Table of Contents
falseQ2--12-310000065770YesYesThe bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration and is included in Bargain purchase gain in the Condensed Consolidated Statement of Operations. 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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
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
 
 
 
LOGO
MicroVision, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
91-1600822
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
18390 NE 68
th
Street
Redmond, Washington 98052
(Address of Principal Executive Offices, including Zip Code)
(425)
936-6847
(Registrant’s Telephone Number, including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $0.001 par value per share
 
MVIS
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days.
YES  ☒    NO  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
YES  ☒    NO  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
Non-accelerated
filer
     Smaller reporting company  
     Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).
YES  ☐    NO  
The number of shares of the registrant’s common stock outstanding as of August 4, 2023 was 187,783,274.
 
 
 


Table of Contents

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION   
     Page  
Item 1. Financial Statements (unaudited)   
Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022      3  
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022      4  
Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2023 and 2022      5  
Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2023 and 2022      6  
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022      7  
Notes to Condensed Consolidated Financial Statements      8  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      22  
Item 3. Quantitative and Qualitative Disclosures About Market Risk      26  
Item 4. Controls and Procedures      27  
PART II. OTHER INFORMATION   
Item 1. Legal Proceedings      27  
Item 1A. Risk Factors      27  
Item 5. Other information      36  
Item 6. Exhibits      37  
Signatures      38  

 

2


Table of Contents
PART I.
ITEM 1. FINANCIAL STATEMENTS
MicroVision, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
 
    
June 30,
   
December 31,
 
    
2023
   
2022
 
Assets
    
Current assets
    
Cash and cash equivalents
   $ 62,308     $ 20,536  
Investment securities,
available-for-sale
     31,565       62,173  
Restricted cash, current
     3,263           
Accounts receivable, net
     821           
Inventory
     2,933       1,861  
Advance to Ibeo
              4,132  
Deferred tax current
     53           
Other current assets
     2,332       2,306  
  
 
 
   
 
 
 
Total current assets
     103,275       91,008  
Property and equipment, net
     9,949       6,830  
Operating lease
right-of-use
asset
     14,422       14,579  
Restricted cash
     961       1,418  
Intangible assets, net
     18,321       75  
Non-current deferred tax assets
     392           
Other assets
     1,335       1,086  
  
 
 
   
 
 
 
Total assets
   $ 148,655     $ 114,996  
  
 
 
   
 
 
 
Liabilities and shareholders’ equity
    
Current liabilities
    
Accounts payable
   $ 1,890     $ 2,061  
Accrued liabilities
     6,595       2,058  
Accrued liability for Ibeo business combination
     6,191           
Contract liabilities
     5,729       4,601  
Current portion of operating lease liability
     2,285       1,846  
Current portion of finance lease obligations
     8       21  
Other current liabilities
              839  
  
 
 
   
 
 
 
Total current liabilities
     22,698       11,426  
Operating lease liability, net of current portion
     13,371       13,829  
Other long-term liabilities
     81           
  
 
 
   
 
 
 
Total liabilities
  
36,150    
25,255  
  
 
 
   
 
 
 
Commitments and contingencies (Note 10)
    
Shareholders’ equity
    
Preferred stock, par value $0.001; 25,000 shares authorized; no and no shares issued and outstanding
                  
Common stock, par value $0.001; 310,000 shares authorized; 187,620 and 170,503 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively
     188       171  
Additional
paid-in
capital
     835,410       772,221  
Subscriptions receivable
     (925   —  
Accumulated other comprehensive loss
     (8     (127
Accumulated deficit
     (722,160 )     (682,524
  
 
 
   
 
 
 
Total shareholders’ equity
     112,505       89,741  
  
 
 
   
 
 
 
Total liabilities and shareholders’ equity
   $ 148,655     $ 114,996  
  
 
 
   
 
 
 
The accompanying notes are an integral part of these financial statements.
 
3

Table of Contents
MicroVision, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
 
    
Three Months Ended
   
Six Months Ended
 
    
June 30,
   
June 30,
 
    
2023
   
2022
   
2023
   
2022
 
Revenue
   $ 329     $ 314     $ 1,111     $ 664  
Cost of Revenue


701    
18    
1,245    
22  
  
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
  
(372  
296    
(134 )  
642  
  
 
 
   
 
 
   
 
 
   
 
 
 
Research and development expense
  
13,851    
7,700    
26,543    
15,293  
Sales, marketing, general and administrative expense
  
9,692    
6,265    
18,429    
12,142  
Gain on disposal of fixed assets
     (15              (15         
  
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
  
23,528    
13,965    
44,957    
27,435  
  
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
  
(23,900  
(13,669  
(45,091  
(26,793
Bargain purchase gain, net of tax
                    1,706           
Other income
  
3,570    
72    
4,209    
28  
  
 
 
   
 
 
   
 
 
   
 
 
 
Net loss before taxes
     (20,330     (13,597     (39,176     (26,765
Income tax expense
     (279              (460         
  
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
  
$
(20,609  
$

(13,597  
$

(39,636   $ (26,765
  
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share - basic and diluted
   $ (0.12   $ (0.08   $ (0.23   $ (0.16
  
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average shares outstanding - basic and diluted
     177,302       165,238       176,009       164,902  
  
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these financial statements.
 
