Q2 2020 MicroVision Inc Earnings Call
[music].
Good day.
Welcome to the Microvision second quarter, 2020 financial and operating results conference call.
All participants will be in listen only mode should you need assistance, please signal, which often specialist.
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After todays presentation, there will be an opportunity to ask questions to ask a question. Even press Star then one on your telephone keypad to withdraw your question. Please press Star then to you May also submit all my questions at any point today, usually the window on the web cast.
Please also note today's event is being recorded.
I would now like to turn the conference over two months Eastover. Please go ahead Bob.
Thanks, Good afternoon, and welcome everyone to my cremation second quarter, 2020 financial and operating results conference call.
Joining me on todays call or to make sure, Matt Chief Executive Officer, and Steve Fowle, Chief Financial Officer.
The information in today's conference call includes forward looking statement.
Including statements regarding exploration of strategic alternative.
They all of our product verticals technology say a merger if the company expressions of interest regarding strategic alternatives.
Take real value, if the company or product verticals.
Handheld competitive advantages.
Let me to profit definitely scale module, so large volumes.
Capacity.
Hey, generate free cash flow.
Sure demand for consumer electronic product future monetization opportunity expected capabilities at the augmented reality and automotive light our product and ability to develop and launch sets of products.
Potentially disruptive capabilities of our product.
Tend to markets for products.
Ability to execute potential strategic transactions managing costs cash to fund operations.
Potential forgiveness of a portion of loan proceeds under the payroll protection program.
Future use of shares of common stock completing its strategic transaction.
Maximizing shareholder value expected customer order future royalty progress under and benefits of existing contracts and license agreement.
And the negotiation of future agreement.
Customer product launches advantages of our technology litigation business execution projections of future operations and financial results availability of fun product development applications and benefit.
Availability and supply it products and key component.
Personalization of our technology market opportunities and future demand effective approvals of proposals contained in our preliminary proxy statement dated August 5th 2020.
As well as statements containing words like opportunity potential.
Possibly intend believe focus path expects plans will.
Good would think endeavoring, enabling likely resulting and other similar expressions.
These statements are not guarantees of future performance actual results could differ materially from the future results implied or expressed in the forward looking statements.
We encourage you to review our various FCC filings, including our annual report on form 10-K filed on March 12 2020.
Form 10-Q filed on May 820, 20.
Preliminary proxy statement filed August 15, 2020, and various other FCC filings made from time to time in which we discussed risk factors associated with investing in my career vision.
These risk factors could cause results to differ from those insights for expressed in our forward looking statements.
All forward looking statements are made as if the date at this call and except as required by law, we undertake no obligation to update this information.
The financial numbers presented on the call today are included in our press release, and India 8-K filed today.
There are available from the Investor Relations section of our website.
This conference call will also be available for audio replay, India Investor Relations section of my provisions website at Www Dot Microvision Dot com.
And now I'd like to turn the call over to soon with Charles So much.
Thank you Lindsay.
Good afternoon, everyone.
For the past two decades Microvision has been driven by one simple principle.
This is the innovate and advance Mems based laser beam scanning and associated detection technology.
Well, some tough problems and enable high performance displays.
And our product.
We believe we have created soccer technology in multiple products verticals and a strong intellectual property portfolio, but we believe provides a competitive advantage.
We also saw the key through these partnerships and believe have demonstrated potential customers the capability to profitably scale our module in large volumes.
As we focus on pursuing strategic transaction, it potentially said partner.
Good reviews margin dollars they would otherwise be paid if they were our customer foresee potential revenue and margin for modeling too.
Our innovation execution and intellectual property are the result, overdriving purposeful and represent the value if they don't need for shareholders and all parties that may be interested in pursuing strategic opportunities.
Basically the certainty global demand and capital markets in Q1 point to 20.
Committed ourselves to finding strategic alternatives, including the potential sale or merger of the company.
With the help all our financial advisors Craig Hallum.
We have since reached out to more than 100 companies across the globe to explore their interest in strategic alternatives.
All the companies that have expressed interest are required to maintain strict confidentiality as it might provision.
Therefore, we will not provide specific comments.
On these discussions until inappropriate agreement is completed.
I know that merger market recently published an article about our strategic process.
The article refer to strong interest from bidders.
I would like to clarify that we are engaged in discussions with certain potentially interested parties for at various stages abilities.
Do not plan to make public statements about any bid or potential transactions.
Nothing on feel appropriate agreement is reached.
I can't share that a focus group of top gear Oems and technology companies are engaged in exploring and potentially pursuing strategic alternatives.
Which could include a sale of merger the company.
Acquisition of one or more product verticals.
The big investments.
And acquisition or licensing of our intellectual property.
We believe parties would be particularly interested in our augmented reality and automotive lighter verticals.
We continue to work closely and responsibly.
With their technical and corporate development team as well as our board devalued options that will maximize shareholder value.
We believe that our interactive split in consumer letter verticals. We're also represent significant value when acquiring companies.
As consumer demand returns for smart speaker and smart home products.
These products segments launch by OEM, so large demand and growth for multiple years prior to the outbreak overnight dependent.
However, I'm certain expectations of global demand for consumer electronics due to the pandemic may have affected current expectation.
Book value for the verticals.
Michael This is a long history of engaging with Oems for custom development funded by NRT or nonrecurring entering programs.
That's it.
Sort of our discussion the full value of the body of work and product Micros, you could bring to market may not have been cleared for getting some parties or investment community.
It is ever incumbent upon us clearly identified all these future monetization opportunities as a potential strategic partner.
This week, we both have videos on are you do channel that demonstrate what our modules could potentially enable in the near future. If an OEM partners with us on a program using our augmented reality or automotive light our models.
