Company: MVIS
Filing Date: 2025-03-26
Form Type: 10-K
Source: 0001641172-25-000783
Chunk: 39

Company: MICROVISION, INC.
Filing Date: 2025-03-26
Form: 10-K
Item: Item 1A
Chunk 39
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. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.

Critical
Audit Matters

The
critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that
were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material
to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication
of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or
disclosures to which they relate.

32

Valuation
of Derivative Liability

As
described in note 7, the fair value of the derivative liability is determined utilizing a “with and without” method, in which
the fair value is calculated as the difference in the fair value of the entire hybrid instrument and the fair value of the instrument
excluding the bifurcated derivative features. The fair value of the hybrid instrument is estimated using a binomial lattice model. The
fair value of the host contract excluding embedded derivative features is estimated using a debt discounted cash flow model, which assumes
that the contract is a debt instrument with only the option to redeem partial principal payments prior to maturity. The estimated fair
value of the derivative liability was $14.6 million as of December 31, 2024.

We
identified the valuation of derivative liability as a critical audit matter. Performing audit procedures to evaluate the reasonableness
of the fair value estimates and underlying inputs and assumptions required especially challenging and subjective auditor judgment and
an increased extent of effort, including the need to involve of our valuation professionals.

Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming an overall opinion on the consolidated
financial statements. Our audit procedures related to the matter included the following, among others:

  ●
  Testing management’s process used in determining the
estimated fair value of the derivative liability by:

●Involving
                                            our valuation professionals with specialized skills and knowledge who assisted in evaluating
                                            the valuation methodologies and the reasonableness of