Innovative Aerosystems, Inc. (ISSC) Q4 2018 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Innovative Solutions & Support Fourth Quarter 2018 Fiscal Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, that this event is being recorded. At this time, I would now like to turn the conference over to Mr. Geoffrey Hedrick, Chairman and Chief Executive Officer. Please go ahead, sir.

Good morning. This is Geoff Hedrick. I'd like to welcome you this morning to our conference call to discuss our performance for the fourth quarter and fiscal year 2018 current business conditions and our outlook for the upcoming year. Joining me today are Shahram Askarpour, our President; and Relland Winand, our CFO. Before I begin, I'd like Relland to read the safe harbor message. Rell?

Thank you, Geoff, and good morning, everyone. I would remind our listeners that certain matters discussed in the conference call today, including new products and operational and financial results for future periods, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially, either better or worse, from those discussed, including other risks and uncertainties reflected in our company's 10-K, which is on file with the SEC and other public filings. Now I will turn the call back to Geoff.

Thank you, Rell. In fiscal 2018, revenue and operating results were both down from fiscal 2017. These results are disappointing, but with our strong and financial position and by entering the new year with the portfolio of technology products that we believe are ideally positioned to capitalize on the growing demand for technologies that improve both safety and performance of aircraft in commercial, military and general aviation markets. Over the past 12 months, we have focused on preparing for the growth opportunity we see with our patented ThrustSense Autothrottle. At the Board's recommendation, we engaged an outside consulting firm to perform independent reassessment of the market opportunities and review our four-year business plan. Prime Magazine shows our ThrustSense Autothrottle for its 9 page November cover story. In this article, they said our technology transforms the the total crop single and call the back-up display that doubles as brains of the system ingenious. They concluded that for owners of the PC-12 an upgrade to the IS&S NextGen 2015 cockpit can make a sound operational sense by providing maximum flexibility and access to the 21st century aerospace tools, not to mention it removes 60 pounds of weight. Because it's designed to function in virtually any Pratt & Whitney PT6 powered airplane, they see a very, very large market opportunity. Today, both Pilatus PC-12 Classic and NG have been certified and an STC for the King Air is expected shortly. By note, this is the first and only STC, the FAA has issued to a turboprop Autothrottle. Certifications on these models provide a blueprint for a quickly expanded -- expand out into the manufacturers of other PT6 aircraft, so that we can -- we’re continuously enlarging our market opportunity. Consequently, we’ve realigned and strengthened all of the various functions needed to support the growth of our Autothrottle business. As mentioned in the last quarter, this stronger tactical and product expertise at the point of the customer contact is expected to improve market development and increase penetration. We were also eliminated peripheral and other spending that was not core to our future planned strategy thereby reducing any drag on operations and lowering our cost structure. We’re now focused on the kind of product innovations which built IS&S. We believe that there’s no product currently in the market like the patented Autothrottle. Consequently, throughout development we understood that to be a success we’re going to have to make a commitment to marketing commensurate with our engineering effort. The market has just needed to be informed about this new functionality. Our initial marketing efforts have yielded very encouraging results. Shahram will go through them in more detail. From an aviation expert in Flying Magazine that conducted a flight test at owners and operators at the recent NBAA show. The reception has been extremely encouraging. Let me turn it over to Rell for the discussion of financials.