4

Table of Contents
MicroVision, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
 
    
Three Months Ended
   
Six Months Ended
 
    
June 30,
   
June 30,
 
    
2023
   
2022
   
2023
   
2022
 
Net loss
   $ (20,609 )   $ (13,597   $ (39,636 )   $ (26,765
Other comprehensive loss:
        
Unrealized loss on investment securities,
available-for-sale
  
18    
(54  
95    
(159
Foreign currency translation adjustments
     (83              24           
  
 
 
   
 
 
   
 
 
   
 
 
 
Total comprehensive income (loss)
     (65     (54     119       (159
  
 
 
   
 
 
   
 
 
   
 
 
 
Comprehensive loss
   $ (20,674 )   $ (13,651   $ (39,517 )   $ (26,924
  
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these financial statements.
 
5

Table of Contents
MicroVision, Inc.
Condensed Consolidated Statements of Shareholders’ Equity
(In thousands)
(Unaudited)
 
                               
Accumulated
             
    
Common Stock
    
Additional
          
other
         
Total
 
           
Par
    
paid-in
    
Subscriptions
   
comprehensive
   
Accumulated
   
shareholders’
 
    
Shares
    
value
    
capital
    
receivable
   
loss
   
deficit
   
equity
 
Balance at March 31, 2023
     176,026      $ 176      $ 787,856      $        $ 57     $ (701,551   $ 86,538  
Share-based compensation expense
     536        1        3,477                                   3,478  
Exercise of options
     180                  168                                   168  
Sales of common stock, net
     10,878        11        43,909        (925                       42,995  
Net loss
     —                                                (20,609 )     (20,609 )
Other comprehensive loss
     —                                       (65              (65
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2023
     187,620      $ 188      $ 835,410      $ (925   $ (8   $ (722,160 )   $ 112,505  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at January 1, 2023
     170,503      $ 171      $ 772,221      $        $ (127   $ (682,524   $ 89,741  
Share-based compensation expense
     999        1        6,426                                   6,427  
Exercise of options
     180                  168                                   168  
Sales of common stock, net
     15,938        16        56,595        (925                       55,686  
Net loss
     —                                                (39,636 )     (39,636 )
Other comprehensive income
     —                                       119                119  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2023
     187,620      $ 188      $ 835,410      $ (925   $ (8   $ (722,160 )   $ 112,505  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at March 31, 2022
     164,887      $ 165      $ 746,028      $        $ (124   $ (642,601   $ 103,468  
Share-based compensation expense
     423                  4,120                                   4,120  
Exercise of options
     128                  163                                   163  
Net loss
     —                                                (13,597     (13,597
Other comprehensive loss
     —                                       (54              (54
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2022
     165,438      $ 165      $ 750,311      $        $ (178   $ (656,198   $ 94,100  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at January 1, 2022
     164,363      $ 164      $ 742,042      $        $ (19   $ (629,433   $ 112,754  
Share-based compensation expense
     757        1        7,853                                   7,854  
Exercise of options
     318                  416                                   416  
Net loss
     —                                                (26,765     (26,765
Other comprehensive loss
     —                                       (159              (159
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at June 30, 2022
     165,438      $ 165      $ 750,311      $        $ (178   $ (656,198   $ 94,100  
  
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these financial statements.
 
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Table of Contents
MicroVision, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

            
            
 
  
Six Months Ended
 
 
  
June 30,
 
 
  
2023
 
 
2022
 
                                       
Cash flows from operating activities
                
Net loss
  
$
(39,636
)  
$
(26,765
Adjustments to reconcile net loss to net cash used in operations:
                
Depreciation and amortization
  
 
4,151
 
 
 
901
 
Bargain purchase gain, net of tax
  
 
(1,706
 
 
  
 
Gain on disposal of fixed assets
  
 
(15
 
 
  
 
Impairment of property and equipment
  
 
12
 
 
 
60
 
Inventory write-downs
  
 
56
 
 
 
17
 
Share-based compensation expense
  
 
6,815
 
 
 
7,854
 
Non-cash
interest expense
  
 
  
 
 
 
9
 
Net accretion of premium on short-term investments
  
 
(695
 
 
269
 
Change in:
                
Accounts receivable
  
 
(821
 
 
  
 
Inventory
  
 
69
 
 
 
(70
Other current and
non-current
assets
  
 
(31
)
 
 
 
1,213
 
Accounts payable
  
 
246
 
 
 
(1,874
Accrued liabilities
  
 
4,138
 
 
 
