MicroVision, Inc. (NASDAQ:MVIS) Q3 2022 Earnings Conference Call October 27, 2022 5:00 PM ET Company Participants Drew Markham - Vice President, Secretary and General Counsel Sumit Sharma - Chief Executive Officer Anubhav Verma - Chief Financial Officer Conference Call Participants Andres Sheppard - Cantor Fitzgerald Operator Good day. And welcome to the MicroVision Third Quarter 2022 Financial and Operating Results Conference Call. At this time, all participants are in listen-only mode. [Operator Instructi ...

Integrated Lidar and Software Solution for ADAS L3 and L2+ MicroVision Q3 2022 Financial Results and Update O c t o b e r 2 7 , 2022 Safe Harbor Statements This presentation of MicroVision, Inc. ("MicroVision," "the Company," "we," or "our"), and any accompanying oral presentation, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, among others: statement ...

PART I. FINANCIAL INFORMATION [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) The company reported a net loss of **$13.6 million** for Q2 2022, with revenue from Microsoft at **$0.3 million**, and total assets at **$107.2 million** [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) Total assets decreased to **$107.2 million** from **$130.2 million** due to reduced cash and cash equivalents Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $36,964 | $82,647 | | Investment securities, available-for-sale | $55,926 | $32,720 | | Total current assets | $95,750 | $119,430 | | Total assets | $107,192 | $130,225 | | **Liabilities & Equity** | | | | Total current liabilities | $8,055 | $12,462 | | Total liabilities | $13,092 | $17,471 | | Total shareholders' equity | $94,100 | $112,754 | | Total liabilities and shareholders' equity | $107,192 | $130,225 | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) Q2 2022 revenue was **$314 thousand**, down from **$746 thousand**, resulting in a net loss of **$13.6 million** Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $314 | $746 | $664 | $1,225 | | Gross profit | $296 | $777 | $642 | $1,261 | | Research and development expense | $7,700 | $7,376 | $15,293 | $11,838 | | Sales, marketing, general and administrative expense | $6,265 | $8,355 | $12,142 | $10,602 | | Loss from operations | $(13,669) | $(14,954) | $(26,793) | $(21,179) | | Net loss | $(13,597) | $(14,962) | $(26,765) | $(21,193) | | Net loss per share | $(0.08) | $(0.09) | $(0.16) | $(0.13) | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased to **$20.6 million**, reducing total cash by **$45.4 million** to **$38.4 million** Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,604) | $(11,277) | | Net cash used in investing activities | $(24,762) | $(1,884) | | Net cash provided by financing activities | $9 | $131,587 | | Change in cash, cash equivalents, and restricted cash | $(45,357) | $118,426 | | Cash, cash equivalents, and restricted cash at end of period | $38,382 | $135,723 | [Notes to Condensed Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) The company shifted to automotive Lidar for ADAS, with Microsoft as its sole customer, maintaining **$92.9 million** liquidity - The company has shifted its strategic focus to developing Lidar sensors and software for the L2+ and L3 Advanced Driver-Assistance Systems (ADAS) market[29](index=29&type=chunk)[31](index=31&type=chunk) - As of June 30, 2022, the company had **$92.9 million** in total liquidity (**$37.0 million** in cash and cash equivalents and **$55.9 million** in short-term investments) and anticipates this is sufficient to fund operations for at least the next 12 months[33](index=33&type=chunk) - Microsoft Corporation is the company's sole customer, accounting for **100% of revenue** for the three and six months ended June 30, 2022 and 2021[60](index=60&type=chunk) - In June 2022, the company issued **6.0 million** Performance Stock Units (PSUs) to its executive officers, which are subject to stock price performance goals and time-based vesting through December 31, 2025[66](index=66&type=chunk) - The company entered into a 120-month lease for approximately **36,062 square feet** of office space in Redmond, WA, with total minimum lease payments of **$13.0 million**[73](index=73&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's automotive Lidar focus, with Microsoft revenue down **57.9%** and R&D expenses up **29.2%** Year-over-Year Financial Changes (in thousands) | Metric | Six Months 2022 | Six Months 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | License and royalty revenue | $664 | $1,225 | $(561) | (45.8)% | | Research and development expense | $15,293 | $11,838 | $3,455 | 29.2% | | Sales, marketing, general and administrative expense | $12,142 | $10,602 | $1,540 | 14.5% | - The decrease in license and royalty revenue was due to a lower number of royalty-bearing products being distributed by the company's customer, Microsoft[97](index=97&type=chunk) - The increase in R&D expense was primarily due to increased salary and benefits from higher headcount of approximately **$2.4 million** for the six-month period[102](index=102&type=chunk) - At June 30, 2022, the company had total liquidity of **$92.9 million** and anticipates sufficient cash to fund operations for at least the next 12 months[105](index=105&type=chunk)[106](index=106&type=chunk) - Cash used in operating activities increased to **$20.6 million** in the first six months of 2022 from **$11.3 million** in the prior-year period, primarily due to increased operating expenses to support Lidar sensor development[107](index=107&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company assesses market, interest rate, and foreign exchange risks as not material due to short-term, highly rated investments - Management believes the company's exposure to market and interest rate risk is not material due to the short-term maturities of its investment securities[114](index=114&type=chunk) - Foreign exchange rate risk is considered not material as major contracts are currently in U.S. dollars, though this could change with future international expansion[116](index=116&type=chunk) Cash and Investment