Thank you. Good afternoon, and welcome everyone to MicroVision's second quarter 2020 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 exploration of strategic alternatives, sale of our product verticals or technology; sale or merger of the company; expressions of the interest regarding strategic alternatives; potential value of the company or product vertical; potential competitive advantages; ability to profitably scale modules to large volumes; capacity to generate free cash flow; future demand for consumer electronic, products; future monetization opportunities; expected capabilities of augmented reality and automotive LIDAR products and ability to develop and launch such products; potentially disruptive capabilities of our products; potential markets for our 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 royalties; progress under and benefits of existing contracts and license agreements 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 funds; product development applications and benefits; availability and supply of products and key components; commercialization of our technology; market opportunities and future demand; effect of approvals of proposals contained in our preliminary Proxy Statement dated August 5, 2020 as well as statements containing words like; opportunity, potential, possibly, intend, believe, focus, paths, expects, plans, will, could, 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 SEC filings, including our Annual Report on Form 10-K filed on March 12, 2020, Form 10-Q filed on May 8, 2020, Preliminary Proxy Statement documents filed August 5, 2020 and various 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 Sumit Sharma. Sumit?

Thank you, Lindsey. Good afternoon everyone. For the past two decades, MicroVision has been driven by one simple principle continuously innovate and advance MEMS based laser beam scanning and associated detection technology to solve some tough problems and enable high performance display and LiDAR products We believe we have created disruptive technology in multiple product verticals and a strong intellectual property portfolio that we believe provides a competitive advantage. We also established key strategic partnerships and believe have demonstrated to potential customers the capability to profitably scale our modules to large volumes. As we focus on pursuing a strategic transaction, a potential interested partner could reduce margin dollars they would otherwise be paying if they were our customer or see potential revenue and margin from module sales. Our innovation, execution, and intellectual property are the result of our driving principle and represents the value of the company to our shareholders and all parties that may be interested in pursuing a strategic opportunity. Facing uncertainty in global demand and capital markets in Q1 2020, we committed ourselves to finding strategic alternatives, including a potential sale or merger of the Company. With the help of 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 is MicroVision. Therefore, we will not provide specific comments on these discussions until an appropriate agreement is completed. I note that MergerMarket recently published an article about our strategic process. The article referred to strong interest from bidders. I would like to clarify that we are engaged in discussions with certain potentially interested parties who are at various stages of diligence. We do not plan to make public statements…

Thank you, Sumit. Good afternoon, everyone. For the second quarter, revenue was $587,000 with $572,000 of royalty revenue and the balance from contract revenue. All of the second quarter's royalty revenue was attributable to our April 2017 customer, which assume production responsibility of our product on March 1st. Beginning in the second quarter, the royalty earned 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 to transfer manufacturing responsibility to our customer provides MicroVision with a lower cost structure and lower working capital requirements. And importantly, it enables MicroVision to enjoy the upside should the customer’s 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 with about $1.2 million in product revenue and the balance in 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 $588,000. In comparison, gross profit was $70,000 in the prior quarter. The royalties that are due to MicroVision 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 prepayment stood at $8.7 million. There is no potential scenario we see where MicroVision would be required to repay any portion of the $8.7 million prepayment. This $8.7 million is on the balance sheet as a contract liability. ASC 606, the applicable revenue standard requires that companies estimate and disclose the timing of when those liabilities…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] 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. It's an interesting situation. Obviously, the time is not on your side with the cash balance and the burn rate and everything else. So, there is always that thought process that people can wait you out a little bit. But then there's an issue of like how do you balance that versus how much capital you potentially would raise leaving aside the strategic investment thing option for a minute? And you if raise say $5 million or $10 million you're only kicking the can down the road a little further and perhaps people could continue to wait you out. Can you just give a sense of how you balance what the capital needs could be with regards to the negotiations?

Right. I think Glenn the way to think about it is there's a pretty finite level of cash to get us through the end of this year. With the shares available, we have the ability to raise more and so the certainty of when we would start to run out of cash goes away. That becomes uncertain right because you can continue to raise more if the $6.3 million is available say in the Lincoln Park facility becomes available and so you have the ability to continue to go through the sale process the process that we're in and the certainty that there is a finite point in time where either the cash runs out goes away and that's the thing we're trying to take away.

