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utr:Y
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
March 31, 2022
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
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) |
|
6244 185th Avenue NE,
Suite 100
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
April 25, 2022 was
165,209,972.
TABLE OF CONTENTS |
|
|
|
PART I. FINANCIAL
INFORMATION |
|
Item 1. Financial Statements
(unaudited) |
Page |
Condensed Balance Sheets as of March
31, 2022 and December 31, 2021 |
2 |
Condensed Statements of Operations
for the three months ended March 31, 2022 and
2021 |
3 |
Condensed Statements of Comprehensive
Loss for the three months ended March 31, 2022 and
2021 |
4 |
Condensed Statements of
Shareholders’ Equity for the three months ended March 31, 2022 and
2021 |
5 |
Condensed Statements of Cash Flows
for the three months ended March 31, 2022 and
2021 |
6 |
Notes to Condensed Financial
Statements |
7 |
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations |
16 |
Item 3. Quantitative and Qualitative Disclosures
About Market Risk |
20 |
Item 4. Controls and Procedures |
20 |
|
|
PART II. OTHER
INFORMATION |
|
Item 1. Legal Proceedings |
21 |
Item 1A. Risk Factors |
21 |
Item 6. Exhibits |
29 |
Signatures |
30 |
|
|
|
|
|
|
PART I.
ITEM 1. FINANCIAL STATEMENTS
MicroVision,
Inc.
Condensed Balance Sheets
(In thousands,
except per share data)
(Unaudited)
The accompanying notes are an integral part of these financial
statements.
MicroVision, Inc.
Condensed Statements of Operations
(In thousands, except per
share data)
(Unaudited)
The accompanying notes are an integral part of these financial
statements.
MicroVision, Inc.
Condensed Statements of Comprehensive Loss
(In
thousands)
(Unaudited)
The accompanying notes are an integral part of these financial
statements.
MicroVision, Inc.
Condensed Statements of Shareholders’ Equity
(In
thousands)
(Unaudited)
The accompanying notes are an integral part of these financial
statements.
MicroVision, Inc.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
The accompanying notes are an integral part of these financial
statements.
MicroVision, Inc.
Notes to Condensed Financial
Statements
(Unaudited)
1. MANAGEMENT'S STATEMENT
Accounting Policy
The Condensed Balance Sheets as of March 31, 2022, the Condensed
Statements of Operations, Condensed Statements of Comprehensive
Loss and Condensed Statements of Shareholders’ Equity for the three
months ended March 31, 2022 and 2021, and Condensed Statements of
Cash Flows for the three months ended March 31, 2022 and 2021, 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 March 31, 2022
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
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, 2021. The results of operations
for the three months ended March 31, 2022 are not necessarily
indicative of the operating results that may be attained for the
entire fiscal year.
We are developing lidar sensors and sensor fusion software to
address the needs of the Level 2+, or L2+, and Level 3 or L3,
Advanced Driver Assisted Systems (ADAS) markets to be used in
automotive safety and autonomous driving applications. Our lidar
sensor uses 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 adaptability.
With these factors in mind, we believe that our best-in-class lidar
sensor supports 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.
Our LBS technology is based on our patented expertise in systems
that include micro-electrical mechanical systems (MEMS), laser
diodes, opto-mechanics, electronics, algorithms and software, and
how those elements are packaged into a small form factor. Our lidar
sensor also utilizes edge computing and machine intelligence as
part of the solutions. Though automotive lidar is our priority now,
we have developed solutions for Augmented Reality, Interactive
Displays, and Consumer Lidars in the recent past.
For the recent few years, our strategy has been to sell Augmented
Reality (AR) displays or components, Interactive Displays, or
Consumer Lidars to original equipment manufacturers (OEMs) and
original design manufacturers (ODMs) for incorporation into their
products. Currently, our sole customer is Microsoft Corporation.
Our arrangement with this customer generates royalty income;
however, the volume of sales and resulting royalties from that
arrangement is not significant. In the recent past, we shifted our
strategic focus to increase the value of the Company by completing
development of our 1st Generation LRL module to a level that would
be ready to scale in the market for automotive applications. We
believe the size of the ADAS market is significantly bigger than
the AR market and related applications. We believe our technology
and designs for automotive lidar can be successful in the market,
and our solutions will have features and performance that exceed
those of competitors and will provide a sustainable strategic
advantage in the market.
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 March 31, 2022, we had total liquidity of $103.3 million including $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.
2.
NET LOSS PER SHARE
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):
Components of Basic and Diluted Net Loss Per
Share
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
|
2021 |
Numerator: |
|
|
|
|
|
|
Net loss available for common shareholders - basic and
diluted |
|
$ |
(13,168) |
|
$ |
(6,231) |
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
Weighted-average common shares outstanding - basic and
diluted |
|
|
164,563 |
|
|
155,454 |
|
|
|
|
|
|
|
Net loss per share - basic and
diluted |
|
$ |
(0.08) |
|
$ |
(0.04) |
For
the three months ended March 31, 2022 and 2021, 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 1,338,000 and 2,096,000 shares of common
stock, respectively, and 4,025,000 and 2,445,000 nonvested restricted
and performance stock units, respectively.
3. 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.
Disaggregation of
revenue
The following table provides information about disaggregated
revenue by timing of revenue recognition (in thousands):
Disaggregation of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended March 31, 2022 |
|
|
|
|
|
|
License and |
|
|
|
|
|
|
|
|
|
Product |
|
|
royalty |
|
|
Contract |
|
|
|
|
|
|
revenue |
|
|
revenue |
|
|
revenue |
|
|
Total |
Timing of revenue
recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
Products
transferred at a point in time |
|
$ |
- |
|
$ |
350 |
|
$ |
- |
|
$ |
350 |
Product and
services transferred over time |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Total |
|
$ |
- |
|
$ |
350 |
|
$ |
- |
|
$ |
350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended March 31, 2021 |
|
|
|
|
|
|
License and |
|
|
|
|
|
|
|
|
|
Product |
|
|
royalty |
|
|
Contract |
|
|
|
|
|
|
revenue |
|
|
revenue |
|
|
revenue |
|
|
Total |
Timing of revenue
recognition: |
|
|
|
|
|
|
|
|
|
|
|
|
Products
transferred at a point in time |
|
$ |
- |
|
$ |
479 |
|
$ |
- |
|
$ |
479 |
Product and
services transferred over time |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
Total |
|
$ |
- |
|
$ |
479 |
|
$ |
- |
|
$ |
479 |
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):
Significant Changes in Contract Assets and Contract
Liabilities
|
|
|
March
31, |
|
|
December 31, |
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
$ Change |
|
% Change |
|
|
|
|
|
|
|
|
|
|
|
|
Contract assets |
|
$ |
- |
|
$ |
- |
|
$ |
- |
|
- |
Contract liabilities |
|
|
(4,915) |
|
|
(5,265) |
|
|
350 |
|
(6.6) |
Net contract assets (liabilities) |
|
$ |
(4,915) |
|
$ |
(5,265) |
|
$ |
350 |
|
(6.6) |
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,
2021, we had applied $4.7 million
against the contract liability. During the three months ended March
31, 2022, we applied $350,000 against
the contract liability with this 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
March 31, 2022.
