Greetings and welcome to the Vuzix’s Third Quarter 2019 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.

It is now my pleasure to introduce your hosts, Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin..

Good morning everyone and welcome to Vuzix’s third quarter 2019 financial results and business update conference call. With us today are Vuzix 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 certain 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 represent management’s estimates as of today, November 7, 2019. Vuzix assumes no obligation to update these projections in the future as market conditions change.

After the market closes this morning, the Company issued a press release announcing its financial results and filed its 10-Q with the SEC. So participants in this call, who may not have already done so, may wish to look at these documents as the Company will provide a summary of the results discussed on today’s call.

Today’s call may also contain 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 www.vuzix.com.

I'll now turn the call over to Vuzix CEO, Paul Travers will give an overview of the Company's third quarter 2019 financial results of business outlook. Paul will then turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the Company's third quarter operating results.

Paul?.

our M-Series Smart Glasses segment includes both direct sales to enterprise by our internal sales team, our resellers as well as the OEM partners that sell smart glasses to enterprise customers; the Vuzix Blade segment consists of enterprise, security providers and first responders and, of course, the prosumer.

Our third segment is wide guide based OEM projects for commercial and defense opportunities. I would like to try to characterize what we see happening in enterprise for Vuzix and the size of the business ahead of us.

Over the last several years, we have gone from a large number of customers test driving our technology, which has resulted in a handful of modest volume deployments to date of approximately $1 million or more.

If you fast forward to today, we now have grown to dozens of enterprise accounts across various industries and use cases, that each represent more than $1 million of pipeline revenue and that have a good likelihood of being deployed over the next 12 months.

We expect it will be an exciting time over the coming months as this business unfolds, and we can share more. One of our most significant opportunities is with the Fortune 100 retailer that is a very extensive global retail store footprint.

Our M300XL Smart Glasses have been live on multiple stores with this customer, and the data suggests that the order picking using Vuzix's smart glasses is significantly more efficient than the incumbent technology.

Given the competitive environment for online order fulfillment and improvement in picking times using smart glasses is not only a competitive advantage, but when scaled over thousands of stores, is potentially worth hundreds of millions of dollars in savings at scale for this customer and others with similar operations.

For Vuzix, this particular customer represents an opportunity to deploy numerous smart glasses per store, and indications are that this customer could begin an extensive rollout over the coming months. This one has been in the works for quite some time, and it's great to see the efforts finally coming to fruition.

As most of you know, the M300XL has been in various stages of deployment with a large number of customers, and this is one of many that want the M300XL as their deployment platform, even with the introduction of the new M400.

The M400 is truly best-in-class in opening up doors with both new and existing customers, including many that require a more current version of the Android OS for broad deployments as compared to our M300XL. The M400 Smart Glasses received regulatory approval in September for shipment into North America, the EU and Japan.

Production of the M400 coming up from our West Henrietta, New York manufacturing facility continues to scale well, and we are prepared from a manufacturing and software perspective to fulfill the expected volume unit M400 orders from our enterprise customers and partners. Customer feedback to date has also been very encouraging around the M400.

WiFi performance is outstanding. The OLED display reminds them of a retina display on an iPhone. The M400 OLED display is breathtaking. And when you couple its crispiness with the incredible streaming video performance and barcode scanning capabilities, it's one hell of a leading device.

And importantly, the M400 battery life continues to show nice improvements over our prior models. Customers get a device that sits at the top of the food chain in terms of performance when compared to any other competitive offering in the enterprise smart glasses space.

One important feature of the M400 that may go fairly unnoticed due to its size and weight of the device is its ruggedness. We are talking about surviving a 2-meter drop, being submerged in 3 feet of water for 30 minutes and being dust and water resistant, all of which comes with being IP67 rated.

To complement the commercial release of our M400 and with backwards compatibility to the M300XL, Vuzix has developed several new mounting options and an extended life wearable battery. These new wearable options, including hats and visors allow our smart glasses to work all day for almost any worker.

In addition to using the newer Android OS 8.1 required by many customers, the M400 enables AI and other powerful features afforded by the SXR1 chipset from Qualcomm.

Finally, the M400 also is able to coexist with the M300XL, both from a software and accessory standpoint, both of which are being used in several new sizable programs that are expected to be going live very soon.

The Everything-as-a-Service solution from Ubimax, will have a $200 monthly fee with no additional upfront costs, and the solution will include use case specific workflows for applications such as inspection, remote support and order picking.

Both the Vuzix and Ubimax will be offering this solution, and although it has just been announced, we already have inbound interests. At the same time, a few of our other software partners have asked that they could also offer a similar rental or subscription solution around their application. The cool thing here is this is a 24-month commitment.

So for Vuzix, this would represent $1,200 a year revenue for 2 years, which is a big increase over just selling the unit outright.

Regarding our intrinsically safe M-Series and intrinsically safe smart glasses, we continue to work closely with our OEM partner, Eaton Crouse-Hinds on device certification to bring our co-branded and co-marketed intrinsically safe smart glasses to market as soon as possible.

We had mentioned on our last call that this effort was being expanded to include our entire line of smart glasses. At this point, the teams at Eaton and Vuzix have migrated to developing an intrinsically safe version of our M400 Smart Glasses platform to take advantage of the latest advancements built into the device.

Although the transition will extend the introduction of an ATEX-certified device beyond the time frame we previously had indicated, both companies remain focused on delivering the best intrinsically safe smart glasses solution to the market and the M400 platform just really needs to be the one to start with.

Within the security markets, the Vuzix Blade has many of the makings of becoming a disruptive and game-changing product.