Holdings as of June 30, 2022 (in thousands) | Category | Amount | Percent | | :--- | :--- | :--- | | Cash and cash equivalents | $36,964 | 39.8% | | Investments (Less than one year) | $55,926 | 60.2% | | **Total** | **$92,890** | **100.0%** | [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[118](index=118&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently party to any legal proceedings expected to materially affect its financial position or results - The company is not currently party to any legal proceedings that are expected to have a material adverse effect on its financials[120](index=120&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include substantial operating losses (**$656.2 million** accumulated deficit), single customer reliance, and stock volatility [Risks Related to Our Business](index=25&type=section&id=Risks%20Related%20to%20Our%20Business) Business risks include substantial operating losses (**$656.2 million** accumulated deficit), potential need for additional capital - The company has a history of substantial losses, with an accumulated deficit of **$656.2 million** as of June 30, 2022, and expects to incur significant losses in the future[122](index=122&type=chunk)[126](index=126&type=chunk) - The company may require additional capital to fund operations beyond the next 12 months, and there is no assurance that such capital will be available on acceptable terms[127](index=127&type=chunk)[129](index=129&type=chunk) - The COVID-19 pandemic continues to pose risks, including potential delays in technology development, supply chain disruptions, and challenges in engaging with potential customers[125](index=125&type=chunk)[133](index=133&type=chunk) [Risks Related to our Financial Statements and Results](index=26&type=section&id=Risks%20Related%20to%20our%20Financial%20Statements%20and%20Results) Financial risks include 100% revenue concentration from Microsoft, high stock price volatility, and Nasdaq listing challenges - For the six months ended June 30, 2022, one customer, Microsoft, accounted for **100% of total revenue**[130](index=130&type=chunk) - The company's stock price is highly volatile, and investors could incur substantial losses, with the price fluctuating between **$2.50** and **$16.38** in the preceding 52-week period[132](index=132&type=chunk) - There is a risk that the company may be unable to maintain its listing on The Nasdaq Global Market if it fails to meet continued listing standards, which could harm stock liquidity[136](index=136&type=chunk)[138](index=138&type=chunk) [Risks Related to Our Operations](index=28&type=section&id=Risks%20Related%20to%20Our%20Operations) Operational risks include reliance on single-source suppliers, dependence on third-party OEMs/ODMs, and customer negotiating power - The company relies on single or limited-source suppliers, and the loss or failure of any such supplier could cause significant delays and damage customer relationships[141](index=141&type=chunk) - The business strategy depends on third parties (OEMs, ODMs) to develop, manufacture, and sell products incorporating its technology, and the success of these arrangements is not guaranteed[142](index=142&type=chunk)[144](index=144&type=chunk) - Potential customers are large, multinational companies with substantial negotiating power and may have competitive internal solutions, which could adversely affect sales prospects[149](index=149&type=chunk) - The company's success depends on protecting its intellectual property through patents and trade secrets, but it cannot be certain of the extent of this protection[158](index=158&type=chunk)[160](index=160&type=chunk) [Risks Related to Development for the Automotive Industry](index=32&type=section&id=Risks%20Related%20to%20Development%20for%20the%20Automotive%20Industry) Automotive risks include long OEM qualification, potential ADAS product defects, and competition from alternative technologies - Failure to be selected for inclusion in ADAS systems by automotive OEMs (a "series production win") would materially and adversely affect future prospects, as design cycles are long (5-7+ years)[167](index=167&type=chunk) - The complexity of the company's products could lead to undetected defects or reliability issues, which is a particular risk in the ADAS market and could lead to litigation and reputational damage[168](index=168&type=chunk) - Significant developments in alternative technologies, such as cameras and radar, may emerge as an OEM's preferred solution, adversely affecting demand for the company's Lidar technology[171](index=171&type=chunk) - Because the Lidar and ADAS markets are rapidly evolving, it is difficult to forecast customer adoption rates, demand, and selling prices for the company's products[173](index=173&type=chunk) [Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with XBRL data files[176](index=176&type=chunk) [Signatures](index=35&type=section&id=Signatures) The report was signed and authorized on July 29, 2022, by Sumit Sharma (CEO) and Anubhav Verma (CFO) - The report was signed on July 29, 2022 by Sumit Sharma (CEO) and Anubhav Verma (CFO)[181](index=181&type=chunk)

Financial Data and Key Metrics Changes - The company recognized $314,000 in royalty revenue from Microsoft in Q2 2022, with expectations to recognize approximately $1.5 million for the year 2022 [32][34] - R&D expenses totaled $7.7 million in Q2 2022, compared to $7.4 million in the same period last year, with cash R&D expenses at $5.7 million [36][37] - SG&A expenses were $6.3 million in Q2 2022, down from $8.4 million in the same period last year, with cash SG&A expenses at $4.2 million [38] - Cash used in operating activities for Q2 2022 was $9.7 million, reflecting an 11% reduction sequentially [40][43] - The company finished the quarter with cash and cash equivalents of $93 million, indicating a strong liquidity position [43] Business Line Data and Key Metrics Changes - The launch of the MAVIN dynamic range LiDAR product was highlighted as a significant achievement, combining short, medium, and long-range sensors [27][30] - The MAVIN