Principal payments under finance leases  (19)  (20)
Principal payments under long-term debt  -   (392)
Proceeds from stock option exercises  175   727 
Net proceeds from issuance of common stock  60,607   - 
Net cash provided by financing activities  60,763   315 
         
Change in cash, cash equivalents, and restricted cash  31,636   (60,344)
Cash, cash equivalents, and restricted cash at beginning of period  21,954   83,739 
Cash, cash equivalents, and restricted cash at end of period $53,590  $23,395 
         
Supplemental schedule of non-cash investing and financing activities        
Non-cash additions to property and equipment $-  $645 
Amounts issued to escrow for acquisition consideration $3,263  $- 
Acquisition of right-to-use asset $1,294  $9,622 
Accrued financing fees $101  $- 
Issuance of common stock for subscriptions receivable $323  $- 
Foreign currency translation adjustments $55  $- 
Unrealized loss on investment securities, available-for-sale $117  $175 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of September 30, 2023 and December 31, 2022:

  September 30,  December 31, 
  2023  2022 
Cash and cash equivalents $49,366  $20,536 
Restricted cash, current  3,263   - 
Restricted cash  961   1,418 
Cash, cash equivalents and restricted cash $53,590  $21,954 

The accompanying notes are an integral part of these financial statements.

 67


 

MicroVision, Inc.

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. MANAGEMENT'S STATEMENT

Accounting Policy

(Unaudited)

1. MANAGEMENT’S STATEMENT

The Condensed Consolidated Balance Sheets as of September 30, 2022,2023, the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 20222023 and 2021,2022, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20222023 and 2021,2022, have been prepared by MicroVision, Inc. ("we"(“we” or "our"“our”) and have not been audited. In the opinion of management, all adjustments necessary to state fairly the financial position at September 30, 20222023 and the results of operations and cash flows for all periods presented have been made and consist of normal recurring adjustments. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (SEC). The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. You should read these condensed consolidatedCondensed Consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.2022. The results of operations for the three and nine months ended September 30, 20222023 are not necessarily indicative of the operating results that may be attained for the entire fiscal year.

We are developing lidar sensors and sensor fusionperception software to address the needs of the Level 2+, or L2+, and Level 3, or L3, Advanced Driver-Assistance Systemsadvanced driver-assistance systems (ADAS) markets to be used in automotive safety and autonomous driving applications. Our micro-electromechanical systems, or MEMS-based high-speed lidar sensor usessensors, which we call MAVIN™, use our pioneering laser beam scanning (LBS) technology. Our solution-based development approach recognizes two key realities of the L2+ and L3 markets: that safety is mission critical and that OEMs require cost efficiency and integration adaptability. With these factors in mind, we believe that our best-in-class MAVIN lidar sensor supportssensors support critical safety needs by providing the highest resolution at range and velocity of moving objects with a dynamic field of view while running at 30 hertz.hertz, thus enabling ADAS features, such as automatic emergency braking, forward collision warning, and automatic emergency steering, at higher speeds of operation than most competing products.

Our LBS technology is based

We completed the acquisition of Ibeo Automotive Systems GmbH (“Ibeo”) assets on our patented expertise in systems that include micro-electromechanical systems (MEMS), laser diodes, opto-mechanics, electronics, algorithmsJanuary 31, 2023 pursuant to the terms and software, and how those elements are packaged into a small form factor. Our lidar sensor also utilizes edge computing and machine intelligence as partsubject to the conditions of the solution. Though automotive lidar isAsset Purchase Agreement, dated December 1, 2022, and amended as of January 31, 2023, by and between our priority now, we have developed solutionswholly owned subsidiary, MicroVision GmbH organized under the laws of The Federal Republic of Germany, and Ibeo for Augmented Reality, Interactive Displays, and Consumer Lidara purchase price of EUR 15.0 million, or approximately $16.3 million, subject to potential reduction on the terms set forth in the recent past.Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the purchase price also included advanced funds to Ibeo so that it could continue its operations while in insolvency during the period between signing and closing. Specifically, we advanced to Ibeo EUR 3.9 million, or approximately $4.1 million in December 2022; EUR 2.7 million, or approximately $3.0 million in January 2023; and EUR 599,000, or approximately $650,000 in February 2023 shortly after the closing. These fund advances included amounts related to headcount reductions carried out by Ibeo management, decreasing the number of employees to transfer in connection with the acquisition to approximately 250 employees. These headcount reduction costs of EUR 2.3 million, or approximately $2.5 million, were reimbursed to MicroVision by way of deduction from the purchase price in accordance with the Asset Purchase Agreement.

Prior to our shift in focus to automotive lidar, our strategy had been to sell Augmented Reality (AR) displays or components, Interactive Displays, or Consumer Lidar to original equipment manufacturers (OEMs) and original design manufacturers (ODMs) for incorporation into their products. For the two fiscal years ended December 31, 2021 and the nine months ended September 30, 2022, our sole customer has been Microsoft Corporation. Our arrangement with this customer generates royalty income; however, the volume of sales and resulting royalties from that arrangement are not significant. In the recent past, we shifted our strategic focus to increase the value of the Company by completing development of our 1st Generation long range lidar module to a level that would be ready to scale in the market for automotive applications. We believe the size of the ADAS market is significantly bigger than the AR market and related applications. We believe our technology and designs for automotive lidar can be successful in the market, and our solutions will have features and performance that exceed those of competitors and will provide a sustainable strategic advantage in the market.

We have incurred significant losses since inception. 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.

At September 30, 2022,2023, we had total liquidity of $83.378.0 million including $22.049.4 million in cash and cash equivalents and $61.328.7 million in short-term investment securities. 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. As of September 30, 2023, we have approximately $1230.6 months.million available under the ATM agreement.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of MicroVision, Inc. and MicroVision GmbH. MicroVision GmbH is a wholly owned subsidiary of MicroVision, Inc. All material intercompany accounts and transactions have been eliminated in consolidation.

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Foreign Currency Translation

The functional currency for our German operation is the Euro, which represents the currency of its primary economic environment. The results of operations for the German operation are translated from the local currency into U.S. dollars using the average exchange rates during each period. All assets and liabilities are translated using exchange rates at the end of each period, with foreign currency translation adjustments included as a component of other comprehensive loss. All equity transactions and certain assets are translated using historical rates. The consolidated financial statements are presented in U.S. dollars.

Segment Information

We determine operating segments based on how our chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. Our CODM is our Executive Management team, who reviews our operating results on a consolidated basis. We operate as one segment, which relates to sale and servicing of lidar hardware and software. The profitability of our product group is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.

2. NET LOSS PER SHARE

Net loss per share

Basic net loss per share is calculated using the weighted-average number of common shares outstanding during the period. Net loss per share, assuming dilution, 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. Net loss per share, assuming dilution, is equal to basic net loss per share because the effect of dilutive securities outstanding during the period, including options and warrants computed using the treasury stock method, is anti-dilutive.

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

Components of Basic and Diluted Net Loss Per ShareSCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE

             2023  2022  2023  2022 
 Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended 
 September 30, September 30, September 30,  September 30, 
 2022 2021 2022 2021 2023  2022  2023  2022 
Numerator:                 
Net loss available for common shareholders - basic and diluted $(12,851) $(9,382) $(39,616) $(30,575) $(23,469) $(12,851) $(63,105) $(39,616)
  
Denominator:                 
Weighted-average common shares outstanding - basic and diluted  165,687 163,985 165,167 159,452  188,306   165,687   180,156   165,167 
                  
Net loss per share - basic and diluted $(0.08) $(0.06) $(0.24) $(0.19) $(0.12) $(0.08) $(0.35) $(0.24)

For the three and nine months ended September 30, 20222023 and 2021,2022, 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 954,000752,000 and 1,712,000954,000 shares of common stock, respectively, and 9,591,00010,323,000 and 2,553,0009,591,000 nonvested restricted and performance stock units, respectively.

3. BUSINESS COMBINATION

On January 31, 2023, we 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, intellectual property, and teams, which will enable us to expand our total addressable market and diversify our revenue profile.

Total consideration related to this transaction, subject to settlement of working capital adjustments, was approximately EUR 19.9 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 held in escrow for 13 months to be available to cover properly established claims by MicroVision, (iv) EUR 0.6 million or $0.7 million in costs paid on behalf of the seller, and (v) EUR 2.7 million or $2.9 million in cash held back at closing and to be offset by any working capital adjustments, which the parties continue to work through. The remaining balance of EUR 2.7 million will be paid once the seller has accepted and approved all the associated holdback calculations, which we expect to incur during the fourth quarter of 2023. In addition, we 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.

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3. The transaction has been accounted for as a business combination. The results of operations for the acquisition are included in our consolidated financial statements from the date of acquisition onwards.

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

SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES ASSUMED

     Weighted Average 
 Amount  Useful Life (in years) 
Purchase consideration:        
Cash paid at closing(1) $8,245     
Cash in escrow(2)  3,263     
Holdback amount(3)  2,928     
Advances to Ibeo(4)  7,120     
Total purchase consideration $21,556     
         
Inventory $1,197     
Other current assets  703     
Operating lease right-of-use asset  234     
Property and equipment, net  5,330     
Intangible assets:        
Acquired technology  17,987   13 
Order backlog  26   1 
Contract liabilities  (1,178)    
Operating lease liabilities  (234)    
Deferred tax liabilities  (803)    
Total identifiable net assets $23,262     
Bargain purchase gain(5)  (1,706)    

(1)Represents $7.6 million in cash paid at closing and $0.7 million in cash paid shortly after close.
(2)Recorded as restricted cash and accrued liability to Ibeo in our condensed consolidated balance sheet. Pursuant to the terms of the Asset Purchase Agreement, $3.3 million will be withheld from the Purchase Price and held in escrow for a maximum period of 13 months post-Closing as partial security for potential claims arising out of or in connection with the Asset Purchase Agreement.
(3)Recorded in accrued liability to Ibeo in our condensed consolidated balance sheet. Payment of this amount is pending review of holdback from the sellers.
(4)Represents $4.1 million and $3.0 million in cash advanced to Ibeo in December 2022 and January 2023, respectively.
(5)The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration and is included in bargain purchase gain in the Condensed Consolidated Statement of Operations. The bargain purchase gain was attributable to the negotiation process with Ibeo during its insolvency proceedings resulting in cash consideration paid being less than the fair value of the net assets.

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.

The initial allocation of the purchase price was based on preliminary valuations and assumptions and is subject to change within the measurement period. We expect to finalize the allocation of the purchase price as soon as practicable and no later than one year from the acquisition date.

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Supplemental Unaudited Pro Forma Information

The below unaudited pro forma financial information summarizes the combined results of operations for the Company and Ibeo as if the acquisition had been completed on January 1, 2022. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2022 or the results of our future operations of the combined businesses. Nonrecurring pro forma adjustments include:

●Recognition of the bargain purchase gain as if incurred in the first quarter of 2022;
●Acquisition-related costs of $1.1 million are assumed to have been incurred on January 1, 2022.

The following table summarizes the unaudited pro forma results (in thousands):

SCHEDULE OF BUSINESS ACQUISITION, PRO FORMA INFORMATION

  2023  2022  2023  2022 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2023  2022  2023  2022 
Total revenue $1,047   63   2,707   5,580 
Net loss  (23,469)  (34,874)  (60,506)  (91,963)

4. REVENUE RECOGNITION

The following is a description of principal activities from which we generate revenue. 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 generate all of our revenue from contracts with customers.

We evaluate 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 we 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 our 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.

