Company: MVIS
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001641172-25-000783
Chunk: 346

Company: MICROVISION, INC.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 3
Chunk 346
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esses all contracts executed to determine whether the agreements contain a lease component. Significant judgment may be required to
determine whether a contract contains a lease, the length of the lease term, the allocation of the consideration between lease and non-lease
components, and the appropriate discount rate to be applied. Management reviews the underlying objective of each contract, the terms
of the contract, and considers current and future business conditions when making these judgments.

The
Company’s lease obligations consist of various office and equipment operating leases. Operating lease assets are recorded under
the operating lease right-of-use asset (“ROU”) line item, while liabilities are recorded under the current portion of operating
lease liability and operating lease liability, net of current portion line items on the consolidated balance sheets.

Operating
lease ROU assets and liabilities are recognized upon lease commencement based on the present value of payments over the lease term. For
leases which do not provide an implicit rate, the Company’s incremental borrowing rate as of the commencement date serves as the
discount rate to determine the present value of lease payments. Lease expense from operating leases is recognized on a straight-line
basis over the lease term.

Notes
Payable

The
Company evaluates all conversion, redemption, and put features contained in its debt instruments to determine if there are any embedded
features that require bifurcation as a derivative. The Company accounts for debt as a long-term liability, with the current portion classified
as a short-term liability, equal to the amount repayable at maturity, net of any debt discount and issuance costs, within notes payable
on the consolidated balance sheets. The debt discount and issuance costs are amortized over the term of the Note, using the effective
interest method, as interest expense in the accompanying consolidated statements of operations. Conversions of principal are accounted
for in accordance with ASC 470-20, “Debt with Conversion and Other Options,” with immediate expense of the unamortized discount
associated with the converted principal.

Derivative
Liability

The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC 815, “Derivatives and Hedging”. For derivative financial instruments that are accounted
for as liabilities, the derivative instrument is initially recorded at its fair value on the issuance date and is then re-valued at each
reporting date, with changes in the fair value reported as an unrealized gain or loss in earnings on the consolidated statements of operations.
The Company has