UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
OR
For the transition period from ________to _________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices, including Zip Code)
(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 | ||
| The
|
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.
☒ 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).
☒ 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.
| 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
☐
The number of shares of the registrant’s common stock outstanding as of November 3, 2023 was .
TABLE OF CONTENTS
| 2 |
PART I.
ITEM 1. FINANCIAL STATEMENTS
MicroVision, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investment securities, available-for-sale | ||||||||
| Restricted cash, current | ||||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Advance to Ibeo | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use asset | ||||||||
| Restricted cash | ||||||||
| Intangible assets, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and shareholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued liability for Ibeo business combination | ||||||||
| Contract liabilities | ||||||||
| Current portion of operating lease liability | ||||||||
| Current portion of finance lease obligations | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Shareholders’ equity | ||||||||
| Preferred stock, par value $; shares authorized; and shares issued and outstanding | ||||||||
| Common stock, par value $; shares authorized; and shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Subscriptions receivable | ( | ) | ||||||
| Accumulated other comprehensive gain (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 3 |
MicroVision, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Revenue | ||||||||||||||||
| Gross profit | ( | ) | ||||||||||||||
| Research and development expense | ||||||||||||||||
| Sales, marketing, general and administrative expense | ||||||||||||||||
| Gain on disposal of fixed assets | ( | ) | ( | ) | ||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Bargain purchase gain, net of tax | ||||||||||||||||
| Other income | ||||||||||||||||
| Net loss before taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted-average shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 4 |
MicroVision, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive loss: | ||||||||||||||||
| Unrealized gain (loss) on investment securities, available-for-sale | ( | ) | ( | ) | ||||||||||||
| Foreign currency translation adjustments | ||||||||||||||||
| Total comprehensive income (loss) | ( | ) | ( | ) | ||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these financial statements.
| 5 |
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 June 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| Exercise of options | ||||||||||||||||||||||||||||
| Sales of common stock, net | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | |||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| Exercise of options | ||||||||||||||||||||||||||||
| Sales of common stock, net | ( | ) | ||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive income | - | |||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| Exercise of options | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||||
| Exercise of options | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
| 6 |
MicroVision, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | ( | ) | |||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Depreciation and amortization | ||||||||
| Bargain purchase gain, net of tax | ( | ) | ||||||
| Gain on disposal of fixed assets | ( | ) | ||||||
| Impairment of property and equipment | ||||||||
| Inventory write-downs | ||||||||
| Share-based compensation expense | ||||||||
| Net accretion of premium on short-term investments | ( | ) | ||||||
| Change in: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Other current and non-current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ||||||||
| Contract liabilities and other current liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Other long-term liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Sales of investment securities | ||||||||
| Purchases of investment securities | ( | ) | ( | ) | ||||
| Cash paid for Ibeo business combination | ( | ) | ||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Principal payments under finance leases | ( | ) | ( | ) | ||||
| Principal payments under long-term debt | ( | ) | ||||||
| Proceeds from stock option exercises | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Change in cash, cash equivalents, and restricted cash | ( | ) | ||||||
| Cash, cash equivalents, and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | ||||||
| Supplemental schedule of non-cash investing and financing activities | ||||||||
| Non-cash additions to property and equipment | $ | $ | ||||||
| Amounts issued to escrow for acquisition consideration | $ | $ | ||||||
| Acquisition of right-to-use asset | $ | $ | ||||||
| Accrued financing fees | $ | $ | ||||||
| Issuance of common stock for subscriptions receivable | $ | $ | ||||||
| Foreign currency translation adjustments | $ | $ | ||||||
| Unrealized loss on investment securities, available-for-sale | $ | $ | ||||||
The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of September 30, 2023 and December 31, 2022:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash, current | ||||||||
| Restricted cash | ||||||||
| Cash, cash equivalents and restricted cash | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
| 7 |
MicroVision, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. MANAGEMENT’S STATEMENT
The Condensed Consolidated Balance Sheets as of September 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 nine months ended September 30, 2023 and 2022, and the Condensed Consolidated Statements of Cash Flows for the nine months ended September 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 September 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 nine months ended September 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
We have incurred significant losses since inception. We have funded our operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales and licensing activities.
