Quarterly Report for Quarter Ending March 31, 2026 (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 defining the next generation of lidar-based perception solutions for automotive, industrial, and security & defense markets. We deliver integrated hardware and software solutions designed for real-world performance, automotive-grade reliability, and economic scalability. Our diverse portfolio of lidar sensors, with both short- and long-range lidar solutions, feature solid-state sensors with varying wavelengths, advanced sensor architectures, design-to-cost engineering, and open software solutions.

Our solutions enable advanced driver assistance systems, or ADAS, and autonomy features for customers in a wide range of markets, including automotive, industrial, and security & defense. Target industrial sectors include robotics, automated warehouse, agriculture, and mining. Our integrated hardware and software solutions enable intelligent autonomous, active safety, and automation systems which depend on secure, cost-effective, and energy-efficient solutions. Our software has been developed in close collaboration with automotive customers and also has broad application in industrial, defense, and commercial vehicle sectors.

We have incurred substantial losses since inception and expect to incur significant losses in the near term. 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. In October 2024, we entered into a securities purchase agreement with an institutional investor for the purchase of senior secured convertible notes of up to $75.0 million. See Part I, Item 1, Note 7. 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 8. Warrant Liability. In February 2026, we entered into a securities purchase and exchange agreement with the same investor, pursuant to which we issued two senior secured convertible notes due March 2028 - one for approximately $20.6 million in exchange for the previously existing senior secured convertible note due March 2026 and the other for approximately $22.4 million. See Part I, Item 1, Note 7. Notes Payable and Derivative Liability for additional discussion.

There can be no assurance that additional capital will be available or that, if available, it will be available on terms acceptable to us on a timely basis. We cannot be certain that we will succeed in commercializing our technology or products.

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 industries relevant to our strategic plan, 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, 2025.

Results of Operations

Revenue

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	935			$	589			$	346				58.7

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 increase in revenue for the three months ended March 31, 2026 compared to the same period in 2025 was primarily due to shipments of our long-range IRIS sensors to automotive and industrial customers and shipments of our short-range MOVIA L sensors to a security and defense customer, among others.

Cost of revenue

						% of								% of								%
(in thousands)		2026				Revenue				2025				Revenue				$ change				change
Three Months Ended March 31,		$	572				61.2			$	550				93.4			$	22				4.0

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.

Research and development expense

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	14,445			$	7,403			$	7,042				95.1

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 March 31, 2026 compared to the same period in 2025 was primarily due to higher salary and benefits expense of $3.7 million due to increased headcount from acquisitions (see Part I, Item 1, Note 4. Business Combinations), higher one-time employee-related restructuring charges of $1.0 million stemming from the Luminar acquisition and Consolidation Plan, higher building expenses of $0.7 million, higher direct materials and equipment costs of $0.5 million, and higher IT and software costs of $0.3 million. These increases were partially offset by lower share-based compensation expense of $0.3 million.

Sales, marketing, general and administrative expense

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	9,511			$	6,676			$	2,835				42.5

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 March 31, 2026 compared to the same period in 2025 was primarily due to higher salary and benefits expense of approximately $1.4 million due to increased headcount from acquisitions, higher professional and purchased service fees of $2.6 million primarily related to acquisitions (see Part I, Item 1, Note 4. Business Combinations), and higher employee-related restructuring charges of $0.1 million. These increases were partially offset by lower share-based compensation expense of $0.7 million and lower building expenses of $0.3 million.

Interest expense

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	(2,753	)		$	(12,903	)		$	10,150				(78.7	)

The decrease in interest expense during the three months ended March 31, 2026 compared to the same period in 2025 primarily 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 8. Warrant Liability) and $2.1 million of non-cash interest expense related to the modification of notes payable during the three months ended March 31, 2025 (see Part I, Item 1, Note 7. Notes Payable and Derivative Liability).

Unrealized gain on derivative liability

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	3,380			$	842			$	2,538				301.4

Unrealized gain on derivative liability reflects the revaluation of our derivative liability associated with notes payable as of March 31, 2026. Due to the decrease in the fair value of the derivative liability as of March 31, 2026 driven primarily by the decrease in our stock price, we recognized an unrealized gain. See Part I, Item 1, Note 7. Notes Payable and Derivative Liability for additional discussion.