Thank you, Geoff. Thank you all for joining us this morning. Revenues for fiscal 2018 were $13.9 million compared to $16.8 million for fiscal 2017. Gross margins for the year was 47%, down slightly from 48% a year ago. The relatively unchanged gross margin on lowered 2018 sales reflect increased customer service revenue, which yields higher gross margins and the workforce reductions which occurred in the third quarter of fiscal 2018. Total operating expenses for the year were 10.3 million compared to 8.2 million in 2017; however, total operating expenses were actually down approximately 1.5 million in 2018 compared to 2017, if we exclude the fiscal 2017 bad debt reversal that reduced selling and general and administrative expenses by 3.6 million in fiscal 2017. Research and development was down approximately 900,000 in 2018 from a year ago in part reflecting the impact of the workforce reductions undertaken in the third quarter. Our research and development expenses were down on an absolute basis, we continue to make a significant commitment to research and development as proportion of total revenues. For the fiscal year 2018 selling, general and administrative costs were down 600,000 primarily reflecting reduced legal expense from a year ago, if we're giving effect to the bad debt reversal in fiscal 2017. Even though we are already a low base, we believe that the workforce reduction undertaken in the third quarter could result in further decreases in the future selling, general and administrative expenses. For the year, we recorded a net loss of $3.7 million or $0.22 per share, a year-ago the 3.6 million reversal of a bad debt reserve a 4.1 million legal settlement and 700,000 earn on the sale of Pennsylvania R&D tax credits enabled us to report net income of 4.6 million or $0.27 per share. For the fourth quarter of fiscal 2018, we reported revenues of 3.6 million compared to 4.2 million in the fourth quarter of fiscal 2017. Coming to the cost savings generated by the third quarter of fiscal 2018 reduction in force, gross margin was 50% as compared to fourth quarter 2017 gross margin of 44%, also reflecting the workflow reduction. R&D development expense was down 500,000 or 44% in the fourth quarter of fiscal 2018, as compared to the fourth of fiscal 2017. The fourth quarter fiscal 2018 net loss was 414,000 or $0.02 per share. The fourth quarter of 2017 net loss was 186,000 or $0.01, which benefited from the sale of the Pennsylvania State R&D tax credits. For the year, cash used in operations was 1.7 million while we also use cash of 2.6 million in investing activities primarily to purchase the King Air. Nevertheless at September 30, 2018, we remain in strong financial conditions with over 20 million of cash on hand and no debt. We believe the Company has sufficient cash to fund operations for the foreseeable future. Now, I'd like to call turn the call over to Shahram.

Thank you, Rell, and good morning everyone. Back in August, we indicated that our next few quarters may be a bit bumpy as our new strategy takes root. Efforts in the near term have been primarily focused on certifying our Autothrottle on the King Air and other platforms as well as establishing a formal Autothrottle sales and marketing program, as we believe can best capitalize on this compelling opportunity. And from that perspective, we have made progress on several fronts. We have obtained several STCs for our patented ThrustSense Autothrottle technology. Several others are eminent. We have adopted a new marketing strategy which is product oriented, aiming to improve our market penetration. We have also been building the infrastructure needed to ensure that the formal launch of our Autothrottle into the market is fully supported. Finally, we have reorganized such that we can concentrate our resources around our most valuable programs which have enabled us to reduce costs and improve efficiency. As we look into 2019, Autothrottle remains our prime focus because ThrustSense Autothrottle is the first of its kind patented technology, the process for obtaining our initial STCs have been quite exhaustive and time-consuming. However, now that we have been through the process, we have a template that can be repeated to pursue STCs on other general aviation platforms and importantly to do so expeditiously. As a result, we are in the enviable position as the only source for a product that I've just mentioned is receiving enthusiastic praise from the industry. We ensure the formal launch is successful. We’ve built an infrastructure that can quickly scale with demand. All of the details have been worked out, manufacturing, fielding experienced business development professionals, writing training manuals and establishing a strong customer service capability, and while we’ve yet to formally launch market is already on the rise. Most recently, we experienced warm reception from OEMs, installers, operators and other attending NBAA. This has resulted in opportunities for sales and marketing team to fly our Autothrottle equipped King Air and PC-12 to prospect locations where they’re conducting large demonstrations. This is the most direct path to new orders. Consequently, into calendar 2019, we feel that we are well positioned and the market is getting prime to capitalize on the innovative safety features such as engine protection, speed envelope protection and VMC protection in the case of multiengine aircraft as well as significant fuel savings that our Autothrottle offers the general aviation market. Looking at some of our ongoing programs, the PC-24 program is going well, having booked 3.4 million in orders over the course of fiscal 2018. Based on the success of this new aircraft, we may be in line for orders exceeding 40 shift sets per year over the coming years. The military market is showing renewed strength. Our KC-46A program continues to trend well, while in June, we were awarded a contract to develop a new F5 data computer for the U.S. Navy. This new system will update antiquated analog equipment with new digital technology that is next gen compliant which makes this product that will likely be of interest to other military aircraft operators. We also continue to ship products in air transport retrofit market where we have established a strong presence for the 737, 75, 7, and 767 cockpit upgrades. In summary, we’re following the plan we’ve laid at, to very carefully and deliberately bring our existing new Autothrottle technology to market; our goal is to execute efficiently from the start, and we have dedicated time and resources assuring that we are prepared to do so. We appreciate your support and confidence in our ability to continue to create value by bringing innovative new technologies to market. Let me turn the call back to Geoff for some closing remarks.

