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MicroVision Annual Shareholder Meeting May 22, 2019 notes

Prepare for a lot of copy and paste because much was similar to last year's ASM.

I am human. Mistakes will be made. The SEC and Investor Relations are the bastions of truth. So, feel free to correct me, ask them, or better yet, do all of that and then ask the other attendees what they think. Multiple points of view, a diversity of opinion. Good stuff. (Yada. Yada. I've done this often enough that the CAVEAT has become mostly a copy & paste, partly because I am lazy, mostly because I hope it's good enough.)

SYNOPSIS (The ultra-short edition)
It’s not a champagne and lobster kind of dinner. More like tea, followed by a pork chop and some frozen veggies thrown together to thaw and cook while I type.
Things look great in about six to nine months.
(Newbies may take that as a great encouragement. Long term shareholders can hear an echo that has rebounded for over eighteen. er nineteen years.)

The meeting was held in the same Courtyard Marriott as the last few years. This year I tried mass transit. Ha! That adventure and fiasco will be documented elsewhere. At least it only cost as much as a couple dozen MVIS shares instead of several dozen if I drove.

As usual, one room was devoted to demos, which for some people is the main attraction: display with auto keystone as well as improved specs, LiDAR, interactive touch. I only had seven minutes to sign in sweep and bump my way through the demos, and then dash over to my favorite seat (which Bryan was either trying to save for me, or steel from me just as I arrived. Thanks, Bryan.) I'm sorry I didn't get more time with the demos, not because of the demos, but because the fellow shareholders' opinions and insights are frequently more valuable than the COB and CEO scripts. Impressive improvements in sensitivity, brightness, features; but all prototypes, no customer logos. (Hey, at least Celluon showed up one year.) By the way, seat selection is intentional. When I attend scripted meetings I prefer to sit in the back. The words may be scripted but the reactions aren't. Body language is valuable.

The quick headcount showed yet another reduction from 2017’s ~55 people to 2018’s ~45 people to 2019's ~42. The suit count was about a dozen, though some may have been behind me. Considering that many of the company officials are required to attend, the reduction was probably in shareholders. Even more of my friends have given up on the stock and the company. No newbies from what I could see.

As usual, they had MicroVision pens. There's your dividend!

The official part of the meeting was broken into two parts. I’ll combine them here for conciseness.
All of the directors received at least 69% of the vote. Not resounding.
The incentive plan passed with 63% of the vote (as compared to last year's 79% of the vote.)
Moss Adams was confirmed as the auditor with 94% of the vote. (The auditors were more popular than anything else, again.)
The compensation recommendation passed with over 63% of the vote (as compared to last year's 80% of the vote.)

Prior to the CEO presentation, the COB made sure we knew they were "ready for volume production in 2H19."
This year's main message is "Bringing IO to AI". Artificial Intelligence is greatly enabled by improving Input (gesture controls) and Output (displays instead of just listening to Alexa's voice.)
Since last year they've developed a new MEMS, new ASICS, machine intelligence, and corporate culture.

Last year's five vertical markets:
* Internet of Things
* Consumer LiDAR
* Auto LiDAR
* Artificial Reality/Mixed Reality
* Display

This year's four paths to monetization:
* Internet of Things
* Consumer LiDAR
* Display
* Auto LiDAR
(Despite the interest in Hololens, AR/MR was absent from the list.)

Internet of Things (same as last year except that they directly mentioned 'smart speakers' this year.)
Internet of Things (IoT) is a vast field and opportunity. MicroVision is aiming at the improving AI’s I/O. Currently, devices like Amazon’s Alexa interact via voice. While that has enabled a new market and technology, voice is inherently limiting. Being able to interact with displays is seen as a product changer. Instead of Alexa telling you about a recipe, a MicroVision-enabled device could display the recipe, connect the cook to an online grocery, and play a video of how to put it all together. The current products were produced in the tens of millions, which is encouraging; especially, if MicroVision is eventually included and if MicroVIsion helps the market expand.

Consumer LiDAR (same as last year except projecting a launch in 2020)
Consumer LiDAR is easiest described in terms of home security, but instead of noting break-ins, LiDAR can also identify members of the family, including pets. Knowing where everyone is enables the smarthouse controller to customize whatever it can control to the individual’s preferences.

Auto LiDAR
Auto LiDAR is basically radar for cars, particularly autonomous autos that need to know what’s around them in detail and quickly. MicroVision’s solution evidently produces high-resolution data quickly for crash avoidance as well as mapping. The target date is "years out" (instead of 2018's '2020-2021') with autonomous autos a decade away.

Display (on track and waiting on the partner)
Display, simple displays continue to be a market. Displays are also the only market that was described in verifiable financial data. Last year, the purchase requirement was unspecified. This year they mentioned $20M/year for the customer to maintain exclusivity.

Before the Q&A period, the COB interjected and emphasized that they expect to ship displays in June.

