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 engagements, 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 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 solutions for
the automotive market.



Currently, our development efforts are primarily focused on automotive lidar
sensors and perception software for advanced driver-assistance systems, or ADAS.
Our integrated solution will combine our MEMS-based lidar sensor, custom ASICs,
and software targeted for sale to automotive OEMs and Tier-1 automotive
suppliers.



We believe that our MEMS-based lidar sensor demonstrates best-in-class features
and performance that can exceed market expectations and outperform competitive
products. In 2021 we completed our A-Sample long range lidar module, and we are
continuing to advance our lidar sensor and refine its features.



Our ADAS solution is intended to leverage edge computing and custom ASICs to
enable our hardware and sensor fusion software to be integrated into an OEM's
ADAS stack. We are continuing to refine our technology and products and we
expect to test our solution and demonstrate its capabilities during the first
half of 2022. Although we are forecasting small quantities of sales in 2022, we
do not expect to achieve significant, sustained revenue from our ADAS solution
in the near term.



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In the recent past, we developed micro-display concepts and designs for use in
head-mounted AR headsets and developed a 1440i MEMS module that can support AR
headsets. We also developed a display solution targeted at the smart speakers
market, which we call an Interactive Display module. The display was designed to
project onto a countertop, tabletop or a wall from inside a smart speaker. The
user could then touch the projected image on any surface on which the display is
visible and it will behave like a touchscreen, as on a tablet or smartphone. In
addition, we developed a small lidar sensor, which we call Consumer Lidar, for
use indoors with smart home systems. It was designed to allow for a smart home
system to understand what is happening in the home and then enable the smart
home to respond in an appropriate way.



Although our development and productization efforts are now solely focused on
our ADAS solution, our revenue in the two fiscal years ended December 31, 2021
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, 2022.

Continuing Impact of COVID-19 on Our Business



Our business operations continue to be impacted by the ongoing COVID-19
pandemic. Government restrictions in the early days of the pandemic caused us to
mostly close our offices in early 2020. To support our hardware development
efforts, we reopened our offices in July 2021 while maintaining compliance with
government mandates and health agency protocols, including masking requirements
and encouraging vaccination. Some of our office employees continue to work
remotely or on hybrid schedules. We may experience reductions in productivity
and disruptions to our business routines while our hybrid work policy remains in
place, or if our employees become ill and are unable to work, which could have
an adverse effect on the timing of our development and productization
activities. We will continue to prioritize the health and safety of our
employees as we adapt our workplace policies based on evolving government
regulation, health agency advice, and industry best practice.

In addition, several of our suppliers have experienced closures or have been
operating at reduced capacity, resulting in lower component availability.
Continued disruptions to our supply chain could have a material impact on our
development and future operations. Moreover, various global travel restrictions
and office closures have hampered our business development efforts, making it
more difficult to engage with potential customers and partners, which could have
a material negative impact on our business prospects.

Key accounting policies and estimates



Our discussion and analysis of our financial condition and results of operations
are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of these financial statements requires us to make estimates and
judgments that materially affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent liabilities. We
evaluate our estimates on a continuous basis. We base our estimates on
historical data, terms of existing contracts, our evaluation of trends in the
consumer display and 3D sensing industries, information provided by our current
and prospective customers and strategic partners, information available from
other outside sources and on various other assumptions we believe to be
reasonable under the circumstances. The results form the basis for making
judgments regarding the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. There have been no
significant changes to our critical accounting judgments, policies, and
estimates as described in our Annual Report on Form 10-K for the year ended
December 31, 2021.

Results of operations

License and royalty revenue



(in thousands)                      2022            2021            $ change           % change

Three Months Ended March 31, $ 350 $ 479 $ (129)

              (26.9)


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License and royalty revenue is revenue under license agreements to our PicoP®
scanning technology. We recognize revenue on upfront license fees at a point in
time if the nature of the license granted is a right-to-use license,
representing functional intellectual property with significant standalone
functionality. If the nature of the license granted is a right-to-access
license, representing symbolic intellectual property, which excludes significant
standalone functionality, we recognize revenue over the period of time we have
ongoing obligations under the agreement. We will recognize revenue from
sales-based royalties on the basis of the quarterly reports provided by our
customer as to the number of royalty-bearing products sold or otherwise
distributed. In the event that reports are not received, we will estimate the
number of royalty-bearing products sold by our customers.

The decrease in license and royalty revenue for the three months ended March 31, 2022 compared to the same period in 2021 was due to a lower number of royalty-bearing products being distributed by our customer.