All right. That's fair. All right. And then just kind of shifting a little bit, I realize you guys can't talk about the sale process much, but just watching the kind of the big handful of tech companies that got drawn in front -- pulled in front of Congress last week for questioning their practices with regards to competitive nature and things. One of the questions that kept coming up was how some of these guys are using the tactics such as kicking tires on investments and then backing away the last minute and wind up doing some sort of work around and things like that. Now it makes me think of you guys in a couple ways. Number one, it almost sounds somewhat similar to the process that you guys went through when we thought for a while there that you guys were getting very close on landing a large contract perhaps for a home speaker type device and then it also makes me think about this process that you're going through now and just how you protect the investments that you've made over the years and the technology that you've developed as you're negotiating with these kind of giants which is not an easy task for sure. So maybe some color on that perhaps.

So I think if you take a broader look at it right so everything you say I think everybody on the call is probably not in your head. We all heard it right? But one thing about MicroVision that I'm very proud of is the grid that's been there right? So we know all of us that are intact. We know this is a rule right? This may happen. There is some change happens right? This is what we have to do. But ultimately the IP that has been created that has to have value. It's not just because you're in tech that you're obligated to be successful right? So, I think the valuation point for me is the things that we're talking about the verticals those also have a time line 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 if you think about what we've done this year once we focus on strategic alternatives right we've been actually focused on that right? Yes? People will have different rules of how they want to behave right? But I think we have for many years survived this and we don't drive several times, right? It didn't bake true unfortunately right? But it definitely feels like inflection point now. But the IP by itself is mature. The markets pick any one of them right I think Kavaler expensively bought them right? They are present. So even those companies right the choice is always about the money right? Is it better to actually collaborate or acquire versus a significantly more risky path of potentially doing it on their own, right? So that's at all been factors. So it just -- all of the things like -- those are the rules. We're 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 IP, we have designs we have people. We've done a lot right? We just have to have grid right? We start to get through it. That's the only way right? That's the best answer I can give you.

Yes. So just the last one. Maybe you can comment on the talent inside the firm. Have you seen any -- it's obviously public that you're going through this process. So, do you see any -- are people looking elsewhere or that kind of thing because a big part of the value is probably the talent of the people there if you do go through it the sale process as well?

Yes. I think, we've been very sensitive to that and we've done everything possible all the tools that have been given to us to make sure that all the staff is comfortable and feel secure. At this moment happy to share that that we have all the key personnel required to complete a potential transaction.

Great. Okay. Thanks. That’s it for me. Good luck in the process.

Thank you.

And our next audio question comes from Kevin Dede with HCW. Please go ahead.

Good afternoon gentlemen, Steve, Sumit, thank you so much for taking my question. I really appreciate it. Steve, I think you did a great job, highlighting the nuances of the April 17 contract, right especially with $50,000 gross profit expanding to what $580 million this year -- or this quarter sequentially. But it's not clear what the unit volume is behind there and it's not really clear 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 think it would be helpful.

Yes. We have not disclosed any per unit information and we did -- we have said and we said this back in Q1 when we transferred the production responsibility to the customer that one of the things that drove us to that was the low volumes. So we did the agreement that we did so that -- and one of the things we talked about even today was in the event that the volume of that product takes off, we will benefit from that. But the volumes were more low for us and difficult for us to maintain the 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 if -- how to read in between the sequential change between March and June and your expectation to realize all of $1.8 million for the entire year?

We have some indication of what the usage will be. I think we said, $1.1 million is what we expect to be recognized as royalty revenue over the last half of the year. So that's the indication we have and the knowledge we have from interacting with the customer. Of course that's an estimate and that's what's required in the footnote is for us to estimate that and that's why I disclosed it because I know people are interested in what we see there. So given where we are the first half royalty revenue plus the $1.1 million to come, in the second half our estimate would be about $1.8 million for the whole year.

Okay. Fair enough. Appreciate it. Can you explain how that liability might either benefit or interfere with potential strategic deal?