product is expected to be a centerpiece for ADAS L3 and L2 solutions for over a decade [21] Market Data and Key Metrics Changes - The company anticipates a revenue opportunity between $2 billion to $4 billion through 2030, with a cumulative EBITDA profile of $1 billion to $2 billion [31] Company Strategy and Development Direction - The company is focused on achieving Class 1 certification and starting sample sales by Q4 2022, aligning with OEM expectations [13][18] - The strategy includes positioning MicroVision as a leader in LiDAR technology, emphasizing partnerships with OEMs rather than just sales [17][24] - Future plans include expanding software offerings to enable ADAS safety and autonomous driving [24][99] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the rising interest rate environment and supply chain challenges, indicating no direct impact from these factors [51][52] - The company is optimistic about its technology and the potential for strategic partnerships to build a high-growth business model [46][97] Other Important Information - The company has shifted its liquidity position to one-year treasury bills to capture yield from the market [43] - The ATM program is viewed as a flexible tool for funding growth plans, with no sales executed in the past year due to market conditions [45][66] Q&A Session Summary Question: Impact of rising interest rates on the business - Management indicated that the rising interest rates provide extra yield on investment securities, positioning the company well for the next four to six quarters [51] Question: Anticipated impact of supply shortages - Management stated that there is currently no direct impact from supply chain shortages due to strong engagement with OEMs [52] Question: Timing and use of the ATM program - The ATM program is seen as a flexible tool for capital raising, with no immediate need for execution due to the company's strong balance sheet [53][55] Question: Revenue ramp-up expectations - Management confirmed that sample sales are expected to begin in 2022, with potential revenue ramp-up in 2023 and exploration of non-automotive verticals [56][58] Question: Normal cash levels needed to support the business - Management reiterated that with $93 million in cash and a low cash burn rate, the company is well-positioned compared to peers [63] Question: Impact of the chips bill - Management noted that the company operates on a fabless model and is not directly affected by the chips bill, but it could benefit the automotive ecosystem if passed [66] Question: Class 1 certification necessity for public use - Management clarified that while Class 1 certification is not required for demos, it is essential for sales, ensuring safety and compliance [67][74] Question: Differences in point cloud quality - Management confirmed that the recently released point cloud data is directly from the LiDAR without post-processing, showcasing the product's capabilities [75][76] Question: Differences between MAVIN and prior products - Management highlighted that MAVIN offers higher specifications and flexibility to meet customer needs compared to previous products [82][88] Question: View on chip platforms like Qualcomm and NVIDIA - Management explained that their ASICs are co-located within the LiDAR hardware for optimal performance, differentiating from competitors using application processors [89][95] Question: Focus on automotive LiDAR and potential expansion - Management confirmed a continued focus on automotive LiDAR, while remaining open to opportunities in industrial applications and AR/VR if approached [97][99]

Integrated Lidar and Software Solution for ADAS L3 and L2+ MicroVision Q2 2022 Financial Results and Update J u l y 2 8 , 2 0 2 2 Safe Harbor Statements © 2022 MICROVISION, INC. ALL RIGHTS RESERVED. 1 This presentation of MicroVision, Inc. ("MicroVision," "the Company," "we," or "our"), and any accompanying oral presentation, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Suc ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents MicroVision's unaudited condensed financial statements, management's discussion, market risk, and internal controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents MicroVision's unaudited condensed financial statements for Q1 2022 and 2021, including balance sheets, operations, comprehensive loss, equity, cash flows, and notes [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) This section presents MicroVision's financial position, detailing assets, liabilities, and shareholders' equity as of March 31, 2022, and December 31, 2021 Condensed Balance Sheet Highlights (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $55,611 | $82,647 | | Investment securities, available-for-sale | $47,651 | $32,720 | | Total current assets | $106,942 | $119,430 | | Total assets | $117,769 | $130,225 | | Total current liabilities | $9,404 | $12,462 | | Total liabilities | $14,301 | $17,471 | | Total shareholders' equity | $103,468 | $112,754 | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) This section outlines MicroVision's financial performance for the three months ended March 31, 2022 and 2021, including revenue, expenses, and net loss Condensed Statements of Operations Highlights (Three Months Ended March 31, in thousands, except per share data) | Item | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Total revenue | $350 | $479 | | Gross profit | $346 | $484 | | Research and development expense | $7,593 | $4,462 | | Sales, marketing, general and administrative expense | $5,877 | $2,247 | | Total operating expenses | $13,470 | $6,709 | | Loss from operations | $(13,124) | $(6,225) | | Net loss | $(13,168) | $(6,231) | | Net loss per share - basic and diluted | $(0.08) | $(0.04) | [Condensed Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Statements%20of%20Comprehensive%20Loss) This section details MicroVision's comprehensive loss for the three months ended March 31, 2022 and 2021, including net loss and other comprehensive income/loss components Condensed Statements of Comprehensive Loss Highlights (Three Months Ended March 31, in thousands) | Item | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Net loss | $(13,168) | $(6,231) | | Unrealized loss on investment securities, available-for-sale | $(105) | $- | | Comprehensive loss | $(13,273) | $(6,231) | [Condensed Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Statements%20of%20Shareholders'%20Equity) This section presents changes in MicroVision's shareholders' equity for the three months ended March 31, 2022, reflecting common stock, additional paid-in capital, and accumulated deficit Condensed Statements of Shareholders' Equity Highlights (Three Months Ended March 31, in thousands) | Item | Balance at Jan 1, 2022 | Share-based comp expense | Exercise of options | Net loss | Other comp loss | Balance at Mar 31, 2022 | | :-------------------------------- | :--------------------- | :--------------------- | :------------------ | :------- | :-------------- | :---------------------- | | Common Stock (Par value) | $164 | $1 | $- | $- | $- | $165 | | Additional paid-in capital | $742,042 | $3,733 | $253 | $- | $- | $746,028 | | Accumulated other comprehensive loss | $(19) | $- | $- | $- | $(105) | $(124) | | Accumulated deficit | $(629,433) | $- | $- | $(13,168) | $- | $(642,601) | | Total shareholders' equity | $112,754 | $3,734 | $253 | $(13,168) | $(105) | $103,468 | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) This section details MicroVision's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022 and 2021 Condensed Statements of Cash Flows Highlights (Three Months Ended March 31, in thousands) | Cash Flow Activity | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(10,907) | $(4,531) | | Net cash used in investing activities | $(16,080) | $(565) | | Net cash (used in) provided by financing activities | $(49) | $63,572 | | Change in cash, cash equivalents, and restricted cash | $(27,036) | $58,476 | | Cash, cash equivalents, and restricted cash at end of period | $56,703 | $75,773 | [Notes to Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) This section provides detailed explanations and disclosures supporting MicroVision's condensed financial statements, covering accounting policies, revenue, investments, and other financial items - MicroVision, Inc. is developing lidar sensors and sensor fusion software for Level 2+ and Level 3 Advanced Driver Assisted Systems (ADAS) in automotive safety and autonomous driving applications, utilizing its patented laser beam scanning (LBS) technology[30](index=30&type=chunk)[31](index=31&type=chunk) - The company's strategy has shifted to increase value by completing development of its 1st Generation LRL module for automotive applications, believing the ADAS market is significantly larger than previous AR markets[32](index=32&type=chunk) - The company has incurred significant losses since inception, funding operations primarily through common stock sales, convertible preferred stock, warrants, convertible debt, and to a lesser extent, development contract revenues, product sales, and licensing activities[33](index=33&type=chunk) Net Loss Per Share (Three Months Ended March 31, in thousands, except loss per share data) | Item | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | | Net loss available for common shareholders - basic and diluted | $(13,168) | $(6,231) | | Weighted-average common shares outstanding - basic and diluted | 164,563 | 155,454 | | Net loss per share - basic and diluted | $(0.08) | $(0.04) | - For both periods, outstanding options and nonvested restricted/performance stock units were excluded from diluted net loss per share calculations as their effect would have been anti-dilutive[36](index=36&type=chunk) Disaggregated Revenue by Timing of Recognition (Three Months Ended March 31, in thousands) | Timing of Revenue Recognition | 2022 (License and royalty revenue) | 2021 (License and royalty revenue) | | :-------------------------------- | :--------------------------------- | :--------------------------------- | | Products transferred at a point in time | $350 | $479 | | Product and services transferred over time | $- | $- | | Total | $350 | $479 | Contract Liabilities (in thousands) | Item | March 31, 2022 | December 31, 2021 | $ Change | % Change | | :-------------------------------- | :------------- | :---------------- | :------- | :------- | | Contract liabilities | $(4,915) | $(5,265) | $350 | (6.6)% | - The company expects to recognize an additional **$2.2 million** in license and royalty revenue in the remainder of 2022 from a **$10.0 million** upfront payment received from a customer in April 2017, with the remaining contract liability recognition uncertain beyond 12 months[45](index=45&type=chunk) Investment Securities, Available-for-Sale (as of March 31, 2022, in thousands) | Asset Type | Fair Value (Level 2) | | :-------------------------------- | :------------------- | | Corporate debt securities | $34,174 | | U.S. Treasury securities | $13,477 | | Total | $47,651 | - For the three months ended March 31, 2022 and 2021, one customer accounted for **100% of total revenue** (**$350,000** and **$479,000**, respectively)[55](index=55&type=chunk) Inventory (in thousands) | Item | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Raw materials | $1,815 | $1,780 | | Total Inventory | $1,815 | $1,780 | Share-Based Compensation Expense (Three Months Ended March 31, in thousands) | Expense Category | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Research and development expense | $1,833 | $1,184 | | Sales, marketing, general and administrative expense | $1,901 | $454 | | Total | $3,734 | $1,638 | Options and Restricted Stock Activity (as of March 31, 2022) | Item | Shares | Weighted-Average Exercise Price / Price | | :-------------------------------- | :------- | :------------------------------------ | | Options Outstanding | 1,338,000 | $1.38 | | Options Exercisable | 1,013,000 | $1.58 | | Unvested RSUs/PSUs (Dec 31, 2021) | 2,625,000 | $13.05 | | Granted RSUs/PSUs | 1,742,000 | $4.07 | | Unvested RSUs/PSUs (Mar 31, 2022) | 4,025,000 | $9.17 | - The company entered into two new office lease