Transaction price
allocated to the remaining performance obligations
The following table includes estimated revenue expected to be
recognized in the future related to performance obligations that
are unsatisfied or partially unsatisfied at the end of the
reporting period. 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. We expect to
apply an additional $2.2 million in 2022, and this amount is
included in revenue below. Because there is uncertainty about the
timing of the application of the remainder of the contract
liability, it has been excluded from future estimated revenue in
the table below. The $4.9
million contract liability is classified as a current liability on
our balance sheet. It is likely that recognition of revenue may
extend beyond the next twelve months. The following table provides
information about the estimated timing of revenue recognition (in
thousands):
The following table provides information about the estimated timing
of revenue recognition (in thousands):
Estimated Timing of Revenue Recognition
|
|
|
Remainder of 2022 |
|
|
2023 |
|
|
|
|
|
|
|
License and royalty revenue |
|
$ |
2,150 |
|
$ |
- |
4.
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.
The
valuation inputs hierarchy classification for assets measured at
fair value on a recurring basis are summarized below as of March
31, 2022 and December 31, 2021 (in thousands). These tables do not
include cash held in our money market savings accounts.
Schedule of Fair Value Hierarchy Assets and Liabilities
As of March 31, 2022 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
- |
|
$ |
34,174 |
|
$ |
- |
|
$ |
34,174 |
U.S. Treasury securities |
|
|
- |
|
|
13,477 |
|
|
- |
|
|
13,477 |
|
|
$ |
- |
|
$ |
47,651 |
|
$ |
- |
|
$ |
47,651 |
As of December 31,
2021 |
|
|
Level
1 |
|
|
Level
2 |
|
|
Level
3 |
|
|
Total |
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
- |
|
$ |
32,720 |
|
$ |
- |
|
$ |
32,720 |
|
|
$ |
- |
|
$ |
32,720 |
|
$ |
- |
|
$ |
32,720 |
Our
short-term investments are summarized below as of March 31, 2022
and December 31, 2021 (in thousands).
Schedule of Unrealized Gain or Loss on Short-term Investments
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
|
Cost/ |
|
|
Gross |
|
|
Gross |
|
|
Securities, |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Available- |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
For-Sale |
As of March 31,
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
securities |
|
$ |
34,291 |
|
$ |
- |
|
$ |
(117) |
|
$ |
34,174 |
U.S. Treasury
securities |
|
|
13,484 |
|
|
1 |
|
|
(8) |
|
|
13,477 |
|
|
$ |
47,775 |
|
$ |
1 |
|
$ |
(125) |
|
$ |
47,651 |
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
|
|
|
Cost/ |
|
|
Gross |
|
|
Gross |
|
|
Securities, |
|
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Available- |
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
For-Sale |
As of December 31,
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt
securities |
|
$ |
32,739 |
|
$ |
3 |
|
$ |
(22) |
|
$ |
32,720 |
|
|
$ |
32,739 |
|
$ |
3 |
|
$ |
(22) |
|
$ |
32,720 |
The
maturities of the investment securities available-for-sale as of
March 31, 2022 and December 31, 2021 are shown below (in
thousands):
+Maturity Date of Available-for-sale Securities
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
As of March 31,
2022 |
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
Maturity date |
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
$ |
47,775 |
|
$ |
1 |
|
$ |
(125) |
|
$ |
47,651 |
|
|
$ |
47,775 |
|
|
|
|
|
|
|
$ |
47,651 |
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
As of December 31,
2021 |
|
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
Maturity date |
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than one year |
|
$ |
32,739 |
|
$ |
3 |
|
$ |
(22) |
|
$ |
32,720 |
|
|
$ |
32,739 |
|
|
|
|
|
|
|
$ |
32,720 |
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 March 31, 2022 and December 31, 2021 (in
thousands):
Schedule of Unrealized Loss on Investment Securities
|
|
|
Less than Twelve Months |
|
|
Twelve Months or Greater |
|
|
Total |
As of
March 31, 2022 |
|
|
|
|
|
Gross |
|
|
|
|
|
Gross |
|
|
|
|
|
Gross |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
30,380 |
|
$ |
(117) |
|
$ |
- |
|
$ |
- |
|
$ |
30,380 |
|
$ |
(117) |
U.S. Treasury
securities |
|
|
7,483 |
|
|
(8) |
|
|
- |
|
|
- |
|
|
7,483 |
|
|
(8) |
|
|
$ |
37,863 |
|
$ |
(125) |
|
$ |
- |
|
$ |
- |
|
$ |
37,863 |
|
$ |
(125) |
|
|
|
Less than Twelve Months |
|
|
Twelve Months or Greater |
|
|
Total |
As of
December 31, 2021 |
|
|
|
|
|
Gross |
|
|
|
|
|
Gross |
|
|
|
|
|
Gross |
|
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
27,195 |
|
$ |
(22) |
|
$ |
- |
|
$ |
- |
|
$ |
27,195 |
|
$ |
(22) |
|
|
$ |
27,195 |
|
$ |
(22) |
|
$ |
- |
|
$ |
- |
|
$ |
27,195 |
|
$ |
(22) |
5. 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 March 31, 2022, 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 March 31, 2022, one customer accounted
for $350,000
in revenue, representing
100% of our total revenue. For the three months ended March
31, 2021, one customer accounted for $479,000
in revenue, representing
100% of our total revenue.
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.
6. INVENTORY
Inventory consists of the following:
Components of Inventory
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
(in thousands) |
|
|
2022 |
|
|
2021 |
Raw materials |
|
$ |
1,815 |
|
$ |
1,780 |
|
|
$ |
1,815 |
|
$ |
1,780 |
Inventory
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.
7. SHARE-BASED COMPENSATION
Share-Based Compensation
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. Changes in estimated
inputs or using other option valuation methods may result in
materially different option values and share-based compensation
expense.
