Q3 2020 MicroVision Inc Earnings Call
[music].
Good day and welcome.
So the Microvision third quarter, 2020 financial and operating results call.
All participants will be in listen only mode should.
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Please note. This event is being recorded I would now like to turn the conference over to Lindsey Stepper. Please go ahead.
Thank you good afternoon, and welcome everyone to Microvisions third quarter, 2020 financial and operating results conference call joining.
Joining me on today's call are Sumit Sharma, Chief Executive Officer, and Steve Fowle, Chief Financial Officer.
Information in today's conference call includes forward looking statements.
Coding statements regarding exploration of strategic alternatives.
Ill bar product verticals our technology.
Taylor merger up the company potential value of the company managing costs, completing a strategic transaction maximizing shareholder value expected customer orders future royalties progress under and benefits of existing conquer.
Cracks in license agreements and the negotiation of future agreements.
Product availability and product sale advantages of our technology intellectual property business execution projections of future operations and financial results availability of funds.
Product development applications and benefits.
They'll ability and supply of products in key components.
Commercialization of our technology market size market opportunities and future demand as well as statements containing words like opportunity potential, possibly intend confident targeting estimate believe.
Goal objective folk.
Okay.
Got it.
Expects plan will.
Good good.
Would 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 at T SEC filings, including our annual report on form 10-K filed on March 12 2024.
Form 10-Q filed on August six 2020, as well as the various other SEC filings made from time to time in which we discussed risk factors associated with investing in Microvision.
These risk factors could cause results to differ from those implied or expressed in our forward looking statements. All forward looking statements are made as of the date of 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 in the 8-K filed today.
Both are available from the Investor Relations section of our website.
This conference call will also be available for audio replay in the Investor Relations section of Microvisions website at Www Dot Microvision Dot com and now I'd like to turn the call over to so much Sharma sumit.
Thank you Lindsey.
Good afternoon, everyone.
It's certainly been a busy time for us all and I'm glad to be here.
I hope investors, everyone listening is staying safe to the pandemic and multiple in certain ways communities are experiencing.
I want to thank all employees, who are working incredibly hard and continue to deliver two key development milestones for our first generation men scanning long range later.
Well, who is focusing on finding strategic alternatives that provide the right value for our shareholders.
Today, we have 41 talented people focused and working hard towards accomplishing this goal, which could include a sale of the company in a transaction that would recognize both the short and the long term value of our technology.
We continue to explore all options, while maintaining strict control on expenses.
With the support of our shareholders and continued dedication and health or employees. We are prepared for the work ahead.
I would like to start by sincerely thanking all our shareholders for your support improving the authorization of 60 million additional shares of common stock at our special shareholder meeting a few weeks ago.
Roughly 115 million shares voted this special election greater than 95% of these votes in favor of the company proposal to increase the number of shares.
I believe your strong support for moves ambiguity about our capabilities to explore and complete any strategic alternatives, including a sale of the company.
I firmly believe additional shares well built eagle helped provide the operational flexibility to continue to pursue a strategic transaction that reflects the impact our verticals would have on these market segments.
Coburn I'd be pandemic continues to grip Jesus grip on our lives.
[noise] gold markets are experiencing macroeconomic pressures, which by some estimates could run well into 2021.
I believe this has created an environment where consolidation of technology companies.
We also believe the importance and expected future scaling in augmented reality and automotive Vitor will continue.
We believe that we have a solid IP and technology portfolio in both verticals, which represent value for our shareholders.
Let me be more specific about this point.
Mike we wouldn't have a long track record of delivering advanced products and augment reality with our laser beam scanning or LDS technology.
Our full intellectual property body of work has been invested in and created by Microvision over long period.
Our IP includes in house develop custom Mems custom optics.
<unk> proprietary digital to analog silicon chips embedded real time firmware and software that's actually policies custom automation and strategic partnerships that allow us to operate in a fabulous model.
Microvision modules function at the micro display engine, which is a key enabling technology required for augmented reality headsets.
Well, we don't control pupil expanding waveguides, coupled with our micro display engine are required to create the wide field of view high definition and see through user experience required in augmented reality segment.
We have been focused on miniaturizing and optimizing all aspects of our Lvs technology and hardware.
Oh, Yeah decoupling of the waveguide development from our Mems Microdisplay engine affected microvisions ability to invest in any specific we've got a platform.
However, I believe that we still have the most advanced and better technology for their micro display engine for the augmented reality headset market.
We believe the process of exploring strategic alternatives has allowed sufficiently interested companies the benefit of it you have technology, allowing us to showcase current and future possibilities.
I believe we have the IP talent and partnerships in place to develop the next generation custom high volume display engine to meet all the requirements.
With respect to our IP Microvision has granted a very few limited licenses for use of our technology in Lvs products.
We believe our approach of having very few limited licenses for use of our technology, coupled with the depth of our IP and state of technology development Rep.
Represents a strong value proposition is potential acquisition or other strategic alternatives.
We believe this approach provides an opportunity for future cost avoidance by acquiring party.