In the Microvision augmented reality video for example.
We share a potential modern design using our existing Mems technology platform that could offer the lightest smallest of volume low power module.
40 degrees field of view package into eyewear that resembled frames currency accepted in the market.
I believe wanted to see how our module in this design example would be compelling for a mass market product.
Our module illustrate it is its video is based on existing design model files.
That are part of our intellectual property and body of work.
Mark or would it have been willing ready and able to develop and launched this module.
[laughter].
Even though we were not engagement NRT program for development, we expect that the future value. It may present should be acknowledged.
This potential modules has not previously been just discussed publicly but.
I think you'd see that it presents a path to a truly mass market product and could represent a very interesting because its opportunity.
Potential acquirer or strategic partner.
With the into some of our shareholder than mine, we are endeavoring to make a compelling case.
Opportunity in each vertical so in acquiring company understands entire opportunity, which would be reflective in if possible transactions.
As I mentioned I will now discuss specific about the process and progress with any specific parties.
However.
In light of our filing of a preliminary proxy statement earlier today I'd like to provide some general background and context on the strategic alternative process for our shareholders as they consider the company's recommendation to authorize additional shares of common stock in a proxy filing.
We are in discussions with certain top tier Oems and technology companies, who may be interested in our augmented reality and automotive blood our verticals in particular.
Because you do have discussions and exploration into our technology and how you could provide an advantage to their strategic path with compelling products.
Each interested parties presents unique objectives and requirement is with respect to any potential deal.
As you can you continue to engage with interested parties and actively explore their desired structures, where endeavoring to make sure that the value of all they would acquire is demonstrated for design financial models and examples of other relative transactions in a particular market.
We have received feedback from multiple interested parties recognizing that they think microvisions technology is the most sophisticated and potentially disruptive, but they have review so far.
I believe this feedback is great compliment to the hard work our employees have performed for more than two days.
You can see working diligently to find the right Matt for each party in an effort to maximize the value of the company for our shareholders.
As you may imagine, there's going to take time and needs to develop a natural faced common to such agreements.
I strongly believe that it is critical we have the timing of to allow all interested parties.
Determined the REIT structure and value.
We believe our product verticals, including a deep IP mold.
And body of work that could allow the right affording parties multiple disruptive products in multiple verticals.
And acquiring company will also benefit from our experience engineers, joining their team and continues to mature the technology.
We believe we have solved the key challenges of supply chain partnerships and establish the capability to scale our margins in production.
Combined with large total addressable market size forecast with these verticals.
We believe these verticals would represent significant value to them.
Our technology could allow them to develop disruptive products under their brand.
We are working diligently to make sure that the value of our work IP experienced capabilities and technology our acknowledged.
The entire Microvision team continues to remain healthy and performed admirably through the corporate 19 pandemic work requirements.
In addition to supporting all the technology reviews, I'm happy to share.
Micro disease has made valuable progress in enabling our automotive led our path.
One of the stuck with features that enable our automotive lighter is its capability to actively reject Andrew so thats noise, while using a 95 nanometer laser.
I believe this capability could enable a potential product to support active collision avoidance systems.
And potential hardware for channel sales to software companies focused on economy.
Our team successfully completed and important development milestone is the last earnings call in which we demonstrated in a working prototype the capability of our future lider after reject and based on that noise.
This milestone is one of few required to demonstrate the disruptive nature of our automotive lighter.
And what output.
That would help with more than 20 million point per second that 30 hurt have a raise greater than 200 meters operable in full sunlight.
Upward of loss. Seafield addition to foreign club and will include three scanning fields of you in a single out our hardware.
During this period, we also completed design details on the 40 degree field of view Microdisplay.
Modules shared in our video.
I'm very proud of our team will continue to work hard and making meaningful progress.
I would like to I'll switch gears, an update on some government items.
As you may recall at the annual shareholder meeting in May shareholders approved the proposal authorize the board of directors devaluated, and if necessary implement a reverse stock split to maintain listing on the NASDAQ global market.
First I want to sincerely, thank our shareholders for the support and authorizing a reverse stock split.
As you know if the company has regained compliance with NASDAQ listing standards and remains publicly listed on the NASDAQ global market, which helps maintain the value of the company and our ability to execute future strategic transactions.
Therefore, I'm happy to announce that ACA serious evaluation of the situation. The board of directors have decided not to affect the reverse stock split within the timeframe offers our shareholders.
Also today, we filed a preliminary proxy statement, which includes the request for shareholders to approved an increase in the number of outstanding shares of common stock by an additional 60 million shares.
I believe it is investor interest of all shareholders support this proposal.
As I shared earlier in my update we're engaged with multiple parties in trying to find the right Matt to maximize value of the company.
I believe having additional shares of common stock available is important provides the company with the flexibility it needs to increase his ability to pursue strategic options.
The increase shareholder value and is in our best interest shareholders.
We believe we have the cash to fund operations until the end of year.
In closing the transaction days longer than that we believe the flexibility that this authorization provides to achieve value for shareholders.
It is very important but everyone everyone, both regardless of how many shares there.
I would like to conclude my remarks today by thanking here are employed our shareholders for their continued support and commitment while we explore a potential merger or sale of the company.
Despite global economic headwinds that surround us we can do to make progress in pursuing a potential strategic transaction.
Now, let me turn the call over to Steve to discuss the second quarter results.
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Thank you Simon.
Good afternoon, everyone.
For the second quarter revenue was 587000.
With 572000 of royalty revenue and the balance from contract revenue.
All the second quarters royalty revenue was attributable to our April 2017 customer.
Which assume production responsibilities of our product on March Onest.