Thanks, Shahram. As you heard over 2019, we intend to grow platforms for which we’ve certified the Autothrottle while simultaneously developing niche markets through aggressive sales and marketing program. The Autothrottle’s value proposition is compelling. It is the first and only Part 23 FAA certified Turboprop Autothrottle, and it is patented both the United States and Europe issuing. Industry authorities have flown the equipment and are impressed with its ability to reduce pilot workload and improve aircraft safety and performance. The upcoming year should be an exciting time for Innovative Solutions and Support. We thank you for the continued support and encouragement. On a side note, because the Turboprop Autothrottle has never been certified before by the FAA, the certification has Shahram commentated has been more protracted than anticipated. It included things like a 45-day industry common solicitation and novelty review. Application of that Autothrottle is VMCA mitigation which is unique and patented serve to reduce, if not eliminate common catastrophic multiengine aircraft accidents. So in conclusion, I appreciate your attention today and look forward to any questions you may have. Operator?

Thank you, Mr. Hedrick. [Operator Instructions] And our first question will be from Scott Lewis of Lewis Capital Management. Please go ahead.

First of all just congratulations on getting your expenses close to in line with your revenues. I had a question on the Utilities Management System for the PC-24. I know that Pilatus is planning on picking up the pace manufacturing quite a bit in the next year or two. Are your current orders reflective of the very slow pace they are starting with? Or is Pilatus building up some inventory to start?

Build up initial inventory obviously to support the production line and spares. But what we expect is that we will follow their growth and they are being properly judicious in their production growth as you know the demand is there, the book is closed for the time being. And we expect this --we follow the demand closely that gives us a line on where our expected deliveries to Pilatus are. In the meantime, we continue to support their program, which is growing well. And of course the exception of the aircraft just has been exceptional.

So if your orders you think may double or triple from here compared to where they were this…

I don’t know double or triple, remember you have some of the initial orders to bring in a fair amount of equipment to put staff support locations and support the fundamental inventory and work in process. So after that I would expect it to reflect, historically, reflect the actual production rate of the aircraft.

On the new air data system you are working for on the navy, is that just for a single aircraft model for the navy or for multiple models?

It's actually from the F5 and potentially G38 application although we had already made that G38, it is in fact a reapplication of an existing product that we built for the A-10 that's in service and it is showing remarkable performance reliability. So, we adapted that technology to the F5 which has minimized this development cost, accelerated at a time for our development, and the F5 is probably or even more universally our aircraft that desperately need an air data computer. Bluntly, this air data computer can then be in turn adapted to a variety of other applications, so that the core process is -- and air data process, it would be identical and it is identical basically to the A-10, but it's only the peripheral interfaces that need to be adapted and this new design should accommodate many of the opportunities that are out there.

And then switching to the Autothrottle STC for the King Air, I know it's very difficult to say when the government would grant you the STC, but Geoff could you give me anymore kind of flavor of where you are exactly in the process? Are you at least done with flight testing, it's all paperwork from here?

Look, we're finished up our flight testing and we're in the process of -- unfortunately, this hit right at holiday time so everything stopped, but we are ready to go for the government flight test, STC flight test, so that's -- and we have already demonstrated it to the FAA, so they are well versed in it. We are waiting for responses from the government now on our certification plan. And when that's authorized and ready to go, we would hope -- we had hope to get it done before the end of the year and it looks like it's going to be early next year that we should get this done. Frankly, the FAA has been unusually cooperative. Recognize that, this is really very new technology. One of the patented features of this is a system that will potentially eliminate a series of cash profit malfunctions. So much so that the FAA one of the senior people of the FAA commented that we as a country lose 1 person every fourth days that means die due to a kind of aircraft accident that we would eliminate, and he quoted that we would save lives for this, if that's actually bears out I would not only be very proud but very pleased.

