Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'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 Discussion and Analysis of Financial Condition and Results of Operations," and Item 3, "Quantitative and Qualitative Disclosures about Market Risk," includes "Forward-Looking Statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "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, cooperative arrangements, 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," "will" 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 committed to driving the global adoption of our proprietary products, which leverage our deterministic AI "at the edge" with our innovative perception and application software running on our diverse lidar sensors. Our solutions enable ADAS and autonomy features for customers in a wide range of industries, including robotics, automated warehouse, agriculture, mining, military, and automotive. Our deterministic AI at the edge software running on our sensors enables intelligent autonomous, active safety, and automation systems which depend on secure, cost-effective, and energy-efficient solutions. This software has been developed in close collaboration with our automotive customers and we are now rapidly expanding with it into new industrial and commercial vehicle sectors.

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

Founded in 1993, MicroVision, Inc. is a pioneer in laser beam scanning, or LBS technology, which is based on our patented technology 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, more recently, lidar sensors and software solutions for industrial, automotive, and military markets.

In January 2023, we acquired certain strategic assets of Germany-based 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 premium, or Tier 1, automotive supplier and that is currently available in passenger cars by premium original equipment manufacturers, or 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, agriculture, smart infrastructure and robotics applications.

Our integrated solution, built on our perception software stack, combines our lidar sensors, both MEMS-based and flash-based, and application software targeted for sale to industrial mobility and autonomy companies, automotive OEMs and Tier 1 suppliers, and defense contractors. Our deterministic AI at the edge enables critical decisions to be made locally and independent of the cloud, leading to faster responses, improved data privacy, and reduced costs. Our mature perception software stack has met the rigorous requirements of automotive qualification and incorporates advanced features, like localization and fusion. Our lidar sensors include MAVIN™, a MEMS-based long-range sensor capable of small object detection, and MOVIA™, a flash-based short- to mid-range sensor, both suitable for industrial and automotive applications. We also develop customer-specific application software, allowing expansion into a wide array of sectors.

Recently, we entered into an Asset Purchase Agreement to acquire Scantinel Photonics GmbH ("Scantinel"), a Germany-based developer of 1550 nm FMCW lidar technology. This acquisition will add the complementary technology of FMCW-based lidar to our product portfolio, giving us the unique advantage amongst our peer of offering both Time-of-Flight and FMCW sensors.

Our product suite also includes our validation software tool, the MOSAIK™ suite, which is targeted for use by OEMs and Tier 1s for validating vehicle sensors for ADAS and autonomous driving, or AD, applications. In 2024, we reduced the dedicated resources and investment into further development of MOSAIK. Specifically, in 2024, in an effort to better align our resources with our product plan, we restructured and reorganized our workforce and related expenditures to strategically focus on our perception software and MAVIN and MOVIA products. While this 41% reduction in workforce added approximately $6.0 million to our fiscal year 2024 expenses, it reduced go-forward operating expenses through reduced personnel expenses and other operational efficiencies.

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 supporting AR headsets. This technology was integrated into products marketed to consumer and military sectors.

To date, we have been unable to secure customers at the scale needed to successfully launch our products. We have incurred significant losses since inception and we expect to continue to incur significant losses in the near term. We have funded our operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales and licensing activities. In October 2024, we entered into a securities purchase agreement with an institutional investor for the sale of up to $75.0 million in senior secured convertible notes. See Part I, Item 1, Note 6. Notes Payable and Derivative Liability. In February 2025, we entered into another securities purchase agreement with the same institutional investor for the issuance and sale of $8.0 million in shares of common stock, plus warrants to purchase additional shares of common stock for approximately $9.0 million. See Part I, Item 1, Note 7. Warrant Liability.

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that materially affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We evaluate our estimates on a continuous basis. We base our estimates on historical data, terms of existing contracts, our evaluation of trends in the consumer display and 3D sensing industries, information provided by our current and prospective customers and strategic partners, information available from other outside sources and on various other assumptions we believe to be reasonable under the circumstances. The results form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant changes to our critical accounting judgments, policies, and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

Revenue

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	241			$	190			$	51				26.8
Nine Months Ended September 30,			985				3,046				(2,061	)			(67.7	)

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 recognize revenue either at a point in time, or over time, depending upon the characteristics of the individual contract. If control of the deliverable(s) occurs over time, the revenue is recognized in proportion to the transfer of control. If control passes to the customer only upon completion and transfer of the asset, revenue is recognized at the completion of the contract.