Cost of product revenue

                                                    % of                              % of
                                                  product                           product
(in thousands)                      2022          revenue            2021           revenue        $ change       % change

Three Months Ended March 31,    $         4               -    $          (5)               -    $         9         (180.0)







Cost of product revenue includes the direct and allocated indirect costs of
products 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, manufacturing overhead, and other costs associated with
operating our manufacturing capabilities and capacity. Manufacturing overhead
includes the costs of procuring, inspecting and storing material, facility and
other costs, and is allocated to cost of product revenue based on the proportion
of indirect labor which supported production activities.

Cost of product revenue can fluctuate significantly from period to period,
depending on the product mix and volume, the level of manufacturing overhead
expense and the volume of direct material purchased. The credit of $5,000 for
the three months ending March 31, 2021 is related to the reversal of accrued
warranty liabilities since warranty claims were less than expected.

Research and development expense



(in thousands)                       2022             2021           $ change        % change
Three Months Ended March 31,   $        7,593   $        4,462   $        3,131            70.2



Research and development expense consists of compensation related costs of
employees and contractors engaged in internal research and product development
activities, direct material to support development programs, laboratory
operations, outsourced development and processing work, and other operating
expenses. We assign our research and development resources based on the business
opportunity of the available projects, the skill mix of the resources available
and the contractual commitments we have made to our customers. We believe that a
substantial level of continuing research and development expense will be
required to further develop our scanning technology.



The increase in research and development expense during the three months ended
March 31, 2022 compared to the same period in 2021 was primarily due to
increased salary and benefits expenses as a result of increased headcount of
approximately $1.5 million, higher non-cash compensation expense of $648,000,
and higher non-labor direct expenses related to the development of our lidar
sensor of $611,000.

Sales, marketing, general and administrative expense





(in thousands)                      2022             2021           $

change % change Three Months Ended March 31, $ 5,877 $ 2,247 $ 3,630

            161.5






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Sales, marketing, general and administrative expense includes compensation and
support costs for marketing, sales, management and administrative staff, and for
other general and administrative costs, including legal and accounting services,
consultants and other operating expenses.

The increase in sales, marketing, general and administrative expense during the
three months ended March 31, 2022 compared to the same period in 2021 was
primarily attributed to higher non-cash compensation expense of $1.4 million,
increased professional services and consulting costs of $804,000, increased
business insurance expense of $565,000, and increased salary and benefits
expenses as a result of increased headcount of approximately $493,000.

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 March
31, 2022, we had $55.6 million in cash and cash equivalents and $47.7 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.



Operating activities



Cash used in operating activities totaled $10.9 million during the three months
ended March 31, 2022 compared to cash used in operating activities of $4.5
million during the same period in 2021. 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.

Investing activities



During the three months ended March 31, 2022, net cash used in investing
activities was $16.1 million compared to $565,000 during the three months ended
March 31, 2021. During the three months ended March 31, 2022, we purchased
short-term investment securities totaling $16.7 million and sold short-term
investment securities totaling $1.5 million. Purchases of property and equipment
during the three months ended March 31, 2022 and 2021 were $884,000 and
$565,000, respectively.

Financing activities



Net cash used in financing activities totaled $49,000 during the three months
ended March 31, 2022, compared to net cash provided by financing activities of
$63.6 million during the same period of 2021. During the three months ended
March 31, 2022, we made principal payments under long-term debt totaling
$294,000 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 $253,000 during the three months
ended March 31, 2022 compared to $2.1 million during the same period of 2021.
Principal payments under finance leases were $8,000 during the three months
ended March 31, 2022 and 2021.



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 March 31, 2022, we had issued 4.0 million
shares of our common stock for net proceeds of $67.8 million under this ATM
agreement. There were no transactions under this agreement in the first quarter
of 2022.



In February 2021, we entered into a $50.0 million ATM equity offering agreement
with Craig-Hallum. Under the agreement we were able, at our discretion, to offer
and sell shares of our common stock having an aggregate value of up to $50.0
million through Craig-Hallum. We have issued 2.5 million shares of our common
stock for net proceeds of $48.8 million under this ATM agreement. No further
shares are available for sales under this agreement.



 19





In December 2020, we entered into a $13.0 million ATM equity offering agreement
with Craig-Hallum. Under the agreement we were able to, from time to time, at
our discretion offer and sell shares of our common stock having an aggregate
value of up to $13.0 million through Craig-Hallum. As of December 31, 2020, we
had issued 1.0 million shares for net proceeds of $6.1 million that was received
in January 2021. The $6.1 million was classified as subscriptions receivable on
our December 31, 2020 balance sheet and is not included in the cash balance as
of December 31, 2020. In January 2021, we issued 1.1 million shares of our
common stock for net proceeds of $6.6 million under the agreement. In total, we
have issued 2.1 million shares of our common stock for net proceeds of $12.7
million under this ATM agreement. No further shares are available for sales
under this agreement.

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