And when you say it prevents an aircraft malfunction, are talking about something different than just the difficulties of engine out on a twin where you have sort of pilot error? Or is there a literal malfunction that your…

Well, no, an engine out on a twin as you obviously know, an engine out on a twin, it's not -- if right now, even some of the most sophisticated aircrafts are out there, like the -- even the F-14, their solution was to immediately retard the remaining engine to something about half thrust, so that you wouldn’t have a yaw moment that would cause the airplane to rollover on its back, which is how many twins people crash -- twins. Our system actually measures and anticipates the loss of that control and only proportionately reduces the thrust, meaning that you can get -- you still have a thrust left and automatic sensing and haptic feedback of excessive speed or under speed, over speed, all those conditions. So, it’s quite remarkable and it’s a great feature especially when pilots flying a twin single pilot.

And then last question, a broader question Geoff. You or Shahram said in the call that, as a strategic matter ISSC was going to go back to kind of its original focus of what made it successful. Can you just talk about what that focus is compared to maybe where you had gone that you thought, had not been what maybe originally successful and relatedly just what areas you’re now kind of getting out of so that you can focus on what it was that made you successful?

I think Shahram spoke to it, but I’ll get it right. What we’re doing is it means that, that the business was called Innovative Solutions, not just name of the business, but what we did for a living and finding a pursuant products where we could bring real product innovation which reflected itself in better performance, better reliability and hopefully reduced cost simultaneously. Simply producing an also a similar product or an ordinary solution is not an area that we believe that are -- that we can best serve. So, essentially, we are now focusing on things like the Autothrottle and utility management systems; systems that have never been designed or even conceived up before that we can even get patents on or control that the uniqueness of the technology and that gives us a special strait in the market place.

And the next question will be from David Campbell of Thompson, Davis and Company. Please go ahead.

You brought the King Air in April to essentially speed up the STC process, and I was wondering if you were satisfied it is doing that?

Well, I think it’s quite invaluable doing that. I wanted to buy another airplane as much as I wanted another arthroscopic knee surgery cost, but it served its purpose in every single way. The twin application for STC has been unusually, not unusually, but it has been difficult, it's been demanding, is probably the correct way of doing and appropriately so. Understand it's never been done before. What we are doing is all the new and by the way patented. So without the airplane, I believe we would not be able to do this program. We have extensively tested the equipment and demonstrated and even so its yes, it's pretty good investment from that standpoint. But I'm starting to feel like I'm playing polo.

The use of the plane is about. You have mentioned that your flight testing has been completed, so presumably you…

It's has been completed, it's here and now we have to demonstrate it for the FAA. So, we still have fair amount of time, but there will be extensive demonstration flights to the FAA for final testing.

And the other thing is. Is that possible to get orders or get some feel for companies who want this products, that airlines and FPOs who want this product until there is an STC, I mean, I'm surprised you can't take orders before the STC is complete?

Well, it's difficult, we normally grow where we can take orders for the PC-12 and we will be able to take orders for the King Air, and we have got several other aircraft we are working on as well. We are seeing a significant activity the more activity that we have seen in total in the past, and we expect some very good results. We have a pro with a lot of experience Tom Grunbeck who is leading the effort. He has 10 years of experience in Autothrottle. So, he can help bring this -- bring this into market. And it's making an awareness that Autothrottle is something more than a cruise control. People don’t need a -- pilot certainly don’t feel they need a cruise control, but if you can provide them something that truly reduces their work and provide significant safety features you have a winning combination and demonstrating that and showing that. And remember, it's all very new, nobody ever done this before and that’s part of the certification for efforts that we are going through right now.

There was a $200,000 consulting fee. Was that in the fourth quarter charged in the fourth quarter?

Yes.

So fourth quarter charge for consulting fee, and that was for -- what was the consulting fee for?

