Good day, and welcome to the Summit Wireless Technologies Second Quarter 2019 Update Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Mary Magnani. Please go ahead.

Thank you, operator, and good morning, everyone. I'd like to welcome you to Summit Wireless Technologies second quarter update call. With us today is Brett Moyer, CEO of Summit Wireless; and Tony Ostrom, President of WiSABefore I turn the call over to Brett, I'd like to remind everyone of the Safe Harbor statement referenced in the SEC filings. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for certain forward-looking statements, including statements made during the course of today's call. Statements contained herein that are not based upon current or historical facts are forward-looking in nature and constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and the Section 21E of the Securities Exchange Act of 1934.Such forward-looking statements reflect the company's expectations about its future operating results, performance and opportunities. These forward-looking statements are based on information currently available to the company and are subject to a number of risks, uncertainties and other factors that could cause the company's actual results, performance, prospects and opportunities to differ materially from those expressed or implied by these forward-looking statements. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, I'll refer you to the company's various filings with the SEC.Now, it's my pleasure to turn the call over to Summit's CEO, Brett Moyer. Please go ahead, Brett.

Thank you, Mary, and good morning. I'd like to thank everybody for participating this morning on today's Summit update. This is a special update since just one year past the IPO and if you look at what's happened in that 12 months, there's been a lot of accomplishments. There's still quite a bit to do and Tony is going to talk about it, but as we think back at the IPO, we had two TV members. We're now at seven, which is a very strategic beachhead in terms of expanding the WiSA market.We were at a rough 30 plus brands as members and now we're over 60. But if you think about what those two TV guys were a year ago, we were anticipating an addressable market around them of 3 million TVs. Now we're looking at 20 million TVs.Well, where's the beef, right? There's not a lot of products out in retail. We've been saying to come in, we have gone through a number of customer-driven delays not related to our technology or our shipments, but I think by the time you hear Tony's presentation, you'll see all the marketing material, all the collateral, everything that's about to roll out over the next four to eight weeks through this holiday season.So, as a reminder, who's in the members is quite a big brand list. But there are strategic ones that I think are very important. They're the seven TV guys. There are the brands like Harman, Bang & Olufsen and SAVANT that are doing both TV and transmitters. And then we have our key partners, which is obviously a key partner as a speaker designer for the LG launch. We've had LG in tech designing dongles for the LG TVs. We've got Xbox support in Olufsen and rest of…

Quite the introduction. Thank you, Brett. I really appreciate it. Thank you Mary and I appreciate everyone's time this morning and the ability to share some of the good news as we head into the end of this year.So, on next slide, as you know we at CES had major announcements around LG and their integration of the WiSA Ready concept. It's all of their 2019 mid and high end TVs, NanoCell TVs which we're renaming of the Super UHD and the OLEDs. Their integration of the WiSA Ready has been phenomenally received. So, WiSA Ready as you probably know is the ability of the TV to easily integrate into a WiSA system through a USB transmitter.This slide shows the application of the USB transmitter on the back of a TV, step one. Once that happens, the TV becomes the user interface for the system. So, LG has integrated the WiSA user interface into their systems, so that once you plug the transmitter in, you can use the LG remote and you see all of the speakers in the system, it takes about two to three seconds to find all the speakers that you've connected in your room and it wirelessly connects and shows you all the speakers and lets you take all the control and operations from there through the TV, which is an absolutely beautiful install for -- from their guys -- by their engineers. They've implemented into the UI flawlessly.So, this is now where we can show our TV partners that for a long time now have been wanting to know what exactly is going to transmit to us. We really don't want to build a transmitter well, the TV is now -- that transmitter for them and it's a huge step forward.LG has also implemented the…