The following table summarizes the amount of share-based
compensation expense by line item on the statements of
operations:
Share-based Compensation Expense by Line
Item
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
Three
Months Ended |
|
|
|
March 31, |
(in thousands) |
|
|
2022 |
|
|
2021 |
Research and development expense |
|
$ |
1,833 |
|
$ |
1,184 |
Sales, marketing, general and administrative expense |
|
|
1,901 |
|
|
454 |
|
|
$ |
3,734 |
|
$ |
1,638 |
Options activity and
positions
The following table summarizes shares, weighted-average exercise
price, weighted-average remaining contractual term and aggregate
intrinsic value of options outstanding and options exercisable as
of March 31, 2022:
Option Positions
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
|
|
|
|
Average |
|
Remaining |
|
|
Aggregate |
Options |
|
|
|
|
Exercise |
|
Contractual |
|
|
Intrinsic |
|
|
Shares |
|
|
Price |
|
Term (years) |
|
|
Value |
Outstanding as of March 31, 2022 |
|
1,338,000 |
|
$ |
1.38 |
|
6.0 |
|
$ |
4,476,000 |
|
|
|
|
|
|
|
|
|
|
|
Exercisable as of March 31,
2022 |
|
1,013,000 |
|
$ |
1.58 |
|
5.6 |
|
$ |
3,197,000 |
As of March 31, 2022, our unrecognized share-based employee
compensation related to stock options was $30,000
which we plan to expense over the next 0.3 years.
Restricted stock activity
and positions
The following table summarizes activity and positions with respect
to RSUs and PSUs for the three months ended March 31, 2022:
Restricted Stock Unit Activity
|
|
|
|
|
|
Weighted-average |
|
|
|
Shares |
|
|
price |
Unvested as of December 31, 2021 |
|
|
2,625,000 |
|
$ |
13.05 |
Granted |
|
|
1,742,000 |
|
|
4.07 |
Vested |
|
|
(332,000) |
|
|
13.21 |
Forfeited |
|
|
(10,000) |
|
|
6.60 |
Unvested as of March 31, 2022 |
|
|
4,025,000 |
|
$ |
9.17 |
As
of March 31, 2022, our unrecognized share-based compensation
related to RSUs was $22.9
million which we plan to expense over the next 2.2 years and our unrecognized
share-based compensation related to the non-executive PSUs was
$6.8
million, which we plan to expense over the next 1.3 years.
8. LEASES
Lessee Lease Policy
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. Our finance leases contain
options to purchase the leased property. The depreciable life of
assets and leasehold improvements are limited by the expected lease
term, unless we are reasonably certain to exercise the purchase
option.
In September 2021, we entered
into an office lease with Redmond East Office Park LLC, a
Washington limited liability company, pursuant to which we will
lease approximately 16,681 square feet of space located in Redmond,
Washington that we will use primarily for general office space and
product testing. The lease provides for an initial term of 128
months that commenced November 1, 2021. Pursuant to the lease,
annual base rent will be approximately $500,000 for the first year
and is subject to annual increases of 3.0%. In addition to base
rent, we will pay additional rent comprised of our proportionate
share of any operating expenses, real estate taxes, and management
fees. We have the option to extend the term for one ten-year
renewal period, provided that the rent would be subject to market
adjustment at the beginning of the renewal term. The total minimum
lease payments related to this lease is $6.4 million.
In September 2021, we entered into a second office lease with
Redmond East Office Park LLC, pursuant to which we will lease
approximately 36,062 square feet of space located in Redmond,
Washington that we will use primarily for general office and lab
space. The lease provides for an initial term of 120 months with a
target commencement date of July 1, 2022. Pursuant to the lease,
annual base rent will be approximately $1.1 million for the first
year and is subject to annual increases of 3.0%. In addition to
base rent, we will pay additional rent comprised of our
proportionate share of any operating expenses, real estate taxes,
and management fees. We have the option to extend the term for one
ten-year renewal period, provided that the rent would be subject to
market adjustment at the beginning of the renewal term. The total
minimum lease payments related to this forward-starting lease are
$13.0 million. The lease liability associated with this
forward-starting lease is excluded from the tables
below.
In connection with the
effectiveness of the second lease with Redmond East Office Park, we
amended our current office lease to provide for early termination
intended to coincide with our move into the new 36,062 square feet
of space but, in any event, no later than October 31,
2022.
The
components of lease expense were as follows:
Components of Lease Expense
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
|
March 31, |
(in thousands) |
|
|
2022 |
|
|
2021 |
Operating lease expense |
|
$ |
244 |
|
$ |
116 |
|
|
|
|
|
|
|
Finance lease expense: |
|
|
|
|
|
|
Amortization of leased assets |
|
|
8 |
|
|
8 |
Interest on lease liabilities |
|
|
1 |
|
|
1 |
Total finance lease expense |
|
|
9 |
|
|
9 |
Total lease
expense |
|
$ |
253 |
|
$ |
125 |
Supplemental cash flow information related to
leases was as follows:
Cash Flow Information Related to
Leases
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
|
March 31, |
(in thousands) |
|
|
2022 |
|
|
2021 |
Cash paid for amounts included in measurement of lease
liabilities: |
|
|
|
|
|
|
Operating cash
flows from operating leases |
|
$ |
299 |
|
$ |
166 |
Operating cash
flows from finance leases |
|
|
1 |
|
|
1 |
Financing cash
flows from finance leases |
|
|
8 |
|
|
8 |
Supplemental balance sheet information related to leases was as
follows:
Supplemental Balance Sheet Information Related to
Leases
|
|
|
March 31, |
|
|
December
31, |
(in thousands) |
|
|
2022 |
|
|
2021 |
Operating leases |
|
|
|
|
|
|
Operating lease
right-of-use assets |
|
$ |
5,368 |
|
$ |
5,577 |
|
|
|
|
|
|
|
Current portion of
operating lease liability |
|
|
686 |
|
|
849 |
Operating lease
liability, net of current portion |
|
|
4,882 |
|
|
4,983 |
Total operating
lease liabilities |
|
$ |
5,568 |
|
$ |
5,832 |
|
|
|
|
|
|
|
Finance leases |
|
|
|
|
|
|
Property and
equipment, at cost |
|
$ |
112 |
|
$ |
112 |
Accumulated
depreciation |
|
|
(63) |
|
|
(56) |
Property and
equipment, net |
|
$ |
49 |
|
$ |
56 |
|
|
|
|
|
|
|
Current portion of
finance lease obligations |
|
$ |
24 |
|
$ |
21 |
Finance lease
obligations, net of current portion |
|
|
15 |
|
|
26 |
Total finance
lease liabilities |
|
$ |
39 |
|
$ |
47 |
|
|
|
|
|
|
|
Weighted Average
Remaining Lease Term |
|
|
|
|
|
|
Operating leases |
|
|
9.5
years |
|
|
9.5
years |
Finance leases |
|
|
1.0
years |
|
|
1.2
years |
|
|
|
|
|
|
|
Weighted Average
Discount Rate |
|
|
|
|
|
|
Operating leases |
|
|
2.5% |
|
|
2.5% |
Finance leases |
|
|
6.3% |
|
|
6.3% |
As of
March 31, 2022, maturities of lease liabilities were as
follows:
Maturities of Lease Liabilities
|
|
|
|
|
|
|
(in thousands) |
|
|
Operating |
|
|
Finance |
Years Ended December
31, |
|
|
leases |
|
|
leases |
2022 |
|
$ |
600 |
|
$ |
19 |
2023 |
|
|
535 |
|
|
21 |
2024 |
|
|
551 |
|
|
- |
2025 |
|
|
567 |
|
|
- |
Thereafter |
|
|
4,069 |
|
|
- |
Total minimum lease payments |
|
|
6,322 |
|
|
40 |
Less: amount representing interest |
|
|
(754) |
|
|
(1) |
Present value of capital lease liabilities |
|
$ |
5,568 |
|
$ |
39 |
9. COMMITMENTS AND CONTINGENCIES
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.