At
September 30, 2023, we had total liquidity of $
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.
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.
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net loss available for common shareholders - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted-average common shares outstanding - basic and diluted | ||||||||||||||||
| Net loss per share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
For the three and nine months ended September 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 and shares of common stock, respectively, and and 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
| 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):
| Weighted Average | ||||||||
| Amount | Useful Life (in years) | |||||||
| Purchase consideration: | ||||||||
| Cash paid at closing(1) | $ | |||||||
| Cash in escrow(2) | ||||||||
| Holdback amount(3) | ||||||||
| Advances to Ibeo(4) | ||||||||
| Total purchase consideration | $ | |||||||
| Inventory | $ | |||||||
| Other current assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets: | ||||||||
| Acquired technology | ||||||||
| Order backlog | ||||||||
| Contract liabilities | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ||||||
| Deferred tax liabilities | ( | ) | ||||||
| Total identifiable net assets | $ | |||||||
| Bargain purchase gain(5) | ( | ) | ||||||
| (1) | ||
| (2) | ||
| (3) | ||
| (4) | ||
| (5) |
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 |
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 $ |
The following table summarizes the unaudited pro forma results (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Total revenue | $ | |||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
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 September 30, 2023 | ||||||||||||||||
| License and | ||||||||||||||||
| Product | royalty | Contract | ||||||||||||||
| revenue | revenue | revenue | Total | |||||||||||||
| Timing of revenue recognition: | ||||||||||||||||
| Products transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Product and services transferred over time | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended September 30, 2023 | ||||||||||||||||
| License and | ||||||||||||||||
| Product | royalty | Contract | ||||||||||||||
| revenue | revenue | revenue | Total | |||||||||||||
| Timing of revenue recognition: | ||||||||||||||||
| Products transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Product and services transferred over time | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Three Months Ended September 30, 2022 | ||||||||||||||||
| License and | ||||||||||||||||
| Product | royalty | Contract | ||||||||||||||
| revenue | revenue | revenue | Total | |||||||||||||
| Timing of revenue recognition: | ||||||||||||||||
| Products transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Product and services transferred over time | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Nine Months Ended September 30, 2022 | ||||||||||||||||
| License and | ||||||||||||||||
| Product | royalty | Contract | ||||||||||||||
| revenue | revenue | revenue | Total | |||||||||||||
| Timing of revenue recognition: | ||||||||||||||||
| Products transferred at a point in time | $ | $ | $ | $ | ||||||||||||
| Product and services transferred over time | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 12 |
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):
| September 30, | December 31, | |||||||||||||||
| 2023 | 2022 | $ Change | % Change | |||||||||||||
| Contract assets | $ | $ | $ | - | - | |||||||||||
| Contract liabilities | ||||||||||||||||
| Net contract assets (liabilities) | $ | $ | $ | |||||||||||||
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 $
In
connection with our January 2023 acquisition of assets from Ibeo, we assumed contract liabilities totaling approximately $
Transaction price allocated to the remaining performance obligations
The
$
The
remaining balance of the contract liabilities assumed in our acquisition of assets from Ibeo was approximately $
The following table provides information about the estimated timing of revenue recognition (in thousands):
| Remainder of 2023 | 2024 | |||||||
| Revenue | $ | | $ | |||||
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.
| 13 |
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.
The valuation inputs hierarchy classification for assets measured at fair value on a recurring basis are summarized below as of September 30, 2023 and December 31, 2022 (in thousands). These tables do not include cash held in our money market savings accounts.