All right. So Tony is going to stay on the line. There's a lot of interesting content that he's just gone through. So for those that want to ask questions, I got a couple more slides we're going to run through quickly and then we'll open it up for questions, which will include any things that you have for Tony as he is the figurehead -- the leader of the WiSA organization.Last week, maybe 10 days ago, we did announce that we were upping, our market opportunity and the expectations of WiSA Ready TV going into 2020. As I mentioned a year ago, we thought we'd have about 3 million in 2019. That is substantially higher. That'll be somewhere between seven and 10 million this year, but next year we expect to be over 30 million. So what does that do for us, right?So -- I'm sorry I said 30 million, 20 million. Right? So, 20 million TV takes everything that Tony just talked about around LG. And then expands it to multiple brands, expands it worldwide. Expands us to speaker -- speaker-less TVs, right, and clearly speechless TVs helps expands the wireless market around those TVs.We have seven brands. I can tell you, there's a lot of design work going on. We will not have a definitive answer of who is going to launch versus in 2020 versus 2021, but we are on track and expect to get four to five TV guys that CES supporting WiSa. And that will exceed more than 20 million units. And I want 20 million units mean for us.Generally, we look at TV providing a 25% attach rates external audio. Which means, if there's 20 million TVs out there, 5 million TVs are going to get. 5 million audio systems are going to…

Thank you. [Operator Instructions] And our first question today will come from Daniel Carlson with Tailwinds Research.

Hey Brett, couple of questions. The first off, you didn't talk much about revenue in the press release or anything. So, just wondering if you can talk about what revenues you're comfortable. We'll look like in the second half of this year and sort of what goes into those revenues?

So we have been calling these calls updates since we're not pre-revenue, but until we start getting replenishment orders that's when we expect revenue to jump. So we would -- our revenue this quarter we’ll report out today as in the 350,000 range. Maybe 20,000 lower than last year, which is insignificant in terms of what we're doing.But as I mentioned earlier in the call, Q4 is when we will not only have new products launching. All these products that Tony went through today should start issuing replenishment orders and building our revenue curve in Q4 forward.So Q3, Q2, Q1 all single product shipments to new production starts. With the exception of Bang & Olufsen and the first Harman project, which our replenishment orders, everything else has been one time shipments until stocks hit the field.Second question?

Yes. I think this maybe more a question for Tony, but just with regards to Best Buy and if you can quantify, what the opportunity is there in a sense of -- I have no idea how many how many high-end TV they sell? What internal attach rates they get when they sell these TVs. And just how many surround sound systems they sell a year. Can you speak about a little more detail would be great?

Yeah. The exact numbers on surround sound systems, it's something I don't have. As, you know, they’re one of the key retailers in the United States for that type of equipment and Magnolia Home Theatre. The stores that have the Magnolia Home Theatres really focus on the mid to high end products and that's where our initial launch will be. That's where you will typically see the more of the OLED TVs, the higher end products things like that and that's where the product reference wireless system will be. Brett, I think we have some attach rate numbers on the systems, although I don't have them in front of me.

Yeah. So as I mentioned earlier Dan, right. Our attach rate is set. So we've gotten feedback on attach rates from Samsung, Vizio, Xbox. And those numbers consistently run between 25% and 35%. So we use 25% for modelling.To Tony's point, my high five really is the leader in the premium audio market and the premium video market of the industry. So, if there's any one place you want to launch and set the tone for the industry is there. And so we're quite pleased with that because that does send the message to everybody else.

One thing, I'll add to that is two of the drivers for the attachment of external audio is are content availability and the desire for a better sound quality. And so, I guess it's third on simplicity. So what we really do is take those three things and roll them up and answer all the questions because something like a sound bar and you see the growth of that category because it's very simple, not necessarily because it sounds great on TV, but it's a very simple application which is what we bring to the table. We eliminate all the complexities of the traditional system bring the simplicity of the sound bar, but it's a much better audio experience.And then on the content side, we're really working to tell the story of there's so much streaming over-the-top content now that's in a multichannel format, you really serve yourself well by exploring an opportunity to have an immersive experience which is what we make so simple and guys like Best Buy and assisted Salesforce like a lot of people like Klipsch and LG are reaching out to initially get that story and want to tell it.

I think I got to say my personal experience I bought with the unclaimed systems and the simplicity is just amazing. And I think that's going to be the big driving point. That's why I'm so excited here.