246
 
Contract liabilities and other current liabilities
  
 
(1,692
 
 
(1,845
Operating lease liabilities
  
 
(1,096
 
 
(619
Other long-term liabilities
  
 
81
 
 
 
  
 
    
 
 
   
 
 
 
Net cash used in operating activities
  
 
(30,124
 
 
(20,604
    
 
 
   
 
 
 
Cash flows from investing activities
                
Sales of investment securities
  
 
48,700
 
 
 
14,500
 
Purchases of investment securities
  
 
(17,302
 
 
(38,134
Cash paid for Ibeo business combination
  
 
(11,233
 
 
  
 
Purchases of property and equipment
  
 
(1,484
 
 
(1,128
    
 
 
   
 
 
 
Net cash provided by (used in) investing activities
  
 
18,681
 
 
 
(24,762
    
 
 
   
 
 
 
Cash flows from financing activities
                
Principal payments under finance leases
  
 
(13
 
 
(15
Principal payments under long-term debt
  
 
  
 
 
 
(392
Proceeds from stock option exercises
  
 
168
 
 
 
416
 
Net proceeds from issuance of common stock
  
 
55,866
 
 
 
  
 
    
 
 
   
 
 
 
Net cash provided by financing activities
  
 
56,021
 
 
 
9
 
    
 
 
   
 
 
 
Change in cash, cash equivalents, and restricted cash
  
 
44,578
 
 
 
(45,357
Cash, cash equivalents, and restricted cash at beginning of period
  
 
21,954
 
 
 
83,739
 
    
 
 
   
 
 
 
Cash, cash equivalents, and restricted cash at end of period
  
$
66,532
 
 
$
38,382
 
    
 
 
   
 
 
 
Supplemental schedule of
non-cash
investing and financing activities
                
Non-cash
additions to property and equipment
  
$
167
 
 
$
255
 
    
 
 
   
 
 
 
Amounts issued to escrow for acquisition consideration
  
$
3,263
 
 
$
  
 
    
 
 
   
 
 
 
Accrued financing fees
  
$
180
 
 
$
  
 
Issuance of common stock for subscription receivable
  
$
925
 
 
$
  
 
    
 
 
   
 
 
 
Foreign currency translation adjustments
  
$
24
 
 
$
  
 
    
 
 
   
 
 
 
Unrealized gain (loss) in investment securities,
available-for-sale
  
$
95
 
 
$
159
 
    
 
 
   
 
 
 
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of June 30, 2023 and December 31, 2022:
 
                           
    
June 30,
    
December 31,
 
    
2023
    
2022
 
Cash and cash equivalents
  
$
62,308
 
  
$
20,536
 
Restricted cash, current
  
 
3,263
 
  
 
  
 
Restricted cash
  
 
961
 
  
 
1,418
 
    
 
 
    
 
 
 
Cash, cash equivalents and restricted cash
  
$
66,532
 
  
$
21,954
 
    
 
 
    
 
 
 
The accompanying notes are an integral part of these financial statements.
 
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Table of Contents
MicroVision, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. MANAGEMENT’S STATEMENT
The Condensed Consolidated Balance Sheets as of June 30, 2023, the Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Comprehensive Loss and the Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2023 and 2022, and the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022, have been prepared by MicroVision, Inc. (“we” or “our”) and have not been audited. In the opinion of management, all adjustments necessary to state fairly the financial position at June 30, 2023 and the results of operations and cash flows for all periods presented have been made and consist of normal recurring adjustments. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules of the Securities and Exchange Commission (SEC). The
year-end
condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. You should read these Condensed Consolidated financial statements in conjunction with the financial statements and notes thereto included in our Annual Report on Form
10-K
for the fiscal year ended December 31, 2022. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results that may be attained for the entire fiscal year.
We are developing lidar sensors and perception software to address the needs of the Level 2+, or L2+, and Level 3 or L3, advanced driver-assistance systems (ADAS) markets to be used in automotive safety and autonomous driving applications. Our micro-electromechanical systems, or MEMS-based high-speed lidar sensors, which we call MAVIN
, use our pioneering laser beam scanning (LBS) technology. Our solution-based development approach recognizes two key realities of the L2+ and L3 markets: that safety is mission critical and that OEMs require cost efficiency and integration adaptability. With these factors in mind, we believe that our
best-in-class
MAVIN lidar sensors support critical safety needs by providing the highest resolution at range and velocity of moving objects with a dynamic field of view while running at 30 hertz, thus enabling ADAS features, such as automatic emergency braking, forward collision warning, and automatic emergency steering, at higher speeds of operation than most competing products.
We completed the acquisition of Ibeo Automotive Systems GmbH (“Ibeo”) assets on January 31, 2023 pursuant to the terms and subject to the conditions of the Asset Purchase Agreement, dated December 1, 2022, and amended as of January 31, 2023, by and between our wholly owned subsidiary, MicroVision GmbH organized under the laws of The Federal Republic of Germany, and Ibeo for a purchase price of EUR 15.0 million, or approximately $16.3 million, subject to potential reduction on the terms set forth in the Asset Purchase Agreement. Pursuant to the Asset Purchase Agreement, the purchase price also included advanced funds to Ibeo so that it could continue its operations while in insolvency during the period between signing and closing. Specifically, we advanced to Ibeo EUR 3.9 million, or approximately $4.1 million in December 2022; EUR 2.7 million, or approximately $3.0 million in January 2023; and EUR 599,000, or approximately $650,000 in February 2023 shortly after the closing. These fund advances included amounts related to headcount reductions carried out by Ibeo management, decreasing the number of employees to transfer in connection with the acquisition to approximately 250 employees. These headcount reduction costs of EUR 2.3 million, or approximately $2.5 million, were reimbursed to MicroVision by way of deduction from the purchase price in accordance with the Asset Purchase Agreement.
We have incurred significant losses since inception. We have funded our operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales and licensing activities.
At June 30, 2023, we had total liquidity of $93.9 million including $62.3 million in cash and cash equivalents and $31.6 million in short-term investment securities. Based on our current operating plan, we anticipate that we have sufficient cash and cash equivalents to fund our operations for at least the next 12 months.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of MicroVision, Inc. and MicroVision GmbH. MicroVision GmbH is a wholly owned subsidiary of MicroVision, Inc. All material intercompany accounts and transactions have been eliminated in consolidation.
 