QUESTIONS & ANSWERS (heavily paraphrased partly because I couldn’t write as fast as some people talk)
* The COB interjected an answer to several questions he heard earlier, basically that the company has gone from working with several customers including on Tier 1 to working with multiple Tier 1s.
* Trying to understand the imapct of trade wars is "foggy".
* No plans for the 1440 display.
* The company sees no reason to act on Bosch's possible IP intrusion.
* Industrial LiDAR is de-emphasized, though customers could decide to use the Consumer LiDAR as long as the work environment wasn't too severe.
* The Tier 1 Display Only device is considered near-term.
* One of MicroVision's advantages in LiDAR is embedding some of the computing inside, rather than requiring the customer to integrate yet more components.
* AR/VR/MR? are not off the table.
* Some contracts are being held up by third parties to the deal, "Not in our control." They will release a PR when it is a material event.
* MicroVision's LiDAR is considered solid state.
* The interactive touch display, like many consumer electronics, may be delayed if the customer expects a recession and doesn't want to launch in the middle of it.
* The COB was asked why he or other board members weren't buying more shares. The answer had something to do with what is required (and I suspect the question had to do with why it wasn't desired. Why aren't more board members buying shares if the promise is as good as stated or suggested?)
* The 'discussion' about profitability in 2019 was more along 'goals', 'objectives', etc.; not intended to be guidance.
(My notes from 2018; "Before the Q&A period, the COB interjected and emphasized that they see the company passing from possibility to probability, hopefully with profitability in 2019.")

SUMMARY (Copied and pasted from last year's notes.)
Taken as-is, the future looks bright. Profitability in 2019 is a goal, though not guaranteed.

I've purposely put aside last year's notes so I can draw fresh conclusions. I may make a comparison in a paragraph or two (OK, four).

The technology continues to impress.
The market is phenomenal.
The industry (as well as the competitors) is maturing.
The future of the company is shrouded by NDAs, in the control of customers and third parties, should be significantly better within 6-9 months, maybe sooner.
That little litany can the same words to describe the situation every year for over a decade, including the insight that this year is different. They are making impressive progress. They aren't making money. They continue to use words like 'hope'. Fine philosophy for people; but hope is not a strategy. I hope to win the lottery. It might happen.

That was about the company. The stock is different. I suspect that the current stock price has very little relation to the objective valuation of the company, and definitely not the present value of its future revenues even when discounted for risk. MVIS is probably experiencing irrational pessimism. It could equally well eventually experience irrational optimism. That could happen as soon as the next PR or order or slipped bit of insider information. There are slightly over 100,000,000 shares (which I suspect will be diluted very soon unless there's news before the end of June.) Take a Price/Sales = 6 (for a tech in perpetual startup mode), reach about $100,000,000 in sales (which could correlate with profitability or at least positive cash flow), and get a price at $6. Call it $7 or $8 and just getting back to where it belongs is a ten-bagger.

As I said above, the tech, the market, the industry, and the future are all encouraging. I did not include management. There was less information in this year's presentation, greater assurances, not no commitment from management. If the control of the company is in the customers and third parties, then management's job isn't as signficant, and possibly out of scope of their compensation. The shrinking vote percentages suggest I'm not the only one thinking this.

And yet, I'll hold, and maybe buy more because - well - I hope.

From 2018 (Now, I've read ahead. Except for replacing Moviphone with Ragentek, the same words apply);
"I find myself in the silly situation of saying something I’ve said too many times before. By next year’s meeting, things should be much better with more to celebrate, more concrete things to talk about, and an expanding future. I’ve said something similar for most of the last several years; and yet, the stock languishes, share count increases, and the potential gains I can enjoy are diminished.

The good news about the new CEO is that he is also articulate, presents well, has a sense of humor, and appears to be well-informed. I wish the COB would not steal the spotlight as much, because part of the goal of attending this meeting was to meet the new boss.

Two key detractions were from things that were missing. There was no financial report from the COB, the CEO, the CFO, or anyone. Numbers were scattered through the meeting, but there was no formal report. I asked about that years ago, but was told that they felt everything had already been reported, so there was no reason to say it again. This is one of the few companies I’ve invested in that doesn’t treat finances as a necessary part of the meeting with the people who own the company. The other thing missing was any of the management showing off personal purchases of the products. I learned more from other shareholders, particularly Peter in past years, and the owner of the Moviphone this year. I plan to buy a Moviphone, because I see the benefit; but the management and officers (who own < 2% of the company) decided not to buy and demonstrate the “great new things.”

I am further convinced that the technology is positively disruptive in many ways. I am further convinced that it will generate significant, and possibly news-worthy, financial reports. I am also further convinced that a buyout will happen prior to me benefiting from owning the stock. I’ve invested about three years of living expenses into the stock over the last twenty years, but those shares are only worth about a month and a half of living expenses, now. Dilution may seem trivial and incremental, but the cumulative effect is to diminish my percentage ownership by at least a factor of forty. Those extra 50M shares aren’t going to help that. Considering the size of some of those increments, I wonder if the company ever considered finding the funds inside the executive compensation packages. The cumulative effect of lower management payouts over twenty years could be significant."

This time is different and the same and the next significant PR will mean more than most.

LTBH since 2000, hesitant to mention the company to friends, but too drawn to the potential and the drama to keep from telling the story - just like last year. And, as my finances recover, I may buy more. Sigh. Also, since they didn’t mention projectors embedded in smartphones (something was considered just as key then as LiDAR is now) I guess I’ll replace my flip phone with a boring Android. So it goes.

PS: I've included a bit more (somewhat non-MVIS) commentary on my blog.
Corporations Meet Owners MVIS 2019
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