Yes, the second quarter royalty earn is approximately equal to the gross profit. We would have earned on each unit. If we had not transferred production responsibility to our customer.
The agreement transfer manufacturing responsibility to our customer provides microvision with a lower cost structure.
And lower working capital requirements, and importantly, and enabled microvision to enjoy the upside should the customers unit volume increase in the future.
As in the prior arrangement our customer continues to have a license to produce our components, but we retain ownership of the intellectual property.
In comparison last quarter, we recognized 1.5 million of revenue was about 1.2 million product revenue and the balance and contract and royalty revenue.
Second quarter cost of revenue was effectively zero given the transfer of manufacturing responsibility to our April 2017 customer.
The resulting gross profit was 580000.
In comparison gross profit was 70000 in the prior quarter.
The royalties that are due to microvisions will be credited against the prepayment made by the customer.
When the prepayment is exhausted the customer will begin making cash payments for royalties due.
At the end of Q2, the balance of the prepayments stood at 8.7 million.
There was no potential scenario, we see where microvision will be required to repay any portion of the $8.7 million prepayments.
This 8.7 million is on the balance sheet as a contract liability.
The six so six the applicable revenue standard requires that accompanies estimate and disclose the timing of when those liabilities are expected to be recognized.
This information will be found in the revenue recognition footnote in our form 10-Q, which we'll be filing shore.
Our current estimate is at approximately 1.1 million of the 8.7 million will be recognized over the remainder of the year.
And that will result in our royalty revenue being approximately $1.8 million for for all 20 points.
Operating expenses were 2.9 million in second quarter.
Slightly lower than the 3 million to three and a half a million second quarter range, we provided on our last call.
In comparison operating expenses were 5 million in the prior quarter, which included approximately $100000 in charges related to the reduction in workforce, we announced in February.
And other nonrecurring expenses and credits in the quarter.
For the second quarter, our net loss was 2.3 million or two cents per share.
This compares to a loss of 4.9 million or four cents per share in the prior quarter.
For the second quarter cash used in operations was $2.9 million, which compares to cash used in the prior quarter of $5.4 million.
We ended the second quarter with cash and cash equivalence of 7.8 million.
Given our current expense rate, we believe our current cash balance will fund operations through the fourth quarter.
During the second quarter, we raised $6.8 million from the Lincoln Park capital facility that we established in December 2019.
At the end of the second quarter, we had $6.7 million available under the Lincoln Park capital facility.
However, given that we only have a few hundred thousand authorized shares of common stock available to issue. The facility does not currently offer an effective opportunity to accessing the remaining 6.7 million or raise any material amount of cash outside of the facility.
During the second quarter, we also secured 1.6 million of funding under the payroll protection plan.
We expect a portion of a $1.6 million alone will be forgiven based on the rules of the PPP program.
We expect to apply for the appropriate loan forgiveness amount near the end of third quarter. According to the rules of the program.
Now I want to address the proxy statement that was filed earlier today.
It is a preliminary proxy and will be reviewed by the FCC for a minimum period of 10 days.
If there are no FCC comments, we will begin mailing the proxy to shareholders.
If the FCC has any comments, we will resolve those comments and send the proxy to the shareholders after resolute.
It is very important that everyone vote, regardless of how many shares you all.
The proposal to increase the number of authorized shares requires a majority of all shares outstanding to vote in favor of the proposal.
That is a high order reach and every vote matters.
I know that some shareholders do not like the thought of approving more shares because of the dilution that may occur in so shares our subsequently issued.
We understand appreciate that concern.
However, we are in the process of trying to sell the company.
Possible Acquirers will act in their own best interests.
It is in their interest to try to acquire the company at the lowest possible price.
We previously indicated that we had cash until the end of the year and that we are essentially out of shares of common stock.
So a fire may attempt to get a lower price by delaying the process until closer to the ended the year thought may be that as we get lower and lower on cash we might except a lower price.
Having shares of common stock available allows the company to be able to raise cash to keep the staff that we have and allow the sale process to proceed without being forced into an unfavorable position due to cash constraints.
Without the additional authorized shares we have very few alternatives to raising funds.
None of which we view as appealing.
And we could be in a weaker negotiating position.
There's also a second reason to approve the increase in authorized common shares.
It is possible satish that shareholder value may be maximize by accepting a minority investment from another company.
For example, a company may want to purchase a percentage of Microvision now and then purchase the rest of the company after a milestone or other event takes place.
If the buyer was a potential customer or had some other strategic reasons for the investment.
Shareholders might benefit greatly from that investment.
But to be able to do a transaction such as this without the delay of future shareholder approval.
Microvision would need to have more shares available, which could be sold to the investment company.
Some of you may ask why 60 million shares.
The main reason is this a number of shares could allow for minority investment as I, just described and still have sufficient number of shares that could be available for other purposes.
Remember 60 million shares are not issue if they are approved on the products.
Would only be issued as needed.
It is possible. The company is sold this year that very few of the shares would need to be issues.
Finally.
I want you to no we're not asking for the opposite authorization of more shares lightly.
We're working hard so that a sale transaction could close within the time period that our cash our current cash will last.
However, it takes around 60 days to file a proxy and hold a special shareholder meeting for new shares. So the results of this will both wont be known until early in the fourth quarter.
A seven assuming discuss Microvision has developed amazing technology that we believe has a place like minted reality automotive light, our and consumer electronics.
Having additional shares available gives us an opportunity pursue all avenues to get the highest value for our shareholders.
Please look for your proxy in late August either in the mail or or via email. If you have opted for electronic delivery and vote in favor of authorizing more shares.
Thank you we will now open the call up for questions.
Thank you well when are we going to question answer session.
Ask a question in your press Star then one order telephone keypad.
[laughter] Speaker phone, we also you pretty Springer, perhaps just before passing the keys to withdraw your question. Please press Star then too.
You may submit all my questions anytime today, using the window and the webcast.
And today's first audio question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.
Hi, Thanks for taking my question.
So just to hit on that topic of the.
Share issuance that Steve you're just talking about.
And then Justine.
Duration, obviously time is on your side.
You know with cash balance in the burn rate and everything else. So you know there's always that that thought process that people can weigh down a little bit.
You know, but then there's there's there's there's sort of like how do you balance that versus how much capital you potentially would raise leaving aside the did you give us the thing option for a minute.
And.
Are you ready to say $5 million or $10 million you know you only kicking the can down the road.
A little further and perhaps you could continue to weigh you out.
You know can you just give a sense of how you balance.
What the capital needs could be.
You know with regards to negotiations right.
I think Glenn the way to think about it is there's a there's a.
Pretty finite level of cash to get us through the end of this year.
With the shares available you have the ability to raise more and so the certainty when we start to run out of cash goes goes away themselves uncertain right. Because you can continue to raise more is that the 6.3 million as available say in the Lincoln Park facility becomes available again.
So you have the ability to to continue to to go through the sale process that process that we're in.
And.
The certainty that there's a.
Okay, Fine I point time or G., the cash runs out.
Goes away and that's that's a single trying to take away.
Oh right. That's fair Alright, and then just kind of shifting a little bit I really cant talk about.
The sale process much but do you know or just the watching the kind of the big.
A handful of tech companies that got drawn in front of pulled in front of Congress last week for.
[music].
Question there there there.
Practices with regards to competitive nature things.
One of the question that kept coming up without some of these guys are using tactics, which are kicking tires on investment.
And then you know backing away the last minute.
In wind up doing some sort of work around and things like that now. It makes me think of you guys in a couple of ways number one.
You know it almost sounds somewhat similar to the process that you guys went through when we saw it for a while there that you guys were getting very close on land Lord contract, perhaps for home Speaker type device and then it also makes me thinking about this process is going through now and just how you protect.
You know the investments that you've made over the years and the technology developed does your negotiated with these kind of Giants, which is not an easy task for sure. So maybe some color on that perhaps.
Yes, I think I think there if you take a broader look at it right. So.
Everything you said you know I think everybody on the call is probably not going ahead, you all her dead right, but one thing about Microvision dive you know I I'm very proud of it.
You know the Greg that's been there right. So we know all of US that are intact. We know this is the rule right. This may happen. There was some change happened right. This is what you know we have to do but ultimately the IP. That's been created that has to have value. It's not just because you're an attack that you know you're obligated to be successful right. So I think that evaluation apart from.
Me is the things that we're talking about the verticals. Those also how timeline for them. They do have a desire to acquire what they need and they want to be successful themselves right. So if you're able to persevere. So think about what we've done this year. Once we know focused on the out years, you've alternative I agree Ben.
And I really focused on that right Yep people, who have different rules of how they want to behave right, but I think rehab for many years survive. This and you don't drive several times right.
Going back through unfortunately, right, but a definite feels like a bucket or not but the I'd be by itself is a chore the markets.
Pick any one of them right I think I get talked expense, we bought them right. They are present, so even those companies right. The choice is always lots of money right is it better to actually collaborate or acquire versus a significantly more risky pathiparampil that you're doing it on their own right. So.
That's all been factor so just.
One other things like those are the rules, we are all knowing it right, but we're positioned well actually so we have something of value we have IP here.
And we have not just like be we have designed good people we've done a lot right.
We just have to upgrade maybe start to get through it that's the only way right.
But that's our given.
Yeah, so not just the last whether you'd give you can comment on the.
Talent inside the firm as you've seen any you know.
Its e. honestly public that you're going through this process. So.
Do you see any.
You know people are people looking elsewhere that kind of thing because that's a big part of the value is probably the talent of the people. There if you to go through it.
The sale process as well, yeah, I think you're never going very sensitive that and we've done everything possible all the tools that been given to us or to.
Make sure that the all the staff is comfortable and to secure a at this woman happy to share that.
But you know we have all the key personnel required.
To complete a potential transaction.
Great. Okay, well. Thanks, that's it for me good luck in the process.
Q.
Hi, My remarks audio question comes from Kevin duty was actually doubled your please go ahead.
[noise] afternoon, gentlemen, Steve somebody. Thank you so much for taking my question really appreciate it.
Hi, Steve I think you did a great job highlighting the nuances or the April 17 contract.
Right, especially with 60000 dollar gross profit expanding to what 580 this year or this quarter sequentially.
But it's not clear what the unit volume is behind there and it's not really clear or what's happening in the end market I don't know how much you can speak to that.
But if you could give us some color I know you'd be helpful.
Yeah, we have not disclose any per unit a information and we did we have said and we said this back in Q1, when when we transferred production responsibility to the customer.
That one of the things that drove us to that was the low volume.
So.
We did the agreement that we did so that and one of the things we talked about even today was.
In the event the volume of that product takes off we will benefit from that.
So that the volumes were up more low for us so it's difficult for us to maintain production.
Given the low volume.
Okay.
But you seem to have a little bit of a grasp of what you expect for the second half and I'm wondering.
Yes.
You know how to read in between the second sequential change between March and June and your expectation to realize all of 1.8 for the entire year.
We have some indication of what the what the usage will be when he said a 1.1 million is what we expect to be recognized as royalty revenue over the last half of the year. So that's the so the indication we haven't been knowledge we have from from.
Interacting with customers.
Four sets an estimate and that's what's required to the footnote is for US estimate that that's why I disclosed.