10. COMMON STOCK
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 have been no transactions under this
agreement since June 2021.
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 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.
In December 2020, we entered into a $13.0 million ATM equity
offering agreement with Craig-Hallum. Under the agreement we were
able, from time to time, at our discretion to 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
was 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.
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 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.
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) |
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 |
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.
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.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate and market
liquidity risk
As of March 31, 2022, all of our cash and cash equivalents have
variable interest rates. Therefore, 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.
Our
investment policy generally directs that the investment manager
should select investments to achieve the following goals: principal
preservation, adequate liquidity and return. As of March 31, 2022, our cash and cash
equivalents are comprised of short-term highly rated money market
savings accounts and our short-term investments are comprised of
highly rated corporate bonds. The values of cash and cash
equivalents and investment securities, available-for-sale as of
March 31, 2022, are as follows:
(in
thousands) |
|
|
Amount |
|
|
Percent |
|
Cash and cash equivalents |
|
$ |
55,611 |
|
|
53.9 |
% |
Less than one year |
|
|
47,651 |
|
|
46.1 |
% |
|
|
$ |
103,262 |
|
|
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. However, in the future we may enter
into contracts or collaborative research and development agreements
in foreign currencies that may subject us to foreign exchange rate
risk. We have entered into purchase orders and supply agreements in
foreign currencies in the past and may enter into such
arrangements, from time to time, in the future. We believe our
exposure to currency fluctuations related to these arrangements is
not material. 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.
ITEM 4. CONTROLS AND
PROCEDURES
Under the supervision and with the participation of our management,
including our Principal Executive Officer and Principal Financial
Officer, we have evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934) as of the end of
the period covered by this report and, based on this evaluation,
our Principal Executive Officer and Principal Financial Officer
have concluded that these disclosure controls and procedures are
effective. There were no changes in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Securities Exchange Act of 1934) that occurred during the
quarter ended March 31, 2022 that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
PART II.
ITEM 1. LEGAL
PROCEEDINGS
We are subject to various claims and pending or threatened lawsuits
in the normal course of business. We are not currently party to any
other legal proceedings that management believes are reasonably
possible to have a material adverse effect on our financial
position, results of operations or cash flows.
ITEM 1A. RISK
FACTORS
You should carefully consider the risks described below together
with the other information set forth in this report, which could
materially affect our business, financial condition and future
results. The risks described below are not the only risks facing
our company. Risks and uncertainties not currently known to us or
that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and operating
results.
Risk Factors Related to
Our Business
We have a history of operating losses and expect to incur
significant losses in the future.
We
have had substantial losses since our inception. We cannot assure
you that we will ever become or remain profitable.
|
· |
As of March 31, 2022, we had an
accumulated deficit of $642.6 million. |
|
· |
We incurred net losses of $629.4
million from inception through 2021, and a net loss of $13.2
million during the three months ended March 31, 2022. |
The likelihood of our success must
be considered in light of the expenses, difficulties and delays
frequently encountered by companies formed to develop and
commercialize new technologies. In particular, our operations to
date have focused primarily on research and development of our LBS
technology system and development of demonstration units. We are
unable to accurately estimate future revenues and operating
expenses based upon historical performance.
We cannot be certain that we will succeed in obtaining additional
development revenue or commercializing our technology or products.
In light of these factors, we expect to continue to incur
significant losses and negative cash flow at least through 2022 and
likely thereafter. There is significant risk that we will not
achieve positive cash flow at any time in the future.
COVID-19 has had an adverse effect on our business, and the
future COVID-19 effects on our financial position and business
prospects are uncertain.
On March 11, 2020, the World Health Organization declared the
outbreak of COVID-19 a pandemic, which continues to spread
throughout the United States and the world. We are unable to
accurately predict the full impact that COVID-19 may have on our
operations due to numerous uncertainties, including the pandemic’s
severity, duration and spread, as well as actions that may be taken
by governmental authorities.
The adverse impacts of the pandemic on our business and future
financial performance could include, but are not limited to:
|
· |
difficulties in our ability to
raise capital, |
|
· |
delays
to our technology development plans and timelines, |
|
· |
significant declines or
delays in revenue or development efforts due to supply chain
disruptions, |
|
· |
obstacles or delays in
meeting with potential customers and partners or entering into
agreements with them, and |
|
· |
challenges to our
operating effectiveness resulting from employees working remotely
or being ill and unable to work. |
We may require additional capital to fund our operations and to
implement our business plan. Raising additional capital may dilute
the value of current shareholders' investment in us.
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. We may, however, require additional
capital to fund our operating plan past that time. We may seek to
obtain additional capital through the issuance of equity or debt
securities, product sales and/or licensing activities. There can be
no assurance that any such efforts to obtain additional capital
would be successful.
We
are currently focused on developing our automotive lidar module.
This involves introducing new technology into an emerging market
which creates significant uncertainty about our ability to
accurately project revenue, costs and cash flows. Our capital
requirements will depend on many factors, including, but not
limited to, the commercial success of our technology, the rate at
which OEMs and ODMs introduce products incorporating our technology
and the market acceptance and competitive position of such
products. If revenues are less than we anticipate, if the mix of
revenues and the associated margins vary from anticipated amounts
or if expenses exceed the amounts budgeted, we may require
additional capital earlier than expected to fund our operations. In
addition, our operating plan provides for the development of
strategic relationships with suppliers of components, products and
systems, and equipment manufacturers that may require additional
investments by us.
Additional capital may not be available to us or, if available, may
not be available on terms acceptable to us or on a timely basis.
Raising additional capital may involve issuing securities with
rights and preferences that are senior to our common stock and may
dilute the value of our current shareholders' investment in us. If
adequate capital resources are not available on a timely basis, we
may consider limiting our operations substantially and we may be
unable to continue as a going concern. This limitation of
operations could include reducing investments in our research and
development projects, staff, operating costs, and capital
expenditures which could jeopardize our ability to achieve our
business goals or satisfy our customer requirements.
Risks Related to our
Financial Statements and Results
Our revenue is generated from one customer, and losing that
customer would have a negative impact on our revenue.