The decrease in revenue for the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to higher sales of sensors to industrial customers in the 2024 period driven by shipments of MOVIA L sensors to Daimler Truck North America and affiliates as part of RFQ evaluation processes.

Cost of Revenue

(in thousands)		2025				% of revenue				2024				% of revenue				$ change				% change
Three Months Ended September 30,		$	957				397.1			$	583				306.8			$	374				64.2
Nine Months Ended September 30,			2,223				225.7				3,414				112.1				(1,191	)			(34.9	)

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

Cost of revenue can fluctuate significantly from period to period, depending on the product mix and volume, the level of overhead expense and the volume of direct material purchased. The decrease in cost of revenue for the three and nine months ended September 30, 2025 compared to the same periods in 2024 was primarily due to decreased revenue and the revenue mix.

Research and Development Expense

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	7,978			$	8,736			$	(758	)			(8.7	)
Nine Months Ended September 30,			23,039				40,251				(17,212	)			(42.8	)

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 decrease in research and development expense during the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to a reduced workforce resulting in lower salary and benefits expense of $0.5 million and lower IT and software costs of $0.3 million, partially offset by higher building costs of $0.4 million and higher travel costs of $0.3 million.

The decrease in research and development expense during the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to a reduced workforce resulting in lower salary and benefits expense of $8.5 million, lower restructuring charges of $5.1 million, lower purchased services of $1.7 million, lower IT and software costs of $0.8 million, and lower direct materials and equipment costs of $0.4 million, partially offset by higher building costs of $0.6 million.

Sales, marketing, general and administrative expense

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	4,027			$	6,599			$	(2,572	)			(39.0	)
Nine Months Ended September 30,			17,140				23,423				(6,283	)			(26.8	)

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 decrease in sales, marketing, general and administrative expense during the three months ended September 30, 2025 compared to the same period in 2024 was primarily due to lower non-cash share-based compensation expense of $4.2 million from the reversal of previously recognized expense related to the forfeiture of awards in connection with the CEO separation that occurred in the three months ended September 30, 2025, and lower professional service fees of $0.3 million, partially offset by higher severance expense of $1.2 million and advertising costs of $0.3 million and higher travel costs of $0.3 million.

The decrease in sales, marketing, general and administrative expense during the nine months ended September 30, 2025 compared to the same period in 2024 was primarily due to lower non-cash share-based compensation expense of $4.2 million from the reversal of previously recognized expense related to the forfeiture of awards in connection with the CEO separation that occurred in the three months ended September 30, 2025, lower salary and benefits expense of $2.8 million, lower restructuring charges of $0.7 million, and lower trade show expense of $0.4 million, partially offset by higher purchased services of $0.4 million, higher building costs of $0.4 million, higher recruiting costs of $0.4 million, higher travel costs of $0.3 million, and higher advertising costs of $0.3 million.

Impairment loss on intangible assets

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	-			$	-			$	-				-
Nine Months Ended September 30,			-				3,027				(3,027	)			(100.0	)

Impairment loss on intangible assets includes impairment charges on intangible assets. During the nine months ended September 30, 2024, management identified impairment indicators related to MOSAIK software. We performed an assessment of projected future cash flows which resulted in a $3.0 million impairment charge and reduction in the estimated useful life of the asset. See Item 1, Note 8. Financial Statement Components - Intangible Assets for additional discussion.

Interest expense

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	(2,197	)		$	(21	)		$	(2,176	)			10,361.9
Nine Months Ended September 30,			(17,270	)			(51	)			(17,219	)			33,762.7

The increase in interest expense during the three months ended September 30, 2025 compared to the same period in 2024 relates to non-cash interest expense related to amortization of the debt discount on notes payable.

The increase in interest expense during the nine months ended September 30, 2025 compared to the same period in 2024 relates to $7.3 million of non-cash interest expense representing the discount on the 2025 Purchase Agreement for warrants and shares of common stock (see Part I, Item 1, Note 7. Warrant Liability), $7.9 million of non-cash interest expense related to amortization of the debt discount and issuance costs on notes payable, and $2.1 million of non-cash interest expense related to the modification of notes payable (see Part I, Item 1, Note 6. Notes Payable and Derivative Liability).

Unrealized gain on derivative liability

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	1,059			$	-			$	1,059				-
Nine Months Ended September 30,			3,853				-				3,853				-

Unrealized gain on derivative liability reflects the revaluation of our derivative liability associated with notes payable as of September 30, 2025. Due to the decrease in the fair value of the derivative liability as of September 30, 2025, we recognized an unrealized gain. See Part I, Item 1, Note 6. Notes Payable and Derivative Liability for additional discussion.