But last question for you, Brett, you've talked in the past a little bit about potential strategic investors and I was just wondering if you can talk more about that and also would it makes sense for one of these OEMs to maybe just look at acquiring this technology, just sort of have a lock in the market place on it. It seems like that would be a great differentiator for an LG versus a Samsung or something like that.

So let me take the last part of that first. It might make sense for them to acquire us, but it doesn't make sense for us because that would sub-optimize the value off of our technology to a broad industry and optimize and via acquisition to optimize and say that particular brands TV or speakers right. We think there's better targets that are in the audio and Wi-Fi and IP licensing space. Should that -- should we -- should those conversations come up. But we're not pursuing those at current time.We're focused on establishing the WiSA brand as the dominant logo for consumers on wireless multi-channel, so that people understand why so like to do HDMI and Bluetooth for its role. We're focused on getting the IP out which extends us from the mid and premium audio video space to the whole broad market. So, yeah it could make sense for somebody like them to acquire us, but that's not our pursuit, number one. What was the other question?

Just if you've had any conversations with strategic investor?

Strategic, we are active in those conversations, but that's all I can say.

Okay. Well thanks guys. It's been a long road to here, but it looks like it's exciting times, so I'm looking forward to seeing the roll out and how you guys do?

Thanks.

Thank you.

[Operator Instructions] Our next question will come from Ted Feldman, Private Investor.

Yes. I have a quick question about multi room audio. Recently, Sonos won their lawsuit against D&M Holdings and now they're going after Lenbrook, who is the maker of the Bluesound product. Your website used to mention multi-room audio is one of the capabilities of your technology, but now your website doesn't mention it at all. It only mentioned single room, nine meters by nine meters.So that's my first question, which is why aren't you mentioning multi-room anymore. Is it some type of possible limitation of your technology? Or is it related to all the lawsuits that Sonos has been filing against other companies? Why is there no mention of that now and is that something you plan to scale into.

Okay. So I'll take that. And just for the general people on the call. Tony was VP of Product Planning, so he knows this well, but we took that off the website, but it should have been a while ago, primarily because that was not ever our focus. It was a market that we were testing as an extension, because when we say a 10 by 10 meter room, I mean, the technology actually does substantially better.But to us, we did not see that market as appropriate for, A, our technology and, B, we don't see any reason to compete against what Google or Amazon or Apple can do in terms of using Wi-Fi to stream audio around the house. Our technology is optimized for low latency and tight speaker synchronization of lots of speakers, whether it's two speakers or eight speakers. So when that was on our website, we were experimenting with do we want to push it into that space. Well, we've moved away from that probably two years ago, maybe three years ago.

So, I can just elaborate real quickly. Brett, you did mention my history in product development. We look at it as kind of a three-part category with respect to wireless audio. One is, very near-field stereo only personal audio experiences.One is a whole house, there's still two channel stereo audio experience and one is a home theater experience, which is very different with multiple channels, tight synchronization, low latency around a video screen which changes the entire paradigm of what you're trying to do. And that's where we excel and that's where we really don't have competition. So it's really difficult to do this. The other thing is, not that they're not difficult; they're just a very different beast.

Our next question will come from Ted Ketterer with T.K. Associates.

Hi, guys. Thanks for taking my call. In a different segment you had mentioned Xbox a lot in the gaming. Can you give us any idea where you are on that? Will Xbox do any marketing and promotion?

Yeah. So I'll answer that. So the Xbox was modified with the WiSA Ready. It needs the AXIOM dongle to de-encrypt the output that comes through the USB port. The AXIOM dongle went to production. This month and starts and it gets shipped out of Asia on August 24th. So now, there will be dongles to -- available to plug in the Xbox and to buy. So I think this is -- has not been from a lack of support from Xbox. It's been a action decision on when they launch that dongle, when they felt they had enough market to bring it to market, which with the LG release of their firmware in June and going to this launch and we just spent quite a bit of time talking to enable them to go to production. So we would anticipate that action starts talking about that and products like that this fall.

How would that market opportunity compared to the opportunity that you presented on -- with the TVs?