agreements in September 2021 in Redmond, Washington, with initial terms of **128 and 120 months**, respectively, and total minimum lease payments of **$6.4 million** and **$13.0 million**[64](index=64&type=chunk)[65](index=65&type=chunk) Lease Expense (Three Months Ended March 31, in thousands) | Lease Type | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Operating lease expense | $244 | $116 | | Total finance lease expense | $9 | $9 | | Total lease expense | $253 | $125 | Maturities of Lease Liabilities (as of March 31, 2022, in thousands) | Years Ended December 31, | Operating leases | Finance leases | | :-------------------------------- | :--------------- | :------------- | | 2022 | $600 | $19 | | 2023 | $535 | $21 | | 2024 | $551 | $- | | 2025 | $567 | $- | | Thereafter | $4,069 | $- | | Total minimum lease payments | $6,322 | $40 | - The company is not currently party to any legal proceedings that management believes are reasonably possible to have a material adverse effect on its financial position, results of operations, or cash flows[69](index=69&type=chunk) - As of March 31, 2022, the company had issued **4.0 million shares** of common stock for net proceeds of **$67.8 million** under a **$140.0 million** ATM equity offering agreement entered in June 2021, with no transactions in Q1 2022[70](index=70&type=chunk)[99](index=99&type=chunk) - Under a **$50.0 million** ATM equity offering agreement from February 2021, the company issued **2.5 million shares** for net proceeds of **$48.8 million**, with no further shares available[71](index=71&type=chunk)[100](index=100&type=chunk) - Under a **$13.0 million** ATM equity offering agreement from December 2020, the company issued a total of **2.1 million shares** for net proceeds of **$12.7 million**, with no further shares available[72](index=72&type=chunk)[101](index=101&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on MicroVision's Q1 2022 financial condition and operational results, highlighting the strategic shift to automotive lidar, performance drivers, liquidity, and COVID-19 impact [Overview and Business Strategy](index=20&type=section&id=Overview) This section outlines MicroVision's primary focus on automotive lidar sensors and perception software for ADAS, leveraging its MEMS-based LBS technology, and discusses revenue expectations - MicroVision's development efforts are primarily focused on automotive lidar sensors and perception software for Advanced Driver-Assistance Systems (ADAS), leveraging its patented MEMS-based laser beam scanning (LBS) technology[75](index=75&type=chunk)[76](index=76&type=chunk) - The company completed its A-Sample long-range lidar module in 2021 and expects to test and demonstrate its ADAS solution capabilities during the first half of 2022[77](index=77&type=chunk)[78](index=78&type=chunk) - While small quantities of sales are forecasted for 2022, significant, sustained revenue from the ADAS solution is not expected in the near term[78](index=78&type=chunk) - Revenue in the past two fiscal years and the current quarter was derived solely from **Microsoft Corporation**, related to components for a high-definition display system, generating insignificant royalty income[80](index=80&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20operations) This section analyzes MicroVision's financial performance for the three months ended March 31, 2022 and 2021, detailing changes in revenue, cost of revenue, and operating expenses License and Royalty Revenue (Three Months Ended March 31, in thousands) | Item | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | License and royalty revenue | $350 | $479 | $(129) | (26.9)% | - The decrease in license and royalty revenue was due to a lower number of royalty-bearing products distributed by the customer[87](index=87&type=chunk) Cost of Product Revenue (Three Months Ended March 31, in thousands) | Item | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | Cost of product revenue | $4 | $(5) | $9 | (180.0)% | - The credit in 2021 was related to the reversal of accrued warranty liabilities due to lower-than-expected warranty claims[88](index=88&type=chunk) Research and Development Expense (Three Months Ended March 31, in thousands) | Item | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | Research and development expense | $7,593 | $4,462 | $3,131 | 70.2% | - The increase in R&D expense was primarily driven by increased salary and benefits (**$1.5 million**), higher non-cash compensation (**$648,000**), and higher non-labor direct expenses related to lidar sensor development (**$611,000**)[90](index=90&type=chunk) Sales, Marketing, General and Administrative Expense (Three Months Ended March 31, in thousands) | Item | 2022 | 2021 | $ Change | % Change | | :-------------------------------- | :----- | :----- | :------- | :------- | | Sales, marketing, general and administrative expense | $5,877 | $2,247 | $3,630 | 161.5% | - The increase in SG&A expense was mainly due to higher non-cash compensation (**$1.4 million**), increased professional services and consulting costs (**$804,000**), increased business insurance expense (**$565,000**), and increased salary and benefits (**$493,000**)[93](index=93&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20capital%20resources) This section assesses MicroVision's financial liquidity and capital resources as of March 31, 2022, including cash, investments, and cash flow activities, and its ability to fund future operations - As of March 31, 2022, total liquidity was **$103.3 million**, comprising **$55.6 million** in cash and cash equivalents and **$47.7 million** in short-term investment securities[94](index=94&type=chunk) - Based on the current operating plan, the company anticipates having sufficient cash and cash equivalents to fund operations for at least the next 12 months[95](index=95&type=chunk) Net Cash Flow Activities (Three Months Ended March 31, in thousands) | Activity | 2022 | 2021 | | :-------------------------------- | :--------- | :--------- | | Net cash used in operating activities | $(10,907) | $(4,531) | | Net cash used in