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| As of September 30, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| As of December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Corporate debt securities | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Our short-term investments are summarized below as of September 30, 2023 and December 31, 2022 (in thousands).
| Investment | ||||||||||||||||
| Cost/ | Gross | Gross | Securities, | |||||||||||||
| Amortized | Unrealized | Unrealized | Available- | |||||||||||||
| Cost | Gains | Losses | For-Sale | |||||||||||||
| As of September 30, 2023 | ||||||||||||||||
| Assets | ||||||||||||||||
| Corporate debt securities | $ | $ | | $ | ( | ) | $ | |||||||||
| U.S. Treasury securities | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
| Investment | ||||||||||||||||
| Cost/ | Gross | Gross | Securities, | |||||||||||||
| Amortized | Unrealized | Unrealized | Available- | |||||||||||||
| Cost | Gains | Losses | For-Sale | |||||||||||||
| As of December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Corporate debt securities | $ | $ | $ | ( | ) | $ | ||||||||||
| U.S. Treasury securities | ( | ) | ||||||||||||||
| $ | $ | $ | ( | ) | $ | |||||||||||
| 14 |
The maturities of the investment securities available-for-sale as of September 30, 2023 and December 31, 2022 are shown below (in thousands):
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| As of September 30, 2023 | ||||||||||||||||
| Maturity date | ||||||||||||||||
| Less than one year | $ | $ | | $ | ( | ) | $ | |||||||||
| $ | $ | |||||||||||||||
| Gross | Gross | |||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
| As of December 31, 2022 | ||||||||||||||||
| Maturity date | ||||||||||||||||
| Less than one year | $ | $ | | $ | ( | ) | $ | |||||||||
| $ | $ | |||||||||||||||
The following table summarizes investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for more than 12 months as of September 30, 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 September 30, 2023 | ||||||||||||||||||||||||
| Corporate debt securities | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
| U.S. Treasury securities | ( | ) | ( | ) | ||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||||
| Less than Twelve Months | Twelve Months or Greater | Total | ||||||||||||||||||||||
| Gross | Gross | Gross | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
| Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
| As of December 31, 2022 | ||||||||||||||||||||||||
| Corporate debt securities | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | ||||||||||||||
| U.S. Treasury securities | ( | ) | ( | ) | ||||||||||||||||||||
| $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | |||||||||||||||
6. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS AND SUPPLIERS
Concentration of credit risk
Financial instruments that potentially subject us to a concentration of credit risk are primarily cash equivalents and investment securities. As of September 30, 2023, our cash and cash equivalents are comprised of operating checking accounts and short-term highly rated money market savings accounts. Our short-term investments are comprised of highly rated corporate bonds and U.S. Treasury securities.
Concentration of major customers and suppliers
For
the three months ended September 30, 2023, one commercial customer accounted for $
| 15 |
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.
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:
| September 30, | December 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Raw materials | $ | $ | ||||||
| Work in process | ||||||||
| Finished goods | ||||||||
| $ | $ | |||||||
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:
| September 30, | December 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Production equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Computer hardware and software/lab equipment | ||||||||
| Office furniture and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Depreciation
expense was $
| 16 |
Intangible assets
The components of intangible assets were as follows:
| As of September 30, 2023 | Gross | Net | Weighted | |||||||||||||
| Carrying | Accumulated | Carrying | Average Remaining | |||||||||||||
| (in thousands) | Amount | Amortization | Amount | Period (Years) | ||||||||||||
| Acquired technology | $ | $ | $ | | ||||||||||||
| Backlog | - | |||||||||||||||
| $ | $ | $ | ||||||||||||||
| As of December 31, 2022 | Gross | Net | Weighted | |||||||||||||
| Carrying | Accumulated | Carrying | Average Remaining | |||||||||||||
| (in thousands) | Amount | Amortization | Amount | Period (Years) | ||||||||||||
| Acquired technology | $ | | $ | | $ | | | |||||||||
| $ | $ | $ | ||||||||||||||
Amortization
expense was $
The following table outlines our estimated future amortization expense related to intangible assets held at September 30, 2023 by line item on the statement of operations (in thousands):
| Research and | ||||||||||||
| Cost of | Development | |||||||||||
| Years Ended December 31, | Revenue | Expense | Total | |||||||||
| 2023 | $ | $ | | $ | ||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| Thereafter | ||||||||||||
| $ | $ | $ | ||||||||||
We issue share-based compensation to employees in the form of stock options, restricted stock units (RSUs), and performance stock units (PSUs). We account for the share-based awards by recognizing the fair value of share-based compensation expense on a straight-line basis over the service period of the award, net of estimated forfeitures. The fair value of stock options is estimated on the grant date using the Black-Scholes option pricing model. The fair value of RSUs and non-executive PSUs is determined by the closing price of our common stock on the grant date or the period end date for the awards that are being measured by the service inception date. Changes in estimated inputs or using other option valuation methods may result in materially different option values and share-based compensation expense.