It's really in a way it's kind of a non-cash liability. 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 an impediment to a transaction because there's no liability that somebody is taking over that's going to require them as potentially to pay out any cash and a company that would acquire us would essentially be able to record that revenue as it comes in over the next period until that entire prepayment balances exhaust it. And then future royalties after that would be cash royalties cash paid for those. So I don't see it as really frankly a big issue.

Okay. Fair enough. Sumit, thank you for the emphasis on AR and auto LIDAR. But I know that you guys have done a great job on -- and my understanding was the module that was used in tracking in a small field was getting closer to commercial market acceptance. And the demo that you showed at CES, I think was great evidence of that and 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 deal?

Yes. I think you're talking about our consumer LIDAR that we presented and certainly it was very, very impressive. But as you know like early on this year this pivot to trying to sell the company. So it makes it very difficult to enter any kind of development right? Interested parties are concerned about where the development would be. We haven't had any specific increase about that. But if you take a step back there's -- what's really driving a lot of things is not a validation of one versus the other. It's really the global demand for consumer electronic is unknown right? Any kind of data that's coming around you can see across different segments of the consumer market right? Is the body of work valid? Absolutely. Anybody of interest that we have had a chance to describe to? Absolutely. And that's what it was in my prepared remarks, right? It's our job to make sure they get the full value that nothing -- all this stuff has value. This is created right? So regardless of what the timeline would be for a product right, those are things that are controllable. These things are value right? So it's a great demonstrator, right? I still get complements for it by the way. I get questions about it because people look to be impressed by that. So yes it's definitely all the things that we've been created right? It's all in the mix right? I think if you think about our AR, how far back our AR goes it's such a long history that -- well before me even like -- so it's just be proud of and just lost to go through. And AR for gets a lot of attention right? But it's got great foundational pieces right, but the consumer LiDAR and the tracking display right, all the consumer products have in place in a transaction like.

Right. So with regard to AR, Sumit could you talk to that 40-degree field of view? That's not going to be enough to substantiate a VR environment. I'm not exactly clear how it plays into an AR environment.

Right. So I got a little bit of history as you know in AR probably more than a decade, so I'm going to speak from that. So before I answer your VR question, let me just talk about little AR, right? Think about yourself if you're on a product, what would you need? If you don't work glasses, I'll tell you what you need. It has to be light. That's number one thing, which means as we low power, small battery, big field of view. So you feel that it's not just something tiny, right? It's something valuable. And -- but not sure if I can be that, right? So if anybody could ever produce their product right that's how you get to the mass market consumer product, right? Shipping any kind of volume that is not going to scale to millions it's not -- think about cellphones, right? They shipped quite a lot of cellphones in single model. To get to that kind of mass market, right, there's many, many steps to go. So for AR, if 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. It's MicroVision's core development for decades. We've already done that right and we're demonstrating it, right? And so that video was specifically that sometimes folks may not have forgotten about our AR capability, but it's always right there. It's not forgotten, right? So that was the real reason. So from AR standpoint, right, those are things that are valuable, right? People have been trying to find a way to get AR into your life, so you have these micro interactions rather than big LTDs and immersive kind of environment, right? You get what you want. If you want to have…

Yes, yes. No, no, I understand. And I follow and I appreciate the color. I just -- I guess, I was a little taken aback, because my thinking was that you've been able to demonstrate a wider field of view, but it's really inconsequential. It's really -- your point, I think is a stronger one that you've got just broad capability in multiple technologies.

Right. So that…

On that note, could you…

Yes. I'm sorry, go ahead.

Yes. I'm sorry, go ahead.

I'm going to say like…

I was just hoping you could…

All right. You go ahead please.

Okay. Yes. No I was hoping you could talk a little bit about -- I mean, I know you mentioned this in your prepared remarks, but you talked specifically to display technology versus the interactive display technology, which I think was further closer to commercialization. And I'm just -- I know Glenn touched on it too, but I was just hoping you could kind of go back and maybe review where those might differ, I guess, in terms of their final development and in terms of their interest to potential suitors.