People are interested in what we see that.
So given where we are.
The first half royalty revenue plus the 1.1 to calm.
Half our estimate would even be about 1.8.
For the whole year.
Okay.
Fair enough appreciate it.
Can you explain.
How about liability.
My.
Either benefit or interfere with a potential strategic.
Deal.
It's a it's a it's a it's really the way it's kind of it and non cash liability to the company. We don't have to do anything right now to earn that.
So I don't I personally don't see it as a as an impediment to a transaction because there's no liability that somebody's taking over that's going to require them it potentially to pay out any cash.
And a company that would require us would essentially be able to record that revenue as a company that over the over the next periods until that time.
Tire prepaying the balances.
Exhausted and then future royalties after that would be cash.
Got paper, though so.
I don't see it has really frankly to be.
Okay Fair enough summit. Thank you for to be you know the emphasis on.
Hey are.
And auto light, our but I I know that you guys done a great job on and my understanding was the module that was used in.
Tracking.
In a small to yield was getting closer to commercial market acceptance and.
The demo that you Sue to see yes, I think was great evidence of that I'm just wondering.
If you can speak to where you see that and whether or not you think that might factor into.
Potential interest.
In a deal.
Yeah, I think you know you're talking about our consumer large rather be presented and certainly was a very aggressive but as you know like our job. This year. This pivot to trying to solve the company. If it makes a very difficult to enter any kind of development right interested parties are concerned about you know what are the develop it would be we haven't had any specific inquiries about that.
But if you take a step back to.
What's really driving a lot of things is not that it validation on one versus the other it's really been global demand for consumer electronic is unknown right or any kind of data that's coming around and you can see across.
Different.
Segments off the a consumer market right.
It's a body of work valleys, absolutely anybody of interest that up I mean, I've had a chance described food absolutely and that's what wasn't my prepared remarks right. It's our job to make sure they get the full value, but nothing you know all this stuff has value. This was up just graded right through Garda somewhat the a there you know a timeline would be for a product.
Right those are things are controllable.
He sees the value right. So it is you know a great demonstrated right I still get compliments for it by the way I get questions about it up because people are still depressed by that so yes, it's definitely all the things that we've integrated right. So all in the mix right. I think you know to think about who they are how far back RDR goes that's a long history that well before.
For me even like so its you know just be proud off and you just love to go through and no airport gets a lot depends right, but it's got great a foundational pieces right, but the consumer light, our and the Dragon display right.
All the because were products have played.
In the transaction like this.
Right so with regard to pay our so we could you talk to that 40 degree field of view it.
That's not gonna be enough to substantiate see our environment I I'm not.
Exactly clear how it plays into when they are environment.
So so I got a little bit of history out you know when they are probably more than a decade, so I'm going to speak from that so before I answer. Your question. Let me just talk about <unk> right. They could buy yourself, if you ever want to air product what would you need if you don't get lot they'll tell you what you need it has to be like that's number one thing, which means we low power small battery.
They feel the views. So you feel that it's not just something tiny right at something valuable.
And binocular if it can be that right. So if anybody could ever produced a product right. That's how you get to the mass market consumer product right. There no shipping any kind of volume that is not going to scale to millions if not think about cellphones right. They ship well a lot of felt one of the single model.
You get to that kind of mass market right. There's many many steps to go so far as they are ever it was going to be a thing.
It's going to need some features well, they're not deep R&D a decade out its provisions core development for decades, we've already done that right ever demonstrating its right. It's all that video what specifically that sometimes folks may not have forgotten about RDR capability, but it's always you know right. There is not you know forgotten right so that wasn't real real.
And.
So from Air standpoint, right. Those are things that are valuable right. You know people have been trying to find a way to get a our into your life. So you have these micro interactions rather than Big Ltd. Then you know immersive kinda environments like you get what do you want you. If you want to have a visual personal assistant just don't have to pick up your phone anymore right. It disappears in your vision.
Now, we think Bobby our it's a it's a different market right. It is immersive right. It is you know you include yourself from the environment and experiences are friends. So if you want to take in Yeah, you know.
You want to be transported from your living room, I think it's a poor.
For example, about the games with the pandemic. If you want to go through my Fuji wouldn't be greater because it's part of VR headset and feel like you were transported there right. It's a different experience right. It's a different use case. It is different kind of no training modules are different right. So a rnvr and mixed reality in the middle right. They all have a place right, but it depends on what the use cases right.
No.
We aren't can be used for lots of things you know that's why there's all those investments so all valid right.
All right is also valid and mixed reality, obviously back sharks immersed things together. So I think it has been put in context coffee market and what they use or.
What problem for these are you're solving right. So I think in the air which obviously you know one of my previous employers right was you know very heavily into it right. So you can tell that people have to trying to find to break this equated to figure out how can you actually get because there's something there. There's a device that everybody believes that there, but yet it's a tough form factor right and I mean.
I'm personally very proud of our teams that are the video it just so hard to show people all the things right over the years. We always gets question how come you don't talk more about it right just worked best friends or that was a great opportunity across the show what is possible you know in context of a certain transactions. It's probably longer answer then you're looking for but I think you know there to subset.
I'd like one Rob somebody out there are one is about a one is invalid most of them are valid.
Yes, Yeah, I don't know I understand and I fall and I. Appreciate the color I, just so I guess I was a little taken aback because my thinking was that you.
You've been able to demonstrate a wider field of view.
But I, it's really in consequential it it's really what your point I think as the stronger one that you've got a 'cause this broad capability in multiple technologies <unk>.
Right. So that one on that note could you yeah I'm sorry got yeah I'm sorry go ahead I'll go say like you know I was just hoping you could.
