Good day, and welcome to the MicroVision Fourth Quarter 2019 Financial and Operating Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Lindsey Stibbard. Please go ahead.

Thank you. Good afternoon, and welcome, everyone, to MicroVision's fourth quarter and full year 2019 financial and operating results conference call. Joining me on today's call are Sumit Sharma, Chief Executive Officer; and Steve Holt, Chief Financial Officer. The information in today's conference call includes forward-looking statements, including statements regarding opportunities to license our technology; evaluation of strategic alternatives; development of perceptive automotive lidar; potential effect of COVID-19 on operations; compliance with NASDAQ listing standards; potential partnership structures; expected customer orders; progress under and benefits of existing contracts and license agreements; the negotiation of future agreements; advantages of our technology; progress with prospective customers; business execution and abilities of management and staff; projections of future operations, growth and financial results; product development applications and benefits; availability and supply of products and key components; commercialization of our technology; and potential market opportunities; as well as statements containing words like target, intend, believe, path, expect, will, could, would, opportunity, grow, potential, evident, create, evaluate 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 SEC filings, including our Annual Report on Form 10-K filed on March 6, 2019, our Form 10-Qs filed on April 26, 2019, July 19, 2019, November 6, 2019 and other SEC filings made from time to time in which we discuss 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 MicroVision's website at www.microvision.com. And now I'd like to turn the call over to our new CEO Sumit Sharma. Sumit?

Thank you, Lindsey. Good afternoon everyone. First off, I would like to take a few minutes and introduce myself as I take on the Chief Executive Officer role and assume a position on the MicroVision Board of Directors. I’ve joined MicroVision in September 2015, four and a half years ago, to lead the company’s Engineering, Operations, and R&D functions. Most recently, I served as Chief Operating Officer where I have been responsible for Business Development, Engineering and Operations. I have been fortunate enough to have the opportunity to drive our direction and execution for the last two years. I first became aware and gained appreciation of MicroVision’s technology and what it could achieve in 2006 when I served as Vice President of Engineering and Operations at MicroOptical and through my time at Google [X]. I am personally humbled, honored and excited to have the opportunity to lead the company into the future with the support and commitment of a very capable staff. We are committed and excited and, we believe, that our best products and opportunities are still ahead of us. As you know, we have been working with a North American technology OEM for a 2020 launch of our interactive display module in their product line and we expected to complete a supply agreement. We were recently informed by the OEM that for various reasons they were no longer targeting a 2020 launch of their product. These reasons were not related to our technology or capability to execute in production. They shared with us that internal considerations factored into their decision not to launch in 2020 but did not provide details of these internal discussions. This, of course, was a very disappointing and big surprise to us. While we worked with them to explore all reasonable options for a…

Thank you, Sumit. Good afternoon, everyone. For the fourth quarter, revenue was $4.6 million, with approximately $4.1 million of product revenue, $376,000 of contract revenue and the balance from license revenue. The product revenue came from two sources: first, $3.6 million came from the shipment of components to our April 2017 customer, and second, we recognized $594,000 of revenue on the projection engines we built for Ragentek. In comparison, last quarter we recognized $1.2 million of revenue, with about $1 million in product revenue and the balance in contract and royalty revenue. Revenue for 2019 was $8.9 million, $5.3 million in product revenue, $3.4 million in contract revenue and $99,000 from royalties. Fourth quarter cost of revenue was $3.8 million [Later changed by the company to $3.4 million], resulting in a gross profit of $1.2 million. $594,000 in gross profit was from the revenue on the Ragentek units, which had zero cost of sales. The components we shipped to our April 2017, customer had a gross profit of $213,000 or 6% of revenue, and we had $372,000 in gross profit on contracts and royalties. In comparison, gross profit was negative $882,000 in Q3. Gross profit for 2019 was $332,000, $1.6 million from contract revenue, $99,000 from royalties, and negative $1.3 million from product revenue. Fourth quarter operating expenses were $4.5 million. We are not paying management or executive bonuses for 2019 though estimated bonuses were accrued in the first three quarters of the year. So, the $4.5 million of OpEx in Q4 is $770,000 lower as a result of those accruals being reversed in Q4. For reference, operating expenses were $5.3 million in the third quarter. For the full-year, operating expenses were $26.8 million. For the fourth quarter, our net loss was $3.3 million or $0.03 per share. This compares…

Thank you, Steve. I would like to re-iterate our commitment and sense of urgency to secure partnerships to license and monetize our product verticals and other strategic alternatives that maximize shareholder value. We are thankful to our employees and shareholders for their continued support and opportunity to create a stronger company for the future. Thank you we will now open the call for the questions.

[Operator Instructions] The first question comes from Glenn Mattson from Ladenburg Thalmann. Please go ahead.

Hi, thanks for taking my question. So, as it relates to monetizing IP, what’s your general, Sumit, what’s your general experience for how long it should take, it surprising that you feel like you could get something done reasonably quickly and that it doesn’t feel like there’s been much done to date because, perhaps, many people are thinking about this being kind of an option that wouldn’t hopefully be needed. But anyway, we’re here now so, curious how long do you think it take, and then what – just what part of the patent portfolio is due to is like core and something that you wouldn’t want to part with almost under any circumstances and which part it’s a more likely to be monetize them in the medium term?

I think, first of all, if you think about it that being a public company, all our partners always know we’re up for any kind of opportunity they want to present. They’re always evaluating us, right. And we are engaged with some of the top OEMs in the world that value our technology, right. Sometimes because of NDAs we’re not able to talk about it. But in general, I think, they are aware of us. So, I clearly say that I believe very strongly that in first half 2020, we should be able to get some level of agreement with one or more on the product verticals. So, I think your question had two parts. The second part was what part of the IP portfolio is patent portfolio? When you think about IP, you think about not just the patent, but also our designs, our products, our know-how, our algorithms. There’s a whole body of work that goes with it. So if you think about our interactive display module, for example, right, a product that some of you visited – some folks have visited at CES and other haven’t have had an opportunity to look at the devices, these are real things with real production lines and ready to go. Think about the licensing, anything like that design to be licensed away, right? So, people are engaged, as I mentioned. They’re actively looking at it, and we’re working through them. Their questions or due diligence and looking forward to finding a common ground where we can agree.

Okay. And as you think about funding operations going forward, do you bake into your plans some level of expectations that the customer, the large North American OEMs who decided not to go into production – do you factor in that they could come back in 2021 and you need to be prepared for that? Or is that I guess how much of that kind of – how fast as you're lying in?

That’s a good question, right? So that subtlety, the 2020 launch is what is not happening. We are in good standing. All other options for 2021 obviously would be available, but for us to continue funding out through 2020 we have to look at alternative options.

Okay. And perhaps can you give us an idea of how much is left on the Lincoln Park in total? You mentioned that you thought about two different facilities.

Yes. The line that we set up in December was a $16 million line. We took $1 million in the fourth quarter, that’d be $15 million.

And is there anything that could trigger the, I mean, I think I've read through the document pretty clearly, but is there anything that I may have missed that could create their ability to get out of that agreement at all or anything?

I can't give you a blanket statement, but there's nothing that I'm aware of at this time.

Okay. All right. I think that's it for me. Thanks guys.

[Operator Instructions]

I’m just being knowledge by somebody here in the room that said, I may have misspoke, when I said the cost of revenue number, I may have said $3.8 million and the number is $3.4 million, so just current that.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Sumit Sharma for any closing remarks.

Thank you, operator. In closing, I want to thank our employees, business partners and our investors for their continued support. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.