investing activities | $(16,080) | $(565) | | Net cash (used in) provided by financing activities | $(49) | $63,572 | - Cash used in operating activities increased primarily due to higher operating expenses supporting lidar sensor development[96](index=96&type=chunk) - Net cash used in investing activities significantly increased due to purchases of short-term investment securities (**$16.7 million**) and property and equipment (**$884,000**)[97](index=97&type=chunk) - Net cash used in financing activities in 2022 contrasts with net cash provided in 2021, primarily due to principal payments on long-term debt (**$294,000**) and lower proceeds from stock option exercises (**$253,000** vs. **$2.1 million** in 2021), with no ATM equity offering transactions in Q1 2022[98](index=98&type=chunk)[99](index=99&type=chunk) [Continuing Impact of COVID-19 on Business](index=21&type=section&id=Continuing%20Impact%20of%20COVID-19%20on%20Our%20Business) This section addresses the ongoing adverse effects of the COVID-19 pandemic on MicroVision's business operations, including productivity, supply chain, and development activities - The ongoing COVID-19 pandemic continues to impact business operations, potentially causing reductions in productivity, disruptions to business routines, and adverse effects on development and productization activities[82](index=82&type=chunk) - Supply chain disruptions due to supplier closures or reduced capacity have resulted in lower component availability, and global travel restrictions have hampered business development efforts[83](index=83&type=chunk) [Key Accounting Policies and Estimates](index=21&type=section&id=Key%20accounting%20policies%20and%20estimates) This section confirms that there have been no significant changes to MicroVision's critical accounting judgments, policies, and estimates since its last annual report - There have been no significant changes to the company's critical accounting judgments, policies, and estimates as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2021[84](index=84&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section assesses MicroVision's exposure to market risks, including interest rate, liquidity, and foreign exchange, concluding these are not material due to short-term investments and U.S. dollar contracts - The company believes its exposure to market and interest rate risk is not material due to variable interest rates on cash and cash equivalents and the generally short-term maturities of its investment securities[102](index=102&type=chunk) - Foreign exchange rate risk is not material as major contracts and licensing activity payments are currently made in U.S. dollars, although future foreign currency arrangements may occur[104](index=104&type=chunk) Cash and Cash Equivalents and Investment Securities (as of March 31, 2022, in thousands) | Item | Amount | Percent | | :-------------------------------- | :----- | :------ | | Cash and cash equivalents | $55,611 | 53.9% | | Less than one year (Investments) | $47,651 | 46.1% | | Total | $103,262 | 100.0% | [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022, under the supervision of management, including the Principal Executive Officer and Principal Financial Officer[105](index=105&type=chunk) - There were no material changes in internal control over financial reporting during the quarter ended March 31, 2022[105](index=105&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers MicroVision's legal proceedings, risk factors, exhibits, and signatures, providing additional context beyond the financial statements [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to routine claims but has no legal proceedings management believes would materially adversely affect its financial position, results, or cash flows - The company is not currently party to any legal proceedings that management believes are reasonably possible to have a material adverse effect on its financial position, results of operations, or cash flows[108](index=108&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could materially affect MicroVision's business, financial condition, and future results, categorized by business operations, financial performance, general operations, and automotive industry challenges [Risks Related to Our Business](index=25&type=section&id=Risk%20Factors%20Related%20to%20Our%20Business) This section details risks associated with MicroVision's business, including a history of operating losses, potential need for additional capital, and the ongoing adverse effects of the COVID-19 pandemic - The company has a history of substantial operating losses since inception and expects to incur significant losses in the future, with no assurance of achieving or maintaining profitability[110](index=110&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk) - Additional capital may be required to fund operations beyond the next 12 months, and there is no assurance that such capital will be available on acceptable terms or without diluting current shareholders' investment[114](index=114&type=chunk)[117](index=117&type=chunk) - The COVID-19 pandemic continues to have an adverse effect on the business, potentially causing difficulties in raising capital, delays in technology development, supply chain disruptions, and challenges in engaging with potential customers and partners[113](index=113&type=chunk)[115](index=115&type=chunk) [Risks Related to our Financial Statements and Results](index=26&type=section&id=Risks%20Related%20to%20our%20Financial%20Statements%20and%20Results) This section highlights financial risks, including revenue concentration from a single customer, internal control weaknesses, stock price volatility, Nasdaq listing compliance, and competitive resource limitations - The company's revenue is generated from a single customer, accounting for **100% of total revenue** for the three months ended March 31, 2022 and 2021, making it highly vulnerable to the loss of this customer[118](index=118&type=chunk) - A material weakness was identified in internal controls supporting the determination of equity