Yes. So I think if you think about the micro display, the AR module for example, right, that's where I care try. It's a display, right? It's a microdisplay, but it's a display technology, right? In some sense, it's actually harder than a display like a bigger display. Our interactive display, of course, by adding a 0.3 meter LiDAR to it, right, being able to create this experience of touch, especially nowadays, right, you don't need a piece of glass to wipe down, right? It would be any surface that could be engaged, right? We would have produced that kind of effect -- that kind of experience, right? That was the intent of it, right? So I think, you're right. If you think about the reason we make the distinction is, because when you add the LiDAR too, there's a different kind experience different value to it, right? If you were to add some of the people tracking or featured to the micro display, then again, it would also be still the micro display for AR, except now you can do people tracking, right? Could MicroVision do that? Yes. Have we been demonstrated anything? No. Right? But, so I think like it's -- they're all displays. Whenever you have a red green and blue laser right, obviously, it's a display. When you add the IR you can add interaction and other features, right? We chose to call it attractive display, because there's better description of it, because it's not just display, because it's the next level of interaction, right? For example, one is just your TV, the other one is your iPad, perhaps, right? So, yes. But they are subset, right? I think the interactive display and micro display, right, are display products, right, they are subsets of the big core development that's been done.

Okay. Now, my understanding was from the difference in the consumer LIDAR and the auto LiDAR 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 if you've moved the auto development forward in light of its interest commercially? Or how you might compare those two now and their relative value?

I think, the relative value to the company, right? I think it's what product will launch market what's the fastest path to revenue, when we're operating, right? So I'm going to keep the answer in that context, right? So when it comes to consumer LIDAR, is it the ultimate of everything we could ever build? I'm pretty sure the ideas that we have that we can go on and even develop further. But it got to a good platform from where we could find out what the market interest is, how big it would be? Some of the ideas of home security, right? You want to have something to explore with. You have a development version of it, right? But you have something much more stable mature that people can collaborate with us, right? That's what we did to explore version of it. The automotive LiDAR part of it, right, so I think, like, this is one of the things that I want to make sure that we understand. The automotive LiDAR is a temporary. I think, if you have a Google alert on all the automotive like ourselves, you see the activity on the consolidation side and the investment side. You can see there's something happening. There's a big thing. But it's not just something we did as a me-too product. It is a pretty decent business that could be there, because there's two different things to consider. First is your, what we call, the active safety ADAS. These are required by regulation. This is like having airbag in your car. It will be mandated. Systems like this, not just LiDAR, whatever system we do that has to get those cars safer. That's a requirement. And number two, of course, is these amazing companies that we all read about…

Okay. Last question for you Sumit on the -- you mentioned 100 or so companies that you've interacted with and I'm wondering sort of what does that number really represent in 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 of sifting through the ones that you've been addressing so far?

We will -- from the 100 companies that we work through, right I think we -- a smaller -- much smaller subset is where we are where we focused on right now. I would say the -- from top tier OEMs to the top technology companies, right and license companies, they're represented well. So I'm not really sure that we would say that you had to turn other stones that you were at fifth gear. That's why use the word top care. I think broadly that's all I want to say on the subject.

Yes, fair enough. No, I appreciate that. I just wasn't sure, if you were still investigating other I guess potential opportunities or just in the narrowing down phase. I appreciate your perspectives. And again thank you much for entertaining the questions.

Thank you.

And ladies and gentlemen this concludes the audio question-and-answer session. I'd like to turn it over to the company for the webcast questions. Please proceed.

Okay. We received several hundred questions in advance of the call today. Many of them were 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 questions, we have received and hope you understand that we may not be able to respond to some questions on some specific topics. So I'll start with some of the questions here. Sumit, would the company sell a particular vertical such as augmented reality? And if so, would that limit your ability to work on other verticals such as automotive LIDAR?

So I think as we stated consistently right that we're selling the company and looking at all tragic opportunities, but selling the company is the main part of it. When you think about our core technology and our know-how and our IP, obviously that's 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 if any one of the four verticals somebody wanted to acquire and we could essentially move on, it stands says by itself. It does not deplete our capability to do any other work.