Unrealized gain on warrant liability

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	604			$	1,761			$	(1,157	)			(65.7	)

Unrealized gain on warrant liability reflects the revaluation of our warrant liability as of March 31, 2026. Due to the decrease in the fair value of the warrant liability as of March 31, 2026 driven primarily by the decrease in our stock price, we recognized an unrealized gain. See Part I, Item 1, Note 8. Warrant Liability for additional discussion.

Realized loss on debt extinguishment

(in thousands)		2026				2025				$ change				% change
Three Months Ended March 31,		$	(3,083	)		$	(4,654	)		$	1,571				(33.8	)

As a result of the debt exchange during the three months ended March 31, 2026 and the debt modification during the three months ended March 31, 2025, we recognized losses on the extinguishment of notes payable. See Part I, Item 1, Note 7. Notes Payable and Derivative Liability for additional discussion.

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 March 31, 2026, the Company had $46.1 million in cash and cash equivalents. In addition to cash and cash equivalents, the Company also has potential availability of $42.0 million left on our existing $150.0 million ATM facility that was put in place in the first quarter of 2024, subject to certain limitations, including ongoing listing on The Nasdaq Global Market.

In consideration of the $46.1 million in cash and cash equivalents and $42.0 million on our existing ATM, the Company has total liquidity of $88.1 million. Pursuant to terms of the securities purchase and exchange agreement entered into in February 2026, we will maintain minimum cash liquidity of the lesser of $21.5 million or 110% of the then outstanding balance of the Note for the remaining duration of the Note term. Based on our current operating plan, including expected financing activities, 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 $16.4 million during the three months ended March 31, 2026 compared to cash used in operating activities of $14.1 million during the same period in 2025. Cash used in operating activities resulted primarily from cash used to fund our net loss, after adjusting for non-cash charges such as interest expense, share-based compensation, depreciation and amortization charges, unrealized and realized gains and losses, and changes in operating assets and liabilities. The changes in cash used in operating activities were primarily attributed to increased operating expenses related to personnel and operations; see Part I, Item 1, Note 4. Business Combinations.

Investing activities

During the three months ended March 31, 2026, net cash provided by investing activities was $9.2 million compared to net cash provided by investing activities of $3.1 million during the three months ended March 31, 2025. During the three months ended March 31, 2026, we sold short-term investment securities totaling $42.5 million to, in part, fund the $33.2 million purchase price to acquire from Luminar Technology, Inc. ("Luminar") certain assets related to Luminar's worldwide lidar sensor business (see Part I, Item 1, Note 4. Business Combinations). During the three months ended March 31, 2025, we purchased short-term investment securities totaling $10.3 million and sold short-term investment securities totaling $13.5 million.

Financing activities

Cash provided by financing activities totaled $21.0 million during the three months ended March 31, 2026, compared to net cash provided by financing activities of $8.2 million during the same period of 2025. During the three months ended March 31, 2026, we received approximately $20.7 million in net proceeds, inclusive of certain debt issuance costs, from the issuance of a $22.4 million senior secured convertible note (see Part I, Item 1, Note 7. Notes Payable and Derivative Liability). Net proceeds from issuance of common stock and warrants were $0.3 million during the three months ended March 31, 2026 compared to $8.2 million during the three months ended March 31, 2025.

The following is a list of our financing activities during 2026 and 2025.

	●	In February 2026, we entered into a securities purchase and exchange agreement with an institutional investor, pursuant to which we issued two senior secured convertible notes due March 2028 - one for approximately $20.6 million in exchange for the previously existing senior secured convertible note due March 2026 and the other for approximately $22.4 million.
	●	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 (the "Purchase Agreement") for the purchase of senior secured convertible notes (the "Note") with an institutional investor (the "Holder"). The principal amount for the initial note was $45.0 million. 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 March 31, 2026, we completed sales under such sales agreement of 80.6 million shares for net proceeds of $104.0 million. As of March 31, 2026, we have approximately $42.0 million available under this sales agreement.