8

Foreign Currency Translation
The functional currency for our German operation is the Euro, which represents the currency of its primary economic environment. The results of operations for the German operation are translated from the local currency into U.S. dollars using the average exchange rates during each period. All assets and liabilities are translated using exchange rates at the end of each period, with foreign currency translation adjustments included as a component of other comprehensive loss. All equity transactions and certain assets are translated using historical rates. The consolidated financial statements are presented in U.S. dollars.
Segment Information
We determine operating segments based on how our chief operating decision maker (“CODM”) manages the business, makes operating decisions around the allocation of resources, and evaluates operating performance. Our CODM is our Executive Management team, who reviews our operating results on a consolidated basis. We operate as one segment, which relates to sale and servicing of lidar hardware and software. The profitability of our product group is not a determining factor in allocating resources and the CODM does not evaluate profitability below the level of the consolidated company.
2. NET LOSS PER SHARE
Basic net loss per share is calculated using the weighted-average number of common shares outstanding during the period. Net loss per share, assuming dilution, is calculated using the weighted-average number of common shares outstanding and the dilutive effect of all potentially dilutive securities, including common stock equivalents and convertible securities. Net loss per share, assuming dilution, is equal to basic net loss per share because the effect of dilutive securities outstanding during the period, including options and warrants computed using the treasury stock method, is anti-dilutive.
The components of basic and diluted net loss per share were as follows (in thousands, except loss per share data):
 
    
Three Months Ended
June 30,
    
Six Months Ended
June 30,
 
                             
    
2023
    
2022
    
2023
    
2022
 
Numerator:
                                   
Net loss available for common shareholders - basic and diluted
   $ (20,609 )    $ (13,597    $ (39,636 )    $ (26,765
    
 
 
    
 
 
    
 
 
    
 
 
 
Denominator:
                                   
Weighted-average common shares outstanding - basic and diluted
     177,302        165,238        176,009        164,902  
    
 
 
    
 
 
    
 
 
    
 
 
 
Net loss per share - basic and diluted
   $ (0.12    $ (0.08    $ (0.23    $ (0.16
    
 
 
    
 
 
    
 
 
    
 
 
 
For the three and six months ended June 30, 2023 and 2022, we excluded the following securities from net loss per share as the effect of including them would have been anti-dilutive: outstanding options exercisable into a total of 752,000 and 1,153,000 shares of common stock, respectively, and 9,626,000 and 9,788,000 nonvested restricted and performance stock units, respectively.
3. BUSINESS COMBINATION
On January 31, 2023, we completed the acquisition of certain net assets of Ibeo, a lidar hardware and software provider based in Hamburg, Germany. The purpose of the acquisition was to acquire certain Ibeo assets, intellectual property, and teams, which will enable us to expand our total addressable market and diversify our revenue profile.
Total consideration related to this transaction, subject to settlement of working capital adjustments, was approximately EUR 19.9 million or $21.6 million, consisting of approximately (i) EUR 7.0 million or $7.6 million in cash paid at closing, (ii) EUR 6.6 million or $7.1 million in cash advanced to Ibeo prior to closing, (iii) EUR 3.0 million or $3.3 
million held in escrow for 13 months to be available to cover properly established claims by MicroVision, (iv) EUR
0.6 million or $0.7 million in costs paid on behalf of the seller, and (v) EUR 2.7 million or $2.9 
million in cash held back at closing and to be offset by any working capital adjustments, which the parties continue to work through. The remaining balance of EUR 2.7 million will be paid once the seller has accepted and approved all the associated holdback calculations. In addition, we incurred $
0.6 million of acquisition-related costs associated with the acquisition during the three months ended March 31, 2023, which were included in Sales, marketing, general and administrative expense.
 
9

The transaction has been accounted for as a business combination. The results of operations for the acquisition are included in our consolidated financial statements from the date of acquisition onwards.
The following table summarizes the preliminary purchase price allocation to assets acquired and liabilities assumed (in thousands):
 
    
Amount
    
Weighted Average
Useful Life (in years)
 
Purchase consideration:
                 
Cash paid at closing
(1)
   $ 8,245           
Cash in escrow
(2)
     3,263           
Holdback amount
(3)
     2,928           
Advances to Ibeo
(4)
     7,120           
    
 
 
          
Total purchase consideration
   $  21,556           
    
 
 
          
Inventory
   $ 1,197           
Other current assets
     703           
Operating lease
right-of-use
asset
     234           
Property and equipment, net
     5,330           
Intangible assets:
                 
Acquired technology
     17,987        13  
Order backlog
     26        1  
Contract liabilities
     (1,178         
Operating lease liabilities
     (234         
Deferred tax liabilities
     (803         
    
 
 
          
Total identifiable net assets
   $ 23,262           
    
 
 
          
Bargain purchase gain
(1)
     (1,706         
 
(1)
Represents $
7.6
 million in cash paid at closing and $
0.7
 million in cash paid shortly after close.
 
(2)
Recorded as restricted cash and accrued liability to Ibeo in our condensed consolidated balance sheet.
 
(3)
Recorded in accrued liability to Ibeo in our condensed consolidated balance sheet.
 
(4)
Represents $
4.1
 million and $
3.0
 million in cash advanced to Ibeo in December 2022 and January 2023, respectively.
 
(5)
The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration and is included in
bargain pu
rchase gain in the Condensed Consolidated Statement of Operations. The bargain purchase gain was attributable to the negotiation process with Ibeo during its insolvency proceedings resulting in cash consideration paid being less than the fair value of the net assets.
The estimated fair value of acquired technology was calculated through the income approach using the multi-period excess earnings and relief from royalty methodologies. The estimated fair value of the order backlog was calculated through the income approach using the multi-period excess earnings methodology.
The initial allocation of the purchase price was based on preliminary valuations and assumptions and is subject to change within the measurement period. We expect to finalize the allocation of the purchase price as soon as practicable and no later than one year from the acquisition date.
 
10

Table of Contents
Revenue and net loss from the acquisition included in our condensed consolidated statement of operations through June 30, 2023 is $1.1 million and $15.1 million, respectively.
Supplemental Unaudited Pro Forma Information
The below unaudited pro forma financial information summarizes the combined results of operations for the Company and Ibeo as if the acquisition had been completed on January 1, 2022. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2022 or the results of our future operations of the combined businesses. Nonrecurring pro forma adjustments include:
 
   
Recognition of the bargain purchase gain as if incurred in the first quarter of 2022;
 
   
Acquisition-related costs of $
1.1
 million are assumed to have been incurred on January 1, 2022.
The following table summarizes the unaudited pro forma results (in thousands):
 
    
Three Months Ended
June 30,
    
Six Months Ended
June 30,
 
                             
    
2023
    
2022
    
2023
    
2022
 
Total revenue
   $ 329        2,796        1,660        5,517  
Net loss
     (20,609 )      (28,661 )      (42,235 )      (57,088
4. REVENUE RECOGNITION
The following is a description of principal activities from which we generate revenue. Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of our revenue from contracts with customers.
We evaluate contracts based on the
5-step
model as stated in Topic 606 as follows: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognize revenue when (or as) performance obligations are satisfied.
A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct, as defined in the revenue standard.
The transaction price is the amount of consideration an entity expects to be entitled to from a customer in exchange for providing the goods or services. A number of factors should be considered to determine the transaction price, including whether there is variable consideration, a significant financing component, noncash consideration, or amounts payable to the customer. The determination of variable consideration will require a significant amount of judgment. In estimating the transaction price we will use either the expected value method or the most likely amount method.
The transaction price is allocated to the separate performance obligations in the contract based on relative standalone selling prices. Determining the relative standalone selling price can be challenging when goods or services are not sold on a standalone basis. The revenue standard sets out several methods that can be used to estimate a standalone selling price when one is not directly observable. Allocating discounts and variable consideration must also be considered. Allocating the transaction price can require significant judgement on our part.
Revenue is recognized when (or as) the customer obtains control of the good or service/performance obligations are satisfied. Topic 606 provides guidance to help determine if a performance obligation is satisfied at a point in time or over time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.
 