| 17 |
| Share-based compensation expense | Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Research and development expense | $ | $ | $ | $ | ||||||||||||
| Sales, marketing, general and administrative expense | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
Options activity and positions
| Weighted- | ||||||||||||||||
| Weighted- | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Exercise | Contractual | Intrinsic | ||||||||||||||
| Options | Shares | Price | Term (years) | Value | ||||||||||||
| Outstanding as of September 30, 2023 | $ | $ | ||||||||||||||
| Exercisable as of September 30, 2023 | $ | $ | ||||||||||||||
As of September 30, 2023, there is no unrecognized share-based employee compensation related to stock options.
Restricted stock activity and positions
| Weighted-average | ||||||||
| Shares | price | |||||||
| Unvested as of December 31, 2022 | $ | |||||||
| Granted | $ | |||||||
| Vested | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Unvested as of September 30, 2023 | $ | |||||||
During the nine months ended September 30, 2023,
During the nine months ended September 30, 2023, we issued shares for the partial achievement of internal performance milestones during the fourth quarter of 2022. These shares were valued based on the closing price of our common stock on the dates of grant and vest quarterly over two years. We had canceled PSUs in the fourth quarter of 2022 related to the same internal performance milestones.
During the nine months ended September 30, 2023,
During the nine months ended September 30, 2023, we issued time-based RSUs to independent directors for annual equity compensation. These shares were valued based on the closing price of our common stock on the dates of grant. These shares , with the final installment vesting the earlier of the one year anniversary of the grant date or the day before the next annual meeting.
| 18 |
As of September 30, 2023, our unrecognized share-based compensation related to RSUs was $million, which we plan to expense over the next years. Our unrecognized share-based compensation related to the executive PSUs was $ million, which we plan to expense over the next years and our unrecognized share-based compensation related to the non-executive PSUs was $ million, which we plan to expense over the next years.
During the nine months ended September 30, 2022, we issued million PSUs to non-executive employees subject to the achievement of development goals. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest quarterly over two years from the achievement of established performance criteria.
During the nine months ended September 30, 2022, we issued time-based RSUs to non-executive employees for promotion, retention, and new hire grants. These shares were valued based on the closing price of our common stock on the dates of grant. These shares vest over three or four years from the date of grant.
9. LEASES
We
lease our office space and certain equipment under finance and operating leases. Our leases have remaining lease terms of one to ten
years. Our office lease agreement includes both lease and non-lease components, which are accounted for separately.
| 19 |
In
connection with our January 2023 acquisition of assets from Ibeo, we assumed three leases in Hamburg, Germany. One lease is with IntReal
International Real Estate Kapitalverwaltungsgesellschaft and covers approximately
The components of lease expense were as follows:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Finance lease expense: | ||||||||||||||||
| Amortization of leased assets | ||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total finance lease expense | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
Supplemental cash flow information related to leases was as follows:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Cash paid for amounts included in measurement of lease liabilities: | ||||||||
| Operating cash flows from operating leases | $ | |||||||
| Operating cash flows from finance leases | ||||||||
| Financing cash flows from finance leases | ||||||||
| 20 |
Supplemental balance sheet information related to leases was as follows:
| September 30, | December 31, | |||||||
| (in thousands) | 2023 | 2022 | ||||||
| Operating leases | ||||||||
| Operating lease right-of-use assets | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Finance leases | ||||||||
| Property and equipment, at cost | $ | $ | ||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
| Current portion of finance lease obligations | $ | $ | ||||||
| Finance lease obligations, net of current portion | ||||||||
| Total finance lease liabilities | $ | $ | ||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
As of September 30, 2023, maturities of lease liabilities were as follows:
| (in thousands) | Operating | Finance | ||||||
| Years Ended December 31, | leases | leases | ||||||
| 2023 | $ | $ | ||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| Thereafter | ||||||||
| Total minimum lease payments | ||||||||
| Less: amount representing interest | ( | ) | ||||||
| Present value of capital lease liabilities | $ | $ | ||||||
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10. COMMITMENTS AND CONTINGENCIES
Purchase commitments
During the quarter ended September 30, 2023, we entered into a $
Litigation
We are subject to various claims and pending or threatened lawsuits in the normal course of business. We are not currently party to any legal proceedings that management believes are reasonably possible to have a material adverse effect on our financial position, results of operations or cash flows.