Unrealized (loss) gain on warrant liability

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	(326	)		$	-			$	(326	)			-
Nine Months Ended September 30,			2,238				-				2,238				-

Unrealized (loss) gain on warrant liability reflects the revaluation of our warrant liability as of September 30, 2025. During the three months ended September 30, 2025, due to the increase in the fair value of the warrant liability during the period, we recognized an unrealized loss. During the nine months ended September 30, 2025, due to the decrease in the fair value of the warrant liability during the period, we recognized an unrealized gain. See Part I, Item 1, Note 7. Warrant Liability for additional discussion.

Realized loss on debt extinguishment

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	-			$	-			$	-				-
Nine Months Ended September 30,			(4,654	)			-				(4,654	)			-

As a result of the debt modification during the nine months ended September 30, 2025, we recognized a loss on extinguishment of notes payable. See Part I, Item 1, Note 6. Notes Payable and Derivative Liability for additional discussion.

Other income

(in thousands)		2025				2024				$ change				% change
Three Months Ended September 30,		$	140			$	318			$	(178	)			(56.0	)
Nine Months Ended September 30,			363				1,764				(1,401	)			(79.4	)

The decrease in other income during the three and nine months ended September 30, 2025 compared to the same period in 2024 is primarily due to decreased interest income.

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. As of September 30, 2025, we had $72.8 million in cash and cash equivalents and $26.7 million in short-term investment securities. Also on that date, we had approximately $46.2 million availability left on our existing $150.0 million ATM facility that was put in place in the first quarter of 2024. In addition, we have a remaining commitment pursuant to the convertible note facility of $30.0 million, subject to certain limitations. 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 $43.3 million during the nine months ended September 30, 2025 compared to cash used in operating activities of $53.5 million during the same period in 2024. Cash used in operating activities resulted primarily from cash used to fund our net loss, after adjusting for non-cash charges such as share-based compensation, intangible impairment expense, depreciation and amortization charges, unrealized gains and losses, and changes in operating assets and liabilities. The changes in cash used in operating activities were primarily attributed to decreased operating expenses related to personnel. We expect to make minimum payments to our contract manufacturing partner in connection with the production of MOVIA L sensor inventory of approximately $2.0 million during the remainder of 2025 and 2026 in line with agreed-upon deliveries.

Investing activities

During the nine months ended September 30, 2025, net cash used in investing activities was $6.6 million compared to net cash used in investing activities of $3.8 million during the same period in 2024. During the nine months ended September 30, 2025, we purchased short-term investment securities totaling $32.9 million and sold short-term investment securities totaling $26.7 million, compared to purchases of $25.6 million and sales of $28.3 million in the same period of 2024. During the nine months ended September 30, 2024, we made payments totaling $6.3 million related to the acquisition of Ibeo assets.

Financing activities

Net cash provided by financing activities totaled $67.8 million during the nine months ended September 30, 2025, compared to net cash provided by financing activities of $26.2 million during the same period of 2024. During the nine months ended September 30, 2025, we repaid $5.0 million principal on our outstanding note payable plus a 10% repayment premium. Net proceeds from issuance of common stock and warrants were $73.3 million during nine months ended September 30, 2025 compared to $26.1 million during the same period in 2024.

The following is a list of our financing activities during 2025 and 2024.

	●	In February 2025, we entered into a securities purchase agreement for the purchase of 5,750,225 shares of our common stock and warrants to purchase 5,750,225 shares of our common stock for $1.57 per share. We received proceeds, net of all costs, of $7.8 million.
	●	In October 2024, we entered into a securities purchase agreement for the purchase of senior secured convertible notes with an institutional investor. The principal amount for the initial note is $45.0 million, with an option for us to issue additional principal in the amount of $30.0 million of convertible notes to the holder, subject to certain limitations. We received proceeds, net of all costs, of $38.1 million.
	●	In March 2024, we entered into a $150.0 million ATM equity offering agreement with Deutsche Bank Securities, Inc., Mizuho Securities USA LLC and Craig-Hallum Capital Group LLC (collectively, the "Agents"). Under the agreement, we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $150.0 million through or directly to the Agents. As of September 30, 2025, we completed sales under such sales agreement of 77.6 million shares for net proceeds of $99.9 million. As of September 30, 2025, we had approximately $46.2 million available under this sales agreement.