Consulting fee was I mentioned it and it's -- we -- as part of -- in generally as part of the boards responsibility that we routinely revealed, the direction of the Company and make sure that we are doing the best investment of the resources of our company for the stockholders as part of our fiduciary responsibility. Coupled with that, we decided that if we're going to go into our new product area like Autothrottle, which is an area that we don’t have extensive experience in and by the way the industry doesn’t have extensive experience, it was virtually mandatory that we get an informed objective review of the marketplace. And we engaged an outside expert firm that does both market research and product analysis and business plan analysis. And so that was a partial payment for a very extensive market research and product research program, which included things like webcast and various other research and into the individual market comments. So, it's proving to be very valuable, and we all felt that it was essential because this is -- honestly, this market didn’t exist except in the higher end airplanes because it was always seen to be too expensive in the lower end airplanes, lower end meaning $10 million.

What about SG&A going forward, is that going to be at the fourth quarter level or lower?

SG&A?

Yes.

Yes, well, the adjusted that will be lower, now the first quarter going forward in '19, it usually the higher with the auto fees and things like that. So because we're 930 just wonder auto right now, so -- but SG&A to be lower.

I think we have a reasonable control over the our expenses we've got focus, I think we're better focused, we have a good team working with the issue so we are not under staffed, but we're definitely not over staffed. And now, it's all the question of execution and we're focusing very much on executing and getting the programs done on time on budget.

How many employees were actually let go?

I don’t -- I can't give you an exact number, but it was about 50.

Around 50.

Yes. So, we have a good -- I'm confident, we have a good staff. Reminder you, I've watched the Company from the time I was the only employee that plugged in a $9.99 telephone into the wall and watched it grow from there. So I believe I have at least an experienced sense of what adequate staffing looks like.

So when you begin to manufacture the Autothrottle based on orders, will there then be an increase in staff to increase the production?

It might be but very -- there's a big direct labor. Remember, our direct labor represents less than 5% of our revenue. So, I think if I double it, we’d have a very small impact on the P&L. The point is that we’re mindful of is that we want to make sure that we’re adequately staffed to support the demand and the happy good news is that, it’s just a remarkable design that takes very little manual labor. We’ve automatic stuff that takes care of it. So, it’s really quite remarkable. I mean we’ve automatic robotic machinery that can -- that virtually manufacture 80% of it.

And the KC-46 tanker program that’s continuing?

It is. We’re in requalification of that and potentially obsolescence issue. So, it’s moving along smoothly and our support is fine in fact Boeing is here today.

Well, congratulate them when you see them, they raised their dividend today, substantially raised their dividend.

That’s a good thing. Well, I can tell you that is growing a little bit, the stock has grown a little bit, about 10 times, over the last 10 years, so that’s pretty good. I guess they make a good product.

So did you give us a backlog figure, I don’t know -- I don’t have the press release?

3.6 million.

3.6 million.

3.6 million, the backlog is basically unchanged.

Yes, the backlog doesn’t reflect any of the long term programs. So, we don’t have all of the KC-46 sitting in backlog. We don’t have the UMS. We don’t have a number of products that are renewed on a quarterly in some cases or annual basis. So, it’s a lot more than that obviously and that will always be that way because the days of people giving 200 to 300 and 500 piece orders, for over 10 year period just are gone, they prefer and appropriately renew the order on an annual basis.

When you get orders for the Autothrottles they’ll come from fixed base operators, won’t they?

They'll come from a bunch of -- they'll come from FPOs, they'll come from fleet owners. For some fleet owners, this is terrific. It's got -- we’re seeing remarkable growth in the industry, we’ve somebody record an interview about the Autothrottle at NBAA. And in the first week, it was online on YoutTube, they got like 10,000 people looking at it, which I found amazing. Anyway, we’re beginning to see a real force going, and we’re working hard to apply it to a broad range of PT6 type of aircraft and there is many of them out there, 10s of 1,000s of.

But there’s no other authorities that you’ll need to get once you get the STC for the Autothrottle.