11. COMMON STOCK
In
June 2021, we entered into a $
In
June 2023, we entered into a $
In
August 2023, we entered into a $
12. INCOME TAXES
We
recognized income tax expense of $
As
of September 30, 2023, we continue to have
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ITEM 2. 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, 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,” and similar expressions identify forward-looking statements. Factors that could cause actual results to differ materially from those projected in our forward-looking statements include risk factors identified below in Item 1A.
Overview
MicroVision, Inc. is a global developer of lidar hardware and software solutions focused primarily on automotive lidar and advanced driver-assistance systems (ADAS) markets where we can deliver safe mobility at the speed of life. We develop a suite of light detection and ranging, or lidar, sensors and perception and validation software for sale to the automotive market for ADAS and autonomous vehicle (AV) applications, as well as to complementary markets for non-automotive applications including industrial, robotics and smart infrastructure. Our long history of developing and commercializing the core components of our lidar hardware and related software, combined with the experience of the team recently acquired from Ibeo Automotive Systems (Ibeo) with automotive-grade qualification, provides a potentially compelling advantage over the less-experienced recent entrants into this market.
Founded in 1993, MicroVision, Inc. is a pioneer in laser beam scanning, or LBS, technology, which is based on our patented expertise in micro-electromechanical systems, or MEMS, laser diodes, opto-mechanics, electronics, algorithms and software and how those elements are packaged into a small form factor. Throughout our history, we have combined our proprietary technology with our development expertise to create innovative solutions to address existing and emerging market needs, such as augmented reality microdisplay engines; interactive display modules; consumer lidar components; and, most recently, automotive lidar sensors and software solutions for the automotive market.
On January 31, 2023, we completed the acquisition of certain assets of Ibeo Automotive Systems GmbH, which was founded in 1998 as a lidar hardware and software provider. Ibeo developed and launched the first lidar sensor to be automotive qualified for serial production with a Tier 1 automotive supplier and that is currently available in passenger cars by premium OEMs. Ibeo developed software solutions, including perception and validation software, which are also used by premium OEMs. In addition, Ibeo sold its products for non-automotive uses such as industrial, smart infrastructure and robotics applications.
For the automotive market, our integrated solution combines our MEMS-based dynamic-range lidar sensor and perception software, to be integrated on our custom ASIC, targeted for sale to premium automotive OEMs and Tier 1 automotive suppliers. We believe that our MEMS-based lidar sensor, or MAVIN sensor, and perception software demonstrates best-in-class features and performance that exceed market expectations and outperform competitive products. Our ADAS solution is intended to leverage edge computing and custom ASICs to enable our hardware and perception software to be integrated into an OEM’s ADAS stack.
In addition to our dynamic-range and long-range MAVIN sensor and perception software solution for the automotive market, our product suite includes our short-range flash-based MOVIA lidar sensor, for automotive and industrial applications, including smart infrastructure, robotics, and other commercial segments. Also, our validation software tool, the MOSAIK suite, is used by OEMs and other customers including Tier 1s for validating vehicle sensors for ADAS and AV applications. The tool includes software that automates the manual data classification or annotation process, significantly reducing the time and resources required by OEMs to validate their ADAS and AV systems.