All right you don't have paid.
Okay. Yeah, I don't I was hoping you could talk a little bit about.
I mean I'd I know you mentioned this in your prepared remarks, but you talk specifically to display technology versus the interactive display technology, which I think was further closer to commercialization that I've, just I know Glenn touched on it too, but I was just hoping you could kind of go back and maybe review.
You were.
Those might.
Differ I guess in terms of their final development and in terms of they're interested potential suitors.
Yes, I think everything about the micro display the our module for example, right, but that's where I characterize the display right. It's a micro display, but it's a display technology right and in some sense is actually harder than a display like a bigger display.
Already graphic display of course by adding a <unk> 0.3 meter lie dark ride from being able to create this experience a touch, especially nowadays right. You can't you don't need a piece of glass to wipe down right. It would be any surface I could be engage right. We would have produced back on in fact, oh that kind of experience or that would they tend to have it right. So I think like you're right no big.
But the reason to make a distinction is because when you add the latter too there's a different conexpo different value to it right if you're to add some of the people tracking how are you know.
Feature to the micro displays then again it would also be filled the microdisplay for a our except now I can tell people are tracking right. Good microvision do that yeah. You know have you been.
That was there anything no right, but so I think I get so they're all displays whenever you have in red Green and Blue laser right. Obviously, it's a display we had the IR and you can add interaction. Other features right. We talked about her track district that is better description of it because it's not just displayed because it's the next level of Ah interaction right.
For example, one just your TV. The other one is ripe at perhaps right. So yeah, but there's upside right I think they drive to display and Microdisplay right. Our display products right. There at their subsets of though that the big core development up and down.
Okay. Now my understanding was from you know, but the difference in the consumer lied are and the auto lie to our was I don't know maybe as much as two years of development time, and I'm wondering whether or not you think that's still fair to say or.
Or if you move the auto development forward in light of its interest commercially or.
How you might compare those two now and their relative value.
Well I think there the relative value to the company right I think it's you know what product will launch market you know, what's the fastest Baskin Robbins, one we're operating right. So I'm going to keep the answer that context right. So when it comes consumer light our it did the ultimate of everything we could ever built I'm pretty sure.
You know ideas that we have that we can go on and even developed further but it got to good platform from wherever we could find out what the market interested topic. It would be no. Some of the you know idea is all about home security right you want to have something to explore what do you have a development burgeoning good right, but do you have something much more stable mature that people can collaborate with us right that's what.
Due to explore version of it the automotive lied are part of it right. So I think like you know this is one of the things that I want to make sure that we understand the automotive I know, it's a temporary I think you know if you have a Google alert on all the automotive let herself you see the activity on the you know a consolidation side on the investment side that you can see there's something happening that there's big thing.
But it's not just something what did you know I, let me too products. It is pretty decent visit that could be either because there's two different things to consider.
First Israel or what we call the active safety Ada Es. These are required by regulation. This is like having airbags new car. It will be mandated systems like this not just like our whatever system and do that has to get those cars safer that's requirement.
And number two of course is you know these amazing company that we all read about you know that are taking on the big thing that is gonna be much one of the future, which is full autonomy right. Much further the future I don't know the number but much for the future, but they have to do a lot of heavy lifting right now to develop their products for the future.
So.
And one can't afford you know you want to one does the Tommy fault for I think about them it like channel sales.
Got a product you can address other channel sales you will have revenue you are working towards the than New York enough conversation, where you're solving the right things right, whereas the the Big Prize of course is the 80 million cars a year globally right up 400 947 million cars on the road right. If you could add safety to that and find a way to say it was.
He is intended like we predict somebody else's had a if you look at the video right at one of the subtleties. There is the car driving and somebody comes through August was a common thing that all said experience, but normally either youre not paying attention, even though it's somebody or you know slamming the brakes and got rear ended right or other permutations that wasn't that video that shows is that if you had.
And I understand is your car the computer how to understanding of intent.
When disbursement was about to start shifting into your lane. It would just north of the Brady can slow you down.
So, causing some sort of other actually right. So when you think about Lighthart right. It is these two categories.
And there's a business that right. So when you think about its two years out in a product development you know whatever level. Our customers want of course, you know that takes whatever time. It takes right. But this is here now you know safety is here now and autonomy need sensors now. So if you think about what we are talking about for our sensor.
They were building really good business. It really you know we're doing it there's definitely a path channel sales and they'll get pastoral yeah, and you get one with the other right now of course I've been thinking about it its strategic transaction.
The final person that would have their product you know that name may change right. They would have under their brand, but certainly it's valid worth because it is the most important conversation at the most active conversation that people are having right now if you think on Silicon Valley right. One is one of the most let me be honest about right. So so I think like the two years a part of it is based on something that somebody specifically wants what.
Our core technology right, how our understanding of it what problems to solve we have that right. So it totally makes sense to do it because you know you have short term.
Pass through revenue you didn't have to wait you know for OEM, which obviously you know we have a history of OEM graduate for them be maybe something incredible and its slow or are they doing something different than a jogs our existence, how can a high tech company get jobs. So easily right. It's because we need that one record revenue path and the automotive lot are totally makes sense you had channel sale you work for the first time separately from.
OEM. Some you have these companies that are actually disrupting their business. So it's actually you know a it makes total sense little bit that's right.
So I'll put on the consumer like I'm, sorry, yes. It is again going back to the ecosystem of these giant seems to be it would be certainly one of the price because they own big part of the market right and you can't be afraid of that but it could take a lot longer that context of the two years Lucky so.
So I think automotive lighter I think at all how else would argue that you know it is validated or what does a good business right I've heard of business.