Regarding your STC, every aircraft, you have get an STC except that what you’ve gotten, the big one is to get the twin and things associated with twin operation. Then subsequent on STCs should be much easier, the FAA is showing the kind of prudence that you would expect from them which is to make sure that this new technology has done that correctly and they are doing that. As much as I get anxious how I get done, I respect what they are doing and happy every time in get in an airplane to know that they actually think through the problem. So I have got no complaints at all. They have been supportive, obviously within their limits of their judicious approach.

Now will you be doing the installations of these Autothrottles? Or will those be really up to the fleet, fixed base operator.

All by the dealers, it’s a very easy installation depending on the aircraft it could be a one day or two day installation.

By the dealers.

And that gives me additional revenues, so they don’t have to make all of their revenue by marking up the product, it’s a good answer, it's a good solution.

Let's hope we get some orders, let's get the STC done then we get some orders and we will be on our way.

Okay, thank you.

And the next question will be from Charlie Pine of Van Clemens & Co. Please go ahead.

Some of my questions have been answered, but there is a few other things I would like to have you address. In the last quarter you talked about with the restructuring that you're going to have about 3.5 million of cost savings going forward. You obviously had an impact in the fourth quarter on your R&D line. But I guess I'm curious to know with the workforce reduction and everything else because your SG&A was basically flat in Q1. Are you still on track to be able to deliver 3.5 million of cost savings in 2019?

Yes, I don’t see -- yes, absolutely. I mean you saw us as I talked to it before you saw SG&A obviously in the fourth quarter was is somewhat impacted by what Geoff referred to for the consulting expense. So you were seeing more of that obviously R&D you see. And you see it in the gross margin. I mean, we had higher margin percentage on lower sales, so you see -- in all the different phases of the cost structure.

The other thing I wanted to pursue with you was about the STC on the ThrustSense. You said that you have completed your work flight testing and the next stage is that the FAA has to do their flight test. How many flight tests do you anticipate? And how long will they be spending on doing the flight testing?

Well, the flight testing in itself per se is probably only about four hours of testing, but getting all the paperwork done is a big part, recognize they went out and solicited the entire industry for comments over a 45 day period and then taking the report and evaluating and et cetera that takes three weeks and then you have Thanksgiving in the middle of it and then you have Christmas and then you have New Year so by the time you finish all of that. I think they are actually working harder than any other part of our government is, I'll guarantee you that and more effectively I might add.

That’s good to hear so they have to be…

We are actually doing -- honestly as we stand and watch it, it is a little painful, but they are doing it in a deliberate way and I'm encouraged by the fact that they continue to move. I expected that if retainment of that into Thanksgiving which we did without the STC that we would see absolutely nothing until the first of the year because typically everything, every business effectively slows down so much that they stop. And in this case, it's actually moving on to my flight actually, but I still think it's going to be difficult to get something finished before January.

Okay, so in other words just to clarify, it's not a succession of the number of individual flight test…

No.

So, we're just getting -- there will just be one four hour flight test by the FAA.

Probably two hours flight test, but right together, recognize that the FAA has already done a familiarity flight test with the system and assessed all of these very odd special features like VMC mitigation, the engine out mitigation actually staffing here witnessed it with the certain amount of discomfort I might add and myself included. But it is, you know it's terrific, they've been more than co-operative more than and they had people from five different four different branches flying in the airplane to get oriented with the new technology. Certainly, they've gone out of their way that to try to stay up with the advancements that we're going to be certifying. So, I'm cautiously optimistic, it's just unfortunate that we've run into this holiday time at a time we go and trying to get flight testing done.

So that being said, if the flight testing goes on the time line that you are hoping for. You feel and the process they seem to feel pretty committed to making the process works smoothly, but they are being rigorous at it. Do you feel cautiously optimistic that you might wind up having an STC by the end of your second quarter?

Yes. And we're going to work so much -- for us it's important to get it done, it's really we're happy to say that system works extremely well and we're seeing increasing applications to a broad number of other aircraft and we are very optimistic. And by the way with patents were issued on this, both in Europe and in the United States in record time without exception. I have a lot of patents and I have never -- I don’t remember an application that was signed-off by that by the patent office without some comment like why did, you do this than the other. So, we are enthusiastic about this program.