Faster time to market for potential higher unit volumes and supports their multi generational product roadmaps.
We elaborate a bit on our strategic advantage in this vertical.
I would characterize all inquiries, we have received and this vertical as looking at multi generational product Roadmaps, our technology could support and are not limited to a single product.
We have worked very hard to showcase the parties to expanse of what could be possible without technology.
There's also a new emerging segment being driven by privately held.
Software technology companies focus on autonomous driving to deliver mobility as a service.
Using autonomous vehicles mobility as a service companies are endeavoring to change ride sharing long haul transportation and last mile delivery services and the impact on consumer and business to business transactions.
Both these market segments will need a suite of sensors ranging from light our radar camera modules and ultrasonic sensors to achieve these goals.
According to industry reports the automotive sensor market is expected to grow from $8.7 billion in 20 $20 billion to $22.4 billion in 2025.
Within these numbers automotive lighter by itself is expected to grow at 113% compounded annual growth rate going from a projected 400 million in revenue in 2022 $1.7 billion in 2025.
This revenue in 2025 would represent only 2.3% of all vehicle classes sold globally and according to some industry reports is expected to reach approximately 10.3% by 2032.
Some industry projections estimate that up to five light our sensors will be required per vehicle to achieve expected safety standards.
We believe automotive lighter is an important market opportunity for our technology.
Another important validation of this opportunity appears as you start to see Standalone liner companies go public through special purpose acquisition company deals.
These larger companies have invested in development and are expanding with large talented teams as stated in their public filings.
These new companies are addressing multiple market segments with revenue is greater than $100 million annually with expectations of significant growth in the future.
They've also publicly stated they expect to invest in developing their technology for years to come at high levels of expenses in the foreseeable future.
Even with the high required investment ahead and associated risks. These new liner companies are valued at market capitalization in the multiple billion dollar range.
We believe Microvision is well positioned to impact this segment with our automotive bladder technology and IP.
Turning to slide our sensors in the market have limitations in meeting specifications required by targeted OEM and mobility companies.
These companies expect light our sensors to deliver 200 meter detection range low angular resolution, which requires high density point club.
Why field of view capable of operating in full sunlight small sized deck and planning to par styling neat automotive reliability were 15 years of operational life provide velocity data objects within the field of view and price competitive at scale.
Most sensors on the market today are primarily mechanical scanners with small handfuls using other techniques.
Cost structure size and performance of the products on the market do not meet current or future trajectory of requirements.
Microvision expects to be able to offer a solid state lidar sensor that is based on highly scalable silicon wafer processing and our LDR technology.
Throughout our history, we have demonstrated communitarization reliability and scalability of our Lvs technology.
Our team is working to complete a sensor hardware capable of meeting all required OEM and mobility company specifications.
This product represents our first generation Mems scanning long range lighter.
We believe this hardware could allow automotive Oems tier one and pure play latter companies to secure high volume OEM business as well as provide direct sales opportunities to mobility industrial and topography market segments.
I believe the work to complete our long range latter hardware represents significant value to our shareholders.
As many of you know Microvision has invested in R&D and product development in lighter technologies, such as far back as 2011.
I believe that our automotive lighter sensor implemented with our Lvs technology will have a sustainable strategic advantage with features performance price and reliability for several generations.
We have been developing our first generation Mems scanning long range latter product for a 2020 one introduction prior to the changes to our strategy in 2020.
Our long range bladder cancer is expected to have a 200 meter detection range of 10%, reflecting subjects Dan's point cloud output.
New proprietary scanning technology that allows operation full sunlight and be first in market without putting velocity data in a scan Mems lied are using a nine to five nanometer laser in classless safety system.
We believe this would be a groundbreaking product.
Our first sensors expects to be slightly larger than a VHS dataset in size and the future implementation of our custom silicon this size would reduce significantly.
I expect the hardware for demonstration and benchmarking could be available in April 2021 timeframe.
I also expect that a version of this first generation led our sensor could be available for sale in Q3 2021.
I believe this dual opportunity both long term and short term revenue for the first generation product would represent significant value to parties interested in strategic alternatives.
In closing we believe the market is starting to plan for growth in both our in automotive light our segments.
Our eldest technology could potentially provide a sustainable strategic advantage to the acquiring party and allow that acquirer to potentially avoid significant future expenses and product development risk.
Our team remains committed to maximizing value for our shareholders.
We remain focused on pursuing strategic alternatives and working through the process, while maintaining our required expenses appropriate for such effort.
I would like to thank our dedicated employees on effectiveness and their work and our shareholders for their continued support.
With that I would like to turn over the call to Steve.
Thank you Susan good afternoon, everyone.
For the third quarter revenue was $639000.
539000 of royalty revenue and 100000 production product revenue.
All of the third quarter royalty revenue was attributable to our April 2017 customer.
Product revenue is related to projection engines, we made rank INTECH back in 2017.
In the third quarter, Microvision and our distributor concluded legal action with Reagan Tac.
As a result of the settlement, we were able to recognize an additional $100000 of revenue.