In the recent past, we developed micro-display concepts and designs for use in head-mounted augmented reality, or AR, headsets and developed a 1440i MEMS module supporting AR headsets. We also developed an interactive display solution targeted at the smart speakers market and a small consumer lidar sensor for use indoors with smart home systems.
Although our development and productization efforts are now solely focused on our lidar sensors and related software solutions, our revenue in the fiscal year ended December 31, 2022 was derived from one customer, Microsoft Corporation, related to components that we developed for a high-definition display system. Our arrangement with this customer generates royalty income; however, the volume of sales and resulting royalties from that arrangement are not significant.
We have been unable to secure the customers needed to successfully launch our products. We have incurred substantial losses since inception, and we expect to incur a significant loss during the fiscal year ending December 31, 2023.
| 23 |
Key accounting policies and estimates
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that materially affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We evaluate our estimates on a continuous basis. We base our estimates on historical data, terms of existing contracts, our evaluation of trends in the consumer display and 3D sensing industries, information provided by our current and prospective customers and strategic partners, information available from other outside sources and on various other assumptions we believe to be reasonable under the circumstances. The results form the basis for making judgments regarding the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Except for changes in accounting for business combinations associated with our acquisition of Ibeo assets, there have been no significant changes to our critical accounting judgments, policies, and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2022.
Results of operations
Revenue
| (in thousands) | 2023 | 2022 | $ change | % change | ||||||||||||
| Three Months Ended September 30, | $ | 1,047 | $ | - | $ | 1,047 | - | |||||||||
| Nine Months Ended September 30, | 2,158 | 664 | 1,494 | 225.0 | ||||||||||||
Revenues are recognized when control of the promised goods or services are transferred to our 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) occur 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 and nine months ended September 30, 2023 compared to the same period in 2022 was predominately due to software sales, but also included sales of lidar sensors, with sales to various customers as well as, activity on contracts obtained in the acquisition of Ibeo assets.
Cost of revenue
| % of | % of | |||||||||||||||||||||||
| product | product | |||||||||||||||||||||||
| (in thousands) | 2023 | revenue | 2022 | revenue | $ change | % change | ||||||||||||||||||
| Three Months Ended September 30, | $ | 625 | 59.7 | $ | 45 | - | $ | 580 | 1,288.9 | |||||||||||||||
| Nine Months Ended September 30, | 1,870 | 86.7 | 67 | 10.1 | 1,803 | 2,691.0 | ||||||||||||||||||
Cost of revenue includes the direct and allocated indirect costs of products and services sold to customers. Direct costs include labor, materials, reserves for estimated warranty expenses, and other costs incurred directly, or charged to us by our contract manufacturers, in the manufacture of these products. Indirect costs include labor, 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 increase in cost of revenue for the three and nine months ended September 30, 2023 compared to the same period in 2022 was due to increased contract activity and the amortization of intangible assets obtained in the acquisition of Ibeo assets.
Research and development expense
| (in thousands) | 2023 | 2022 | $ change | % change | ||||||||||||
| Three Months Ended September 30, | $ | 15,584 | $ | 7,535 | $ | 8,049 | 106.8 | |||||||||
| Nine Months Ended September 30, | 42,127 | 22,828 | 19,299 | 84.5 | ||||||||||||
Research and development expense consists of compensation related costs of employees and contractors engaged in internal research and product development activities, direct material to support development programs, laboratory operations, outsourced development and processing work, and other operating expenses. We assign our research and development resources based on the business opportunity of the available projects, the skill mix of the resources available and the contractual commitments we have made to our customers. We believe that a substantial level of continuing research and development expense will be required to further develop our scanning technology.