Okay, couple of other things, recognizing that nothing has done until it's done. Once you do have in hand an STC, how quickly afterward do you think you'd actually start to be able to recognize revenue from it from the King Air?

Some revenue almost immediately.

Okay, well that's great to hear.

Once it’s served by and we can install it in an airplane we believe that there’s opportunities out there. Right now, that would be ready to go near the end of the first -- second quarter or the first quarter calendar quarter. So, and by spring, we would expect it’d be doing installations.

And give a little bit more color if you could you said that there’s you said that, there’s actually literally tens of thousands of other Pratt & Whitney planes with these similar Pratt & Whitney engines, which could also be candidates.

It’s probably the most universal plane, it’s called the PT6 and is literally I don’t remember the numbers, it’s 20,000 to 30,000. And by the way, our system also works on drones, and we’ve got a number of enquiries for a new kind of drone that's coming out. So, we see a lot of application for it, and it’s small compact, extremely reliable, very unique and so look, we just kind of get it done, simple answer is get the freaking thing done.

Well, we’ve been out here waiting a long time for it. So, we were certainly ready and willing and able for that to occur, believe us.

Believe me I know you remember I'm a stockholder as well.

Yes and I am well aware of that, okay…

The times will be great. I have no complaints. I'll try to give you the -- I'll try to give you as accurate representation of what I believe we have. I got to be careful that my enthusiasm doesn't alter my judgment that's all. And that's in part one of the reasons why I support, strongly support an outside independent company that would come in and say, wait a second, do you tell me what you're planning to do when and let’s look at the market? And they have this webcast to analyze the value of an Autothrottle. So, I mean, we’re trying to be sensible about this approach, so we don’t just run off a little too adolescently, all right.

Okay, last thing just so I can check myself. Is there actually you referred to a YouTube video on the ThrustSense that was out there? Is that still…

Yes, should be on the site I believe.

You can look at our site and I think you’ll see a couple of YouTube videos. There’s one of them of the system and there was one at the show. We’ll try -- but they should be available, if you’ve a problem, call in to Rell and he’ll give you the -- we’ll send you the website, all right.

And the next question will be from Steve Rudd of Blackwell. Please go ahead.

Just one last one for Shahram, you've started out in your chat by saying that there’s going to be some choppiness which of course all of us understand is the euphemism for negative earnings. Is it that we go into the first quarter of that choppiness and then Q2 we start to see things head in a more positive direction? Is that about a way to interpret it?

I think that that's pretty close. What we are seeing is we are seeing that revenues are going up and the backlog is growing.

Maybe just out of curiosity when you're calling it Autothrottle and yet to me the most compelling part of these safety features that’s just the maybe, my own orientation. You explored I think it's other names that more closely line marketing, safety throttle, optimal throttle because it did feel like autopilot or what you call auto in the car?

I think ThrustSense is what we have actually named it and it’s a trademark.

It’s a word out people don’t know what it means so.

Why is that it's more than a speed control, it's actually -- it puts intelligence in what thrust you put on any airplane. Like common sense it has ThrustSense.

No, I think that’s was better. So, I've focused on what it does and that probably captures the sense a bit more.

It's quite -- I'll tell you, I hope that I would say in the next three or four weeks, we will have videos of the ThrustSense actually doing VMC mitigation. It is a remarkable experience to actually see the Autothrottle response to the yarning of the airplane and actually correcting for and preventing catastrophic accident. It's quite remarkable actually. It's never been done before.

Sometimes open marketing thing you can work through -- I have seen other safety devices in other industries and you work through insurers have them require it as part of issuing their policy.

It’s a good point and we hope when we get this I think the insurance companies will recognize specially in single engine applications. And think about the guys in flight twins where their families on board, I can tell you I have flown for years with my wife and she asked me how I was doing. They are concerned about their safety as well and the case, so all it adds up and it's not a brutally expensive addition to the aircraft. It represents a relatively small investment compared to that price of the airplane.

Maybe you can spend a tremendous amount of time marketing to your direct industry and if you can market to the insurers they either…

Very good idea, [Multiple Speakers]

I'll give you some systems others like that after the year conference call.

Yes. Thanks for your idea.

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