For
the three months ended March 31, 2022, one customer accounted for
$350,000 in revenue, representing 100% of our total revenue. For
the three months ended March 31, 2021, the same customer accounted
for $479,000 in revenue, representing 100% of our total revenue.
The loss of our current sole customer would negatively affect our
revenue.
We identified a
material weakness in our internal controls.
In
the second quarter of 2021, we identified a material weakness in
the controls that support our determination of the grant date of
equity awards. If we identify further material weaknesses in our
internal controls, our failure to establish and maintain effective
disclosure controls and procedures and internal control over
financial reporting could result in material misstatements in our
financial statements and a failure to meet our reporting
obligations. Any such failure could cause investors to lose
confidence in the accuracy of our financial reports, harm our
reputation and adversely affect the market price of our common
stock.
Our stock price has fluctuated in the past, has recently been in
decline and may be volatile in the future, and as a result,
investors in our common stock could incur substantial
losses.
Our
stock price has fluctuated significantly in the past, and may
continue to be volatile in the future. Over the 52-week period
ending April 25, 2022, our common stock has traded at a low of
$2.61 and a high of $28.00. We may continue to experience sustained
depression or substantial volatility in our stock price in the
foreseeable future unrelated to our operating performance or
prospects. For the fiscal year ended December 31, 2021, we incurred
a loss per share of $(0.27).
As a
result of this volatility, investors may experience losses on their
investment in our common stock. The market price for our common
stock may be influenced by many factors, including the
following:
|
· |
investor reaction to our business
strategy; |
|
· |
the success of competitive
products or technologies; |
|
· |
strategic
developments; |
|
· |
the timing and results of our
development efforts with respect to our lidar sensor and ADAS
solution; |
|
· |
changes in regulatory or industry
standards applicable to our technologies; |
|
· |
variations in our or our
competitors’ financial and operating results; |
|
· |
developments concerning our
collaborations or partners; |
|
· |
developments or disputes with any
third parties that supply, manufacture, sell or market any of our
products; |
|
· |
developments or disputes
concerning patents or other proprietary rights, including patents,
litigation matters and our ability to obtain patent protection for
our technology; |
|
· |
actual or perceived defects in
any of our products, if commercialized, and any related product
liability claims; |
|
· |
our ability or inability to raise
additional capital and the terms on which we raise it; |
|
· |
declines in the market prices of
stocks generally; |
|
· |
trading volume of our common
stock; |
|
· |
sales of our common stock by us
or our stockholders; |
|
· |
general economic, industry and
market conditions; and |
|
· |
the effects of other events or
factors, including war, terrorism and other international
conflicts, public health issues including health epidemics or
pandemics, such as the COVID-19 outbreak, and natural disasters
such as fire, hurricanes, earthquakes, tornados or other adverse
weather and climate conditions, whether occurring in the United
States or elsewhere. |
Since the price of our common stock has fluctuated in the past, has
suffered recent declines and may be volatile in the future,
investors in our common stock could incur substantial losses. In
the past, following periods of volatility in the market, securities
class-action litigation has often been instituted against
companies. Such litigation, if instituted against us, could result
in substantial costs and diversion of management’s attention and
resources, which could materially and adversely affect our
business, financial condition, results of operations and growth
prospects. There can be no guarantee that our stock price will
remain at current levels or that future sales of our common stock
will not be at prices lower than those sold to investors.
Additionally, securities of certain companies have in the past few
years experienced significant and extreme volatility in stock price
due to short sellers of shares of common stock, known as a “short
squeeze.” These short squeezes have caused extreme volatility in
both the stock prices of those companies and in the market, and
have led to the price per share of those companies to trade at a
significantly inflated rate that is disconnected from the
underlying value of the company. Many investors who have purchased
shares in those companies at an inflated rate face the risk of
losing a significant portion of their original investment, as in
many cases the price per share has declined steadily as interest in
those stocks have abated. There can be no assurance that our shares
will not be subject to a short squeeze in the future, and investors
may lose a significant portion or all of their investment if they
purchase our shares at a rate that is significantly disconnected
from our underlying value.
If we are unable to maintain our listing on The Nasdaq Global
Market, it could become more difficult to sell our stock in the
public market.
Our
common stock is listed on The Nasdaq Global Market. To maintain our
listing on this market, we must meet Nasdaq's listing maintenance
standards. From the initial receipt of notice in the fourth quarter
of 2019 through our regaining compliance in the second quarter of
2020, our stock was at risk of being delisted due to noncompliance
with the minimum required market value and closing price
requirements of Nasdaq’s continued listing standards. If we are
unable to continue to meet Nasdaq's listing maintenance standards
for any reason, our common stock could be delisted from The Nasdaq
Global Market. If our common stock were delisted, we may seek to
list our common stock on The Nasdaq Capital Market, the NYSE
American or on a regional stock exchange or, if one or more
broker-dealer market makers comply with applicable requirements,
the over-the-counter (OTC) market. Listing on such other market or
exchange could reduce the liquidity of our common stock. If our
common stock were to trade in the OTC market, an investor would
find it more difficult to dispose of, or to obtain accurate
quotations for the price of, the common stock.
A
delisting from The Nasdaq Global Market and failure to obtain
listing on another market or exchange would subject our common
stock to so-called penny stock rules that impose additional sales
practice and market-making requirements on broker-dealers who sell
or make a market in such securities. Consequently, removal from The
Nasdaq Global Market and failure to obtain listing on another
market or exchange could affect the ability or willingness of
broker-dealers to sell or make a market in our common stock and the
ability of purchasers of our common stock to sell their securities
in the secondary market.
On
April 25, 2022, the closing price of our common stock was $3.19 per
share.
Our lack of financial and technical resources relative to our
competitors may limit our revenues, potential profits, overall
market share or value.
Our
products and potential products incorporating our LBS technology
will compete with established manufacturers of existing products
and companies developing new technologies. Many of our competitors
have substantially greater financial, technical and other resources
than we have. Because of their greater resources, our competitors
may develop products or technologies that may be superior to our
own. The introduction of superior competing products or
technologies could result in reduced revenues, lower margins or
loss of market share, any of which could reduce the value of our
business. Additionally, for a variety of reasons, customers may
choose to purchase from suppliers that have substantially greater
financial, technical or other resources than we have.
Risks Related to Our
Operations
Difficulty in qualifying a contract manufacturer or foundry for
our products, or experiencing changes in our supply chain, could
cause delays that may result in lost future revenues and damaged
customer relationships.