The increase in research and development expense during the three months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher salary and benefits expenses of approximately $5.5 million mostly related to transferred employees in the acquisition of Ibeo assets, increase is purchased services of $1.4 million, a higher depreciation of $525,000 and increase in non-cash share-based compensation of $363,000. The increase in research and development expense during the nine months ended September 30, 2023 compared to the same period in 2022 was primarily due to higher salary and benefits expenses of $16.3 million mostly related to transferred employees in the acquisition of Ibeo assets, a higher depreciation of $2.1 million and an increase in purchased services of $926,000.
| 24 |
Sales, marketing, general and administrative expense
| (in thousands) | 2023 | 2022 | $ change | % change | ||||||||||||
| Three Months Ended September 30, | $ | 8,743 | $ | 5,522 | $ | 3,221 | 58.3 | |||||||||
| Nine Months Ended September 30, | 27,172 | 17,664 | 9,508 | 53.8 | ||||||||||||
Sales, marketing, general and administrative expense includes compensation and support costs for marketing, sales, management and administrative staff, and for other general and administrative costs, including legal and accounting services, consultants and other operating expenses.
The increase in sales, marketing, general and administrative expense during the three months ended September 30, 2023 compared to the same period in 2022 was primarily attributed to higher salary and benefits expenses of approximately of $1.7 million mostly related to transferred employees in the acquisition of Ibeo assets, increased professional fees of approximately $282,000, increased purchased services of $271,000, higher advertising expenses of $272,000 and increased non-cash share-based compensation expense of approximately $247,000. The increase in sales, marketing, general and administrative expense during the nine months ended September 30, 2023 compared to the same period in 2022 was primarily attributed to higher salary and benefits expenses of approximately $4.5 million mostly related to transferred employees in the acquisition of Ibeo assets, increased professional fees of approximately $1.7 million, increased depreciation expense of $846,000, increased non-cash share-based compensation expense of $814,000, increased purchased services of $577,000 and higher advertising expenses of $316,000.
Bargain purchase gain, net of tax
| (in thousands) | 2023 | 2022 | $ change | % change | ||||||||||||
| Three Months Ended September 30, | $ | - | $ | - | $ | - | - | |||||||||
| Nine Months Ended September 30, | 1,706 | - | 1,706 | - | ||||||||||||
During the nine months ended September 30, 2023, we recorded a bargain purchase gain related to the acquisition of assets from Ibeo. The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration paid in the transaction.
Other income
| (in thousands) | 2023 | 2022 | $ change | % change | ||||||||||||
| Three Months Ended September 30, | $ | 637 | $ | 251 | $ | 386 | 153.8 | |||||||||
| Nine Months Ended September 30, | 4,846 | 279 | 4,567 | 1,636.9 | ||||||||||||
The increase in other income during the three and nine months ended September 30, 2023 compared to the same period in 2022 is due a payment of $3.0 million as an incentive to terminate our previous building lease. The remainder of the increase is primarily due to income from investment securities.
Liquidity and capital resources
We have incurred significant losses since inception. We have funded operations to date primarily through the sale of common stock, convertible preferred stock, warrants, the issuance of convertible debt and, to a lesser extent, from development contract revenues, product sales, and licensing activities. At September 30, 2023, we had $49.4 million in cash and cash equivalents and $28.7 million in short-term investment securities. As of September 30, 2023, we have approximately $30.6 million available under the ATM agreement.
| 25 |
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 $50.5 million during the nine months ended September 30, 2023 compared to cash used in operating activities of $29.6 million during the same period in 2022. Cash used in operating activities resulted primarily from cash used to fund our net loss, after adjusting for non-cash charges such as share-based compensation, depreciation and amortization charges and changes in operating assets and liabilities. The changes in cash used in operating activities were primarily attributed to increased operating expenses to support the development of our lidar sensor. During the quarter ended September 30, 2023, we made a payment of $3.1 million to our contract manufacturing partner in connection with the buildup of MOVIA sensor inventory for direct sales to both automotive and non-automotive customers. Moreover, we expect to make additional payments to this partner totaling approximately $9.2 million over the first six months of 2024 in line with agreed-upon deliveries.