In comparison in the second quarter, we recognized 587000 of revenue with 572 and royalty revenue.
Third quarter cost of revenue was zero and the resulting gross profit was 639000.
Harrison second quarter gross profit was 588000, which included a warranty credit of $1000.
Royalties associated with the April 2017 customer that are due to microvision will be credited against the prepayment made by the customer.
On the prepayment is exhausted the April 2017 customer will begin making cash payments for royalties due.
At the end of Q3, and the balance of the prepayment stood at $8.2 million.
This $8.2 million is on the balance sheet as a contract liability.
Assay 606, the applicable revenue standard requires the company's estimate and disclose the timing of when those liabilities are expected to be recognized.
Ascent formation will be found in the revenue recognition footnote in our form 10-Q, which will be filed which we will be filing shortly.
Our current estimate is that approximately 400000 of the $8.2 million will be recognized in Q4 for a total of about $1.7 million being recognized in 2020.
Operating expenses were $3.5 million in the third quarter in line with the $3 million or $3.5 million range, we provided on our last call.
In comparison operating expenses were 2.9 million in the third quarter.
The increase of about 500000 is mostly due to noncash compensation and engineered engineering materials and subcontractors to produce our automotive light our proof of concept and prototypes.
Noncash compensation is related to an employee retention program, we put in place to help retain employees, while the company explore strategic alternatives.
Lets retention program was for employees and excluded section 16 officers.
Our headcount at the end of September was 35.
Price of 25, and engineering and 10 and SGN any.
For the third quarter, our net loss was $2.8 million or two cents per share. This compares to a net loss of 2.3 million or two cents per share in the prior quarter.
For the third quarter cash used in operations was $3.5 million, which compares to cash used in the prior quarter of $3 million.
In the fourth quarter I expect our cash used in operations and capital equipment purchases to increase.
We are procuring components tools and equipment.
Necessary to build the automotive light of automotive light our hardware that we are targeting to be ready in the April timeframe.
Additionally, we paid a 625000 dollar invoicing Q4 related to parts, we shipped earlier this year in Q1.
There was a dispute within a supplier with a supplier and that had delayed the payment.
Additionally, you may recall that during the second quarter, we secured $1.6 million of funding under the payroll protection point.
We expect a portion of the 1.6 million will be forgiven based on the rules of the PPP program.
Our estimates show that we expect about $690000 to be forgiven.
And that we will need to repay about $900000.
The monthly payment to repay the unforgiven portion of the loan should be around $50000 per month and that begins in Q4.
As it is possible that the rules on the PPP program could change the amount to be forgiven could also change.
For all these items give us expected Q4 cash usage and operations plus capital expenditures of around $5 million plus or minus 300000.
Timing of much of this will be late in the quarter and it is possible that some will fall into Q1, but I want you to let I want to let you know that we do expect an increase in Q4.
We are trying to keep expenses down and minimize negative cash flow and.
And I assume that said, we believe completing our large are light our hardware development is important.
Because it could drive a significant increase in valuation for the company.
Value increase comes from the elimination of the development risk.
And that a potential acquirer could be acquiring a product that could be ready for shipment in the second half of 2021.
We ended the third quarter with cash and equivalents of 5 million.
Thus far in the fourth quarter, we have raised $5.8 million from our Lincoln Park capital facility.
Our goal is to maintain sufficient cash position to give potential acquirers confidence that we have the necessary capital and resources to have a successful transaction.
And balance that against dilution that would come along with raising cash through the sale of stock.
Adding the 5.8 million to the 5 million we had at September Thirtyth. We believe we have sufficient cash to fund operations through the first quarter of 2021.
Currently remains about $200000 available to the company and the Lincoln Park facility.
Finally, I'd like to turn our attention to intellectual property and licensing.
We had some investor questions about licenses for our technology.
At this time, we are party to three licenses for our technology.
Our April 2017 customer has a limited license to produce specific components for use in a specific product.
Second in May 2018, we granted a five year unlimited license to a technology company to produce display only products that incorporate our components.
License does not include the right to use our technology and augmented reality or near a micro display engine products.
Third in 2016, we granted a royalty bearing license to a Taiwanese manufacturer to make scanned beam display products.
We have received immaterial royalties under this license agreement.
As we have not received nor expect to receive material royalties from this license we do not expect to extend this license beyond its current expiration date in 2022.
With that we will now open the call up to questions.
We will now.
One of them.
We will now begin the question answer session to ask your question you May Press Star then one on your Touchtone phone withdraw. Your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.
Our first question today will come from Glenn Mattson with blended Ari Folman. Please go ahead.
Yeah, Hi, guys. Thanks for taking the question, so first as Steve or on the topic of cash burn and stuff.
So just the elevated capex and.
Just generally speaking the elevated a use of cash that you expect in Q4 is that.
Oh.
You know I understand there is lot of moving parts with a potential acquisition and things like that but assuming that you continue to pursue.
Pursue the path year on currently is that expected to continue to be elevated in Q1 can you give any color as to.
Thats kind of onetime in nature or if its recurring.
Yes, I think it's not.