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Disaggregation of revenue

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

Disaggregation of Revenue

SCHEDULE OF DISAGGREGATION OF REVENUE

             
  Three Months Ended September 30, 2023 
     License and       
  Product  royalty  Contract    
  revenue  revenue  revenue  Total 
Timing of revenue recognition:                
Products transferred at a point in time $1,047  $       -  $       -  $1,047 
Product and services transferred over time  -   -   -   - 
Total $1,047  $-  $-  $1,047 

             
  Nine Months Ended September 30, 2023 
     License and       
  Product  royalty  Contract    
  revenue  revenue  revenue  Total 
Timing of revenue recognition:                
Products transferred at a point in time $1,898  $      -  $-  $1,898 
Product and services transferred over time  -   -   260   260 
Total $1,898  $-  $260  $2,158 

             
   Three Months endedEnded September 30, 2022
      License and      
   Product  royalty  Contract   
   revenue  revenue  revenue  Total
Timing of revenue recognition:            
Products transferred at a point in time $- $- $- $-
Product and services transferred over time  -   -   -   -
Total $- $- $- $-

             
  Nine Months Ended September 30, 2022 
     License and       
  Product  royalty  Contract    
  revenue  revenue  revenue  Total 
Timing of revenue recognition:                
Products transferred at a point in time $       -  $664  $         -  $664 
Product and services transferred over time  -   -   -   - 
Total $-  $664  $-  $664 

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   Three Months ended September 30, 2021
      License and      
   Product  royalty  Contract   
   revenue  revenue  revenue  Total
Timing of revenue recognition:            
Products transferred at a point in time $    - $       718 $    - $    718
Product and services transferred over time     -     -    -  -
Total $    - $       718 $  - $    718

             
   Nine Months Ended September 30, 2021
      License and      
   Product  royalty  Contract   
   revenue  revenue  revenue  Total
Timing of revenue recognition:            
Products transferred at a point in time $ - $ 1,943 $ - $ 1,943
Product and services transferred over time     -     -    -  -
Total $    - $       1,943 $  - $    1,943

Contract balances

Under Topic 606, our rights to consideration are presented separately depending on whether those rights are conditional or unconditional. We present our unconditional rights to consideration as “accounts receivable” in our Balance Sheet.

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

Significant Changes in Contract Assets and Contract Liabilities

   September 30,  December 31,     
   2022  2021  $ Change % Change
            
Contract assets $     - $      - $        -        -  
Contract liabilities       (4,601)       (5,265)  664  (12.6)
Net contract assets (liabilities) $     (4,601) $     (5,265) $664  (12.6)

SCHEDULE OF CONTRACT WITH CUSTOMER, CONTRACT ASSET, CONTRACT LIABILITY, AND RECEIVABLE

  September 30,  December 31,       
  2023  2022  $ Change  % Change 
             
Contract assets $-  $-  $-   - 
Contract liabilities  4,958   4,601   357   7.8 
Net contract assets (liabilities) $4,958  $4,601  $357   7.8 

In April 2017, we signed a contract with Microsoft Corporation to develop an LBS display system. Under the agreement, we received an upfront payment of $10.0 million. As of December 31, 2021,2022, we had applied $4.75.4 million against the contract liability. During the three and nine months ended September 30, 2022,2023, we applied an additional $0 and $664,000, respectively, against the contract liability with this customer.

ContractIn connection with our January 2023 acquisition costs

We are required to capitalize certainof assets from Ibeo, we assumed contract acquisition costs consisting primarily of commissions paid when contracts are signed. We currently do not pay any commissions uponliabilities totaling approximately $1.2 million. During the signing of a contract; therefore, no commission cost has been incurred as ofthree and nine months ended September 30, 2022.  2023, we recognized revenue totaling $787,000 and $926,000 respectively, against the contract liability.

Transaction price allocated to the remaining performance obligations

The $10.0 million upfront payment received from our customer as noted above was being recognized as revenue as component sales were transferred to the customer. Under the new arrangement reached in March 2020, the royalties we expect to earn will be applied against the remaining prepayment. Because we do not have information on projected future shipments by our customer, we are not able to estimate the timing of revenue recognition related to the remaining performance obligations.obligations; however, the underlying agreement is scheduled to expire on December 31, 2023. The $4.6 million contract liability at September 30, 20222023 is classified as a current liability on our balance sheet. It is likely thatunclear at this time whether recognition of revenue may extend beyond the next twelve months.

The remaining balance of the contract liabilities assumed in our acquisition of assets from Ibeo was approximately $252,000 as of September 30, 2023.

The following table provides information about the estimated timing of revenue recognition (in thousands):

SCHEDULE OF ESTIMATED TIMING OF REVENUE RECOGNITION

Remainder of 20232024
Revenue$   347$-

 

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

Our investment securities, available-for-sale are 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. We use market data, assumptions and risks we believe 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.

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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.

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The valuation inputs hierarchy classification for assets measured at fair value on a recurring basis are summarized below as of September 30, 20222023 and December 31, 20212022 (in thousands). These tables do not include cash held in our money market savings accounts.

Schedule of Fair Value Hierarchy Assets and LiabilitiesSCHEDULE OF FAIR VALUE HIERARCHY ASSETS AND LIABILITIES

 Level 1  Level 2  Level 3  Total 
As of September 30, 2023                
Assets                
Corporate debt securities $   -  $9,215  $   -  $9,215 
U.S. Treasury securities  -   19,462   -   19,462 
  $-  $28,677  $-  $28,677 

 Level 1  Level 2  Level 3  Total 
As of December 31, 2022                
Assets                
Corporate debt securities $   -  $15,500  $    -  $15,500 
U.S. Treasury securities  -   46,673   -   46,673 
  $-  $62,173  $-  $62,173 

As of September 30, 2022  Level 1  Level 2  Level 3  Total
Assets            
    Corporate debt securities $       - $      23,651 $       - $  23,651
    U.S. Treasury securities  -    37,630  -  37,630
  $       - $      61,281 $       - $  61,281

As of December 31, 2021  Level 1  Level 2  Level 3  Total
Assets            
    Corporate debt securities $       - $      32,720 $       - $  32,720
  $       - $      32,720 $       - $  32,720

Our short-term investments are summarized below as of September 30, 20222023 and December 31, 20212022 (in thousands).

SCHEDULE OF UNREALIZED GAIN OR LOSS ON SHORT-TERM INVESTMENTS

           Investment 
  Cost/  Gross  Gross  Securities, 
  Amortized  Unrealized  Unrealized  Available- 
  Cost  Gains  Losses  For-Sale 
As of September 30, 2023                
Assets                
Corporate debt securities $9,220  $         1  $       (6) $9,215 
U.S. Treasury securities  19,468   -   (6)  19,462 
  $28,688  $1  $(12) $28,677 

           Investment 
  Cost/  Gross  Gross  Securities, 
  Amortized  Unrealized  Unrealized  Available- 
  Cost  Gains  Losses  For-Sale 
As of December 31, 2022                
Assets                
Corporate debt securities $15,538  $           -  $    (38) $15,500 
U.S. Treasury securities  46,762   2   (91)  46,673 
  $62,300  $2  $(129) $62,173 

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Schedule of Unrealized Gain or Loss on Short-term Investments

            Investment
   Cost/  Gross  Gross  Securities,
   Amortized  Unrealized  Unrealized  Available-
   Cost  Gains  Losses  For-Sale
As of September 30, 2022            
Assets            
    Corporate debt securities $23,722 $      2 $   (73) $  23,651
    U.S. Treasury securities  37,753  2  (125)  37,630
  $61,475 $      4 $   (198) $  61,281

            Investment
   Cost/  Gross  Gross  Securities,
   Amortized  Unrealized  Unrealized  Available-
   Cost  Gains  Losses  For-Sale
As of December 31, 2021            
Assets            
    Corporate debt securities $32,739 $      3 $   (22) $  32,720
  $32,739 $      3 $   (22) $  32,720

The maturities of the investment securities available-for-sale as of September 30, 20222023 and December 31, 20212022 are shown below (in thousands):

+Maturity Date of Available-for-sale SecuritiesSCHEDULE OF MATURITY DATE OF AVAILABLE-FOR-SALE SECURITIES

     Gross  Gross    
  Amortized  Unrealized  Unrealized  Estimated 
  Cost  Gains  Losses  Fair Value 
As of September 30, 2023                
Maturity date                
Less than one year $28,688  $         1  $    (12) $28,677 
  $28,688          $28,677 

     Gross  Gross    
  Amortized  Unrealized  Unrealized  Estimated 
  Cost  Gains  Losses  Fair Value 
As of December 31, 2022                
Maturity date                
Less than one year $62,300  $        2  $   (129) $62,173 
  $62,300          $62,173 

      Gross  Gross   
As of September 30, 2022  Amortized  Unrealized  Unrealized  Estimated
Maturity date  Cost  Gains  Losses  Fair Value
             
    Less than one year $      61,475 $      4 $   (198) $  61,281
  $      61,475       $  61,281
      Gross  Gross   
As of December 31, 2021  Amortized  Unrealized  Unrealized  Estimated
Maturity date  Cost  Gains  Losses  Fair Value
             
    Less than one year $      32,739 $      3 $   (22) $  32,720
  $      32,739       $  32,720

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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, 20222023 and December 31, 20212022 (in thousands):

Schedule of Unrealized Loss on Investment SecuritiesSCHEDULE OF UNREALIZED LOSS ON INVESTMENTS SECURITIES

  Less than Twelve Months  Twelve Months or Greater  Total 
     Gross     Gross     Gross 
  Fair  Unrealized  Fair  Unrealized  Fair  Unrealized 
  Value  Losses  Value  Losses  Value  Losses 
As of September 30, 2023                        
Corporate debt securities $2,988  $    (6) $    -  $        -  $2,988  $      (6)
U.S. Treasury securities  12,570   (6)  -   -   12,570   (6)
  $15,558  $(12) $-  $-  $15,558  $(12)

  Less than Twelve Months  Twelve Months or Greater  Total 
     Gross     Gross     Gross 
  Fair  Unrealized  Fair  Unrealized  Fair  Unrealized 
  Value  Losses  Value  Losses  Value  Losses 
As of December 31, 2022                        
Corporate debt securities $12,295  $    (38) $     -  $          -  $12,295  $     (38)
U.S. Treasury securities  34,530   (91)  -   -   34,530   (91)
  $46,825  $(129) $-  $-  $46,825  $(129)

   Less than Twelve Months  Twelve Months or Greater  Total
As of September 30, 2022     Gross     Gross     Gross
   Fair  Unrealized  Fair  Unrealized  Fair  Unrealized
   Value  Losses  Value  Losses  Value  Losses
                   
    Corporate debt securities $ 16,249 $ (73) $ - $ - $ 16,249 $ (73)
    U.S. Treasury securities  31,684  (125)  -  -  31,684  (125)
  $      47,933 $ (198) $ - $ - $  47,933 $ (198)

   Less than Twelve Months  Twelve Months or Greater  Total
As of December 31, 2021     Gross     Gross     Gross
   Fair  Unrealized  Fair  Unrealized  Fair  Unrealized
   Value  Losses  Value  Losses  Value  Losses
                   
    Corporate debt securities $      27,195 $   (22) $       - $  - $  27,195 $       (22)
  $      27,195 $   (22) $       - $  - $  27,195 $       (22)

5. 6. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND SUPPLIERS

Concentration of credit risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash equivalents and investment securities. As of September 30, 2022,2023, our cash and cash equivalents are comprised of operating checking accounts and short-term highly rated money market savings accounts. Our short-term investments are comprised of highly rated corporate bonds and U.S. Treasury securities.