11

Disaggregation of revenue
The following table provides information about disaggregated revenue by timing of revenue recognition, (in thousands):
 
                                               
    
Three Months Ended June 30, 2023
 
    
Product
revenue
    
License and
royalty
revenue
    
Contract
revenue
    
Total
 
Timing of revenue recognition:
           
Products transferred at a point in time
  
$
261
 
  
$

  
 
  
$

  
 
  
$
261
 
Product and services transferred over time
  
 
  
 
  
 
  
 
  
 
68
 
  
 
68
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
  
$
261
 
  
$
  
 
  
$
68
 
  
$
329
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
                                               
    
Six Months Ended June 30, 2023
 
    
Product
revenue
    
License and
royalty
revenue
    
Contract
revenue
    
Total
 
Timing of revenue recognition:
           
Products transferred at a point in time
  
$
851
 
  
$
  
 
  
$

  
 
  
$
851
 
Product and services transferred over time
  
 
  
 
  
 
  
 
  
 
260
 
  
 
260
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
  
$
851
 
  
$
  
 
  
$
260
 
  
$
1,111
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
                                               
    
Three Months Ended June 30, 2022
 
    
Product
revenue
    
License and
royalty
revenue
    
Contract
revenue
    
Total
 
Timing of revenue recognition:
           
Products transferred at a point in time
  
$
  
 
  
$

314
 
  
$

  
 
  
$
314
 
Product and services transferred over time
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
  
$
  
 
  
$
314
 
  
$
  
 
  
$
314
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
                                               
    
Six Months Ended June 30, 2022
 
    
Product
revenue
    
License and
royalty
revenue
    
Contract
revenue
    
Total
 
Timing of revenue recognition:
           
Products transferred at a point in time
  
$
  
 
  
$

664
 
  
$

  
 
  
$
664
 
Product and services transferred over time
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
  
$
  
 
  
$
664
 
  
$
  
 
  
$
664
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Contract balances
Under Topic 606, our rights to consideration are presented separately depending on whether those rights are conditional or unconditional. We present our unconditional rights to consideration as “accounts receivable” in our Balance Sheet.
Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands, except percentages):
 
    
June 30,
2023
    
December 31,
2022
    
$Change
    
% Change
 
Contract assets
   $        
$

        $               
Contract liabilities
     5,729        4,601        1,128        24.5  
  
 
 
    
 
 
    
 
 
    
Net contract assets (liabilities)
   $ 5,729      $ 4,601      $ 1,128        24.5  
  
 
 
    
 
 
    
 
 
    
 
12

In April 2017, we signed a contract with Microsoft Corporation to develop an LBS display system. Under the agreement, we received an upfront payment of $10.0 million. As of December 31, 2022, we had applied $5.4 million against the contract liability. During the three and six months ended June 30, 2023, we applied $0 against the contract liability with this customer.
In connection with our January 2023 acquisition of assets from Ibeo, we assumed contract liabilities totaling approximately $1.2 million. During the three and six months ended June 30, 2023, we recognized revenue totaling $27,000 and $137,000 respectively, against the contract liability with the customer.
Contract acquisition costs
We are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. We currently do not pay any commissions upon the signing of a contract; therefore, no commission cost has been incurred as of June 30, 2023 and 2022.
Transaction price allocated to the remaining performance obligations
The $10.0 
million upfront payment received from our customer as noted above was being recognized as revenue as component sales were transferred to the customer. Under the new arrangement reached in March 2020, the royalties we expect to earn will be applied against the remaining prepayment. Because we do not have information on projected future shipments by our customer, we are not able to estimate the timing of revenue recognition related to the remaining performance obligations; however, the underlying agreement is scheduled to expire on December 31, 2023. The $
4.6 
million contract liability at June 30, 2023 is classified as a current liability on our balance sheet. It is unclear at this time whether recognition of revenue may extend beyond the next twelve months.
The remaining balance of the contract liabilities assumed in our acquisition of assets from Ibeo was approximately $1.0 million as of June 30, 2023.
The following table provides information about the estimated timing of revenue recognition (in thousands):
 
    
Remainder of
2023
    
2024
 
Revenue
   $ 1,128      $     
5. INVESTMENT SECURITIES,
AVAILABLE-FOR-SALE
AND FAIR VALUE MEASUREMENTS
Our investment securities,
available-for-sale
are comprised of corporate and government debt securities. The principal markets for the debt securities are dealer markets which have a high level of price transparency. The market participants for debt securities are typically large money center banks and regional banks, brokers, dealers, pension funds, and other entities with debt investment portfolios.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative guidance establishes a three level fair value inputs hierarchy and requires an entity to maximize the use of observable valuation inputs and minimize the use of unobservable inputs. We use market data, assumptions and risks we believe market participants would use in measuring the fair value of the asset or liability, including the risks inherent in the inputs and the valuation techniques. The hierarchy is summarized below.
Level 1 - Quoted prices in active markets for identical assets and liabilities at the measurement date that the reporting entity has the ability to access.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs for which there is little or no market data, which requires us to develop our own assumptions, which are significant to the measurement of the fair values.
 