I expect it to be a bit lower in Q1.
But like you said, there's there's movement from it's a lot of it's timing of this stuff is right at year end, so it's going to be.
Tough to pick which quarters, but I don't expect it to be.
Be going up at an increasing rate.
Okay, great. Thank you.
And then summit. Thank you for the color, especially on the automotive light. Our there is obviously some public companies now in that space and so we have a little more.
Understanding of like where the market is valuing.
You know some products in that space. So I guess, if you mentioned that as well I guess I would just be curious as to how you think your.
Product said once its available we'll match up with the things that are out there already and then given the opportunity so larger given youre so close to.
Ah fruition on have years and years of development I guess like the question would be like.
How do you balance the fact that you know if you sell the company in the medium term.
You're giving up maybe on a lot of the upside potential you know that they could be out. There are you know you know given how these other companies are valued based versus their current revenue streams.
I think that's a good point to bring up.
There is pure play like other companies out there and they gave a great benchmark of what may have been possible. So I think if you think about our path as a product you know the conversation in verticals not becomes important in the automotive space versus our other verticals.
The same body of work allows us to develop a product and as I described when I wanted to be somewhat you know more open about it in the call today.
It's a sizable VHS does that compare to the things that you see outside and other companies that are public or nonpublic those are easily things that folks and get there I did.
Data points on so its significantly starting to look like walk a sensor that goes into the automotive space looks like and behaves like and if there was another opportunity for.
Slide are to find a home that could be a big growth opportunity automotive is a great. One obviously, so whats exciting about that space in general and then I'll get back to like you know what about US do you think about the rolling out of a product like that is not.
Like fire and that's what I wanted to make sure people understand except the size of the market is so large 90 million vehicles sold a year. So you know kind of Bob as your mind right, even though it's slow it's you're talking about big numbers and that requires a different level of scaling of course I think it microvision was you know.
Had the opportunity to get partnerships together and launch a product and generate revenue. Obviously, you know our enterprise value will be significantly better obviously I mean, that's a that's a that it goes without saying, but.
You know one guard focusing on strategic alternatives and that's why I want to be very clear in our call today.
This represents a value for a potential interested parties. There's obviously long term gain on the Mark that I. Just described also the potential of having a product that could be some shorts short term revenue that will generate so what microvision ourselves have been able to be successful. There of course, you know I believe that I think.
It would be silly for me not to believe that but I think where we are we have to be realistic about being a strategic alternative having offered into the market everybody's review and get a certain way. Then you know you really have to put it on the table and look at what the right value for our shareholders and that's the real emphasis I want to put in today's call. The theme is theres values, when there's right value and it should be.
Clear.
We understand what the right value, we think hey for the company and we intend to drive towards it.
That answer your question Mike.
Yeah, No. That's helpful. Just a yeah I mean, I guess the scope of coming to market may be bigger than a megabit is currently capable of is what it basically trying to say so that's they are invalid.
The.
On the consumer led our products that you guys have kind of a jumped around the patent that have you seen it you know there's been obviously apple incorporating some consumer light our scanner into their products. So is that sparked a higher level of interest generally speaking in that.
Market or or anything on that front.
In general on the consumer like you know the interest is I was just a neutral as before a one distinction I would like to make is the product that Apple is talked about those are flash based light are based on a different technology different price point, our consumer light are based on got something different that that flash based lighter.
I have been able to do as well. So there are different things right. It would not have gone into a handset anyway, but it had a bigger opportunity you know I have a few products are pretty big maybe rob, perhaps not as big as handsets or tablets, but still a significant market.
Okay.
And then last Oh, Oh, a pass the call over to someone else, but just.
Could you characterize how you feel you know in the past you've said there are multiple you shop, you looked around and talked to 100 different companies. There are multiple interested parties is that.
Could you just characterize over the last 90 days, how the you know <unk> would you say you are in the same place were 90 days ago. Your narrow down the list your closer on what you guys are further away than you thought you'd be in any just general color. I know you can't you don't like giving specifics about the deal flow, but just.
In General I would say, it's the same list pretty level as you can imagine our October eight special proxy vote, you know, there's ebbs and flow of the things that happened right, but in general It's Sam best.
Okay, great. Thanks for the color.
Yes.
Our next question will come from Kevin Dede with H.C. Wainwright. Please go ahead.
[laughter] definitely guys. Thanks, very much for taking my call.
Hi, Kevin how are you doing.
I'm good I'm. Good. Thank you. Thank you appreciate it I was wondering summit I mean your shareholders have.
I think to your point.
Made it clear that they support your endeavors right would that October eight proxy vote.
And affording you an opportunity to issue more stock and continue.
You're making it explicitly clear there's no doubt about it you're making explicitly clear that you're going to continue the strategic direction that you set earlier this year.
Well I guess, what I'm wondering is whether or not that might be something you'd reconsider given where you see your shareholders Hearts.
Yeah, I think I think that's a great question right I think it's is there any other you know plan or anything that you're working on our focus on strategic alternatives, we got to see it through it's the it's why we established a.