Concentration of major customers and suppliers

For the three months ended September 30, 2023, one commercial customer accounted for $742,000 in revenue, representing 71% of our total revenue and a second commercial customer accounted for $78,000 in revenue, representing 8% of our total revenue. For the nine months ended September 30, 2023, one commercial customer accounted for $825,000 in revenue, representing 38% of our total revenue, a second commercial customer accounted for $364,000 in revenue, representing 17% of our total revenue, a third commercial customer accounted for $246,000 in revenue, representing 11% of our total revenue, and a fourth customer accounted for $206,000 in revenue, representing 10% of our total revenue. For the three and nine months ended September 30, 2022, one customer Microsoft Corporation, accounted for $0and $664,000in revenue, respectively, representing 100100%% of our total revenue for each period. For the three and nine months ended September 30, 2021, the same customer accounted $718,000 and $1.9 million in revenue, respectively, representing 100% of our total revenue for each period.

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Typically, a significant concentration of our components and the products we have 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 us 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 our financial condition and operating results.

6. INVENTORY7. FINANCIAL STATEMENT COMPONENTS

The following financial statement components changed significantly as a result of our January 2023 acquisition of assets from Ibeo.

Inventory

Inventory consists of the following:

Components of Inventory

       
   September 30,  December 31,
(in thousands)  2022  2021
Raw materials $1,572 $   1,780

Work in process 

  190  -

 

 $1,762 $   1,780

COMPONENTS OF INVENTORY

  September 30,  December 31, 
(in thousands) 2023  2022 
Raw materials $1,562  $1,556 
Work in process  305   305 
Finished goods  1,749   - 
Total inventory $3,616  $1,861 

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Inventory

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:

COMPONENTS OF PROPERTY, PLANT AND EQUIPMENT

  September 30,  December 31, 
(in thousands) 2023  2022 
Production equipment $6,140  $6,140 
Leasehold improvements  3,843   3,789 
Computer hardware and software/lab equipment  12,110   10,515 
Office furniture and equipment  5,196   1,804 
Property and equipment, gross   27,289   22,248 
Less: Accumulated depreciation  (17,828)  (15,418)
Property and equipment, net  $9,461  $6,830 

Depreciation expense was $1.1 million and $153,000 for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense was $2.8 million and $533,000 for the nine months ended September 30, 2023 and 2022, respectively.

16

 

7.

Intangible assets

The components of intangible assets were as follows:

SUMMARY OF COMPONENTS OF INTANGIBLE ASSETS

As of September 30, 2023 Gross     Net  Weighted 
  Carrying  Accumulated  Carrying  Average Remaining 
(in thousands) Amount  Amortization  Amount  Period (Years) 
Acquired technology $20,172  $2,415  $17,757      12 
Backlog  26   17   9   - 
  $20,198  $2,432  $17,766     

As of December 31, 2022 Gross     Net  Weighted 
  Carrying  Accumulated  Carrying  Average Remaining 
(in thousands) Amount  Amortization  Amount  Period (Years) 
Acquired technology $   951  $       876  $     75          4 
  $951  $876  $75     

Amortization expense was $573,000 and $10,000 for the three months ended September 30, 2023 and 2022, respectively. Amortization expense was $1.6 million and $30,000 for the nine months ended September 30, 2023 and 2022, respectively.

The following table outlines our estimated future amortization expense related to intangible assets held at September 30, 2023 by line item on the statement of operations (in thousands):

ESTIMATED FUTURE AMORTIZATION EXPENSE RELATED TO INTANGIBLE ASSETS

     Research and    
  Cost of  Development    
Years Ended December 31, Revenue  Expense  Total 
2023 $387  $        179  $566 
2024  1,548   556   2,104 
2025  1,548   52   1,600 
2026  1,548   24   1,572 
Thereafter  11,924   -   11,924 
Total $16,955  $811  $17,766 

8. SHARE-BASED COMPENSATION

Share-Based Compensation

We issue share-based compensation to employees in the form of stock options, restricted stock units (RSUs), and performance stock units (PSUs). We account for the share-based awards 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 stock options is estimated on the grant date using the Black-Scholes option pricing model. The fair value of RSUs and non-executive PSUs is based ondetermined by the closing price of our common stock on the grant date. Executive PSUsdate or the period end date for the awards that are valued using a Monte Carlo simulation model usingbeing measured by the following inputs: stock price, volatility, and risk-free interest rates.service inception date. Changes in estimated inputs or using other option valuation methods may result in materially different option values and share-based compensation expense.

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

Share-based Compensation Expense by Line ItemSCHEDULE OF SHARE-BASED COMPENSATION EXPENSE

            
(in thousands) 2023  2022  2023  2022 
Share-based compensation expense  Three Months Ended  Nine Months Ended Three Months Ended Nine Months Ended 
  September 30,  September 30, September 30,  September 30, 
(in thousands) 2022 2021  2022 2021 2023  2022  2023  2022 
Research and development expense $       1,831 $       1,371 $       5,681 $       4,758 $2,194  $1,831  $4,438  $5,681 
Sales, marketing, general and administrative expense        2,250        1,439         6,254        7,587  2,497   2,250   7,068   6,254 
 $       4,081 $       2,810 $       11,935 $       12,345
Total Share-based compensation expense $4,691  $4,081  $11,506  $11,935 

 

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, 2022:2023:

Option PositionsSCHEDULE OF VALUATION ASSUMPTIONS FOR WEIGHTED-AVERAGE GRANT

       Weighted-   
     Weighted- Average   
     Average Remaining  Aggregate
Options    Exercise Contractual  Intrinsic
  Shares  Price Term (years)  Value
Outstanding as of September 30, 2022   945,000 $  1.26 5.9 $  2,302,000
           
Exercisable as of September 30, 2022   941,000 $  1.26 5.9 $  2,288,000
        Weighted-    
     Weighted-  Average    
     Average  Remaining  Aggregate 
    Exercise  Contractual  Intrinsic 
Options Shares  Price  Term (years)  Value 
Outstanding as of September 30, 2023  752,000  $1.35   4.9  $746,000 
                 
Exercisable as of September 30, 2023  752,000  $1.35   4.9  $746,000 

As of September 30, 2022, our2023, there is no unrecognized share-based employee compensation related to stock options was $1,000options. which we plan to expense over the next 1.4 years.

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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, 2022:2023:

Restricted Stock Unit ActivitySCHEDULE OF ACTIVITY AND POSITIONS WITH RESPECT TO RSUS AND PSUS

   Weighted-average   Weighted-average 
 Shares price Shares  price 
Unvested as of December 31, 2021    2,625,000  $   13.05
Unvested as of December 31, 2022  8,866,000  $        3.85 
Granted        9,083,000     2.45  3,254,000  $4.02 
Vested      (1,019,000)    10.59  (1,374,000) $7.86 
Forfeited        (1,098,000)    7.34  (423,000) $8.09 
Unvested as of September 30, 2022   9,591,000  $   3.93
Unvested as of September 30, 2023  10,323,000  $3.19 

 

During the nine months ended September 30, 2023, we issued 2.6 million PSUs to non-executive employees subject to the achievement of development goals. These shares are liabilities subject to mark-to-market accounting as the number of shares was not fixed when issued. One-third of these shares will vest in connection with 2023 achievement of the milestones and the remaining two-thirds will vest over two years from June 30, 2023.

During the nine months ended September 30, 2023, we issued 106,000 shares for the partial achievement of internal performance milestones during the fourth quarter of 2022. These shares were valued based on the closing price of our common stock on the dates of grant and vest quarterly over two years. We had canceled 426,000 PSUs in the fourth quarter of 2022 related to the same internal performance milestones.

During the nine months ended September 30, 2023, we issued 408,000 time-based RSUs to non-executive employees for promotion, retention, and new hire grants. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest over three or four years from the date of grant.

During the nine months ended September 30, 2023, we issued 275,000  time-based RSUs to independent directors for annual equity compensation. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest quarterly, with the final installment vesting the earlier of the one year anniversary of the grant date or the day before the next annual meeting.

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As of September 30, 2023, our unrecognized share-based compensation related to RSUs was $6.6 million, which we plan to expense over the next 1.5 years. Our unrecognized share-based compensation related to the executive PSUs was $5.9 million, which we plan to expense over the next 2.0 years and our unrecognized share-based compensation related to the non-executive PSUs was $4.6 million, which we plan to expense over the next 1.1 years.

In June 2022, we issued 6.0 million PSUs to our executive officers. The PSUs are subject to the achievement of performance goals and time-based vesting. The PSUs will become eligible to vest if the closing price of our common stock reaches or exceeds specified price thresholds for at least 20 consecutive trading days during the performance period through December 31, 2025. If the performance goals are met, the portion of the PSUs deemed earned will become subject to time-based vesting in equal quarterly installments over two years starting from the date on which the goal is achieved. These PSUs were valued using a Monte Carlo simulation model using the following inputs: stock price, volatility, and risk-free interest rates.

During the nine months ended September 30, 2022, we issued 2.4 million PSUs to non-executive employees subject to the achievement of development goals. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest quarterly over two years from the achievement of established performance criteria.

During the nine months ended September 30, 2022, we issued 511,000 time-based RSUs to non-executive employees for promotion, retention, and new hire grants. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest over three or four years from the date of grant.

As of September 30, 2022, our unrecognized share-based compensation related to RSUs was $15.9 million which we plan to expense over the next 1.8 years. Our unrecognized share-based compensation related to the executive PSUs was $8.5 million, which we plan to expense over the next 2.9 years and our unrecognized share-based compensation related to the non-executive PSUs was $4.0 million, which we plan to expense over the next 1.2 years.

8. 9. LEASES

Lessee Lease Policy

We lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of less than one year to ten years. Our office lease agreement includes both lease and non-lease components, which are accounted for separately. Our 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 we are reasonably certain to exercise the purchase option.

In September 2021, we entered into an office lease with Redmond East Office Park LLC, a Washington limited liability company, pursuant to which we will lease approximately 16,681 square feet of space located in Redmond, Washington that we will use primarily for general office space, lab space and product testing.space. The lease provides for an initial term of 128 months that commenced November 1, 2021. Pursuant to the lease, annual base rent will bewas approximately $500,000$500,000 for the first year and is subject to annual increases of 3.0%3.0%. In addition to base rent, we pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this lease is $6.4$6.4 million.

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In September 2021, we entered into a second office lease with Redmond East Office Park LLC, pursuant to which we will lease approximately 36,062 square feet of space located in Redmond, Washington that we will use primarily for general officeproduct testing and lab space. The lease provides for an initial term of 120 months and is expected to commencethat commenced on December 1, 2022. Pursuant to the lease, annual base rent will be approximately $1.1$1.1 million for the first year and is subject to annual increases of 3.0%3.0%. In addition to base rent, we will pay additional rent comprised of our proportionate share of any operating expenses, real estate taxes, and management fees. fees. We have the option to extend the term for one ten-year renewal period, provided that the rent would be subject to market adjustment at the beginning of the renewal term. The total minimum lease payments related to this forward-starting lease are $13.0$13.0 million. The delivery date of the new space was September 1, 2022 to allow for the build out of tenant improvements before the commencement date. During the quarter ended SeptemberJune 30, 2022,2023, we recordedreceived a right-of-use asset in the amountpayment of $9.33.0 million onas an incentive to terminate our balance sheet.

In connection with the effectivenessprevious building lease. The gain is recorded as other income in our statement of the second lease with Redmond East Office Park, we amended our current office lease and will have access until January 31, 2023 to coincide with our move into the new 36,062 square feet of space.operations.

 

In April 2022, we entered into an office lease with Universal-Investment-Gesellschaft mbH, a German investment company, pursuant to which we lease approximately 3,533 square feet of space located in Nuremberg, Germany that we use primarily for product testing for engineering and development activities. The lease provides for a term of 60 months that commenced May 1, 2022. Pursuant to the lease, annual base rent is approximately $76,000 per year. The total minimum lease payments related to this lease is approximately $380,000.

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In September 2022, we entered into a second office lease with Universal-Investment-Gesellschaft mbH, a German investment company, pursuant to which we lease approximately 3,810 square feet of space located in Nuremberg, Germany that we use primarily for general office space for business development activities. The lease provides for a term of 60 months that commenced May 1,November 15, 2022. Pursuant to the lease, annual base rent is approximately $76,000$92,000 per year. The total minimum lease payments related to this lease is approximately $380,000461,000.

In connection with our January 2023 acquisition of assets from Ibeo, we assumed three leases in Hamburg, Germany. One lease is with IntReal International Real Estate Kapitalverwaltungsgesellschaft and covers approximately 5,511 square feet of space for IT network equipment through December 31, 2026. Pursuant to the lease, annual base rent is approximately $65,000 per year. The total remaining minimum lease payments related to this lease are approximately $259,000. During the quarter ended March 31, 2023, we recorded a right-of-use asset in the amount of $234,000 on our balance sheet. A second lease is with Neuer Holtigbaum and covers approximately 32,529 square feet of office space and long-range laser testing space through August 2023. During the quarter ended September 30 2023, we amended this lease and extended until August 2024. The total remaining minimum lease payments related to this lease are approximately $190,000. The third lease is with BG BAU Berufsgenossenschaft der Bauwirtschaft and covers approximately 13,127 square feet of garage space to house our test and demonstration vehicles through July 31, 2024. The total remaining minimum lease payments related to this lease are approximately $146,000.

The components of lease expense were as follows:

Components of Lease ExpenseSCHEDULE OF COMPONENTS OF LEASE EXPENSE

(in thousands) 2023  2022  2023  2022 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
(in thousands) 2023  2022  2023  2022 
Operating lease expense $667  $365  $1,949  $865 
Finance lease expense:                
Amortization of leased assets  6   6   19   19 
Interest on lease liabilities  -   1   1   2 
Total finance lease expense  6   7   20   21 
Total lease expense $673  $372  $1,969  $886 

             
   Three Months Ended  Nine Months Ended
   September 30,  September 30,
(in thousands)  2022  2021  2022  2021
Operating lease expense $    365 $    116 $    865 $    348
             
Finance lease expense:            
  Amortization of leased assets        6        7        19        24
  Interest on lease liabilities          1          -          2          2
Total finance lease expense        7        7        21        26
Total lease expense $    372 $    123 $    886 $    374

Supplemental cash flow information related to leases was as follows:

Cash Flow Information Related to LeasesSCHEDULE OF CASH FLOW INFORMATION RELATED TO LEASES

(in thousands) 2023  2022 
  Nine Months Ended 
  September 30, 
(in thousands) 2023  2022 
Cash paid for amounts included in measurement of lease liabilities:      
Operating cash flows from operating leases $1,813   938 
Operating cash flows from finance leases  1   2 
Financing cash flows from finance leases  19   20 

       
   Nine Months Ended
   September 30,
(in thousands)  2022  2021
Cash paid for amounts included in measurement of lease liabilities:      
Operating cash flows from operating leases $      938 $   506
Operating cash flows from finance leases   2         2
Financing cash flows from finance leases   20       25

 1520

 

Supplemental balance sheet information related to leases was as follows:

Supplemental Balance Sheet Information Related to LeasesSCHEDULE OF CASH FLOW INFORMATION RELATED TO LEASES

  September 30,  December 31, 
(in thousands) 2023  2022 
Operating leases        
Operating lease right-of-use assets $14,223  $14,579 
         
Current portion of operating lease liability  2,432   1,846 
Operating lease liability, net of current portion  13,027   13,829 
Total operating lease liabilities $15,459  $15,675 
         
Finance leases        
Property and equipment, at cost $112  $112 
Accumulated depreciation  (93)  (80)
Property and equipment, net $19  $32 
         
Current portion of finance lease obligations $2  $21 
Finance lease obligations, net of current portion  -   - 
Total finance lease liabilities $2  $21 
         
Weighted Average Remaining Lease Term        
Operating leases  8.7 years   9.6 years 
Finance leases  0.1 years   0.8 years 
         
Weighted Average Discount Rate        
Operating leases  4.6%  4.6%
Finance leases  5.6%  6.3%

   September 30,  December 31,
(in thousands)  2022  2021
Operating leases      
Operating lease right-of-use assets $      14,486 $   5,577
       
Current portion of operating lease liability        769     849
Operating lease liability, net of current portion        13,803     4,983
Total operating lease liabilities $   14,572 $5,832
       
Finance leases      
Property and equipment, at cost $      112 $   112
Accumulated depreciation        (75)     (56)
Property and equipment, net $        37 $     56
       
Current portion of finance lease obligations $        25 $     21
Finance lease obligations, net of current portion          2       26
Total finance lease liabilities $        27 $     47
       
Weighted Average Remaining Lease Term      
  Operating leases   9.9 years    9.5 years 
  Finance leases   0.7 years    1.2 years 
       
Weighted Average Discount Rate      
  Operating leases  4.6%  2.5%
  Finance leases  6.3%  6.3%

As of September 30, 2022,2023, maturities of lease liabilities were as follows:

Maturities of Lease LiabilitiesSCHEDULE OF MATURITIES OF LEASE LIABILITIES

(in thousands) Operating  Finance 
Years Ended December 31, leases  leases 
2023 $642  $2 
2024  2,340       - 
2025  2,003   - 
2026  2,023   - 
Thereafter  11,631   - 
Total minimum lease payments  18,639   2 
Less: amount representing interest  (3,180)  - 
Present value of capital lease liabilities $15,459  $2 

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10. COMMITMENTS AND CONTINGENCIES

Purchase commitments

 

       
(in thousands)  Operating  Finance
Years Ended December 31,  leases  leases
2022 $   303 $     7
2023     1,753       21
2024     1,804       -
2025          1,855          -
Thereafter          12,733          -
Total minimum lease payments  18,448       28
Less: amount representing interest      (3,876)        (1)
Present value of capital lease liabilities $14,572 $     27

During the quarter ended September 30, 2023, we entered into a $12.3 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. We made a payment of $3.1 million during the third quarter and expect to make the remaining future payments by the end of the second quarter of 2024 based on an agreed sensor delivery schedule.

 

9. COMMITMENTS AND CONTINGENCIESLitigation

Litigation

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

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10. 11. COMMON STOCK

In June 2021, we entered into a $140.0$140.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $140.0$140.0 million through Craig-Hallum. As of September 30,December 31, 2022, we had issued 4.08.3 million shares of our common stock for net proceeds of $67.881.8 million under this ATM agreement. There have been no transactionsDuring the quarter ended March 31, 2023, we issued 5.0 million shares of our common stock for net proceeds of $12.5 million under thisthe agreement. The sales agreement sincewas terminated in June 2021.2023.

 

In February 2021,June 2023, we entered into a $50.0$45.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we wereare able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $50.0$45.0 million through Craig-Hallum. We issuedAs of June 30, 2023, we had completed sales under such sales agreement, having sold 2.510.9 million shares of our common stock for net proceeds of $48.843.9 million under this ATM agreement.million. No further shares are available for sales under this agreement.

In December 2020,August 2023, we entered into a $13.0$35.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we wereare able, from time to time, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $13.0$35.0 million through Craig-Hallum. As of December 31, 2020,September 30, 2023, we had issued 1.0completed sales under such sales agreement, having sold 1.8 million shares for net proceeds of $6.1 million that was received in January 2021. The $6.1 million was classified as subscriptions receivable on our December 31, 2020 balance sheet and was not included in the cash balance as$4.2 million. As of December 31, 2020. In January 2021,September 30, 2023, we issued 1.1 million shares of our common stock for net proceeds of $6.6 million under the agreement. In total, we havehad issued 2.1150,000 million shares of our common stock for net proceeds of $12.7323,000 that was received in October 2023. The $323,000 is classified as subscriptions receivable on our September 30, 2023 balance sheet and is not included in the cash balance as of September 30, 2023. As of September 30, 2023, we have approximately $30.6 million available under this ATM agreement. No further shares are available

12. INCOME TAXES

We recognized income tax expense of $211,000 and $0 during the quarters ended September 30, 2023 and 2022, respectively. The income tax expense for sales under this agreement.the nine months ended September 30, 2023 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 Q1 2023. The change in income tax expense during the quarter ended September 30, 2023 was largely the result of profitability in our foreign jurisdictions related to the Ibeo acquisition.

As of September 30, 2023, we continue to have no unrecognized tax positions.

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ITEM 2. MANAGEMENT'SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking statements

The information set forth in this report in Item 2, "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations,"” and Item 3, "Quantitative“Quantitative and Qualitative Disclosures about Market Risk,"” includes "Forward-Looking Statements"“Forward-Looking Statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“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, 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,"“anticipate,” “could,” “believe,” “estimate,” “expect,” “goal,” “may,” “plan,” 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.

Overview

MicroVision, Inc. is a global developer of lidar hardware and software solutions focused primarily on automotive lidar and advanced driver-assistance systems (ADAS) markets where we can deliver safe mobility at the speed of life. We develop a suite of light detection and ranging, or lidar, sensors and perception and validation software for sale to the automotive market for ADAS and autonomous vehicle (AV) applications, as well as to complementary markets for non-automotive applications including industrial, robotics and smart infrastructure. Our long history of developing and commercializing the core components of our lidar hardware and related software, combined with the experience of the team recently acquired from Ibeo Automotive Systems (Ibeo) with automotive-grade qualification, provides a potentially compelling advantage over the less-experienced recent entrants into this market.

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.

Currently,On January 31, 2023, we completed the acquisition of certain assets of Ibeo Automotive Systems GmbH, which was founded in 1998 as a lidar hardware and software provider. Ibeo developed and launched the first lidar sensor to be automotive qualified for serial production with a Tier 1 automotive supplier and that is currently available in passenger cars by premium OEMs. Ibeo developed software solutions, including perception and validation software, which are also used by premium OEMs. In addition, Ibeo sold its products for non-automotive uses such as industrial, smart infrastructure and robotics applications.

For the automotive market, our development efforts are primarily focused on automotiveintegrated solution combines our MEMS-based dynamic-range lidar sensorssensor and perception software, for advanced driver-assistance systems, or ADAS. Ourto be integrated solution will combineon our MEMS-based lidar sensor, custom ASICs, and softwareASIC, targeted for sale to premium automotive OEMs and Tier-1Tier 1 automotive suppliers.

We believe that our MEMS-based lidar sensor, or MAVIN sensor, and perception software demonstrates best-in-class features and performance that can exceed market expectations and outperform competitive products. In 2021 we completed our A-Sample long range lidar module, and we are continuing to advance our lidar sensor and refine its features.

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Our ADAS solution is intended to leverage edge computing and custom ASICs to enable our hardware and sensor fusionperception software to be integrated into an OEM’s ADAS stack. We are continuing

In addition to refine our technologydynamic-range and productslong-range MAVIN sensor and we have begun testingperception software solution for the automotive market, our solutionproduct suite includes our short-range flash-based MOVIA lidar sensor, for automotive and demonstrating its capabilities duringindustrial applications, including smart infrastructure, robotics, and other commercial segments. Also, our validation software tool, the first half of 2022. Although we are forecasting small quantities of sales in 2022, we do not expectMOSAIK 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 achieve significant, sustained revenue from ourvalidate their ADAS solution in the near term.and AV systems.

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 that can supportsupporting AR headsets. We also developed aan interactive display solution targeted at the smart speakers market which we call an Interactive Display module. The display was designed to project onto a countertop, tabletop or a wall from inside a smart speaker. The user could then touch the projected image on any surface on which the display is visible and it will behave like a touchscreen, as on a tablet or smartphone. In addition, we developed a small consumer lidar sensor which we call Consumer Lidar, for use indoors with smart home systems. It was designed to allow for a smart home system to understand what is happening in the home and then enable the smart home to respond in an appropriate way.

Although our development and productization efforts are now solely focused on our ADAS solution,lidar sensors and related software solutions, our revenue in the nine months ended September 30, 2022 and the two fiscal yearsyear ended December 31, 20212022 was derived from one customer, Microsoft Corporation, related to components that we developed for a high-definition display system. Our arrangement with this customer generatedgenerates royalty income; however, the volume of sales and resulting royalties from that arrangement wereare not significant.

We have been unable to secure the customers needed to successfully launch our products. We have incurred substantial losses since inception, and we expect to incur a significant loss during the fiscal year ending December 31, 2022.2023.

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Continuing Impact of COVID-19 on Our Business

Our business operations continue to be impacted by the ongoing COVID-19 pandemic. Government restrictions in the early days of the pandemic caused us to mostly close our offices in early 2020. To support our hardware development efforts, we reopened our offices in July 2021 while maintaining compliance with government mandates and health agency protocols, including masking requirements and encouraging vaccination. Some of our office employees continue to work remotely or on hybrid schedules. We may experience reductions in productivity and disruptions to our business routines while our hybrid work policy remains in place, or if our employees become ill and are unable to work, which could have an adverse effect on the timing of our development and productization activities. We will continue to prioritize the health and safety of our employees as we adapt our workplace policies based on evolving government regulation, health agency advice, and industry best practice.

In addition, several of our suppliers have experienced closures or have been operating at reduced capacity, resulting in lower component availability. Continued disruptions to our supply chain could have a material impact on our development and future operations. Moreover, various global travel restrictions and office closures have hampered our business development efforts, making it more difficult to engage with potential customers and partners, which could have a material negative impact on our business prospects.

Key accounting policies and estimates

Our discussion and analysis of our financial condition and results of operations are based upon our 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. ThereExcept 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, 2021.2022.

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Results of operations

License and royalty revenue

(in thousands)  2022  2021  $ change  % change
Three Months Ended September 30, $       - $       718 $(718)          (100.0)
Nine Months Ended September 30,     664      1,943      (1,279)     (65.8)

License and royalty revenue is revenue under license agreementsRevenue

(in thousands) 2023  2022  $ change  % change 
Three Months Ended September 30, $1,047  $-  $1,047   - 
Nine Months Ended September 30,  2,158   664   1,494   225.0 

Revenues are recognized when control of the promised goods or services are transferred to our PicoP® scanning technology.customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We recognize revenue on upfront license feeseither at a point in time, ifor over time, depending upon the naturecharacteristics of the license granted is a right-to-use license, representing functional intellectual property with significant standalone functionality.individual contract. If the naturecontrol of the license granteddeliverable(s) occur over time, the revenue is a right-to-access license, representing symbolic intellectual property, which excludes significant standalone functionality, we recognize revenue overrecognized in proportion to the periodtransfer of time we have ongoing obligations undercontrol. If control passes to the agreement. We will recognize revenue from sales-based royalties on the basiscustomer only upon completion and transfer of the quarterly reports provided by our customer as toasset, revenue is recognized at the numbercompletion of royalty-bearing products sold or otherwise distributed. In the event that reports are not received, we will estimate the number of royalty-bearing products sold by our customers.contract.

The decreaseincrease in license and royalty revenue for the three and nine months ended September 30, 20222023 compared to the same period in 20212022 was predominately due to a lower numbersoftware sales, but also included sales of royalty-bearing products being communicatedlidar sensors, with sales to usvarious customers as distributed by our customer.well as, activity on contracts obtained in the acquisition of Ibeo assets.

Cost of product revenue

      % of     % of      
      product     product      
(in thousands)  2022  revenue  2021  revenue  $ change  % change
Three Months Ended September 30, $ 45  -   $(10)  -   $   55  550.0
Nine Months Ended September 30, $ 67  -   $(46)    -   $   113  245.7

     % of     % of       
     product     product       
(in thousands) 2023  revenue  2022  revenue  $ change  % change 
Three Months Ended September 30, $625   59.7  $45   -  $580   1,288.9 
Nine Months Ended September 30,  1,870   86.7   67   10.1   1,803   2,691.0 

Cost of product 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, manufacturing overhead, and other costs associated with operating our manufacturing capabilities and capacity. Manufacturing overheadour research and development department. Overhead includes the costs of procuring, inspecting and storing material, facility and other costs, and is allocated to cost of product revenue based on the proportion of indirect labor which supported productionrevenue activities.

Cost of product revenue can fluctuate significantly from period to period, depending on the product mix and volume, the level of manufacturing overhead expense and the volume of direct material purchased. During the quarter ended September 30, 2022, we recorded inventory write-downsThe increase in cost of $43,000. The credits of $10,000 and $46,000revenue for the three and nine months endingended September 30, 2021, respectively, are related2023 compared to the reversalsame period in 2022 was due to increased contract activity and the amortization of accrued warranty liabilities since warranty claims were less than expected.intangible assets obtained in the acquisition of Ibeo assets.

Research and development expense

(in thousands)  2022  2021  $ change  % change
Three Months Ended September 30, $7,535 $5,791 $1,744  30.1
Nine Months Ended September 30,   22,828  17,629  5,199  29.5

(in thousands) 2023  2022  $ change  % change 
Three Months Ended September 30, $15,584  $7,535  $8,049   106.8 
Nine Months Ended September 30,  42,127   22,828   19,299   84.5 

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Research and development expense consists of compensation related costs of employees and contractors engaged in internal research and product development activities, direct material to support development programs, laboratory operations, outsourced development and processing work, and other operating expenses. We assign our research and development resources based on the business opportunity of the available projects, the skill mix of the resources available and the contractual commitments we have made to our customers. We believe that a substantial level of continuing research and development expense will be required to further develop our scanning technology.

The increase in research and development expense during the three months ended September 30, 20222023 compared to the same period in 20212022 was primarily due to higher salary and benefits expenses of $715,000,approximately $5.5 million mostly related to transferred employees in the acquisition of Ibeo assets, increase is purchased services of $1.4 million, a higher depreciation of $525,000 and increase in non-cash share-based compensation expense of $459,000, higher facilities expenses of $242,000 and higher purchased labor of $180,000.$363,000. The increase in research and development expense during the nine months ended September 30, 20222023 compared to the same periodsperiod in 20212022 was primarily due to increasedhigher salary and benefits expenses asof $16.3 million mostly related to transferred employees in the acquisition of Ibeo assets, a resulthigher depreciation of increased headcount$2.1 million and an increase in purchased services of approximately $2.9 million, higher non-cash compensation expense of $924,000, higher facilities expenses of $678,000 and higher purchased labor of $400,000.$926,000.

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Sales, marketing, general and administrative expense

(in thousands) 2022 2021 $ change % change 2023  2022  $ change  % change 
Three Months Ended September 30, $   5,522 $    5,006 $    516     10.3 $8,743  $5,522  $3,221   58.3 
Nine Months Ended September 30,     17,664      15,608      2,056     13.2  27,172   17,664   9,508   53.8 

Sales, marketing, general and administrative expense includes compensation and support costs for marketing, sales, management and administrative staff, and for other general and administrative costs, including legal and accounting services, consultants and other operating expenses.

The increase in sales, marketing, general and administrative expense during the three months ended September 30, 20222023 compared to the same period in 20212022 was primarily dueattributed to higher non-cash compensation expenses of $811,000 and higher salary and benefits expenses of $389,000 offset by lower consultingapproximately of $1.7 million mostly related to transferred employees in the acquisition of Ibeo assets, increased professional fees of approximately $282,000, increased purchased services of $271,000, higher advertising expenses of $408,000$272,000 and lower recruiting expensesincreased non-cash share-based compensation expense of $142,000.approximately $247,000. The increase in sales, marketing, general and administrative expense during the nine months ended September 30, 20222023 compared to the same period in 20212022 was primarily attributed to increased business insurance expense of $1.1 million, increasedhigher salary and benefits expenses as a result of increased headcount of approximately $1.4$4.5 million andmostly related to transferred employees in the acquisition of Ibeo assets, increased professional services and consulting costsfees of $557,000, offset by lowerapproximately $1.7 million, increased depreciation expense of $846,000, increased non-cash share-based compensation expense of $1.3 million.$814,000, increased purchased services of $577,000 and higher advertising expenses of $316,000.

Bargain purchase gain, net of tax

(in thousands) 2023  2022  $ change  % change 
Three Months Ended September 30, $-  $-  $-      - 
Nine Months Ended September 30,  1,706   -   1,706   - 

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.

Other income

(in thousands) 2023  2022  $ change  % change 
Three Months Ended September 30, $637  $251  $386   153.8 
Nine Months Ended September 30,  4,846   279   4,567   1,636.9 

The increase in other income during the three and nine months ended September 30, 2023 compared to the same period in 2022 is due a payment of $3.0 million as an incentive to terminate our previous building lease. The remainder of the increase is primarily due to income from investment securities.

Liquidity and capital resources

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 September 30, 2022,2023, we had total liquidity of $83.3 million including $22.0$49.4 million in cash and cash equivalents and $61.3$28.7 million in short-term investment securities. As of September 30, 2023, we have approximately $30.6 million available under the ATM agreement.

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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.

Operating activities

 

Cash used in operating activities totaled $29.6$50.5 million during the nine months ended September 30, 20222023 compared to cash used in operating activities of $21.2$29.6 million during the same period in 2021.2022. 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 quarter ended September 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 software solution. non-automotive customers. Moreover, we expect to make additional payments to this partner totaling approximately $9.2 million over the first six months of 2024 in line with agreed-upon deliveries.

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Investing activities

During the nine months ended September 30, 2022,2023, net cash provided by investing activities was $21.4 million compared to net cash used in investing activities wasof $31.0 million compared to $2.0 million during the nine months ended September 30, 2021.2022. During the nine months ended September 30, 2022,2023, we purchased short-term investment securities totaling $63.7$27.1 million and sold short-term investment securities totaling $34.7$61.7 million. During the nine months ended September 30, 2023, we made payments totaling $11.2 million related to the acquisition of Ibeo assets. We expect to make the final payment related to the Ibeo acquisition of approximately $2.9 million during the fourth quarter of 2023. Purchases of property and equipment during the nine months ended September 30, 20222023 and 20212022 were $2.0 million.million and $2.0 million, respectively.

Financing activities

Net cash provided by financing activities totaled $315,000$60.8 million during the nine months ended September 30, 2022,2023, compared to $131.6 millionnet cash provided by financing activities of $315,000 during the same period of 2021.2022. During the nine months ended September 30, 2022, we made principal payments under long-term debt totaling $392,000 related to the loan under the Paycheck Protection Program of the 2020 CARES Act (PPP) administered by the Small Business Administration. Proceeds received from stock option exercises totaled $727,000$175,000 during the nine months ended September 30, 20222023 compared to $2.5 million$727,000 during the same period of 2021.2022. Principal payments under finance leases were $19,000 during the nine months ended September 30, 2023 compared to $20,000 during the nine months ended September 30, 2022 compared to $25,000 during the same period of 2021.2022.

In June 2021, we entered into a $140.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $140.0 million through Craig-Hallum. As of September 30,December 31, 2022, we had issued 4.08.3 million shares of our common stock for net proceeds of $67.8$81.8 million under this ATM agreement. There were no transactionsDuring the quarter ended March 31, 2023, we issued 5.0 million shares of our common stock for net proceeds of $12.5 million under thisthe agreement. This sales agreement was terminated in the first three quarters of 2022.June 2023.

In February 2021,June 2023, we entered into a $50.0$45.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we wereare able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $50.0$45.0 million through Craig-Hallum. We have issued 2.5As of June 30, 2023, we had completed sales under such sales agreement, having sold 10.9 million shares of our common stock for net proceeds of $48.8 million under this ATM agreement.$43.9 million. No further shares are available for sales under this agreement.

In December 2020,August 2023, we entered into a $13.0$35.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we wereare able, to, from time to time, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $13.0$35.0 million through Craig-Hallum. As of December 31, 2020,September 30, 2023, we had issued 1.0completed sales under such sales agreement, having sold 1.8 million shares for net proceeds of $6.1 million$4.2 million. As of September 30, 2023, we had issued 150,000 shares of our common stock for net proceeds of $323,000 that was received in January 2021.October 2023. The $6.1 million was$323,000 is classified as subscriptions receivable on our December 31, 2020September 30, 2023 balance sheet and is not included in the cash balance as of December 31, 2020. In January 2021, we issued 1.1 million sharesSeptember 30, 2023. As of our common stock for net proceeds of $6.6 million under the agreement. In total,September 30, 2023, we have issued 2.1approximately $30.6 million shares of our common stock for net proceeds of $12.7 millionavailable under this ATM agreement. No further shares are available for sales under this agreement.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate and market liquidity risk

As of September 30, 2022,2023, all of our cash and cash equivalents have variable interest rates. Therefore,rates; however, we believe our exposure to market and interest rate risk is not material. Due to the generally short-term maturities of our investment securities, we believe that the market risk arising from our holdings of these financial instruments is not significant. We do not believe that inflation has had a material effect on our business, financial condition or results of operations; however, we do anticipate our labor costs to increase as a result of inflationary pressures.

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Our investment policy generally directs that the investment managermanagers should select investments to achieve the following goals: principal preservation, adequate liquidity and return. As of September 30, 2022,2023, our cash and cash equivalents are comprised of short-term highly rated (A rated securities and above) money market savings accounts and our short-term investments are comprised of highly rated corporate and government debt securities.securities (A rated securities and above). The values of cash and cash equivalents and investment securities, available-for-sale as of September 30, 2022,2023, are as follows:

 

(in thousands) Amount Percent  Amount Percent 
Cash and cash equivalents $  21,977       26.4% $49,366   63.3%
Less than one year   61,281       73.6%  28,677   36.7%
 $83,258     100.0% $78,043   100.0%

 

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Foreign exchange rate risk

Our major contract and collaborative research and development agreements, product sales, and licensing activity payments are currently made in U.S. dollars. However,dollars or Euros. Changes in the future werelative value of the U.S. dollar to the Euro and other currencies may enter into contracts or collaborative researchaffect revenue and development agreementsother operating results as expressed in U.S. dollars. In addition, our international subsidiary financial statements are denominated in Euros. As such, the consolidated financial statements will continue to remain subject to the impact of foreign currencies that may subject uscurrency translation as our international operations continue to foreign exchange rate risk. We have entered into purchase orders and supply agreements in foreign currencies in the past and may enter into such arrangements, from time to time, in the future. We believe our exposure to currency fluctuations related to these arrangements is not material.expand. We may enter into foreign currency hedges to offset material exposure to currency fluctuations when we can adequately determine the timing and amounts of the exposure.

ITEM 4. CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report and, based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934) that occurred during the quarter ended September 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II.

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below together with the other information set forth in this report, which could materially affect our business, financial condition and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

Risk Factors Related to Our Business

We have a history of operating losses and expect to incur significant losses in the future.

We have had substantial losses since our inception. We cannot assure you that we will ever become or remain profitable.

·●As of September 30, 2022,2023, we had an accumulated deficit of $669.0$745.6 million.
·●We incurred net losses of $629.4$682.5 million from inception through 2021,2022, and a net loss of $39.6$63.1 million during the nine months ended September 30, 2022.2023.

 

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The likelihood of our success must be considered in light of the expenses, difficulties and delays frequently encountered by companies formed to develop and commercialize new technologies. In particular, our operations to date have focused primarily on research and development of our LBS technology system, including products built around that technology such as our automotive lidar sensor, and development of demonstration units. We are unable to accurately estimate future revenues and operating expenses based upon historical performance.

We cannot be certain that we will succeed in obtaining additional development revenue or commercializing our technology or products. In light of these factors, we expect to continue to incur significant losses and negative cash flow at least through 20222023 and likely thereafter. There is significant risk that we will not achieve positive cash flow at any time in the future.

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COVID-19 has had an adverse effect on our business, and the future COVID-19 effects on our financial position and business prospects are uncertain.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world. We are unable to accurately predict the full impact that COVID-19 may have on our operations due to numerous uncertainties, including the pandemic’s severity, duration and spread, as well as actions that may be taken by governmental authorities.

The adverse impacts of the pandemic on our business and future financial performance could include, but are not limited to:

·difficulties in our ability to raise capital,
·delays to our technology development plans and timelines,
·significant declines or delays in revenue or development efforts due to supply chain disruptions,
·obstacles or delays in meeting with potential customers and partners or entering into agreements with them, and
·challenges to our operating effectiveness resulting from employees working remotely or being ill and unable to work.

We may require additional capital to fund our operations and to implement our strategicbusiness plan. Raising additional capital may dilute the value of current shareholders'shareholders’ investment in us.

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. We may, however, require additional capital to fund our operating plan past that time. We may seek to obtain additional capital through the issuance of equity or debt securities, product sales and/or licensing activities. There can be no assurance that any such efforts to obtain additional capital would be successful.

We are currently focused on developing and commercializing our automotive lidar module.solution. This involves introducing new technology into an emerging market which creates significant uncertainty about our ability to accurately project revenue, costs and cash flows. Our capital requirements will depend on many factors, including, but not limited to, the commercial success of our technology, the rate at which OEMs and ODMs introduce productssystems incorporating our products and technology and the market acceptance and competitive position of such productssystems. Our expenses are expected to increase significantly as a result of the Ibeo acquisition and related headcount increase. If revenues are less than we anticipate, if the mix of revenues and the execution of our strategic plan. If revenues,associated margins vary from anticipated amounts or if expenses are different thanexceed the amounts budgeted, or strategic opportunities arise, we may seekrequire additional capital earlier than expected to fund our operations. In addition, our operating plan provides for the development of strategic relationships with suppliers of components, products and systems, and equipment manufacturers that may require additional investments by us.

Additional capital may not be available to us or, if available, may not be available on terms acceptable to us or on a timely basis. Raising additional capital may involve issuing securities with rights and preferences that are senior to our common stock and may dilute the value of our current shareholders'shareholders’ investment in us. If adequate capital resources are not available on a timely basis, we may consider limiting our operations substantially and we may be unable to continue as a going concern. This limitation of operations could include reducing investments in our research and development projects, staff, operating costs, and capital expenditures which could jeopardize our ability to achieve our business goals or satisfy our customer requirements.

Risks Related to our Financial Statements and Results

Our revenue is generated from one customer,a small number of customers, and losing thata significant customer wouldcould have a negative impact on our revenue.

For the ninethree months ended September 30, 2022,2023, one commercial customer accounted for $664,000$742,000 in revenue, representing 100%71% of our total revenue and a second commercial customer accounted for $78,000 in revenue, representing 8% of our total revenue. For the nine months ended September 30, 2021, the same2023, one commercial customer accounted for $1.9 million$825,000 in revenue, representing 38% of our total revenue, a second commercial customer accounted for $364,000 in revenue, representing 17% of our total revenue, and a third commercial customer accounted for $246,000 in revenue, representing 11% of our total revenue, and a fourth customer accounted for $206,000 in revenue, representing 10% of our total revenue. For the three and nine months ended September 30, 2022, one customer accounted for $0 and $664,000 in revenue, respectively, representing 100% of our total revenue. The loss of this customer would negatively affect our revenue.revenue for each period.

We have, in the past, identified a material weakness in our internal controls.

In the second quarter of 2021, we identified a material weakness in the controls that support our determination of the grant date of equity awards. If we identify further material weaknesses in our internal controls, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting obligations. Any such failure could cause investors to lose confidence in the accuracy of our financial reports, harm our reputation and adversely affect the market price of our common stock.

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Our stock price has fluctuated in the past, has recently been in declinevolatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.

Our stock price has fluctuated significantly in the past, has recently been volatile, and may continue to be volatile in the future. Over the 52-week period ending October 24, 2022,November 3, 2023, our common stock has traded at a low of $2.50$1.82 and a high of $9.95.$8.20. We may continue to experience sustained depression or substantial volatility in our stock price in the foreseeable future unrelated to our operating performance or prospects. For the fiscal year ended December 31, 2021,2022, we incurred a loss per share of $(0.27)$(0.32).

As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:

·●investor reaction to our business strategy;
·●the success of competitive products or technologies;
·●strategic developments;
·●the timing and results of our development and commercialization efforts with respect to our lidar sensorsensors and ADAS solution;solutions;
·●changes in regulatory or industry standards applicable to our technologies;
·●variations in our or our competitors’ financial and operating results;
·●developments concerning our collaborations or partners;
·●developments or disputes with any third parties that supply, manufacture, sell or market any of our products;
·●developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technology;
·●actual or perceived defects in any of our products, if commercialized, and any related product liability claims;
·●our ability or inability to raise additional capital and the terms on which we raise it;
·●declines in the market prices of stocks generally;
·●trading volume of our common stock;
·●sales of our common stock by us or our stockholders;
·●general economic, industry and market conditions; and
·●the effects of other events or factors, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the COVID-19 outbreak, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere.

Since the price of our common stock has fluctuated in the past, has suffered recent declinesbeen recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current levels or that future sales of our common stock will not be at prices lower than those sold to investors.

Additionally, securities of certain companies have in the past few years experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in both the stock prices of those companies and in the market, and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment, as in many cases the price per share has declined steadily as interest in those stocks have abated. There can be no assurance that our shares will not be subject to a short squeeze in the future, and investors may lose a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying value.

 24

If we are unable to maintain our listing on The Nasdaq Global Market, it could become more difficult to sell our stock in the public market.