So to some extent, they overlap, right. So every Xbox is attached to a TV somewhere. So when we talk about addressable market around TVs, we don't add in set-top boxes, game consoles etc because a set-top box is going to go into a TV, a game console is going to go into a TV.Now there are different buyers of the audio to go onto that TV. So probably expand -- it would expand, whether we get a fifth of the audio systems around those TVs or half those audio systems. There's a lot of things that change that. And the more solutions that plug into it whether it comes from a set-top box and over the top gaming box or something that plugs into an Xbox or a PS4 those would increase our share of the external audio around the TV.

So you don't think that's a standalone market because one of the things that amazed me was a number of people reported watching whatever the gaming finals versus the Super Bowl?

Oh, it's huge.

Normal?

You asked me about X – yeah, but you asked me about Xbox, right. So, Xbox…

No, I'm just talking about gaming. Okay.

Yes. So now gaming, if you're talking about gaming that's -- that is a standalone market. And we announced earlier this year around THX which is owned by Razer, as that's part of our initiative. So beyond the Xbox, absolutely, we think the Esports market, the gaming, the fact that Super Bowl attracts 98 million people, but League of Legends tournament attracted 198 million viewers is phenomenal. In fact, that there's a lot of video action with audio tied to it with big opportunity. Yeah, we're very focused on it and that is beyond the TV market 100%.

Will there be any rollouts for this year?

Yes.

When?

This year.

Guys, come on. You are a dollar -- you are not like this

No. Look this year there will be -- we would anticipate it to be launched in November.

Okay.

Okay.

Now that I have you, do you have any idea how much marketing dollars LG is going to put into risk rollout?

Or already have. I think it's. It's enormous in terms of -- if you went to CES, we were top five features, right. So they have marketing dollars to promote their TVs and we're one of those key features. So I don't know how you slice out just what they're doing for us, but their entire marketing budget is gone for those TV is it going to talk about their key features. I think it's pretty clear from the reviews. And the press they've done that. We're one of those.

Another question, would it be reasonable to expect that Sony is looking at this or are they taking a different there?

It's reasonable to expect that, there is, a lot of people looking at it and a lot of ways. So, the answer would be. Yes, to any number of brands that we haven't announced, but could be either designing, or prototyping, or reviewing.

Is there any alternative technology?

Well that's what I'm just going to say, I mean the core technology is dominant, right but from a performance perspective and a market position. So, we have lots of conversations with people who are not on that brand sheet.Lots of prototyping support, people that's not on the brand sheet. And people are clearly we think one of the biggest impacts of LG launch and as you saw with the TV members, is it will push, other people to reassess, or increase the value of the WiSA logo versus just a technology solution.

Okay. And then last, when do you expect the IP to be in the market?

Next year.

Okay.

We've said that, we expect to get our alpha customer this year.

Okay.

…Which would, lead to product, next year.

And all of these are royalty income?

So, on the host device, it would be a royalty income. On the smart speaker, so if you added the IP to say Google pass or Alexa type smart speaker, it would be royalty or a sound bar, right.

Okay.

On a standalone discrete speakers that would be module revenue, but at a lower ASPs than where we're at today because we're using custom Wi-Fi chip, right.

Okay.

A standard Wi-Fi Chips versus the custom Wi-Fi chip.

Okay. So the margins would be quite attractive.

Yeah. I mean, margins on IP licensing, I don't know the account still find 5% or 10% of cogs on somehow. But yeah, I mean, they're not building and shipping it. You've got engineering and engineering around it.

Okay. That's it. That would be an interesting six months.

It is. Next question?

That does conclude our question and answer session today. And at this time, I'd like to turn it back over to Brett Moyer for any closing remarks.

Well. I'd like to paraphrase the last comment from the last questioner. It is going to be an interesting. I think it's actually exciting next six months. So there's a lot of product. There's a lot of promotion.There's a lot of industry support, around WiSA. And as from here to January is, going to be just an exciting time for the team and the company. And team covers the employees, the customers, the investors, everybody.So, with that, like to conclude the call. Thank you for joining us this morning.

Once again, this does conclude our conference for today. Thank you for your participation.