13

The valuation inputs hierarchy classification for assets measured at fair value on a recurring basis are summarized below as of June 30, 2023 and December 31, 2022 (in thousands). These tables do not include cash held in our money market savings accounts.
 
                                                               
As of June 30, 2023
  
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets
           
Corporate debt securities
  
$
  
 
  
$
8,629
 
  
$
  
 
  
$
8,629
 
U.S. Treasury securities
  
  
 
  
22,936
 
  
  
 
  
22,936
 
  
 
 
    
 
 
    
 
 
    
 
 
 
  
$
  
 
  
$
31,565
 
  
$
  
 
  
$
31,565
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
                                                               
As of December 31, 2022
  
Level 1
    
Level 2
    
Level 3
    
Total
 
Assets
           
Corporate debt securities
  
$
  
 
  
$
15,500
 
  
$
  
 
  
$
15,500
 
U.S. Treasury securities
  
  
 
  
46,673
 
  
  
 
  
46,673
 
  
 
 
    
 
 
    
 
 
    
 
 
 
  
$
  
 
  
$
62,173
 
  
$
  
 
  
$
62,173
 
  
 
 
    
 
 
    
 
 
    
 
 
 
Our short-term investments are summarized below as of June 30, 2023 and December 31, 2022 (in thousands).
 
                                               
                         
Investment
 
    
Cost/
    
Gross
    
Gross
    
Securities,
 
    
Amortized
    
Unrealized
    
Unrealized
    
Available-
 
    
Cost
    
Gains
    
Losses
    
For-Sale
 
As of June 30, 2023
           
Assets
           
Corporate debt securities
  
$
8,645
 
  
$
  
 
  
$
(16
  
$
8,629
 
U.S. Treasury securities
  
22,952
 
  
1
 
  
(17
  
22,936
 
  
 
 
    
 
 
    
 
 
    
 
 
 
  
$
31,597
 
  
$
1
 
  
$
(33
  
$
31,565
 
  
 
 
    
 
 
    
 
 
    
 
 
 
 
                         
Investment
 
    
Cost/
    
Gross
    
Gross
    
Securities,
 
    
Amortized
    
Unrealized
    
Unrealized
    
Available-
 
    
Cost
    
Gains
    
Losses
    
For-Sale
 
As of December 31, 2022
           
Assets
           
Corporate debt securities
   $ 15,538      $         $ (38    $ 15,500  
U.S. Treasury securities
  
46,762     
2     
(91   
46,673  
  
 
 
    
 
 
    
 
 
    
 
 
 
   $ 62,300      $ 2      $ (129    $ 62,173  
  
 
 
    
 
 
    
 
 
    
 
 
 
The maturities of the investment securities
available-for-sale
as of June 30, 2023 and December 31, 2022 are shown below (in thousands):
 
           
           
           
           
           
Gross
    
Gross
        
    
Amortized
    
Unrealized
    
Unrealized
    
Estimated
 
    
Cost
    
Gains
    
Losses
    
Fair Value
 
As of June 30, 2023
           
Maturity date
           
Less than one year
  
$
31,597
 
  
$

1
 
  
$
(33
  
$
31,565
 
  
 
 
          
 
 
 
  
$
  31,597
 
        
$
31,565
 
  
 
 
          
 
 
 
 
14

    
Amortized
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Estimated
Fair Value
 
As of December 31, 2022
           
Maturity date
           
Less than one year
   $ 62,300      $ 2      $ (129    $ 62,173  
  
 
 
          
 
 
 
   $ 62,300            $ 62,173  
  
 
 
          
 
 
 
The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of June 30, 2023 and December 31, 2022 (in thousands):
 
    
Less than Twelve
Months
   
Twelve Months or
Greater
    
Total
 
           
Gross
          
Gross
           
Gross
 
    
Fair
    
Unrealized
   
Fair
    
Unrealized
    
Fair
    
Unrealized
 
    
Value
    
Losses
   
Value
    
Losses
    
Value
    
Losses
 
As of June 30, 2023
                
Corporate debt securities
   $ 6,440      $ (16   $          $          $ 6,440      $ (16
U.S. Treasury securities
  
17,258     
(17  
       
       
17,258     
(17
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
   $ 23,698      $ (33   $         $         $ 23,698      $ (33
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
 
    
Less than Twelve
Months
   
Twelve Months or
Greater
    
Total
 
           
Gross
          
Gross
           
Gross
 
    
Fair
    
Unrealized
   
Fair
    
Unrealized
    
Fair
    
Unrealized
 
    
Value
    
Losses
   
Value
    
Losses
    
Value
    
Losses
 
As of December 31, 2022
                
Corporate debt securities
   $ 12,295      $ (38   $          $          $ 12,295      $ (38
U.S. Treasury securities
  