It's a library so compelling it at such high volume right consumer products are much more I've gone so.
Okay last last question for you summit on the you mentioned 100, or so companies that you interacted with and I'm wondering sort through what does that number really represent in the the total number that you could potentially.
Interact with do you think you have more stones to turn over or is it just a matter sifting through the ones that you.
In a dressing so far.
Well, yeah from the hundred Something's gonna be worked through right I think really.
Smaller much more subset is where we are very focused on right now I would say.
You know the from top gear Oems to the top technology company right and lots of companies. They represent a wealth of so I'm not really sure that he would say that Joe you have to turn other stones that you're right. The fear no. That's why you the word pop here.
I think probably that's all I want to say on the subject.
Yeah Fair enough no I appreciate that I I just wasn't sure if you were still investigating.
Other I guess potential opportunities or just in the narrowing down phase I I appreciate your perspectives and again. Thank you much for entertaining my questions.
Thank you.
I'm always is all this includes the audio question answer session really turned over to the company is part of the World kind of course. Please proceed.
Okay.
We received several hundred questions in advance to the call today many of them. We're on the same topic.
And many of them have been answered in the prepared remarks.
We will not be able to answer all the questions. We received but we'll try to address the questions on a common topic and we appreciate the question.
We have received and hope you understand that we may not be able to respond to some questions on some specific topics.
So all Oh starts to come to questions here.
So must.
Would the company sell a particular verticals such as I've been in reality and if so would that limit your ability to work on other verticals such as automotive light.
So I think.
As it stated.
Consistently right there were selling the company and looking at all so as you go up or opportunities.
But southern company on the as amazed part of it.
When you think about our core technology, and our know how and our IP, obviously that common to all verticals right, but if you think about each vertical by itself. It has its own version of the hardware right. The work stands by itself. So at any one of those four verticals somebody wanted to acquire and up because you know that's actually move on.
Huh.
It said by itself. So it does not you know a deplete our capability to do any other work.
Second question you mentioned there is a focus group of companies interested.
Can you tell us how many and what their interest is and who they are.
Right. So I think I've covered it in my remarks and also the last question never got a startup of the other companies.
It is a much smaller group and they're all in various stages of diligence.
And beyond that.
We're not going to want any more color.
Next question is not what does the likelihood that you'll be able to complete a deal before the end of the year and what happens if you do not close the transaction yeah.
So it's nothing like it so we can't really handicap, the probability of a specific timeframe.
If we get to that scenario.
No we're gonna because you're developing our technology like where today and also could even looking for strategic alternatives. I then confuse the search you know, but we are focused on selling the company I just.
One of your personal care about that.
Thanks.
Are there are several questions concerning the valuation of the company. What do you see is the valuation as a company in a strategic transaction.
I'll take that one.
We're not going to comment on any particular valuation of the company or comment on other people's opinion regarding valuation.
As we mentioned in our prepared remarks, we're working to help companies that may be interested in a strategic transaction.
To see the value that we see and all the product verticals and in our technology.
When I would I can't say is that in in preparing for discussions about valuation.
We have prepared analyses of comparable transactions and M&A activity comparison, just kinda cash flow analyses.
Valuation of intellectual property and other analyses that we've done to be prepared for those kinds of discussion.
The next next question is a please elaborate on why do you think the companies.
[noise] excuse me. Please elaborate on why do you think the company's technology and intellectual property is best in class.
You know you saw some pretty difficult problems or for products.
I'm going to reality automotive lighting markets where devices.
But if you think about the fundamental physical things that we solve the the they should that I'd just like the physics of it it goes to the silicon for US right. So really take some really good problem, they sort of having a.
Much more sophisticated solutions, you really are able to bring it down so the evidence of why do you consider best in class is if you just look at the products that we make and the comparative product. That's next to that the physical version of it that's the real way of saying you know without getting to the lot of a technical details on it right.
For example, like I looked like I'm actually has recently right.
Yeah Microdisplay, it's just a common sense is a user you'll say well it's got to be like I, just wonder element I want to where it's something that looks like no one buses.
Yeah. So then from there comes a lightweight provide bigger field of view all those attributes come in and our Microvisions technology, So using super complicated optical systems right. It does others, who doesn't know Simplist version.
Representation of it right. So that's what do you know you've actually arrive you ought to the from you know ahead of the class because you solve those problems and all you have spoken in front of you. So you know this capability to having no optics yet.
Okay.
So most of them, there's a distortion mostly in electronics.
It's pretty unbelievably the profit right and I can tell you.
Somebody has been an air for long time, it's very difficult as the Holy Grail and so I mean, that's what Mike written technology is very impressive.
You know I believe the you know for probably successful you know we have to enable those kind of things you could think about automotive light or you know we solved cables offered like full sunlight either you know the word let me think simple, but think about these are very difficult problem right nobody has been stable to solve them.
Oh sunlight immune to other like ours or also like a real signal right. I mean these are the kind of thing, but you know how do you know that you are having arrived you know because your product is already doing that when people not even talking about that so that's why don't we believe that yeah. We'd represents something that's best in class and I mean to compliment I shared earlier on my.
Written remarks about that's evidence of it that even parties are interested.
Our impressed and they complement so.
Yeah.
Okay next question [laughter], what does the fully diluted share count and how many shares are available.
So the fully the fully diluted share count is a 149.5 million shares. So there are approximately 143.5 million shares outstanding.
At about 2 million Rs use and 4 million options outstanding and that comes to 149 five.
There was a little bit in this question too about how can they find that out.
And.
So when you look at the cover page of a 10-Q or 10-K toward the bottom it will share the list what the shares outstanding are a couple of days before that particular FCC filing was made so you can see it there and then if you go to the earnings per share footnote or the epic equity comp.