Our common stock is listed on The Nasdaq Global Market. To maintain our listing on this market, we must meet Nasdaq'sNasdaq’s listing maintenance standards. From the initial receipt of notice in the fourth quarter of 2019 through our regaining compliance in the second quarter of 2020, our stock was at risk of being delisted due to noncompliance with the minimum required market value and closing price requirements of Nasdaq’s continued listing standards. If we are unable to continue to meet Nasdaq'sNasdaq’s listing maintenance standards for any reason, our common stock could be delisted from The Nasdaq Global Market. If our common stock were delisted, we may seek to list our common stock on The Nasdaq Capital Market, the NYSE American or on a regional stock exchange or, if one or more broker-dealer market makers comply with applicable requirements, the over-the-counter (OTC) market. Listing on such other market or exchange could reduce the liquidity of our common stock. If our common stock were to trade in the OTC market, an investor would find it more difficult to dispose of, or to obtain accurate quotations for the price of, the common stock.

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A delisting from The Nasdaq Global Market and failure to obtain listing on another market or exchange would subject our common stock to so-called penny stock rules that impose additional sales practice and market-making requirements on broker-dealers who sell or make a market in such securities. Consequently, removal from The Nasdaq Global Market and failure to obtain listing on another market or exchange could affect the ability or willingness of broker-dealers to sell or make a market in our common stock and the ability of purchasers of our common stock to sell their securities in the secondary market.

On October 24, 2022,November 3, 2023, the closing price of our common stock was $3.58$2.25 per share.

Our lack of financial and technical resources relative to our competitors may limit our revenues, potential profits, overall market share or value.

Our products and potential products incorporating our LBS technology willsolutions compete with established manufacturersother pureplay lidar developers, many of existing productswhich have recently gone public through de-SPAC transactions and companies developing new technologies. Many of our competitorstherefore have substantially greater financial technical and other resources than we have. Because of their greater resources, our competitors may develop or commercialize products or technologies that may be superiormore quickly than us and have access to our own. The introduction of superior competing products or technologiesmore entrenched sales channels. This imbalance in financial resources and access could result for us in reduced revenues, lower margins or loss of market share, any of which could reduce the value of our business. Additionally, for a variety of reasons, customers may choose to purchase from suppliers that have substantially greater financial technical or other resources than we have.

Risks Related to Our Operations

Difficulty in qualifying a contract manufacturer, Tier 1 partner, or foundry for our products, or experiencing changes in our supply chain, could cause delays that may result in lost future revenues and damaged customer relationships.

Historically, we have relied on single or limited-source suppliers to manufacture our products. Establishing a relationship with a contract manufacturer, automotive Tier 1 partner, or foundry is a time-consuming process, as our unique technology may require significant manufacturing process adaptation to achieve full manufacturing capacity. To the extent that we are not able to establish a relationship with a contract manufacturer, Tier 1 partner, or foundry in a timely manner or at prices or on other terms that are acceptable to us, we may be unable to meet contract or production milestones. Moreover, changes in our supply chain could result in increased cost and delay and subject us to risks and uncertainties regarding, but not limited to, product warranty, product liability and quality control standards. 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 cause significant delays in product deliveries, which could result in lost future revenues and damaged customer relationships.

We areHistorically, we have been dependent on third parties to develop, manufacture, sell and market products incorporating our LBS technology, scanning modules, and the scanning module components.technology.

Our business strategy for commercializing our technology in products incorporating LBS technology includeshas historically included entering into development, manufacturing, licensing, sales and marketing arrangements with OEMs, ODMs and other third parties. These arrangements reduce our level of control over production and distribution and may subject us to risks and uncertainties regarding, but not limited to, product warranty, product liability and quality control standards.

 25

We cannot be certain that we will be able to negotiate arrangements on acceptable terms, if at all, or that these arrangements will be successful in yielding commercially viable products. If we cannot establish these arrangements, we would require additional capital to undertake such activities on our own and would require extensive manufacturing, sales and marketing expertise that we do not currently possess and that may be difficult to obtain.

In addition, we could encounter significant delays in introducing our LBSproducts and technology or find that the development, manufacture or sale of products incorporating our technology would not be feasible. To the extent that we enter into development, manufacturing, licensing, sales and marketing or other arrangements, our revenues will depend upon the performance of third parties. We cannot be certain that any such arrangements will be successful.

30

 

We could face lawsuits related to our use of LBS technology or other technologies, which would be costly, and any adverse outcome could limit our ability to commercialize our technology or products.

We are aware of several patents held by third parties that relate to certain aspects of light scanning displays, and 3D sensing products.products, and other technologies that are core to our sensor hardware. These patents could be used as a basis to challenge the validity, limit the scope or limit our ability to obtain additional or broader patent rights of our patents. A successful challenge to the validity of our patents could limit our ability to commercialize our technology or products incorporating our LBS technology and, consequently, materially reduce our ability to generate revenues. Moreover, we cannot be certain that patent holders or other third parties will not claim infringement by us with respect to current and future technology. Because U.S. patent applications are held and examined in secrecy, it is also possible that presently pending U.S. applications could eventually be issued with claims that could be infringed by our products or our technology.

The defense and prosecution of a patent suit would be costly and time-consuming, even if the outcome were ultimately favorable to us. An adverse outcome in the defense of a patent suit could subject us to significant costs, require others and us to cease selling products incorporating our technology, require us to cease licensing our technology or require disputed rights to be licensed from third parties. Such licenses, if available, would increase our operating expenses. Moreover, if claims of infringement are asserted against our future co-development partners or customers, those partners or customers may seek indemnification from us for any damages or expenses they incur.

If we fail to manage expansion effectively, our revenue and expenses could be adversely affected.

Our ability to successfully offer products incorporating our technology and implement our business plan in a rapidly evolving market requires an effective planning and management process. The growth in business and relationships with customers and other third parties has placed, and will continue to place, a significant strain on our management systems and resources. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and will need to continue to train and manage our work force. Following our substantial reduction in headcount in February 2020, the risks associated with strained resources are heightened.

We target customers that are large companies with substantial negotiating power and potentially competitive internal solutions; if we are unable to sell our products to these customers, our prospects will be adversely affected.

Our potential customers, automotive OEMs in particular, are large, multinational companies with substantial negotiating power relative to us and, in some instances, may have internal solutions that are competitive to our products. These large, multinational companies also have significant resources, which may allow them to acquire or develop competitive technologies either independently or in partnership with others. Accordingly, even after investing significant resources to develop a product, we may not secure a series production award or, even after securing a series production award, may not be able to commercialize a product on profitable terms. If our products are not selected by these large companies or if these companies develop or acquire competitive technology or negotiate terms that are disadvantageous to us, it will have an adverse effect on our business prospects.

Our technology and products incorporating our LBS technology may be subject to future environmental, health and safety regulations that could increase our development and production costs.

Our technology and products incorporating our LBS technology could become subject to future environmental, health and safety regulations or amendments that could negatively impact our ability to commercialize our technology and products incorporating our LBS technology.products. Compliance with any such current or new regulations would likely increase the cost to develop and producecommercialize products, incorporating our LBS technology, and violations may result in fines, penalties or suspension of production. If we become subject to any environmental, health, or safety laws or regulations that require us to cease or significantly change our operations to comply, our business, financial condition and operating results could be adversely affected.

 26

Our operating results may be adversely impacted by worldwide political and economic uncertainties and specific conditions in the markets we address.

In the recent past and currently, general worldwide economic conditions have experienced a downturn due to slower economic activity, concerns about inflation, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending, and adverse business conditions. Any continuation or worsening of the current global economic and financial conditions could materially adversely affect: (i) our ability to raise, or the cost of, needed capital, (ii) demand for our current and future products, and (iii) our ability to commercialize products. Additionally, the outbreaks of wars or infectious diseases, both as recently experienced, may cause an unexpected downturn in economic conditions. We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery, worldwide, regionally or in our industrythe automotive or target market.technology industries.

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Because we plan tohave recently expanded and may continue expanding our international operations and using foreign suppliers, our operating results could be harmed by economic, political, regulatory and other factors in foreign countries.

During 2021, we established an office in Germany and on January 31, 2023 we plan to expandcompleted our presence thereacquisition of Ibeo assets, with the result that we now have more employees and operations in Germany than in the near term.U.S. In addition, we currently use foreign suppliers and plan to continue to do so to manufacture current and future components and products, where appropriate. These international operations are subject to inherent risks, which may adversely affect us, including, but not limited to:

·●Political and economic instability, international terrorism and the outbreak of war, such as the Russian invasion ofand continuing war against Ukraine;
·●High levels of inflation, as has historically been the case in a number of countries in Asia;
·●Burdens and costs of compliance with a variety of foreign laws, regulations and sanctions;
·●Foreign taxes and duties;
·●Changes in tariff rates or other trade, tax or monetary policies;
·●Changes or volatility in currency exchange rates and interest rates;
·●Global or regional health crises, such as COVID-19 or other epidemics and
·●Disruptions in global supply chains.

As part of growing our business, weWe have recently and may in the future make acquisitions. If we fail to successfully select, execute or integrate our acquisitions, then our business, results of operations and financial condition could be materially adversely affected.

FromOn December 1, 2022, we entered into an Asset Purchase Agreement to acquire certain assets from Ibeo Automotive Systems GmbH. We expended significant management time and effort, as well as capital, identifying, evaluating, negotiating, and executing this transaction and, since the closing of the acquisition on January 31, 2023, we have invested additional time and capital working to time,integrate our new Hamburg- and Detroit-based teams and operations. We cannot guarantee that these integration efforts will be successful, that the goals of the acquisition will be realized, or that the increase to our operating expenses or cash requirements will be manageable.

In the future, we may again undertake acquisitions to add new products and technologies, acquire talent, gain new sales channels or enter into new markets or sales territories. In addition to possible stockholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs, and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions and the subsequent integration of new assets, businesses, key personnel, customers, vendors and suppliers require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

To date,Before our acquisition of assets from Ibeo, we havehad no experience with acquisitions andor the integration of acquired technology and personnel. Failure to successfully identify, complete, manage and integrate acquisitions could materially and adversely affect our business, financial condition and results of operations and could cause our stock price to decline.

Our suppliers'suppliers’ facilities could be damaged or disrupted by a natural disaster or labor strike, either of which would materially affect our financial position, results of operations and cash flows.

A major catastrophe, such as an earthquake, monsoon, flood, infectious disease including the COVID-19 virus, or other natural disaster, labor strike, or work stoppage at our suppliers'suppliers’ facilities or our customers, could result in a prolonged interruption of our business. A disruption resulting from any one of these events could cause significant delays in product shipments and the loss of sales and customers, which could have a material adverse effect on our financial condition, results of operations, and cash flows.

 27

If we are unable to obtain effective intellectual property protection for our products, processes and technology, we may be unable to compete with other companies.

Intellectual property protection for our products, processes and technology is important and uncertain. If we do not obtain effective intellectual property protection for our products, processes and technology, we may be subject to increased competition. Our commercial success will depend, in part, on our ability to maintain the proprietary nature of our key technologies by securing valid and enforceable patents and effectively maintaining unpatented technology as trade secrets.

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We protect our proprietary technology by seeking to obtain United States and foreign patents in our name, or licenses to third party patents, related to proprietary technology, inventions, and improvements that may be important to the development of our business. However, our patent position involves complex legal and factual questions. The standards that the United States Patent and Trademark Office and its foreign counterparts use to grant patents are not always applied predictably or uniformly and can change.

Additionally, the scope of patents is subject to interpretation by courts and their validity can be subject to challenges and defenses, including challenges and defenses based on the existence of prior art. Consequently, we cannot be certain as to the extent to which we will be able to obtain patents for our new products and technology or the extent to which the patents that we already own, protect our products and technology. Reduction in scope of protection or invalidation of our licensed or owned patents, or our inability to obtain new patents, may enable other companies to develop products that compete directly with ours on the basis of the same or similar technology.