Investing activities
During the nine months ended September 30, 2023, net cash provided by investing activities was $21.4 million compared to net cash used in investing activities of $31.0 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, we purchased short-term investment securities totaling $27.1 million and sold short-term investment securities totaling $61.7 million. During the nine months ended September 30, 2023, we made payments totaling $11.2 million related to the acquisition of Ibeo assets. We expect to make the final payment related to the Ibeo acquisition of approximately $2.9 million during the fourth quarter of 2023. Purchases of property and equipment during the nine months ended September 30, 2023 and 2022 were $2.0 million and $2.0 million, respectively.
Financing activities
Net cash provided by financing activities totaled $60.8 million during the nine months ended September 30, 2023, compared to net cash provided by financing activities of $315,000 during the same period of 2022. During the nine months ended September 30, 2022, we made principal payments under long-term debt totaling $392,000 related to the loan under the Paycheck Protection Program of the 2020 CARES Act (PPP) administered by the Small Business Administration. Proceeds received from stock option exercises totaled $175,000 during the nine months ended September 30, 2023 compared to $727,000 during the same period of 2022. Principal payments under finance leases were $19,000 during the nine months ended September 30, 2023 compared to $20,000 during the nine months ended September 30, 2022.
In June 2021, we entered into a $140.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $140.0 million through Craig-Hallum. As of December 31, 2022, we had issued 8.3 million shares of our common stock for net proceeds of $81.8 million under this ATM agreement. During the quarter ended March 31, 2023, we issued 5.0 million shares of our common stock for net proceeds of $12.5 million under the agreement. This sales agreement was terminated in June 2023.
In June 2023, we entered into a $45.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $45.0 million through Craig-Hallum. As of June 30, 2023, we had completed sales under such sales agreement, having sold 10.9 million shares for net proceeds of $43.9 million. No further shares are available for sales under this agreement.
In August 2023, we entered into a $35.0 million ATM equity offering agreement with Craig-Hallum. Under the agreement, we are able, at our discretion, to offer and sell shares of our common stock having an aggregate value of up to $35.0 million through Craig-Hallum. As of September 30, 2023, we had completed sales under such sales agreement, having sold 1.8 million shares for net proceeds of $4.2 million. As of September 30, 2023, we had issued 150,000 shares of our common stock for net proceeds of $323,000 that was received in October 2023. The $323,000 is classified as subscriptions receivable on our September 30, 2023 balance sheet and is not included in the cash balance as of September 30, 2023. As of September 30, 2023, we have approximately $30.6 million available under this ATM agreement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate and market liquidity risk
As of September 30, 2023, all of our cash and cash equivalents have variable interest rates; however, we believe our exposure to market and interest rate risk is not material. Due to the generally short-term maturities of our investment securities, we believe that the market risk arising from our holdings of these financial instruments is not significant. We do not believe that inflation has had a material effect on our business, financial condition or results of operations; however, we do anticipate our labor costs to increase as a result of inflationary pressures.
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Our investment policy generally directs that the investment managers should select investments to achieve the following goals: principal preservation, adequate liquidity and return. As of September 30, 2023, our cash and cash equivalents are comprised of short-term highly rated (A rated securities and above) money market savings accounts and our short-term investments are comprised of highly rated corporate and government debt securities (A rated securities and above). The values of cash and cash equivalents and investment securities, available-for-sale as of September 30, 2023, are as follows:
| (in thousands) | Amount | Percent | ||||||
| Cash and cash equivalents | $ | 49,366 | 63.3 | % | ||||
| Less than one year | 28,677 | 36.7 | % | |||||
| $ | 78,043 | 100.0 | % | |||||
Foreign exchange rate risk
Our major contract and collaborative research and development agreements, product sales, and licensing activity payments are currently made in U.S. dollars or Euros. Changes in the relative value of the U.S. dollar to the Euro and other currencies may affect revenue and other operating results as expressed in U.S. dollars. In addition, our international subsidiary financial statements are denominated in Euros. As such, the consolidated financial statements will continue to remain subject to the impact of foreign currency translation as our international operations continue to expand. We may enter into foreign currency hedges to offset material exposure to currency fluctuations when we can adequately determine the timing and amounts of the exposure.