34,530     
(91  
       
       
34,530     
(91
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
   $ 46,825      $ (129   $         $         $ 46,825      $ (129
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
6. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND SUPPLIERS
Concentration of credit risk
Financial instruments that potentially subject us to a concentration of credit risk are primarily cash equivalents and investment securities. As of June 30, 2023, our cash and cash equivalents are comprised of operating checking accounts and short-term highly rated money market savings accounts. Our short-term investments are comprised of highly rated corporate bonds and U.S. Treasury securities.
Concentration of major customers and suppliers
For the three months ended June 30, 2023, two commercial customers accounted for $65,000 each in revenue, representing 40% of our total revenue, a third commercial customer accounted for $54,000 in revenue, representing 17% of our total revenue, and a fourth commercial customer accounted for $52,000 in revenue, representing 16% of our total revenue. For the six months ended June 30, 2023, one commercial customer accounted for $364,000 in revenue, representing 33% of our total revenue, a second commercial customer accounted for $246,000 in revenue, representing 22% of our total revenue, and a third commercial customer accounted for $128,000 in revenue, representing 11% of our total revenue. For the three and six months ended June 30, 2022, one customer accounted for $314,000 and $664,000 in revenue, respectively, representing 100% of our total revenue for each period.
Typically, a significant concentration of our components and the products we have sold are manufactured and obtained from single or limited-source suppliers. The loss of any single or limited-source supplier, the failure of any of these suppliers to perform as expected, or the disruption in the supply chain of components from these suppliers could subject us to risks and uncertainties including, but not limited to, increased cost of sales, possible loss of revenues, or significant delays in product development or product deliveries, any of which could adversely affect our financial condition and operating results.
 
15

Table of Contents
7. FINANCIAL STATEMENT COMPONENTS
The following financial statement components changed significantly as a result of our January 2023 acquisition of assets from Ibeo.
Inventory
Inventory consists of the following:
 
(in thousands)
  
June 30,
2023
    
December 31,
2022
 
Raw materials
   $ 1,499      $ 1,556  
Work in process
     305        —    
Finished goods
     1,129        305  
    
 
 
    
 
 
 
     $      2,933      $ 1,861  
    
 
 
    
 
 
 
Inventory is computed using the
first-in,
first-out
(FIFO) method and is stated at the lower of cost and net realizable value. Management periodically assesses the need to account for obsolescence of inventory and adjusts the carrying value of inventory to its net realizable value when required.
Property and equipment
Property and equipment consists of the following:
 
(in thousands)
  
June 30,
2023
    
December 31,
2022
 
Production equipment
   $ 6,140      $ 6,140  
Leasehold improvements
     3,843        3,789  
Computer hardware and software/lab equipment
     11,916        10,515  
Office furniture and equipment
     5,196        1,804  
    
 
 
    
 
 
 
       27,095        22,248  
Less: Accumulated depreciation
     (17,146      (15,418
    
 
 
    
 
 
 
     $ 9,949      $ 6,830  
    
 
 
    
 
 
 
Depreciation expense was $479,000 and $151,000 for the three months ended June 30, 2023 and 2022, respectively. Depreciation expense was $1.7
million and $
380,000 for the six months ended June 30, 2023 and 2022, respectively.
Intangible assets
The components of intangible assets were as follows:
 
As of June 30, 2023
  
Gross
           
Net
    
Weighted
 
    
Carrying
    
Accumulated
    
Carrying
    
Average Remaining
 
(in thousands)
  
Amount
    
Amortization
    
Amount
    
Period (Years)
 
Acquired technology
   $ 19,997      $ 1,676      $ 18,321        13  
Backlog
     26                  26        1  
    
 
 
    
 
 
    
 
 
          
     $ 20,023      $ 1,676        18,347           
    
 
 
    
 
 
    
 
 
          
 
16

As of December 31, 2022
  
Gross
           
Net
    
Weighted
 
    
Carrying
    
Accumulated
    
Carrying
    
Average Remaining
 
(in thousands)
  
Amount
    
Amortization
    
Amount
    
Period (Years)
 
Acquired technology
   $ 951      $ 876      $ 75        4  
    
 
 
    
 
 
    
 
 
          
     $ 951      $ 876      $ 75           
    
 
 
    
 
 
    
 
 
          
Amortization expense was $564,000 and $10,000 for the three months ended June 30, 2023 and 2022, respectively. Amortization expense was $906,000 and $20,000 for the six months ended June 30, 2023 and 2022, respectively.
The following table outlines our estimated future amortization expense related to intangible assets held at June 30, 2023 by line item on the statement of operations (in thousands):
 
           
Research and
        
    
Cost of
    
Development
        
Years Ended December 31,
  
Revenue
    
Expense
    
Total
 
2023
   $ 1,694      $ 16      $ 1,710  
2024
     1,548        22