award grant dates, which could lead to material misstatements in financial statements and harm investor confidence[119](index=119&type=chunk) - The company's stock price has fluctuated significantly, recently declined, and may remain volatile, potentially causing substantial losses for investors, including risks from 'short squeezes' disconnected from underlying value[120](index=120&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) - Failure to maintain listing on The Nasdaq Global Market could reduce stock liquidity and subject it to 'penny stock rules,' making it more difficult for investors to trade shares[124](index=124&type=chunk)[125](index=125&type=chunk) - The company's financial and technical resources are substantially less than many competitors, which may limit its revenues, potential profits, overall market share, or value[127](index=127&type=chunk) [Risks Related to Our Operations](index=28&type=section&id=Risks%20Related%20to%20Our%20Operations) This section covers operational risks, including supply chain reliance, dependence on third parties, potential litigation, management of expansion, customer negotiation power, regulatory changes, and global economic uncertainties - Reliance on single or limited-source suppliers and contract manufacturers for components and products creates risks of delays, increased costs, and damaged customer relationships if supply chain disruptions occur[128](index=128&type=chunk) - The business strategy depends on third parties (OEMs, ODMs) for development, manufacturing, licensing, sales, and marketing, which reduces control and introduces risks of unsuccessful arrangements or inability to commercialize technology[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - The company could face costly lawsuits related to its LBS technology or other technologies, including patent infringement claims, which could limit commercialization, increase operating expenses, and divert management attention[132](index=132&type=chunk)[133](index=133&type=chunk) - Failure to effectively manage expansion, particularly after a substantial headcount reduction, could strain management systems and resources, adversely affecting revenue and expenses[134](index=134&type=chunk) - Targeting large, multinational customers with substantial negotiating power and potentially competitive internal solutions makes it difficult to secure series production awards or commercialize products on profitable terms[135](index=135&type=chunk) - Future environmental, health, and safety regulations could increase development and production costs for the company's technology and products, potentially impacting commercialization[136](index=136&type=chunk) - Operating results may be adversely impacted by worldwide political and economic uncertainties, including economic downturns, inflation, increased energy costs, and global conflicts or health crises[137](index=137&type=chunk)[139](index=139&type=chunk) - Expanding international operations and using foreign suppliers expose the company to economic, political, regulatory, and currency risks in foreign countries[138](index=138&type=chunk)[139](index=139&type=chunk) - Potential acquisitions carry risks of integration difficulties, diversion of management resources, substantial cash use, dilutive equity issuances, and potential impairment charges[140](index=140&type=chunk)[141](index=141&type=chunk) - Supplier facilities are vulnerable to natural disasters or labor strikes, which could result in prolonged interruptions, significant delays in product shipments, and loss of sales and customers[142](index=142&type=chunk) - Inability to obtain or maintain effective intellectual property protection for products, processes, and technology could lead to increased competition and negatively affect the company's competitive position[143](index=143&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) - The company could be subject to significant product liability claims, particularly for LBS technology scanning light into users' eyes, which could be costly, divert management attention, harm reputation, and affect insurance coverage[147](index=147&type=chunk)[148](index=148&type=chunk) - Operations are vulnerable to information technology system failures, network disruptions, or cyber security breaches, which could lead to data damage, interruptions, and potential financial losses[149](index=149&type=chunk) - Loss of key personnel or inability to attract and retain qualified new personnel could negatively affect business operations, strategy execution, and ability to compete effectively[150](index=150&type=chunk) [Risks Related to Development for the Automotive Industry](index=31&type=section&id=Risks%20Related%20to%20Development%20for%20the%20Automotive%20Industry) This section addresses specific risks in automotive development, such as securing production wins, product complexity, industry conditions, alternative technologies, ADAS adoption delays, and market forecasting uncertainties - Failure to secure 'series production wins' from automotive OEMs or Tier 1 suppliers for ADAS systems would materially and adversely affect future business prospects due to extensive testing, qualification processes, and long design cycles[151](index=151&type=chunk) - The highly technical and complex nature of products, combined with limited visibility into usage conditions, could result in unforeseen delays, defects, errors, or reliability issues, damaging reputation and exposing the company to product liability claims[152](index=152&type=chunk) - Adverse conditions in the automotive industry or the global economy, such as cyclical production, changes in consumer spending, interest rates, or regulatory requirements, could negatively impact demand for products and results of operations[153](index=153&type=chunk) - Significant developments in alternative technologies, such as cameras and radar, may adversely affect the demand for lidar technology and reduce its competitiveness if OEMs prefer these alternatives[154](index=154&type=chunk) - Delays in the adoption of ADAS features by OEMs, potentially