And station footnote you can find out number of options and Rs user a warrant to those kinds of things are outstanding in our case just options are as you.
Okay. Next question can you tell us more about the videos that were released on the Microvision you to Jim.
Oh right Yeah. So recently put these videos together microarray to put this together by the way to.
Demonstrate our vision of the modules for augmented reality and automotive led our space.
Oh, Yeah, we've heard from investors that they wanted a better idea of Ah.
What we are working on and a thought this will be like a very good way to communicate.
And provide some transparency as to what we're working on.
The videos certainly help.
You know Oh investors and of course than just party help visualize a you know a potential value for this module and as I mentioned earlier, we had already on their behalf Oems anomalies, where their primary Pat sometimes you never Gotta catch showcase water technology could do right. This was a great medium for transparency so.
I hope that it was successful.
Okay can you provide an update on the status of automotive light or development and when you plan to have a dinner at demo available.
Well I think a they've got some part of the past you said that that we were targeting you know.
Number 2020 or are they target date, but that was up before some of the and then make related and also you know things that have happened to us so the strategic transactions happen.
At this point, though we believe that demonstration in Q1 2021 is up is more reasonable timeline.
Given the fact that we have to support all of those activities and both of those laws the priority.
But I want to kind of just put a this question into just a little bit different context right. So it's not just the demo right, it's not just or something.
In the past you know that knows it back in the early done whether we're talking about look for a product I think what we said well, it's what's called a ace ample capital eight sample in the automotive space for Oems with a target of it. So you know the level of majority it because he was higher and the reason why you know we are.
Moving on it because a lot of the worth over the long history. The company right. We have thought about these things for long time and now it was if that's what we have one we're not supporting that those activities are we making incremental progress on it right certainly like you know the targeted fewer 2021, but to be honest Oh, you know that's the goal is the vaccine.
Got a predictable as normal time, but so I think when.
Something specific want to talk about we'll we'll share with that right, but Ah why we want to do this.
If you think about it it's not just you know it was our plan to do this but anyway. If anybody is looking past the automotive and aerospace through us.
The path to an OEM the path to how you would follow economy.
That's very important. So therefore this is relevant work afterwards, the a though tragic transaction that we're looking at some.
Okay. [laughter] next question several companies have announced light or programs using different light or technologies or how do you see the automotive light or market develops.
Yeah, So I think I've kind of covered this in the Oh the other a question of that.
Two specific areas that are.
Our driving all this activity and.
The safety data is you know that could sit here that is actually the big price.
It's a near future one and the long term as I mentioned the autonomy. One. So yes, you know there's still a I think there's questions about mobilize doing this and all the names get tossed around right every company to think about what probably wanted to solving and where they're going with it and you can gauge regardless of what harbor, they're showing how far are they asking the question your brands or.
Would you Trust yourself your families like wood basket the system, that's pretty simple question right. So all the solution either incredibly smart and you know well funded companies out there working on it but.
Something disruptive hasn't happened because nobody's really solve it right.
There's nobody has actually been showing something that solve all the problems all the questions that a a user would have a consumer would have our answer so the way it's going to develop most likely is autonomy is going to continue to drive it because its most active because that's a longer term problem before all of us give up control of our car.
Much harder problems. So there's a lot activity on it right now, but it sounds like a slow burn on the side, but it is active market that is there which is where the most revenues which is the active safety eight at system. So the development of this is going to go along in parallel but you know how soon if somebody has a solution. The eight asked market opens up I think we know a others.
And our companies that are falling off and some people on the call me know they've announced that kinda signed agreements with Oems and but there's no product out there right. So everybody's trying to break into that market, while they're trying to break into the autonomy market. So both of developing but one is the near future and one is indeed much further future that's the best sorry about it.
Okay.
There's a question about the April 2017 customer and a royalty.
There's a question or even when would we.
Start to get some of those are recognized some royalty revenue. So just kind of rehash. This I went over his prepared remarks, but the customer the before 17 customer me a cash payment in 2017 of $10 million.
As we earn royalties, we deduct the amount of the royalties from that prepayment.
When the prepayment is exactly when it gets down to zero the customer was well start making additional cash payments for the royalties we are.
Got a payment balance right now that prepayment Dallas is $8.7 million.
So the royalties that are hurt by Microvision now are recognized as revenue on the income statement. This quarter Q2, we earned 570 to 72000 in royalties and as I said, we expect to earn around.
About 1.8 million for the year.
All right go back goes question on IP.
What steps are you taking to protect the companys intellectual property.
So a similar to than most other high tech companies are we taking measures such as you know establishing security protocols.
Limiting extra proprietary information right Oh, we also nondisclosure their employees that seek to protect their IP employees. The company. So we think these are approved in proper measures in the space. We are in right. So we feel confident that we have protected ourselves.
With us.
Oh.
And then can you provide to display only licensee update I'll take this one the display only likes to see this goes back to would agree my thinking like May of 2018 are they still have a license and the ability to engage with customers, but we're not aware of their of their current activity don't don't have any other.
Okay.
And then how many employees are at the company now can you give an idea of what they are working on.
We have 33.
People working in the company today.
There's 10 in a support management and then there's 23 in engineering and a there if there really focused on.
Supported the diligence requests and that that were and are there also working on advancing the automotive light or technology.
All right.
That's the last question that Uh huh.
All right.
Think of I think whose I'd just like the goes on a thank everybody I think our shareholder spoken to support.
These oh.
It will get the proxy and you know it's very important that's the vote.
And.
Thank you for joining today.
Thank you Sir This concludes todays conference call. Thank you all for coming through from peers you may now disconnect.
[noise].