We also rely on the law of trade secrets to protect unpatented know-how and technology to maintain our competitive position. We try to protect this know-how and technology by limiting access to the trade secrets to those of our employees, contractors and partners, with a need-to-know such information and by entering into confidentiality agreements with parties that have access to it, such as our employees, consultants and business partners. Any of these parties could breach the agreements and disclose our trade secrets or confidential information, or our competitors might learn of the information in some other way. If any trade secret not protected by a patent were to be disclosed to or independently developed by a competitor, our competitive position could be negatively affected.

We could be subject to significant product liability claims that could be time-consuming and costly, divert management attention and adversely affect our ability to obtain and maintain insurance coverage.

We could be subject to product liability claims if any of the product applications are alleged to be defective or cause harmful effects. For example, because some of the scanning modules incorporating our LBS technology could scan a low power beam of colored light into the user'suser’s eye, the testing, manufacture, marketing and sale of these products involve an inherent risk that product liability claims will be asserted against us.

Additionally, any misuse of our technology or products incorporating our LBS technology by end users or third parties that obtain access to our technology, could result in negative publicity and could harm our brand and reputation. Product liability claims or other claims related to our products or our technology, regardless of their outcome, could require us to spend significant time and money in litigation, divert management time and attention, require us to pay significant damages, harm our reputation or hinder acceptance of our products. Any successful product liability claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable or reasonable terms. An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our products and our LBS technology.

Our operations could be adversely impacted by information technology system failures, network disruptions, or cyber security breaches.

We rely on information technology systems to process, transmit, store, and protect electronic data between our employees, our customers and our suppliers. Our systems are vulnerable to damage or interruptions due to events beyond our control, including, but are not limited to, natural disasters, power loss, telecommunications failures, computer viruses, hacking, or other cyber security issues. Our system redundancy may be inadequate and our disaster recovery planning may be ineffective or insufficient to account for all eventualities. Additionally, we maintain insurance coverage to address certain aspects of cyber risks. Such insurance coverage may be insufficient to cover all losses or all claims that may arise, should such an event occur.

 28

Loss of any of our key personnel could have a negative effect on the operation of our business.

Our success depends on our executive officers and other key personnel and on the ability to attract and retain qualified new personnel. Achievement of our business objectives will require substantial additional expertise in the areas of sales and marketing, research and product development and manufacturing. Competition for qualified personnel in these fields is intense, and the inability to attract and retain additional highly skilled personnel, or the loss of key personnel, could hinder our ability to compete effectively in the LBSautomotive or technology markets and adversely affect our business strategy execution and results of operations.

33

COVID-19 has had an adverse effect on our business, and the continuing COVID-19 effects on our financial position and business prospects are uncertain.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the United States and the world. We are unable to fully assess or accurately predict the impact that COVID-19 has had and may continue to have on our operations due to numerous uncertainties.

The adverse impacts of the pandemic on our business thus far and on our future financial performance include, but are not limited to:

●difficulties in our ability to raise capital,
●delays to our technology development plans and timelines,
●significant declines or delays in revenue or development efforts due to supply chain disruptions,
●obstacles or delays in meeting with potential customers and partners or entering into agreements with them, and
●challenges to our operating effectiveness resulting from employees working remotely, or being ill and unable to work.

Risks Related to Development for the Automotive Industry

If our products and solutions are not selected for inclusion in ADAS systems by automotive OEMs or automotive Tier 1 suppliers, our future prospects will be materially and adversely affected.

Automotive OEMs and Tier 1 suppliers design and develop ADAS technology over several years, undertaking extensive testing and qualification processes prior to selecting a product such as our lidar sensor for use in a particular system, product or vehicle model because such products will function as part of a larger system or platform and must meet certain other specifications. We have invested and will continue to invest significant time and resources to have our products considered and possibly selected by OEMs or Tier 1 suppliers for use in a particular system, product or vehicle model, which is known as a “series production win” or a “series production award.” In the case of ADAS technology, a series production award would mean that our lidar sensor and/or ADAS solution had been selected for use in a particular vehicle model. However, if we are unable to achieve a series production award with respect to a particular vehicle model, we may not have an opportunity to supply our products to the automotive OEM for that vehicle model for a period of many years. In many cases, this period can be as long as five to seven or more years. If our products are not selected by an automotive OEM or our suppliers for one vehicle model or if our products are not successful in that vehicle model, it is unlikely that our product will be deployed in other vehicle models of that OEM. If we fail to win a significant number of vehicle models from one or more of automotive OEMs or their suppliers, our future business prospects will be materially and adversely affected.

The complexity of our products and the limited visibility into the various environmental and other conditions under which potential customers may use the products could result in unforeseen delays or expenses from undetected defects, errors or reliability issues in hardware or software which could reduce the market adoption of our products, damage our reputation with prospective customers, expose us to product liability and other claims, and adversely affect our operating costs.

Our products are highly technical and complex and require high standards to manufacture and may experience defects, errors or reliability issues at various stages of development. We may be unable to timely manufacture or release products, or correct problems that have arisen or correct such problems to the customer’s satisfaction. Additionally, undetected errors, defects or security vulnerabilities could result in serious injury to the end users or bystanders of technology incorporating our products, inability of customers to commercialize technology incorporating our products, litigation against us, negative publicity and other consequences. These risks are particularly prevalent in the highly competitive ADAS market. These problems may also result in claims, including class actions, against us that could be costly to defend. Our reputation or brand may be damaged as a result of these problems and potential customers may be reluctant to buy our products, which could adversely affect our financial results.

34

Adverse conditions in the automotive industry or the global economy more generally could have adverse effects on our results of operations.

While we make our strategic planning decisions based on the assumption that the markets we are targeting will grow, our business is dependent, in large part on, and directly affected by, business cycles and other factors affecting the global automobile industry and global economy generally. Automotive production and sales are highly cyclical and depend on general economic conditions and other factors, including consumer spending and preferences, changes in interest rates and credit availability, consumer confidence, fuel costs, fuel availability, environmental impact, governmental incentives and regulatory requirements, and political volatility, especially in energy-producing countries and growth markets. In addition, automotive production and sales can be affected by our automotive OEM customers’ ability to continue operating in response to challenging economic conditions and in response to labor relations issues, regulatory requirements, trade agreements and other factors. The volume of automotive production in North America, Europe and the rest of the world has fluctuated, sometimes significantly, from year to year, and we expect such fluctuations to give rise to fluctuations in the demand for our products. Any significant adverse change in any of these factors may result in a reduction in automotive sales and production by our automotive OEM customers and could have a material adverse effect on our business, results of operations and financial condition.

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Developments in alternative technology may adversely affect the demand for our lidar technology.

Significant developments in alternative technologies, such as cameras and radar,may materially and adversely affect our business prospects in ways we do not currently anticipate. Existing and other camera and radar technologies may emerge as OEMs’ preferred alternative to our solution, which would result in the loss of competitiveness of our lidar solution. Our R&D efforts may not be sufficient to adapt to these changes in technology and our solution may not compete effectively with these alternative systems.

ADAS features may be delayed in adoption by OEMs, which would negatively impact our business prospects.

The ADAS market is fast evolving and there is generally a lack of an established regulatory framework. Vehicle regulators globally continue to consider new and enhanced emissions requirements, including electrification, to meet environmental and economic needs as well as pursue new safety standards to address emerging traffic risks. To control new vehicle prices, among other concerns, OEMs may need to dedicate technology and cost additions to new vehicle designs to meet these emissions and safety requirements and postpone the consumer cost pressures of new ADAS features. As additional safety requirements are imposed on vehicle manufacturers, our business prospects may be materially impacted.

Because the lidar and ADAS markets are rapidly evolving, it is difficult to forecast customer adoption rates, demand, and selling prices for our products and solutions.

We are pursuing opportunities in rapidly evolving markets, including technological and regulatory changes, and it is difficult to predict the timing and size of the opportunities. For example, lidar-based ADAS solutions require complex technology and because these automotive systems depend on technology from many companies, commercialization of ADAS products could be delayed or impaired on account of certain technological components of ours or others not being ready to be deployed in vehicles. In addition, the selling prices we are able to ultimately charge in the future for the products we are currently developing may be less than what we currently project. Our future financial performance will depend on our ability to make timely investments in the correct market opportunities. If one or more of these markets experience a shift in prospective customer demand, our products may not compete as effectively, if at all, and they may not be designed into commercialized products. Given the evolving nature of the markets in which we operate, it is difficult to predict customer demand or adoption rates for our products, selling prices or the future growth of our target markets. If demand does not develop or if we cannot accurately forecast it, the size of our markets, inventory requirements or future financial results will be adversely affected.

Because lidar is new in the markets we are seeking to enter, our market forecasts may not materialize as anticipated.

Our market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not materialize as anticipated. These forecasts and estimates relating to the expected size and growth of the markets for lidar-based technology may prove to be inaccurate. Even if these markets experience the forecasted growth we anticipate, we may not grow our business at similar rates, or at all. Our future growth is subject to many factors, including market adoption of our products, which is subject to many risks and uncertainties. Accordingly, we cannot assure you that these forecasts will not be materially inaccurate.

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ITEM 5. OTHER INFORMATION

(c) Except as disclosed below during the three months ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

In connection with the vesting of shares of our common stock underlying restricted stock unit or performance stock unit awards, and pursuant to the terms of our 2022 Equity Incentive Plan, on August 14, 2023, Sumit Sharma, our Chief Executive Officer, entered into an irrevocable tax withholding election to have the Company withhold and sell shares to cover his tax withholding obligations for all of his future restricted stock unit or performance stock unit vesting events. Such election is intended to satisfy the affirmative defense of Rule 10b5-1(c). Mr. Sharma’s next vesting event is scheduled to occur on April 8, 2024, when a restricted stock unit award for 300,000 shares of our common stock will be automatically awarded and immediately vest, in accordance with Mr. Sharma’s employment agreement, dated April 8, 2021. The aggregate number of shares to be sold pursuant to such election is dependent on the number of awards held by Mr. Sharma at any time and on the tax rates and taxes in effect on the applicable restricted stock unit or performance stock unit vesting event, and therefore is indeterminable at this time. As background information, Mr. Sharma currently has outstanding performance awards for 2.8 million shares which, if earned, would be subject to this election.

 

ITEM 6. EXHIBITS

Exhibit
Number3.1		DescriptionAmended and Restated Bylaws of MicroVision, Inc.(1)
31.110.1At-the-Market Issuance Sales Agreement, dated August 29, 2023, by and between the Company and Craig-Hallum Capital Group LLC.(2)
31.1Principal Executive Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Principal Financial Officer Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Principal Executive Officer Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350, Chapter 63 of Title 18, United States Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2Principal Financial Officer Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350, Chapter 63 of Title 18, United States Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCHInline XBRL Taxonomy Extension Schema.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 14, 2023.

(2) Incorporated by reference to the Company’s Current Report on Form 8-K filed on August 29, 2023.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 MicroVision, Inc.

Date: October 28, 2022By:/s/ Sumit Sharma
Sumit Sharma
Chief Executive Officer and Director
(Principal Executive Officer)
   
Date: November 9, 2023By/s/ Sumit Sharma
Sumit Sharma

Chief Executive Officer and Director

(Principal Executive Officer)

Date: October 28, 2022November 9, 2023By:By/s/ Anubhav Verma
Anubhav Verma

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

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