Second question. You mentioned there is a focused 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 that we got started with 100 companies. It is a much smaller group and they are all in various stages of diligence. And beyond that, we're not going to provide any more color.

Next question is, what is the likelihood that you will be able to complete a deal before the end of the year? And what happens if you do not close a transaction?

So I think like it's -- we can't really handicap the probability of a specific time frame. If we get to that scenario, we're going to continue developing our technology like we're today and also color looking for strategic alternatives as they continue to search, but we are focused on selling the company. I just want to be crystal clear about that.

There are several questions concerning the valuation of the company. What do you see as the valuation of the company and 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 opinions 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 in all the product verticals and in our technology. What I can say is that, in preparing for discussions about valuations we have prepared analyses of comparable transactions and M&A activity comparisons, discounted cash flow analyses, valuation of intellectual property and other analyses that we've done to be prepared for those kinds of discussions. Next question is please elaborate on why you think the company's technology and intellectual property is best-in-class?

We saw some pretty difficult problems for products in augmented reality, automotive LIDAR consumer devices. But if you think about the fundamental physical things that we solve, the issues that exist like the physics of it, it goes with the Silicon for us, right? So it really takes some really complicated problem instead of having a much more sophisticated solution, we really are able to bring it down. So the evidence of why you considered best-in-class is, if you just look at the products that we make and the competitive product that's next to that the physical version of it. That's the real way to say without getting to the lot of the technical details of it, right? For example, like I mentioned just recently right, in AR micro-display, just the common sense is as a user you will say well, it's got to be light, I don't want to wear helmet. I want to wear something that looks like normal glasses. It has to be. So then from there comes the lightweight provide bigger fields of view all those attributes come in. And our MicroVision technologies we're using super complicated optical systems, right? It just as the most simplest version representation of it, right? So that's why you actually arrived. You're in the -- ahead of the class, because you solve those problems and all you have is silicon in front of you. So, this capability to having no optics, yet correct. The distortion mostly in electronics is pretty unbelievably impressive, right? And I can tell you as somebody has been in there for a long time, it's very difficult. It's a holy grail. And so -- I mean that's where MicroVision technology is very impressive. I believe that for product to be successful we have to enable those kinds of things. If you think about automotive LIDAR, we saw capable to offer like full sunlight. These are the words are using are simple, but think about these are very difficult problems, right? Nobody has been able to solve them full sunlight in new to other LIDARs or also like a road signal, right? I mean, these are the kind of things that how do you know that you are arrived, you know because your product is already doing that, but people are not even talking about that. So that's why we believe that, yes, we represent something that's best-in-class. And I think the complement I shared earlier on in my prepared remarks right that's evidence of it that even parties are interested are impressed they complement. So, yes.

Okay. Next question. What is the fully diluted share count? And how many shares are available? So the fully diluted share count is 149.5 million shares. So there are approximately 143.5 million shares outstanding and about two million RSUs and four million options outstanding and that comes to 149.5 million. 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 a 10-K toward the bottom it'll should list what the shares outstanding are a couple of days before that particular SEC filing was made. So, you can see it there. And then if you go to the earnings per share footnote or the equity compensation footnote, you can find out a number of options and RSUs or warrants and those kinds of things are outstanding. In our case it's just options in RSUS.

Okay. Next question. Can you tell us more about the videos that were released on the MicroVision YouTube channel?

Right. Yes. So recently put these videos together MicroVision put this together by the way to demonstrate our vision of the modules for augmented reality in automotive LIDAR space. We've heard from investors that they wanted a better idea of what we are working on and I thought this would be like a very good way to communicate and provide some transparency as to what we're working on. The videos certainly help our investors and of course interested parties help visualize a potential value for this module. And as I mentioned earlier, we had early on that we had OEMs and/or LEDS was our primary path. Sometimes we never got a chance to showcase what our technology could do right? So 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 LIDAR development and when you plan to have a demo available?