Well the next a plateau from where somebody would want to have inflection point in the kind of capitalization never required going forward you know.
It would be somebody else do I believe that microvision by itself could actually be one of those standalone light our companies for example, or a you know a leader when they are is very big in headset market absolutely of course, I do absolutely no doubt in my mind and as far as you know the talent. We've always had the talent. We continue to you know the crack Alan.
It's it's the markets that are finally, catching up and so that's exciting so yeah, but right now you know I think I'll, just generally me right and I think what.
What I'd like to say like you focus on something he was telling me. It's a hyper focus we can be blind to the other options, but again, that's why I bring the concept evaluation into it today without no.
Giving any kind of broad answer on that it has been the right valuation at the technology can have that kind of impact in the short and the long term. It is in our shareholders' best interest for us to make sure that we established what impact that would be and it if something is it the future right, but you have to see through what's in front of US which is we have put.
The company up and you know people that are review looking at the company that they would be.
They need to have certainty as well that you know we are committed to work. The process. So we are committed for the process. That's the message, but at the right valuation so really I'm, hoping that everybody does get the message that it's not just oh, we do understand what the value of this stuff is probably more than a lot of the shareholders probably give us credit for we do understand it and yeah, we do understand the inflection points or how they.
Actually come about in technology, they're not imagination, you know take time, but we also are committed to the process as we said and again you know 41 people today.
Monitoring our expenses I think the good question that was asked before about you know capital tooling is just what's required to demonstrate in a bigger opportunity for potentially somebody else to take that revenue bad and if the right value is there I mean, whatever is in the best interest of shareholders of course, the board would Oh I get to decide on that.
Is it fair for answer Kevin.
[laughter].
So far [laughter] no.
No I appreciate I I know I've always appreciated.
Not just you certainly Steve and even your predecessors being open minded to the opportunities given how unique your technology is and the opportunities that can afford your partners.
And I know your shareholders you out to clearly there is passionate.
It's just a you know there's no right answer right you'll have to.
You know you'll have to I guess make the best decisions that you see come before you. It just seems to me and that sort of leads into my next question for you. So I mean, it's.
I'm curious to know if you develop maybe a new engine for.
That close to high opt for.
Rejection in the <unk> and when you consider the A. arc as you I think you do dedicated much of your prepared remarks to that and I can't recall that you've done that in the previous couple of quarters. So I'm wondering if obviously if Steve spoke to this a little bit right R&D.
Expenses increased over 20% sequentially, you're making some investments in auto lied are I'm just wondering if those investments are parallel then you're a our development.
The Air development I believe or not we are we were ahead. So in the air to make that piece of hardware of course takes a significant amount of investment like anything or R&D company has to do.
But you know what I tried to highlight in the prepared remarks, what it takes eight another partner that owns the waveguide. So Kevin lets say you had a company that is the waveguide, how do I know to partner with you unless I know somebody else would be adopting that technology and that would have to be it still I know yeah. So since these two things are separated right microvision bugs out to say no slight disadvantage.
Like you can't invest in all the different technologies that are out there.
Due to put them together, but the microdisplay part of it certainly be.
You know we have already innovated so as I described I'm very proud of what our team did and what we presented that was quite a surprise to folks that you know things that we can do for them or beyond the field of view and beyond the image qualities that they actually originally anticipated in our discussion. So I think our confidence in a are delivering on air of course is high.
Because we have such a long history with it and a pretty high confidence that we can you know have that are.
Completed automotive lighter on the other hand, it's a it's a different thing different the version of our technology I would say the best bets are describing things that you do in consumer and automotive are slightly different it's actually showcasing another dimension to what lvs would be the same core soc in actually enable another larger market and it does not look and feel.
Like exactly a consumer and just you know slap on some duct tape and bubblegum and send it off it is something something unique and actually showcased some of the things that we certainly could do also and they are those four things that were developing an automotive radar, but unless we have a partner here it's hard to participate.
Participated that not knowing what the waveguide would be and you know how would you would fall then so I think I am not a I'm pretty confident that our position and they are it's ahead of what people in the market, even anticipate anything there or not people, we'll talk about that.
But it's again you know for an acquiring company. This was the best thing because they have multi generational park pass now so.
So our investment over the investments, we're making in automotive lottery is because that's the one place you know again the market is ripe for consolidation as I said early on.
There's interest there their standalone companies. There is you know references therefore, it makes sense to have that one vertical also show and she'll something and piece of hardware that allows people to evaluate different dimensions of our company are different verticals for us.
Right so.
Your I guess the takeaway is and please help me if I'm wrong on that submit if it take away is that it's.
There was a little less operating were and they are just because you'd have to forge partnerships across multiple bridges right. One to secure the proper waveguide technology and that I guess that refers to the OEM decoupling that you spoke to.
Versus like Florida had a moderately.
Go ahead Scott.
Yeah, so versus auto where it's.
I mean, maybe it's a little easier to rate you could work directly with a you know a tier one OEM auto supplier.
That's correct. So you know automotive operate a little bit differently I think we I've already mentioned this early on you know 2019, you know we had contact directly with top tier OEM. So.
So in this case, they're more active because the tier ones will come in but the technology is not coming from tier ones that are either in partnership with their you know, making investment there barring but effectively you know a lot of a path that we're on right now it's not just imagine it is specifically you know some OEM a input or directionally of what.
What the Mark and even these are as I said popular Oems.
So I think it it does not the risk that you think about it in this case, we own everything to deliver our piece of hardware, there's nothing be coupled to our data stream goes into a computing platform. Those things that you know they know our sophistication they know what target specifications they want.
You know we are [noise], we're on a good path there in the case of they are yeah that decoupling. That's I'd say, that's always a slight disadvantage you can you know we can certainly go off and now work with a wave guy partner, what's the probability that that way by partner does or does not get pick by any specific OEM out in the world.
Right and so these kind of things will actually create a inefficiencies if you start developing technologies to demonstrate but yet you cannot show a path to Oh partnerships.
Were commercial but I think if the partnership was there and I think we have we feel pretty confident that our path to demonstrating that technology is not years out it would be.
It would be relatively quick.
Well, if if I'm not wrong on this you.
You know you've developed products or at least have been a key component in products that have reached at least prototype.
And that would suggest that you've worked with.
Intermediate or partner suppliers in developing Ah.
The full solution.
So if you were to take a step back and look at the.
The I guess the cross section of opportunities how many say we'd guide companies do you think could help you get to.
You know a full fledged commercial ready.
Hey, our product and how I mean honestly, how difficult would it be to explore those options.
It's actually not that difficult at all as I mean, I'm not saying this.
Just to be Uh huh, the mute that.
Honestly I don't know how to everyone. We have a board member that's very experienced in that right and I've known him for a long time I think you know we know lots of people in industry. We know what waveguide are are the ones that you want to go with I would give.
If the experience that people are looking for that certainly you know some top your Oems I think previously not this year, but it was last or the year before made some acquisitions. The waveguide, specifically technology wise right. So I think like I think we have a pretty good idea of which ones you would want to go after and you would have a high probability, but making an investment like that especially if they are.
You still if you think about the volumes.
There's there's volume, but there is not the volume do you think about consumer as other consumer devices have yet till that comes in it's kind of difficult to make an investment because you may not see that a return in a meaningful timeframe.
Yeah, I've got to protect company without revenue, where it is you know one would argue hate that would be better than where you are yes, but the investment to get to that point on the risk associated with an OEM not a adopting that weve got technologies is challenging but the amount of companies in the world is not 100 I would say.
It was like 10 companies that can do it and then on a different level. The scale themselves also to the pick apart not that not only has technology, but they can also scale. The technology that you expect the OEM to adopt because we will get the microdisplay done you.
No. That's that's the thing that we're so far ahead and I'll talk about the though that lets our lines in a little bit, but we can get that display done, but if that way by doesn't get adopted then we're still we have to have some level of confidence that that OEM is entertaining that and of course, we can develop a or augment our our.
Our module for any waveguide technology.
Okay. Yeah. Thanks summit for the color I appreciate it getting we switch gears, a little bit and go back to the auto side Steve.
Steve mentioned that you've got 25 engineers can.
In general and admin I'm wondering if you think that's the head count you need to get through.
Two I guess <unk> closer to commercialization that you suggest could be the second half of next year.
Yeah. The head count that I gave was as of September 30th Ah Sumit mentioned in his remarks that I think we're at 41.
Today and all those in all those increases are in the engineering ranks.
So you know, we still have a little bit of hiring to do.
We don't have a specific.
Number target right now to give you, but we're at 41 today.
Okay, but obviously the next step all right and then Kevin and it's not that no commercialization. It's the next step is having a product ready because I've been opportunity for somebody else in our current strategy 2020 strategy there worthwhile.
<unk> right. So did I misunderstand. Your earlier comments, then apologies that I had thought that you.
I felt that the second half next year whats a reasonable target.
For someone to potentially take that product commercial.
Yeah, No I think what I'm, saying is I guess well have reliability will have to things that are required for that market to address it ready so thats the opportunity for somebody to see the product in April timeframe and March April time frame, but let's just say April with the supply chains, where they are right now and effectively you know.
Commercialization the ramp part of its easier to validate the technology by South so once acknowledges validated having a clarity that does not take years after that to commercialize for any interested party.
We expect that that has value.
Okay.
Thank you gentlemen for entertaining my questions I really appreciate the opportunity to discuss them with you.
Thanks, so much good talking to you again.
At this time I would like to turn the conference back over to Steve Hope.
Thank you.
We we received over 60 questions from investors many of the questions are variations on the same topic.
And most of the questions were addressed in her prepared remarks.
We try to consolidate the questions on the same topic to address the address the basic issue, we won't be able to answer every question submitted today, but we will we will go through we'll go through here first first one is there are several questions regarding head count and recent job postings and.
Why are you, adding resources no I'll take the answer that one yeah. It's really very simple. We're we're hiring to support the goal of completing the light our development in that April timeframe that Sumit mentioned, we want to complete that development as soon as possible and have that hardware you know available for.
Evaluation.
Yeah.
Oh, we have a very talented team of at Microvision and we've been fortunate Weve had low turnover and we do appreciate the dedication and the hard work of all of our employees.
The next question is comment on other companies laser beam scanning products and how those products were linked to microvisions intellectual property.
I'll take that one again.
We don't comment on specific IP questions or issues, nor do we comment on other companies products and technology development.
Generally we believe we have broad and early filed patents related to laser beam scanning and we would take appropriate action has needed to defend our IP.
As we have stated our debt our IP does go beyond patents.
We have no how and methods that we believe give our products a performance advantage and a competitive advantage.
It might make sense here to reiterate what I said earlier in there there are three IP related licenses that we granted.
The first is to where April 2017 customer. The second is for display only and does not include augmented reality or near eye applications and the third is a Taiwanese ODM, which expires in 2022, sometimes we get questions about the S.T. micro co marketing agreement that.
That agreement is about promoting each other's products and that does not include any technology license.
Right. One the next question there are several questions about S.T. micro and a lay SAR or the lease our alliance first how is microvisions relationship with S. T.
And second can you comment on Microvisions participation in MSR Sumit, maybe you can take this one.
Good question.
In General I would say SDN Microvision are you know we can do to have a very close relationship.
That's without a doubt a as was evident in the public comments that were made during some of the recent presentations.
They've been our Mems a wafer barker for several generations of our products.
And in the past we had our analog is sick with them, which is now obsolete.
We worked with them collaboratively, but as a fab partner and both parties are very good and maintaining boundaries on our IP.
Additionally, we sell components to our component, we sell components to our customers yes.
Yes, he is not able to sell our components. The Mems on the 86 every design for the market directly and that's actually very important point to remember.
And as you know from the public presentations I think this was recent though it was brought to my attention. We enjoy a very close partnership with them you know they they understand the value that Microvision has created a they've been you know grace of orders.
That lets our lions appears to be a to me at least when a group of US I've looked at it a group of companies dedicated to advancing our development.
I'm pleased to have their areas of expertise like lasers, and Mems and waved guys an algorithm basic et cetera.
But there are individual companies part of the alliance that could be a one stop shop for anybody to do development.
Microvision has these fundamental piece was integrated into our Lvs technology already at a very mature level. So we develop everything required in house. This has allowed us to be one stop shop, and the Lvs Microdisplay engine for a long time.
And Ah I think another way to.
Just really keep in mind is like this is not really makes sense for us to be part of alliances we have the pieces and we already have a solution ready for Oems.
And secondly, we're focused on strategic alternatives not on business development. So.
Didn't really make sense wasn't part of that.
Next question is can.
Can you. Please comment on the number of newly authorized shares you have you. So far and can you talk about burn rate and cash status and the use of Lincoln Park.
Okay. So on October 860 million shares were authorized so far we have issued about 2.5 million and [noise] in raising funds through the Lincoln Park facility.
[music].
Some of you may have seen an S. Eight filed on October nine and let me explain that in May the shareholders approved that 5 million shares could be added to the employee stock incentive plan.
However, because the increase in authorized shares did not pass until October eight we did not have the shares to actually put in the plant and the 5 million shares filed on the S. Eight on October nine just increased the pool that could be granted to employees, whose shares have not been granted to anyone.
They are intended to be granted to new hires and as long term incentives to existing employees over future periods in the form of stock options are Rs user Prs use performance our issues.
I'll I'll mentioned again, while we're on the subject of stock you know I did mentioned in my preferred in my prepared remarks that in Q2, we saw two incentivized employees to stay as we explore strategic options and we granted employees restricted stock units that vast at the earlier of the closing of a strategic transaction or one year.
Action 16 officers of the company were not included in that incentive that's for employees only and I guess I should add that the shares used for that incentive which was about 1.2 million were not part of the 60 million shares that were authorized in October.
It was part of that question about cash in Lincoln Park, I said earlier that a 5 million at the end of the third quarter is what we had on hand, and we raised another 5.8 on Lincoln Park in.
In Q4, and we believe that that gets a sufficient cash to get through a.
Q1 of next year and there is about $200000 remaining on the Lincoln Park facility.
All right like everything on that question I think so okay. Next question. We've had a few questions regarding state of augmented and mixed reality markets and why you think microvisions technology as relevant could you provide any additional color to your prepared remarks.
All right I'll take that.
So first let me give some context I think I started this last time and I want to elaborate little bit more.
Let's distinguish between augmented reality and mixed reality for a second.
[noise] augmented reality product from air products to try to superimpose information.
And user head mounted hardware, who glasses. A example, okay are among other products.
Applications.
I think as you look at what information either neat position out there pupil et cetera, and determine how best to present information.
The micro display engine and sensors to this headset are usually used to enhance user experience and delivery of information.
Focus more on the user directly.
But the products need to be lighter weight low power provide wide field of view rich color able to adjust brightness based on indoor and outdoor condition.
Mixed reality, though at hand.
Well spotted stake everything I listed for LCR and add additional outward looking sensors lots of computing and software and can basically overlay.
Other things on top of reality that you see through them.
You know modified adapters images video of these obviously you can see whole as magical even other showcase experienced they create or they want to create.
I would also like to note that recently I think that brought it up Oh, yeah like Apple our showcase it started to show up and more applications running on phones and tablets.
And just kind of a very interesting.
Way to think about what this opportunity.
This is a form of mixed reality as well.
And mixed reality can be created with VR headsets as well.
There are so many ways to provide an experience and it just depends on what problem for the either needs to be solved.
For example, if you want to help a jet engine technician repair an engine with it with a see through image that overlaps with the technician is seeing in front of them.
Oh seats were waived by that would be a better implementation, whereas you know we are and mixed reality could have other applications, where that makes more sense. So it really depends on what problem, you're solving and what you're trying to monetize.
Top you know im starting to show your applications personally I think you know across other hardware platform is great validation that air is important.
This is exciting because they are solving user problems and thinking about monetization.
Also this would create an opportunity for a our hardware ecosystem to extent.
In my experience personal experience. He has an m. our expenses are significantly more engaging for users and head mounted hardware and that's not just a bias because I'm here.
I've been on the floor as he has with our device. It is more than a decade ago and I know like the reaction that you get you know it's a genuine so.
Personal market. He says I would say I've done on this one for many many many years.
No there isn't the main question. So my permanent technology as I describe it as you saw in the August a video that we put up the module is the menus. The lasers the electronics everything combined so my friends technology represent the micro display engine for use in see through optics required and they are in anymore.
Well that microdisplay.
Branches across all the different experienced you're talking about in the head mounted space.
We would be the main display engine that brings information to the ice.
So that's a that's a very important piece, yes in front of the all you have the waveguide, but everything behind that that's what's called an engine everything happens inside this one engine all the things that you would create for that experience make it like low power. They field of view, it's and this engine by itself.
In the future we could have interviewed a micro is you could have developed more advanced features like people are fracking a that could support foliation integrated into our Microdisplay module.
This level of integration administrators integration would produce engines that are small in size low power low computing among other key features that they experienced suppliers.
So.
The technology is not just I thought you know we have other opportunities to multi generational products. We develop and this is what I meant earlier when I spoke about multi generational possibilities possibilities for technology and the value to present, so anybody looking at that vertical.
Job is to show them all the things that will be made possible with it and it's not just the engine that that maybe in front of them, but it's all the way out to all the different products every possible. So.
So I think if you put that in context, you know a RMR I think we have a great idea very strong IP.
Great validation that we can create the kind of expenses beyond what even Oems were realizing there are users would expect at price points that are very better for the kind of progress solving. So therefore, there was huge amounts of value the air vertical my belief.
Yes.
Thanks.
That that concludes the question and answers for today I will now turn the.
Oh, there's more question sorry.
There's a question about the the state of the development of Microvisions automotive light, our samples and how the availability of samples could be part of a strategic transaction.
[noise] cover that too. So early I mentioned key features and on my door and sustainable strategic advantage they have.
We would be able to very quickly advanced the conversation from mechanical scanners to solid state sensor.
Not in R&D, but ready for product level, and that's not an easy thing to say for anybody you know most people that are looking at technology right now to them. That's a long tail. We it's a long history with Lvs and all the key parts of it I can say with quite a high confidence that <unk>.
You would be able to completely change the conversation that's actually one of the key things remember for context.
To show how disruptive are a lot of technology would be we need to demonstrate in a piece of hardware and not just theory.
And that I can just having a personal experience cannot actually even though you completed across the team. They are talking about you really have to see the hardware to really understand all the the complexity. The problems that have been solved not just a a theoretical version of it.
After all the value of a business. It has escaped goods was hit scale products and generate revenue for potentially other parties. So that's showing that piece of hardware is actually very important.
By completing the Harvard demonstrator, we would show to the market and interested parties, how it'll be a technology based light our meets the goals of the market, which is projected to <unk> projection for huge growth.
Additionally, having the the design demonstrate the capability in terms of economics and reliability the path to being able to generate revenue for an interested party further he said their risk.
Transaction would be easier to acquire can see the ability to generate revenue quickly.
I think I remember what I think.
[noise], there, especially have for augmented reality interact display and consumer lighter is because we have harbor that demonstrate the capability that technology.
Automotive <unk>, it's an important market that is quickly developing.
Our hardware demonstrator for 2021 showcases the value also don't being how this vertical leverages our core common IP.
But that's why it's actually important to have a piece of hardware that demonstrate the all.
All the features that are required for automotive light our partners to see that a transition from mechanical Mems scanning our first in human scanning is what does the Bob Evans in their own possibility and that reference back to our shareholders.
Absolutely.
That that was the last question and that does conclude the question and answer for today I'll turn the call over to Sumit for some closing remarks.
I want to thank all our employees of course that are working extremely hard for the objectives that are in front of us and also I want to thank all our shareholders for their continued support.
Thanks very much.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Yeah.