due to cost pressures or new safety standards, could negatively impact the company's business prospects[155](index=155&type=chunk) - The rapidly evolving lidar and ADAS markets make it difficult to forecast customer adoption rates, demand, and selling prices, leading to uncertainty in future financial performance[157](index=157&type=chunk) - Market opportunity estimates and growth forecasts for lidar-based technology are subject to significant uncertainty and may not materialize as anticipated, affecting business growth and financial results[158](index=158&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various certifications (Principal Executive Officer, Principal Financial Officer) and Inline XBRL documents - The exhibits include certifications from the Principal Executive Officer and Principal Financial Officer, as required by the Sarbanes-Oxley Act of 2002[159](index=159&type=chunk) - Inline XBRL documents, including the instance document, taxonomy extension schema, calculation, definition, label, and presentation linkbase documents, are also filed as exhibits[159](index=159&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report is duly signed on behalf of MicroVision, Inc. by its Chief Executive Officer and Chief Financial Officer, certifying its submission as required by the Securities Exchange Act of 1934 - The report is signed by Sumit Sharma, Chief Executive Officer and Director (Principal Executive Officer), and Anubhav Verma, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on April 28, 2022[163](index=163&type=chunk)

Financial Data and Key Metrics Changes - The company recognized $350,000 in royalty revenue from Microsoft in Q1 2022, with an expectation to recognize $2.5 million for the entire year against the contract liability [34][36] - R&D expenses totaled $7.6 million in Q1 2022, up from $4.5 million in the previous year, primarily due to increased headcount and inflation-based salary adjustments [37] - SG&A expenses increased to $5.9 million in Q1 2022 from $2.2 million last year, driven by higher non-cash stock-based compensation and increased payroll expenses [38] - Cash used in operating activities was $10.9 million in Q1 2022, including approximately $1.5 million of one-time non-recurring payments [39] - The company finished the quarter with liquidity of $103 million, including investment securities, which increased from $33 million at the end of December to $47.6 million at the end of March [40] Business Line Data and Key Metrics Changes - The company is focused on securing partnerships with OEMs and Tier 1 suppliers to provide LiDAR technology for ADAS systems, with demo vehicles ready by the end of June [9][13] - The business model is built on partnering with OEMs, with hardware contributing 25% and software 75% of total revenue [30] Market Data and Key Metrics Changes - The cumulative revenue opportunity for LiDAR sensors is estimated at $80 billion through 2030, with MicroVision's potential revenue between $2 billion to $4 billion based on an average selling price of $500 [28][29] - The company expects to start strategic sales in the second half of 2022, with sample sales anticipated [18] Company Strategy and Development Direction - The company aims to take a leadership role in the ADAS space by providing advanced highway pilot safety features through its integrated hardware and software solutions [19][20] - The focus remains on executing the go-to-market strategy and building momentum towards securing OEM partnerships [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the technology and the ongoing track testing of the integrated LiDAR solution, which is crucial for demonstrating capabilities to OEMs [24][45] - The company anticipates a moderately higher cash burn in 2022 compared to 2021 as it scales the business and invests in growth [40] Other Important Information - The company has secured materials needed to meet objectives for 2022 and 2023, mitigating supply chain disruptions [61][63] - The ATM facility remains available for strategic use, with $140 million currently accessible [53][56] Q&A Session Summary Question: What were the biggest selling points for OEMs? - Management highlighted the technology's pedigree, reliability, and the comprehensive feature set including range and resolution as key selling points [50][52] Question: How will the ATM program be used going forward? - The ATM facility is viewed as a flexible tool for funding growth plans, to be used judiciously based on market conditions [56] Question: Is there consideration for targeting non-automobile verticals? - The primary focus remains on securing a foothold in the ADAS market, with potential exploration of other segments once hardware is available [58][59] Question: What is the visibility into supply chain disruptions? - The supply chain team has secured necessary materials, and the company is well-positioned to mitigate risks associated with supply chain issues [61][63] Question: How does MicroVision's LiDAR solution compare to competitors? - Management emphasized the importance of range, resolution, and velocity, asserting that their solution meets all three criteria effectively [87][89]

Integrated Lidar and Software Solution for ADAS L3 and L2+ MicroVision Q1 2022 Financial Results and Update A p r i l 2 7 , 2 0 2 2 Safe Harbor Statements © 2021 MICROVISION, INC. ALL RIGHTS RESERVED. 1 This presentation of MicroVision, Inc. ("MicroVision," "the Company," "we," or "our"), and any accompanying oral presentation, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. S ...

Integrated Lidar and Software Solution for ADAS L3 and L2+ MicroVision FY 2021 Financial results and update F e b r u a r y 2 4 , 2 0 2 2 Safe Harbor Statements © 2021 MICROVISION, INC. ALL RIGHTS RESERVED. 1 This presentation of MicroVision, Inc. ("MicroVision," "the Company," "we," or "our"), and any accompanying oral presentation, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amen ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 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) Delaware 91-1600822 (State or Other ...