Historically, we have relied on single or limited-source suppliers
to manufacture our products. Establishing a relationship with a
contract manufacturer or foundry is a time-consuming process, as
our unique technology may require significant manufacturing process
adaptation to achieve full manufacturing capacity. To the extent
that we are not able to establish a relationship with a contract
manufacturer or foundry in a timely manner or at prices or on other
terms that are acceptable to us, we may be unable to meet contract
or production milestones. Moreover, changes in our supply chain
could result in increased cost and delay and subject us to risks
and uncertainties regarding, but not limited to, product warranty,
product liability and quality control standards. 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 cause significant
delays in product deliveries, which could result in lost future
revenues and damaged customer relationships.
We are dependent on third parties to develop, manufacture, sell
and market products incorporating our LBS technology, scanning
modules, and the scanning module components.
Our
business strategy for commercializing our technology in products
incorporating LBS technology includes entering into development,
manufacturing, licensing, sales and marketing arrangements with
OEMs, ODMs and other third parties. These arrangements reduce our
level of control over production and distribution and may subject
us to risks and uncertainties regarding, but not limited to,
product warranty, product liability and quality control
standards.
We
cannot be certain that we will be able to negotiate arrangements on
acceptable terms, if at all, or that these arrangements will be
successful in yielding commercially viable products. If we cannot
establish these arrangements, we would require additional capital
to undertake such activities on our own and would require extensive
manufacturing, sales and marketing expertise that we do not
currently possess and that may be difficult to obtain.
In
addition, we could encounter significant delays in introducing our
LBS technology or find that the development, manufacture or sale of
products incorporating our technology would not be feasible. To the
extent that we enter into development, manufacturing, licensing,
sales and marketing or other arrangements, our revenues will depend
upon the performance of third parties. We cannot be certain that
any such arrangements will be successful.
We could face lawsuits related to our use of LBS technology or
other technologies, which would be costly, and any adverse outcome
could limit our ability to commercialize our technology or
products.
We
are aware of several patents held by third parties that relate to
certain aspects of light scanning displays and 3D sensing products.
These patents could be used as a basis to challenge the validity,
limit the scope or limit our ability to obtain additional or
broader patent rights of our patents. A successful challenge to the
validity of our patents could limit our ability to commercialize
our technology or products incorporating our LBS technology and,
consequently, materially reduce our ability to generate revenues.
Moreover, we cannot be certain that patent holders or other third
parties will not claim infringement by us with respect to current
and future technology. Because U.S. patent applications are held
and examined in secrecy, it is also possible that presently pending
U.S. applications could eventually be issued with claims that could
be infringed by our products or our technology.
The
defense and prosecution of a patent suit would be costly and
time-consuming, even if the outcome were ultimately favorable to
us. An adverse outcome in the defense of a patent suit could
subject us to significant costs, require others and us to cease
selling products incorporating our technology, require us to cease
licensing our technology or require disputed rights to be licensed
from third parties. Such licenses, if available, would increase our
operating expenses. Moreover, if claims of infringement are
asserted against our future co-development partners or customers,
those partners or customers may seek indemnification from us for
any damages or expenses they incur.
If we fail to manage expansion effectively, our revenue and
expenses could be adversely affected.
Our
ability to successfully offer products incorporating our technology
and implement our business plan in a rapidly evolving market
requires an effective planning and management process. The growth
in business and relationships with customers and other third
parties has placed, and will continue to place, a significant
strain on our management systems and resources. We will need to
continue to improve our financial and managerial controls,
reporting systems and procedures, and will need to continue to
train and manage our work force. Following our substantial
reduction in headcount in February 2020, the risks associated with
strained resources are heightened.
We target customers that are large companies with substantial
negotiating power and potentially competitive internal solutions;
if we are unable to sell our products to these customers, our
prospects will be adversely affected.
Our
potential customers are large, multinational companies with
substantial negotiating power relative to us and, in some
instances, may have internal solutions that are competitive to our
products. These large, multinational companies also have
significant resources, which may allow them to acquire or develop
competitive technologies either independently or in partnership
with others. Accordingly, even after investing significant
resources to develop a product, we may not secure a series
production award or, even after securing a series production award,
may not be able to commercialize a product on profitable terms. If
our products are not selected by these large companies or if these
companies develop or acquire competitive technology or negotiate
terms that are disadvantageous to us, it will have an adverse
effect on our business prospects.
Our technology and products incorporating our LBS technology may
be subject to future environmental, health and safety regulations
that could increase our development and production costs.
Our
technology and products incorporating our LBS technology could
become subject to future environmental, health and safety
regulations or amendments that could negatively impact our ability
to commercialize our technology and products incorporating our LBS
technology. Compliance with any such new regulations would likely
increase the cost to develop and produce products incorporating our
LBS technology, and violations may result in fines, penalties or
suspension of production. If we become subject to any
environmental, health, or safety laws or regulations that require
us to cease or significantly change our operations to comply, our
business, financial condition and operating results could be
adversely affected.
Our operating results may be adversely impacted by worldwide
political and economic uncertainties and specific conditions in the
markets we address.
In
the recent past, general worldwide economic conditions have
experienced a downturn due to slower economic activity, concerns
about inflation, increased energy costs, decreased consumer
confidence, reduced corporate profits and capital spending, and
adverse business conditions. Any continuation or worsening of the
current global economic and financial conditions could materially
adversely affect: (i) our ability to raise, or the cost of, needed
capital, (ii) demand for our current and future products, and (iii)
our ability to commercialize products. Additionally, the outbreaks
of wars or infectious diseases, both as recently experienced, may
cause an unexpected downturn in economic conditions. We cannot
predict the timing, strength, or duration of any economic slowdown
or subsequent economic recovery, worldwide, regionally or in our
industry or target market.
Because we plan to continue expanding our international
operations and using foreign suppliers, our operating results could
be harmed by economic, political, regulatory and other factors in
foreign countries.
During 2021, we established an office in Germany and we plan to
expand our presence there in the near term. In addition, we
currently use foreign suppliers and plan to continue to do so to
manufacture current and future components and products, where
appropriate. These international operations are subject to inherent
risks, which may adversely affect us, including, but not limited
to:
|
· |
Political and economic
instability, international terrorism and the outbreak of war, such
as the recent invasion of Ukraine; |
|
· |
High levels of inflation, as has
historically been the case in a number of countries in
Asia; |
|
· |
Burdens and costs of compliance
with a variety of foreign laws, regulations and
sanctions; |
|
· |
Foreign taxes and
duties; |
|
· |
Changes in tariff rates or other
trade, tax or monetary policies; |
|
· |
Changes or volatility in currency
exchange rates and interest rates; |
|
· |
Global or regional health crises,
such as COVID-19 or other epidemics and |
|
· |
Disruptions in global supply
chains. |
As part of growing our business, we may make acquisitions. If we
fail to successfully select, execute or integrate our acquisitions,
then our business, results of operations and financial condition
could be materially adversely affected.
From
time to time, we may undertake acquisitions to add new products and
technologies, acquire talent, gain new sales channels or enter into
new markets or sales territories. In addition to possible
stockholder approval, we may need approvals and licenses from
relevant government authorities for the acquisitions and to comply
with any applicable laws and regulations, which could result in
increased delay and costs, and may disrupt our business strategy if
we fail to do so. Furthermore, acquisitions and the subsequent
integration of new assets, businesses, key personnel, customers,
vendors and suppliers require significant attention from our
management and could result in a diversion of resources from our
existing business, which in turn could have an adverse effect on
our operations. Acquired assets or businesses may not generate the
financial results we expect. Acquisitions could result in the use
of substantial amounts of cash, potentially dilutive issuances of
equity securities, the occurrence of significant goodwill
impairment charges, amortization expenses for other intangible
assets and exposure to potential unknown liabilities of the
acquired business. Moreover, the costs of identifying and
consummating acquisitions may be significant.
To
date, we have no experience with acquisitions and the integration
of acquired technology and personnel. Failure to successfully
identify, complete, manage and integrate acquisitions could
materially and adversely affect our business, financial condition
and results of operations and could cause our stock price to
decline.
Our suppliers' facilities could be damaged or disrupted by a
natural disaster or labor strike, either of which would materially
affect our financial position, results of operations and cash
flows.
A
major catastrophe, such as an earthquake, monsoon, flood,
infectious disease including the COVID-19 virus, or other natural
disaster, labor strike, or work stoppage at our suppliers'
facilities or our customers, could result in a prolonged
interruption of our business. A disruption resulting from any one
of these events could cause significant delays in product shipments
and the loss of sales and customers, which could have a material
adverse effect on our financial condition, results of operations,
and cash flows.
If we are unable to obtain effective intellectual property
protection for our products, processes and technology, we may be
unable to compete with other companies.
Intellectual property protection for our products, processes and
technology is important and uncertain. If we do not obtain
effective intellectual property protection for our products,
processes and technology, we may be subject to increased
competition. Our commercial success will depend, in part, on our
ability, to maintain the proprietary nature of our key technologies
by securing valid and enforceable patents and effectively
maintaining unpatented technology as trade secrets.
We
protect our proprietary technology by seeking to obtain United
States and foreign patents in our name, or licenses to third party
patents, related to proprietary technology, inventions, and
improvements that may be important to the development of our
business. However, our patent position involves complex legal and
factual questions. The standards that the United States Patent and
Trademark Office and its foreign counterparts use to grant patents
are not always applied predictably or uniformly and can change.
Additionally, the scope of patents is subject to interpretation by
courts and their validity can be subject to challenges and
defenses, including challenges and defenses based on the existence
of prior art. Consequently, we cannot be certain as to the extent
to which we will be able to obtain patents for our new products and
technology or the extent to which the patents that we already own,
protect our products and technology. Reduction in scope of
protection or invalidation of our licensed or owned patents, or our
inability to obtain new patents, may enable other companies to
develop products that compete directly with ours on the basis of
the same or similar technology.
We
also rely on the law of trade secrets to protect unpatented
know-how and technology to maintain our competitive position. We
try to protect this know-how and technology by limiting access to
the trade secrets to those of our employees, contractors and
partners, with a need-to-know such information and by entering into
confidentiality agreements with parties that have access to it,
such as our employees, consultants and business partners. Any of
these parties could breach the agreements and disclose our trade
secrets or confidential information, or our competitors might learn
of the information in some other way. If any trade secret not
protected by a patent were to be disclosed to or independently
developed by a competitor, our competitive position could be
negatively affected.
We could be subject to significant product liability claims that
could be time-consuming and costly, divert management attention and
adversely affect our ability to obtain and maintain insurance
coverage.
We
could be subject to product liability claims if any of the product
applications are alleged to be defective or cause harmful effects.
For example, because some of the scanning modules incorporating our
LBS technology could scan a low power beam of colored light into
the user's eye, the testing, manufacture, marketing and sale of
these products involve an inherent risk that product liability
claims will be asserted against us.
Additionally, any misuse of our technology or products
incorporating our LBS technology by end users or third parties that
obtain access to our technology, could result in negative publicity
and could harm our brand and reputation. Product liability claims
or other claims related to our products or our technology,
regardless of their outcome, could require us to spend significant
time and money in litigation, divert management time and attention,
require us to pay significant damages, harm our reputation or
hinder acceptance of our products. Any successful product liability
claim may prevent us from obtaining adequate product liability
insurance in the future on commercially desirable or reasonable
terms. An inability to obtain sufficient insurance coverage at an
acceptable cost or otherwise to protect against potential product
liability claims could prevent or inhibit the commercialization of
our products and our LBS technology.
Our operations could be adversely impacted by information
technology system failures, network disruptions, or cyber security
breaches.
We
rely on information technology systems to process, transmit, store,
and protect electronic data between our employees, our customers
and our suppliers. Our systems are vulnerable to damage or
interruptions due to events beyond our control, including, but are
not limited to, natural disasters, power loss, telecommunications
failures, computer viruses, hacking, or other cyber security
issues. Our system redundancy may be inadequate and our disaster
recovery planning may be ineffective or insufficient to account for
all eventualities. Additionally, we maintain insurance coverage to
address certain aspects of cyber risks. Such insurance coverage may
be insufficient to cover all losses or all claims that may arise,
should such an event occur.
Loss of any of our key personnel could have a negative effect on
the operation of our business.
Our
success depends on our executive officers and other key personnel
and on the ability to attract and retain qualified new personnel.
Achievement of our business objectives will require substantial
additional expertise in the areas of sales and marketing, research
and product development and manufacturing. Competition for
qualified personnel in these fields is intense, and the inability
to attract and retain additional highly skilled personnel, or the
loss of key personnel, could hinder our ability to compete
effectively in the LBS markets and adversely affect our business
strategy execution and results of operations.
Risks Related to
Development for the Automotive Industry
If our products and solutions are not selected for inclusion in
ADAS systems by automotive OEMs or automotive Tier 1 suppliers, our
future prospects will be materially and adversely affected.
Automotive OEMs and Tier 1 suppliers design and develop ADAS
technology over several years, undertaking extensive testing
and qualification processes prior to selecting a product such as
our lidar sensor for use in a particular system, product or vehicle
model because such products will function as part of a larger
system or platform and must meet certain other specifications. We
have invested and will continue to invest significant time and
resources to have our products considered and possibly selected by
OEMs or Tier 1 suppliers for use in a particular system, product or
vehicle model, which is known as a “series production win” or a
“series production award.” In the case of ADAS technology, a series
production award would mean that our lidar sensor and/or ADAS
solution had been selected for use in a particular vehicle model.
However, if we are unable to achieve a series production award with
respect to a particular vehicle model, we may not have an
opportunity to supply our products to the automotive OEM for that
vehicle model for a period of many years. In many cases, this
period can be as long as five to seven or more years. If our
products are not selected by an automotive OEM or our suppliers for
one vehicle model or if our products are not successful in that
vehicle model, it is unlikely that our product will be deployed in
other vehicle models of that OEM. If we fail to win a
significant number of vehicle models from one or more of automotive
OEMs or their suppliers, our future business prospects will be
materially and adversely affected.
The complexity of our products and the limited visibility into
the various environmental and other conditions under which
potential customers may use the products could result in unforeseen
delays or expenses from undetected defects, errors or reliability
issues in hardware or software which could reduce the market
adoption of our products, damage our reputation with prospective
customers, expose us to product liability and other claims, and
adversely affect our operating costs.
Our products are highly technical and complex and require high
standards to manufacture and may experience defects, errors or
reliability issues at various stages of development. We may be
unable to timely manufacture or release products, or correct
problems that have arisen or correct such problems to the
customer’s satisfaction. Additionally, undetected errors, defects
or security vulnerabilities could result in serious injury to the
end users or bystanders of technology incorporating our products,
inability of customers to commercialize technology incorporating
our products, litigation against us, negative publicity and other
consequences. These risks are particularly prevalent in the highly
competitive ADAS market. These problems may also result in claims,
including class actions, against us that could be costly to defend.
Our reputation or brand may be damaged as a result of these
problems and potential customers may be reluctant to buy our
products, which could adversely affect our financial results.
Adverse conditions in the automotive industry or the global
economy more generally could have adverse effects on our results of
operations.
While we make our strategic planning decisions based on the
assumption that the markets we are targeting will grow, our
business is dependent, in large part on, and directly affected by,
business cycles and other factors affecting the global automobile
industry and global economy generally. Automotive production and
sales are highly cyclical and depend on general economic conditions
and other factors, including consumer spending and preferences,
changes in interest rates and credit availability, consumer
confidence, fuel costs, fuel availability, environmental impact,
governmental incentives and regulatory requirements, and political
volatility, especially in energy-producing countries and
growth markets. In addition, automotive production and sales can be
affected by our automotive OEM customers’ ability to continue
operating in response to challenging economic conditions and in
response to labor relations issues, regulatory requirements, trade
agreements and other factors. The volume of automotive production
in North America, Europe and the rest of the world has fluctuated,
sometimes significantly, from year to year, and we expect such
fluctuations to give rise to fluctuations in the demand for our
products. Any significant adverse change in any of these factors
may result in a reduction in automotive sales and production by our
automotive OEM customers and could have a material adverse effect
on our business, results of operations and financial condition.
Developments in alternative technology may adversely affect the
demand for our lidar technology.
Significant developments in alternative technologies, such as
cameras and radar, may materially and adversely affect
our business prospects in ways we do not currently anticipate.
Existing and other camera and radar technologies may emerge as
OEMs’ preferred alternative to our solution, which would result in
the loss of competitiveness of our lidar solution. Our R&D
efforts may not be sufficient to adapt to these changes in
technology and our solution may not compete effectively with these
alternative systems.
ADAS features may be delayed in adoption by OEMs, which would
negatively impact our business prospects.
The ADAS market is fast evolving and there is generally a lack of
an established regulatory framework. Vehicle regulators globally
continue to consider new and enhanced emissions requirements,
including electrification, to meet environmental and economic needs
as well as pursue new safety standards to address emerging traffic
risks. To control new vehicle prices, among other concerns, OEMs
may need to dedicate technology and cost additions to new vehicle
designs to meet these emissions and safety requirements and
postpone the consumer cost pressures of new ADAS features. As
additional safety requirements are imposed on vehicle
manufacturers, our business prospects may be materially
impacted.
Because the lidar and ADAS markets are rapidly evolving, it is
difficult to forecast customer adoption rates, demand, and selling
prices for our products and solutions.
We are pursuing opportunities in rapidly evolving markets,
including technological and regulatory changes, and it is difficult
to predict the timing and size of the opportunities. For example,
lidar-based ADAS solutions require complex technology and
because these automotive systems depend on technology from many
companies, commercialization of ADAS products could be delayed or
impaired on account of certain technological components of ours or
others not being ready to be deployed in vehicles. In addition, the
selling prices we are able to ultimately charge in the future for
the products we are currently developing may be less than what we
currently project. Our future financial performance will depend on
our ability to make timely investments in the correct market
opportunities. If one or more of these markets experience a shift
in prospective customer demand, our products may not compete as
effectively, if at all, and they may not be designed into
commercialized products. Given the evolving nature of the markets
in which we operate, it is difficult to predict customer demand or
adoption rates for our products, selling prices or the future
growth of our target markets. If demand does not develop or if we
cannot accurately forecast it, the size of our markets, inventory
requirements or future financial results will be adversely
affected.
Because lidar is new in the markets we are seeking to enter, our
market forecasts may not materialize as anticipated.
Our market opportunity estimates and growth forecasts are subject
to significant uncertainty and are based on assumptions and
estimates that may not materialize as anticipated. These forecasts
and estimates relating to the expected size and growth of the
markets for lidar-based technology may prove to be inaccurate.
Even if these markets experience the forecasted growth we
anticipate, we may not grow our business at similar rates, or at
all. Our future growth is subject to many factors, including market
adoption of our products, which is subject to many risks and
uncertainties. Accordingly, we cannot assure you that these
forecasts will not be materially inaccurate.
ITEM 6. EXHIBITS
Exhibit
Number |
Description |
31.1 |
Principal
Executive Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
31.2 |
Principal
Financial Officer Certification pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
32.1 |
Principal
Executive Officer Certification pursuant to Rule 13a-14(b) or Rule
15d-14(b) and Section 1350, Chapter 63 of Title 18, United States
Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
32.2 |
Principal
Financial Officer Certification pursuant to Rule 13a-14(b) or Rule
15d-14(b) and Section 1350, Chapter 63 of Title 18, United States
Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
101.INS |
Inline
XBRL Instance Document (the instance document does not appear in
the Interactive Data File because its XBRL tags are embedded within
the Inline XBRL document). |
101.SCH |
Inline
XBRL Taxonomy Extension Schema. |
101.CAL |
Inline
XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
Inline
XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
Inline XBRL
Taxonomy Extension Label Linkbase Document. |
101.PRE |
Inline
XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page
Interactive Data File (formatted as inline XBRL and contained in
Exhibit 101). |
|
|
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: April 28, 2022 |
By: |
/s/ Sumit Sharma |
|
|
Sumit
Sharma |
|
|
Chief
Executive Officer and Director
(Principal Executive Officer) |
|
|
|
|
|
|
Date: April 28, 2022 |
By: |
/s/ Anubhav Verma |
|
|
Anubhav
Verma |
|
|
Chief
Financial Officer
(Principal Financial Officer and Principal Accounting
Officer) |
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