3. BUSINESS COMBINATION

3 Months Ended

Mar. 31, 2023

BUSINESS COMBINATION

On January 31, 2023, we completed the acquisition of certain net assets of Ibeo, a lidar hardware and software provider based in Hamburg, Germany. The purpose of the acquisition was to acquire certain Ibeo assets, intellectual property, and teams, which will enable us to expand our total addressable market and diversify our revenue profile.

Total consideration related to this transaction, subject to settlement of working capital adjustments, was approximately EUR 19.9 million or $21.6 million, consisting of approximately (i) EUR 7.0 million or $7.6 million in cash paid at closing, (ii) EUR 6.6 million or $7.1 million in cash advanced to Ibeo prior to closing, (iii) EUR 3.0 million or $3.3

million held in escrow for 13 months to be available to cover properly established claims by MicroVision, (iv) EUR 0.6 million or $0.7 million in costs paid on behalf of the seller, and (v) EUR

2.7 million or $2.9

million in cash held back at closing and to be offset by any working capital adjustments. In addition, we incurred $

0.6 million of acquisition-related costs associated with the acquisition during the three months ended March 31, 2023, which were included in Sales, marketing, general and administrative expense.

The transaction has been accounted for as a business combination. The results of operations for the acquisition are included in our consolidated financial statements from the date of acquisition onwards.

The following table summarizes the preliminary purchase price allocation to assets acquired and liabilities assumed (in thousands):


	Amount			Weighted Average Useful Life (in years)
Purchase consideration:
Cash paid at closing (1)	$	8,245
Cash in escrow (2)		3,263
Holdback amount (3)		2,928
Advances to Ibeo (4)		7,120

Total purchase consideration	$	21,556

Inventory	$	1,197
Other current assets		703
Operating lease right-of-use asset		234
Property and equipment, net		5,330
Intangible assets:
Acquired technology		17,987			13
Order backlog		26			1
Contract liabilities		(1,178	)
Operating lease liabilities		(234	)
Deferred tax liabilities		(803	)

Total identifiable net assets	$	23,262

Bargain purchase gain (1)		(1,706	)

(1)	Represents $7.6 million in cash paid at closing and $0.7 million in cash paid shortly after close.

(2)	Recorded as restricted cash and accrued liability to Ibeo in our condensed consolidated balance sheet.

(3)	Recorded in accrued liability to Ibeo in our condensed consolidated balance sheet.

(4)	Represents $4.1 million and $3.0 million in cash advanced to Ibeo in December 2022 and January 2023, respectively.

(5)

The bargain purchase gain represents the excess of the fair value of the underlying net assets acquired and liabilities assumed over the purchase consideration and is included in Bargain purchase gain in the Condensed Consolidated Statement of Operations. The bargain purchase gain was attributable to the negotiation process with Ibeo during its insolvency proceedings resulting in cash consideration paid being less than the fair value of the net assets.

The

estimated fair value of acquired technology was calculated through the income approach using the multi-period excess earnings and relief from royalty methodologies. The estimated fair value of the order backlog was calculated through the income approach using the multi-period excess earnings

methodology.

Deferred taxes were determined based on the excess tax basis over the book basis of the fair value adjustments attributable to the net assets acquired. The incremental deferred taxes were calculated based on the statutory rates where fair value adjustments were estimated. For the quarter ended March 31, 2023, we recorded a net deferred tax liability of $0.8 million related to the assets acquired.

The initial allocation of the purchase price was based on preliminary valuations and assumptions and is subject to change within the measurement period. We expect to finalize the allocation of the purchase price as soon as practicable and no later than one year from the acquisition date.

Revenue and net loss from the acquisition included in our condensed consolidated statement of operations through March 31, 2023 is $

0.8

million and $5.5 million, respectively.

Supplemental Unaudited Pro Forma Information

The below unaudited pro forma financial information summarizes the combined results of operations for the Company and Ibeo as if the acquisition had been completed on January 1, 2022. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2022 or the results of our future operations of the combined businesses. Nonrecurring pro forma adjustments include:

•

Recognition of the bargain purchase gain as if incurred in the first quarter of 2022;

•

Acquisition-related costs of $1.1 million are assumed to have been incurred on January 1, 2022.

The following table summarizes the unaudited pro forma results (in thousands):


	Three Months Ended
	March 31,
	2023			2022
Total revenue	$	1,331		$	2,796
Net loss		(22,322	)		(28,661	)