I think at some point in the past, we've said that we were targeting November 2020 as a target date, but that was before some of the pandemic related and also things that have happened to us the strategic transactions happen. At this point, we believe that demonstration in Q1 2021 is more reasonable time line. Given the fact that we have to support all the doses activities and those logic priorities. But I want to kind of just put this question into just a little bit different context, right? So it's not just the demo, right? It's not just something in the past. It's like an early time that we talk about for a product. I think what we had said was it's what's called A sample capital, A sample in the automotive space for OEM as a target of it. So level of maturity is significantly higher and the reason why we are moving on it is because a lot of the work over the long history of the company right we have thought about these things for a long time. And now with the SaaS that we have when we're not supporting the doses activities, we make incremental progress on it, right? Certainly, like the targeted Q1 2021. But to be honest the global supply chain is not as predictable as normal time, right? So I think when something specific we want to talk about we'll share with that, right? But why we want to do this? If you think about it it's not just -- it was our plan to do this. But anyway, if anybody is looking at the automotive LIDAR space through us the path to an OEM the path to how you would solve autonomy that's very important. So therefore, this is relevant work actually towards the strategic transaction that we're looking into.

Okay. Next question. Several companies have announced LIDAR programs using different LIDAR technologies. How do you see the automotive LIDAR market developing?

Yes. So I think I've kind of covered this in the other question of that. Two specific areas that are driving all this activity and the safety ADAS is -- the active safety ADAS is actually the big price. It's the near future one. And the long term as I mentioned is the autonomy one. So yes there's -- I think there's questions about Mobileye is doing this and all the names get tossed around, right? Every company if you think about what problem want dissolving and where they're going with it? And you can gauge regardless of what hardware they're showing, how far are they. And the question you have to answer would you trust yourself and your families like with that cat system? That's a pretty simple question, right? So all the solutions these are incredibly smart and well-funded companies right? They're working on it. But something destructive has to happen because nobody's really solved it right? Nobody has actually been showing something that solves all the problems, all the questions that 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 it's most active, because that's a longer-term problem, before all of us give up control of our cars. It's a much harder problem. So, there's a lot of activity on it right now. But it sounds like a slow burn on the side, but it is an active market that is there, which is where the most revenue is, which is the active safety ADAS system. So, the development of this is going to go along in parallel. But as soon as somebody has a solution the ADAS market opens up, I think we know other LIDAR companies that are -- some people on the call may know, they've announced, they've signed agreements with OEMs and there's no product out there right? So, everybody is trying to break into that market while they're trying to break into the autonomy market. So, both are developing, but one is in the near future and one is in the much further future. That's the best way I can put it.

Okay. There's a question about the April 2017 customer and royalties. There's a question on even when would we start to get some of those -- recognized some royalty revenue. So, I'll just kind of rehash this, I went over in the prepared remarks, but the customer -- the April 2017 customer made 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 exhausted when it gets down to zero, the customer will start making additional cash payments for the royalties we earn. Now the payment balance right now that prepayment balance is $8.7 million. So, royalties that are heard by MicroVision now, are recognized as revenue on the income statement. This quarter Q2, we earned $572,000 in royalties. And as I said, we expect to earn around about $1.8 million for the year. All right. We'll go back -- go to the question on IP. What steps are you taking to protect the company's intellectual property?

So, similar to most other high-tech companies, we take measures such as establishing security protocols, limiting access to proprietary information, right? We also have non-disclosure with our employees that seek to protect our IP, if the employees of the company. So, we think these are prudent proper measures in the space we are in, right? So, we feel confident that we have protected ourselves with this.

And then, can you provide a display-only licensee update? I'll take this one. The display-only licensee this goes back to an agreement, I think in like May of 2018. They still have a license and the ability to engage with customers, but we're not aware of their current activity. Don't have any other update on that. And then, how many employees are at the company now? And can you give an idea of what they are working on? We have 33 people working in the company today. There's 10 in support and management, and then there's 23 in engineering. And they're really focused on supporting the diligence requests and that work and they're also working on advancing the automotive LIDAR technology. That's the last question that I have.

All right. I think in conclusion, I'd just like to close out and thank everybody. Thank our shareholders for continued support. Please take look at the proxy, and it's very important that we vote, and thank you for joining today.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect.