Vuzix Corporation (VUZI) Q2 2018 Earnings Report, Transcript and Summary

Greetings, and welcome to the Vuzix Second Quarter 2018 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this call is being recorded. Now, I would like to turn the call over to Andrew Haag, Managing Partner at IRTH Communications. Mr. Haag, you may begin.

Thank you, operator. Good afternoon, everyone. Welcome again to the Vuzix's second quarter 2018 financial results and business update conference call. With us today are Vuzix's CEO, Paul Travers; and CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that on this call management's prepared remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors including but not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represents management's estimates as of today, August 09, 2018. Vuzix assumes no obligation to update these projections in the future as market conditions change. The company has issued a press release announcing its financial results and filed a 10-Q with the SEC. So participants in the call who have not already done so, may wish to look at those documents as the company will provide a summary of the results disclosed there on today's call. Today's call may also include non-GAAP financial measures. When required, reconciliations to the most directly comparable financial measure, calculated and presented in accordance with GAAP can be found in the Company's Form 10-Q, quarterly filings at sec.gov, which is also available at vuzix.com. I will now turn the call over to Paul Travers, who will give an overview of the company's first quarter 2018 financial results and the business outlook for 2018. Paul Travers will then turn the call over to Grant Russell, Vuzix's CFO, who will provide a more detailed overview of the company's second quarter operating results. Paul Travers will follow Mr. Russell and we will then open the call for Q&A after managements updates. Paul?

Thank you, Andrew. Hello everyone, and thank you all for joining our call today to discuss the company's second quarter 2018 financial results and business outlook for 2018. It is a very exciting time at Vuzix as we are on the forefront of the multibillion dollar augmented reality revolution being talked about in almost every business sector. For Vuzix customer adoption and large scale conversions are gaining further momentum and we expect this trend to continue to accelerate. At the same time we are well positioned for the generally expected widespread consumer adoption of augmented reality and more specifically augmented reality Smart Glasses that is also right around the corner introducing an entirely new category of devices like AR Smart Glasses for deployment within enterprise requires developing entirely new ecosystems that takes coordination between software developers, hardware manufacturers, finance, IT and HR departments, the end user and right up through to entire supply chains. It has been years in the making, but Vuzix is successfully navigating this maze and it is showing by many measures including growing revenues from our few million annually to now with revenue in its second quarter 2018 than in all 2016. Yes, it is still modest just yet but we have built the technology infrastructure and ecosystem to deliver so much more in the coming months and years. Now that the groundwork has been laid capitalizing on the effort is becoming much especially with the end results being driven by ROIs and positive customer feedback. As a result we are seeing that the shift towards Smart Glass is becoming a standard in enterprise as well on it's way. Today, analyst after analyst is forecasting that the enterprise AR Smart Glasses market will represent millions of the unit sales annually within the next few years which translates into a total addressable market of billions of dollars in enterprise Smart Glasses alone. And in a recent study our OEM partner Toshiba found that 83% of industrial enterprise customers were interested in deploying Smart Glasses within their operations over the next three years versus just the 2% currently. If you look across just a select group of key enterprise market verticals, such as Field Service manufacturing, inspection and logistics, Vuzix has customers and exposure to all of them. One of the most exciting market verticals today for Vuzix customer deployments is Field Service. Field Service typically involves a see-what-I-see application that could deliver expert knowledge from the office remotely to a technician in the field. When see-what-I-see applications are delivered through to a hands-free pair of Smart glasses technicians in the field are almost instantly more productive because they can work with both hands and simultaneously have access to the information and expertise they need to solve their problems efficiently. In this type of application, a single use of Smart glasses in the field can save tens of thousands of dollars for our customers, especially if their key equipment failures can be remedied faster or avoided altogether. And we have seen some workers view themselves as supercharged or enhanced within their industry as these workers can now leverage this access to expert knowledge that was previously unavailable to them from the worksite. Knowledge, where and when you need it is a powerful tool. On the consumer side, Google and Apple are bringing AR experiences to the masses through their ARKit and ARCore or less extensions. And as a result consumers are being "trained" to accept in use AR in the daily lives. This change is happening at an astounding rate with an estimated 800 million smart phones being enabled to support AR by the end of 2018. That said, consumption of AR through a smart phone is frankly unnatural and can be physically hazardous as well. We have all heard the stories of Pokémon GO users walking off cliffs or into traffic while staring at their phones pointed down the street. The industry is rightfully concluding that the ideal form factor to consume AR is through a pair of Smart glasses that people would actually want to wear. Doing so is one of the biggest challenges to bringing AR to the masses today. This is where Vuzix is going to shine I'll have more on that in a bit. Enterprise space is where the first wave of adoption is occurring for Augmented Reality Smart glasses and this is the first place where Vuzix is driving sales. Our enterprise business continues to expand as seen by M300 revenue growth in the second quarter increasing over 300% year-over-year. The other great news here is that these expanding sales are being driven by repeat customer orders with customers from 2017 accounting for more than 50% of our 2018 M300 Smart glasses sales through June. New enterprise Smart glasses business continues to expand also, as our last 12-month pilot program customer count now exceeds 850. As a reminder, our pilot program count is for direct Vuzix customers. And that there are also a large number of Vuzix integration partners and value-added resellers that are growing their own installed base of pilots. So we believe the total number of pilots are significantly greater as some of our resellers have dozens or in some cases hundreds of active power programs of their own. Inflexion point in enterprise adoption we feel is finally at hand as can be seen by our growing revenues, new pilot programs and conversions of pilots to productive rollouts. Last month we announced our largest M300 order to date to one of our European VIPs. This roughly $1 million follow-on order for M300 Smart glasses will fulfill a number of this customers conversions from pilot to productive rollouts. This account is a great example of the typical Vuzix to the IP/value added reseller customer that has 100s of active enterprise pilot programs that they are overseeing as part of their _____. During the second quarter we also expanded production and shipments to Toshiba of the co branded Toshiba AR100 powered by Vuzix Smart glasses. As I mentioned earlier, Toshiba is just getting started and are already excited at the opportunities in front of them together with Vuzix. Toshiba has also teamed up with Microsoft and now the Vuzix AR100 alongside Toshiba's dynaEdge computer is Microsoft Azure IOT certified to deliver cognitive services and machine learning capabilities. The AR100 dynaEdge is also off to a great start with multiple industry awards including Editor's Choice from a UK reseller and more. We expect to continue to see meaningful growth from Toshiba moving forward. The story over the first half of 2018 from a revenue perspective has really been about our enterprise business driven by our work horse M300 as well as initial contributions from or Toshiba cobranded AR100 being sold into the marketplace by Toshiba. For the second half of 2018 our business will continue to grow with these offerings and expand further as will be in the pick-up, the marketing and sales activities around Vuzix Blade. We are seeing growing demand for the Blade from our developer community which includes B2C facing applications, strategic partners and general application developers and is by far the largest we have seen for any Vuzix product in recent memory. We have a fairly significant backlog of orders and efforts around the Vuzix Blade volume production and commercial launch are just starting to ramp. We have completed SEC and EU certification towards the end of the second quarter and we have successfully launched the Blade Developer Center and released the Blade Edge software for developers. The Blade Developer Center is by far the most advanced tools set Vuzix has put in place prior to an actual product launch to support the developer community. The Developer Center allows our Blade developers to start developing their applications immediately even without a physical unit in hand. In addition to the Developers Center over the last quarter Vuzix has put in place a Tier 2 developer support structure that better allows our developers and key partners to access Vuzix's engineers for complex technical support. Although we had good overall second quarter revenue results, we did not get as many blades out of the factory toward this quarter as we had hoped for on our first quarter conference call. This was primarily due to supply issues with an offshore battery supplier and the time required for a more solid software release. We feel that since the blade is such a significant product for both us and the industry that shouldn’t be fully released until it is ready. Today new products often don’t get a second chance, so we want this right. It is interesting to understand the many use cases people are considering for the blade, although I'm sure that gaming will be fun, watching whales jump out of the floor is not the focus for the blade. Developers that placed Blade Edge orders are focused on a wide variety of applications ranging from the more traditional enterprise use cases to B2C applications and to an array of consumer applications. There is a long list but to give you an idea, some interesting areas include, low vision assist, hearing impaired support, equipment monitoring, facial recognition, drone control, insurance adjusters, inspections, sports and fitness, social media and much, much more. The amazing point here is the developers are not seeing the blade as a toy, but more so as a tool. But you can bet it will be fun to play with soon. It was truly quite amazing the level of interest in creative ideas the blade and its user friendly form factor is garnering. The full blade commercial launch is right around the corner, so you will see building marketing activities starting shortly. Our team of software engineers are working diligently to complete the immigration of the blade, mobile phone Companion app for android and iOS. This as well as the built in applications, sensors, cameras, wireless and AI concierge services, elects in more, social media and entertainment apps all which we expect to be available in parallel with the Blade's commercial release will enable impair your android or iOS smart phone to the Blade. The Blade Companion app is the center point for managing the interface and connectivity from the Blade to the user found. As such the Companion app provides as simple and easy gateway to control the relay of information and the sharing of data between a users Blade, Smart glasses and their Smart classes and their Smart firm. Some of you on this call may have had an opportunity to try the blade on, beauty options, explore the widget and in some cases take a picture or record some video and so already realized the amazing performance the Blade has in such a fashion forward form factor. For those who haven’t all the positive press the Blade has gotten since CES and at Mobile World Congress should help you to understand why Vuzix and our developer partners are so excited about our waveguide based Blade Smart Glasses which is a great segue to discuss the waveguide activities of Vuzix. As you all know, there is ongoing significant interest from a number of Tier 1 companies regarding Vuzix waveguides. We are presently moving forward with a number of them that have placed Blade Edge developer unit orders in addition to having purchased and received stacks of standard waveguides and display engines from Vuzix for their internal testing and validation. And in some cases Vuzix is working on full custom solutions that fulfill the needs of their finished products. To date we have received very positive feedback from these customers as they continue their development efforts with Vuzix. Vuzix expects to continue to demonstrate that we are leaders in wearable display space with solutions that are cracking the code with true usability and at the same time wear ability. Q2 has been a quarter of refocusing some of our operations with the express goal of realigning or efforts to better support our VIPs and value-added resellers to more efficiently accelerate conversions of their enterprise pilots into deployments and to better focus on manufacturing and supply chain operations. From a customer centric perspective, the company is investing in additional sales engineers and brought on a third-party frontline technical support provider to better support our developers, resellers and customers across North America and Europe. Our sales organization is also now not only leaner but more highly focused on our existing customers needs as we continue to leverage more than 250 value-added resellers and over 80 VIP partners that are informing customers selling their applications alongside Vuzix Smart Glass. We are also having myself and others in management reengage with select customers and VIPs regarding their challenges with the goal of focusing on ways that Vuzix can help grow their enterprise businesses. From an internal operations perspective, Zach Stone was promoted to Vice President of Operations in early June. On the engineering side Shane Porzio was promoted to Vice President of Engineering as our Engineering Department has been growing and has numerous active programs. R&D also now has a larger responsibility of supporting sales via sales engineers and supporting partners with Tier 2 technical support that is comprised of a team of experienced and talented hardware and software engineers. Both individuals are extremely talented and well-qualified for these expanded roles. These efforts are all contributing to improving our ability to consistently deliver volume production of our products and are helping our customers convert from pilots to productive rollouts. Our underlying business at Vuzix continues to evolve, grow, and mature. Even more important, Vuzix is more diversified with our product portfolio today than at any time in our company's history. I'd now like to pass the call over to Grant, so he can walk through our second quarter financial results. Grant?

Thank you, Paul. Before I begin, I would like to encourage interested listeners to review our 10-Q that we filed this evening with the SEC for a more detailed explanation on some of the quarterly periods, year-over-year differences as I will be highlighting just a few here. For the three months ended June 30, 2018 Vuzix reported $2.6 million in total revenues as compared to $1.3 million for the same period in 2017, double year-over-year. The overall increase in total revenues was primarily the result of stronger Smart Glass sales in the second quarter of 2018 as compared to the same period in 2017. Sales of Smart Glasses primarily our M300 were $1.8 million in the second quarter 2018 as compared to $0.7 million in the same period in 2017, a 154% increase. Sales of OEM Smart Glasses to Toshiba were 652,000 as compared to nil in the prior year's period when the product was still under development. For the quarter ended June 30, 2018 we reported an overall gross profit from product sales of $670,000 as compared to a gross loss of $429,000 in the prior year's period. The biggest driver for this improvement was our higher overall revenues from which they absorb relatively fixed manufacturing overheads and other related costs. Average gross margins earned on product sales before overheads and other costs that are included in our overall costs of sales was 48% product sales for the quarter, a significant improvement over the prior year's period. This improvement is net of the impact of our contemplated lower margins earned on Toshiba OEM and eye ware sales in the mix. Overall research and development expenses for the second quarter of 2018 increased to $2.6 million as compared to $1.2 million for the 2017 period. The increase was primarily due to additional R&D staff versus the prior year's period and increased development cost spending related to the Blade Smart Glasses for their production trials, external contractors working on the Blade's software, and ongoing new product and technology research. Sales of marketing costs for the second quarter of 2018 increased to $1.5 million from 0.8 million in the second quarter of 2017 due to increased head count and salary cost year-over-year as well as accrued separation payments. Other variances were related to increased advertising, trade shows and travel costs along with increased Vuzix App Store and website costs. General and administrative expenses for the second quarter of 2018 were $2.3 million that's compared to $1.3 million for the 2017 period. The increase is primarily due to increased accounts and related salary and stock compensation costs for the second quarter of 2018 as compared to the prior years as well as the crude separation costs related to the company's former CEO. The second quarter net loss for 2018 after the revision for accrued preferred stock dividends was $6.6 million or loss of $0.24 per share as compared to $4.5 million or a loss of $0.22 per share for the 2017 period. If one were to exclude the accrued one time officer separation costs of approximately $700,000, the 2018 second quarter loss per share would have been $0.22 per share. Now for some balance sheet highlights, our cash position as of June 30, 2018 was $29.2 million, with a net working capital position of $33 million at that same date we believe the company has more than enough capital to operate and execute on its current business plans for the next 12 months. The net operating loss after adding back non cash adjustments for the three months ended June 30, 2018 was approximately $5 million as compared to $4.5 million in the 2017 comparable period. Inventory levels rose further during the second quarter in anticipation of the Blades expected mass production commencement in Q2. We expect inventory to slow with late production and actually ramps up along with volume shipments commencing. Cash for investing activities for the quarter was approximately $630,000 versus $550,000 in the comparable 2017 period. With that, I would like to turn the call over to Paul Travers.

Thanks Grant. In summation, the progress Vuzix has made over the four o six quarters has been stellar. Again in 2017 our sales were largely tied to one product, the M300 and our programs count by year end had reached 350. In 2018 we more than doubled this count to 800 plus with pilot programs now starting to move into productive rollouts. Over the course of 2018 we expect to see continued acceleration of our M300 Smart Glasses business and significant revenue contributions from multiple new sources including the views explained Smart Glasses, Toshiba, AR100 Smart Glasses, OEM sales including Vuzix Blade Smart Glasses, Toshiba AR100 Smart Glasses OEM sales, Vuzix basic video and several new OEM development programs related to our waveguide optics technology that are expected in the second half. Specifically for the Blade we will start to meaningfully ramp production in the third quarter and as we move into the fourth quarter we expect late sales to jump significantly, bolstered by follow-on orders from our developer community and enterprise partners, as well as the commercial Blade product launch through our select channel partners. Our production plans for Blade remains consistent at 10,000 pieces for our first production series and the current build pipeline. With all of these new revenue streams increasing or coming online this year we remain confident that the company is positioned well to deliver breakout revenue growth over the remainder of 2018 and into 2019. With all of this said, Vuzix is just getting started and we are well into developments for 2019 and beyond with several unannounced upcoming new products and technologies and active development. It is becoming more and more clear that our enterprise business is poised for significant growth. Add to this the expected expanding sales of Blade along with OEM sales Smart Glasses in the start of high-volume production of waveguide and the growing list of Tier 1 customers and you have all the makings to establish Vuzix as an industry leader in the rapidly growing Augmented Reality space. Now let me pass the meeting to Andrew to begin the Q&A session. Andrew?

Thank you. [Operator Instructions] Our first question comes from the line of Christian Schwab with Craig-Hallum. Please proceed with your question.

Hi guys, this is Halloran for Christian, thanks for letting me ask some questions.

Yes, hey [indiscernible].

So first, your pipeline of pilot programs was 350 actually in 2017, 700 a quarter ago and now it is 850? Is this a good metric for investors to think about as we try to track your progress?

I mean that's part of the reason why we called it out. I think it is the beginnings of a good measure. These were inbound new opportunities. If I have an opportunity to roll out into real production runs the next measure behind that is conversion of these into rolled out programs. And so yes, I think it's one or two things. You need pilots before. Almost everybody today deploys a pilot first before rolling it into the production processes and stuff, so the pilot will be step one in the process.

All right, perfect and then on the Blades, so we had a manufacturing delay this quarter, but it was encouraging to hear you still expect to manufacture 10,000 units this year. So I guess, in the second half help me understand maybe those 10,000 units what would that mean for shipments?

Well, the production queue that inventories et cetera, especially allow me, et cetera are in place for these 10,000 unit, so we're - I can't guarantee you that we are going to build and ship all 10,000 rolls in this last half of this year, but we probably won't do that, we won’t say a significant reach numbers here. I just don't know are they going eight, 10, nine we're not really projecting and telling people what we think the numbers will be for the latter half of the year but it will be reasonable.

Okay perfect, and then last one here, on your M300s you did $5.5 million in sales in 2017 which a majority I believe was M300s and you expect that to grow off of that, can you help us, give us some color may be on what a magnitude of growth would look like for that?

Well, if you can see the baseline being a continued what it was for the last year although you can see the pilots are increasing faster, you can kind of build in your own baseline from that. And then all of these pilots there's many a large number of companies that we're talking with now that are talking about major deployments, major could be 52,000s of them and really tell us, this is one of the interesting things about where this industry is right now. It's happening, it's just getting off the ground, it's the kind of - it feels a bit like a viral thing where one deployment happens and others start looking and saying, hey we need to get on the ride here. I just means, I can't predict exactly when and how fast that's going to unfold, other than to say without doubt it seems to be growing and accelerating from Vuzix.

All right perfect. And then I guess actually one more if I could sneak it in, on waveguide optics opportunities we're engaging three more Tier 1 potential customers we said, could you help us maybe frame what a potential logical timeline might look for, is this next year, a couple of years our, how should we think about a potential timeline for any partnerships?

It's interesting though, these folks are in, they are in an array of different market sectors, quite frankly. Some of them can get up and running faster because of what those are doing and others take longer. When you are building a brand new product that you've offered before, and it is an marketplace where if you don’t get it right you get punished for it if it takes longer. And I don't know how to describe that, in other places it's, you've just got to do the engineering and it's in a solution that people are ready to consume, so anywhere from a year to potential two in some cases.

All right, that’s all from me. Thanks guys.

Our next question comes from the line of Jim McIlree with Chardan Capital. Please proceed with your question.

Yes, thank you and good evening everyone. Grant, did you say that you did $1.5 million in M300 this quarter, and if you didn't could you show me what you did say and can you compare that to Q1 M300 sales?

Answer to the first question is yes, it’s certainly up, I don't have that right in front of me, but it's probably up near 100% unit wise and dollar revenue wise.

Okay, great.

Go ahead.

I was going to move on, but what else did you have on the 300? All right, I'm trying to understand. the Blade rollout because it seems like we've got, well we have at least two rollouts and I'm thinking it's more like three, so you have the rollouts of the developer, you have the rollout to the consumers and then you have the rollout let’s call it general rollout, where everybody is taking it. And if I understand it correctly, the backlog that you're referring to is the backlog to developers and that's going to start shipping in Q3. I think is what you're saying and then the consumer is Q4 and then we get like, I don't know how to describe it, let's call it a full blown rollout sometime next year is that a reasonable way to look at it?

All right, I think it's a little simpler and little more simple. There is the developer program which is where we're at today and we actually dig ship a very modest number of units in the second quarter. But it will be gone, it will be and in fact now it's starting to ramp up now if you use it here in the third quarter to the developer side of the house. Right behind that developer program is going to be the commercial release Jim and the commercial release, some of these developers that we've got in early products to we’re in negotiations with some of these guys will 500 kinds of unit quantities sort of things, you might consider that a commercial, regular commercial customer enterprises. But then, here certainly Vuzix will be releasing this thing as a consumer ready product, the Companion app will be released with it. There is some really cool content that's coming out right alongside it. So before sometime in the second half and I’m just going to leave it at that, to try to peg these dates exactly, but somehow kind here in the second half Vuzix will be shipping to the general consumer and commercial marketplaces, so it’s really two, its developers and then the world.

Okay, great. That's helpful and I know that there was some.

Yes Jim, it’s Grant here. Just going back to your first question I got it looked up, the increase was 80% Q1 to Q2 on M300 sales.

And that was in dollars or units or about both?

Primarily dollars, unit on growth, some of the bigger volumes go to slightly greater discounts, so.

Yes, got it okay. And then sticking with you Grant, I know that there were some special issues with operating expenses this quarter, so can you help me understand what a normalized operating expense going forward is and if you have some more things to kind of flush through the income statement over the next couple of quarters?

I mean, I think there is – they are going to come down Q2 versus what we just recorded due to some one-time costs in close fine line with Q1. The area where we’re not expecting any decreases would be in R&D because we're continuing to make, continued strong investments there. We just got some good opportunities we're investing in and we're determined to get our next generation products out in 2019, but G&A should come back down a fair bit and sales and marketing should also at this stage.

Okay, thanks and last one if I could, so the Waveguide sales at least according to the 10-Q are around about 125,000 for the first six months, is that a reasonable amount for the second half as well or are we going to start and we see the ramp up next year or is there a possibility that you get a ramp in the Waveguide sales in the second half of this year?

So, there is NRE engineering dollars that are associated with Waveguides and then some Waveguides that roll inside of that Jim not actually how ramp put together I’m not sure Vuzix wants to break that out all that much. I can tell you that engineering programs are around Waveguides and the Waveguides that typically go on with it should be, they should be increasing.

Okay, great. I’ll circle back around. Thanks a lot.

Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question. Brian Kinstlinger, your line is now live. Please address your question.

Sorry I was on mute. Sorry about that. One of the questions I wanted to ask about Toshiba, if I see that math 20% of revenue they have about $1 million revenue for the year which is a little bit behind the annual commitment, so may be talk about how you expect to ramp particularly out the rest of the year and the exclusivity you're providing them.

As we've mentioned many times in the past in the press releases over a 12-month period of time Toshiba in order to keep their exclusive on has a commitment of except $5 million worth of product line I think is what it was like, yes and we’re not seeing a miss in those commitments. They have a 12-month period of time to do that. Their customer base is growing, you've heard some other things I mentioned just a few things it's really hard for us to talk about the details of what happened inside to Toshiba because we're not at liberty and in some cases we just don't know everything that's going on around this program, but I will say they are very positive right now and we expect it to continue and you will, I believe seen more orders and the announcement around those orders as the second half unfolds.

Great and then my other question is relates to pricing. How should we think about pricing in the Blade versus the M300?

The Blade retails are $1,500, sorry M300 sorry, and the Blade retails for 1000 bucks on average we recommend about a 25% average discount when you consider direct sales reseller sales, so you’re looking that $750 net selling price on average expected just wave.

Great, thanks so much.

[Operator Instructions] Our next question comes from the line of Nehal Chokshi with Maxim Group. Please proceed with your question.

Yes, thank you and congrats on a strong ramp there that's very good. Good sign there. I believe that you guys are reentering your guidance that for, you should expect at least doubling revenue for calendar ‘17, just want to double check that that isn't the case correct?

Yes, that's correct, by the way thank you very much. Now it's been a lot of hard work to get here but it is gratifying and great to see the company performing.

Great. I don't believe that you've heard any guard rails on the high end of that, could you provide some color around guard rails on high on what you would expect?

We really can't sorry. I mean, we there's so much potential upside but there's also, when it's actually going to be there it's we're at that point in the game where you're damned if you give guidance and you don't hear that and so at this point in time we're reserving kind of them. I can only say that it's exciting and it's growing.

Great, understood. Shifting over to R&D you mentioned that you have some exciting products as you do every year actually by the way. But yes, you tell the - what idea is that really critical patent that was issued on June 26, where it talks about the development of a replacing the turning grading with a ray of reflectors and I'm wondering if we can expect that technology to show up within the next year or is that more of a two to three year out development there?

So Vuzix actually has filed a significant number of patent applications in just the last year or so. ourselves [indiscernible] 26 patients filed during the quarter and so we had pending, some of them as you just pointed out have issued, would point these things alongside some of the new products that we introduce, we in the last quarter mentioned a relationship with our friends over at Qualcomm. Another relationship with a company called [indiscernible], these are all revolving around next generation products that get us slimmer and trimmer and sSexier kinds of devices and these patent portfolio is a big piece of how that all works.

Okay, there is two critical R&D developments I’m looking for two, one is the increase in the field of view and second one is enabling 3D object projection and ultimately manipulation, could you share with you where you think the priorities of those two particular R&D developments that relative to each other?

Yes, the binocular side of the stuff is definitely on Vuzix’s roadmap and in fact you'll probably see some beyond demonstrations. I mean Vuzix already shows and has stepped you can reach out pick up a little roll back and play with them like they are really there. I mean we have systems that do that today. Productizing that in the form factor Vuzix is not growing to come out with a form factor that you need a Mack truck to carry around with yet and make it work, we think it's critical where ability is first and just like the reason why smartphones are where they are today, it's not because they look at a book anymore. These things to be successful have to look good. There is a huge amount of business even with modest fields of view that real business oriented applications for these kinds of heads up display. We see the very large fields of you being more in the gaming space and we're excited about gaming at some point in time but that's not really where Vuzix are stressed is that said we have optic systems that we're working on that have field to view that should be in the 90 plus degree fields view and the curve Waveguide. So that’s in our queue. It’s out there of that, did I answer the bulk of that?

You did, thank you.

Ladies and gentlemen we have reached the end of the question and answer session and I would like to turn the call back to Paul Travers for closing remarks.

Thank you everybody for joining our conference call. Again it’s exciting times for Vuzix will look forward in the future with everybody and thanks for being an great shareholder. Bye

This concludes today's conference. You may disconnect your lines at the time. Thank you for your participation.