We see significant business opportunities at hand that take advantage of the Blade's form factor to assist law enforcement and security personnel in keeping people safe, while identifying suspicious persons or those associated with crimes.

Recently, one of our security partners, SWORD, placed an order for $7.1 million worth of Vuzix Blade Smart Glasses in preparation for its global launch of the SWORD enterprise edition in 2020.

In addition to the deliveries under this purchase order, Vuzix also expects SWORD to begin purchasing initial Blade volumes in early 2020 to support ongoing internal development, regulatory and client testing.

The ability to deliver a video feed and alerts, real-time from the SWORD solution to a Blade wearer literally give security personnel eyes in the back of their heads, while allowing them to stay remotely connected and informed, away from their station.

The SWORD security product is currently being premarketed by a number of their exclusive and nonexclusive resellers and is expected to ship to customers located worldwide in the second half of 2020. For enterprise users, we recently began offering an ANSI Z87.1 safety glasses rated version of the Vuzix Blade.

This new version of the Blade is certified and now shipping, production continues to ramp in this version of the Blade at $999. A $200 premium for the prosumer version is an ideal fit for enterprise customers that require safety eyewear, such as automotive assembly and big pharma.

For prosumers, we continue to expand the usability of the Blade through introduction of new apps, the most notable of late being the Zoi Meet language transcription app and the DJI drone app.

We currently offer 70 Blade apps on the Vuzix App Store and expect this total to expand significantly following the close of our Blade app developer contest this past Monday, for which we received a number of very impressive applications that really appear to take advantage of the Blade's unique capabilities.

From AI/AR work construction training to real-time closed captioning in a movie theater to an auditory vision system for the blind, are just a few examples.

I'd like to spend a few minutes now to provide an update on developments for us in the telecom center, a vertical which represents a significant opportunity for both our M-Series and Blade Smart Glasses. First, our relationship with Verizon as our strategic business partner continues to strengthen, despite our limited revenues with them to date.

Vuzix was invited by the Verizon Business executive team to attend Mobile World Congress Americas and showcase spatial computing and SLAM, powered by Verizon's 5G network on the Vuzix Blade, along with our joint software partner, 1000 realities, as part of the Verizon's 5G built right exhibit.

If you had a chance to attend Mobile World Congress Americas in Los Angeles, you would have heard the CEO of Verizon Business stress the sense of urgency and benefits of leveraging smart glasses and augmented reality within the Verizon Business group for internal use by Verizon and by Verizon's enterprise customers.

Verizon internally has a fleet of 40,000 -- Verizon internally has a fleet of 48,000 trucks in our operations to support their nationwide network, and we expect the team at Verizon to move past their trials and begin deploying smart glasses to support their internal technicians over the next several months.

We believe the internal Verizon opportunity alone could represent thousands of smart glasses of Vuzix over the next year. On the Verizon Enterprise B2B front, we have been developing the smart glasses hardware and a number of software applications as turnkey solutions ready for their customer adoption.

This internal Verizon -- this external Verizon B2B customers' opportunity could be significant for Vuzix over the next year.

We're also working closely with Verizon to capitalize on our successful Vuzix Blade demonstrations, including real-time language translation and cloud-based SLAM spatial mapping in the Verizon G -- in the Verizon 5G lab and Mobile World Congress Americas.

With that said, we expect to deploy Vuzix Blade nationwide in the coming months across Verizon's executive briefing centers and 5G Labs in the U.S. and also Europe.

The executive briefing centers and 5G Labs are used by Verizon to bring enterprise executives from Fortune 1000 companies through to showcase technologies that are ready today or getting ready to be deployed in enterprise.

In addition to Verizon, Vuzix recently announced the relationship with Sprint to support our Vuzix smart glasses connectivity bundle alongside the and Inseego MIFI 8000 mobile hotspot.

Coupling the connectivity and versatility of the MiFI 8000 on Sprint's network will enable a simple and seamless connectivity of the web for remote enterprise workers wearing Vuzix smart glasses.

This will be an important offering as part of our smart glasses connectivity bundle for enterprise workers, as it will provide an out-of-the-box, low friction solution for field service and remote maintenance applications, one of our biggest market use cases.

Sprint, which also has a very large enterprise B2B focus, showcased the Vuzix smart glasses as part of the Sprint work for business at their Mobile World Congress Americas booth.

We are currently engaged with the leadership team across Sprint's B2B enterprise team and 5G technology and strategy group, our relationship with Sprint came together very quickly over the last several months, and we expect it to expand over the next several.

Beyond Verizon and Sprint, we're actively exploring several other business relationships with wireless carriers around the world to deliver new products, including M-Series and Blade based around LTE and 5G and our services with, ideally, recurring revenue opportunities for Vuzix.

Just in September, for instance, we participated in hackathons hosted both by Deutsche Telekom and T-Mobile, respectively, in Germany.

Our vision remains the same for the telco space, and our path forward is to push the competitive envelope by delivering smaller and more attractive form factors that pack increasingly more punch in terms of functionality and performance and that take advantage of the 5G technologies they are rolling out.

On the custom OEM waveguide-based opportunity side of the house, Vuzix has a lot going on. We have several OEM relationships around waveguides that we are either under contract or responding to requests for proposals for. That includes such diverse areas as aviation, automotive, shipping and defense.

On the aviation side, our programs and relationship with our commercial aviation partner continued to progress well.

This project ultimately could represent a significant business opportunity with our partner as the waveguide-based HMD system that we are building for them will not only be qualified for commercial aircraft, but potentially for military aircraft also.

This project is still on track to pave the way for sizable production programs for Vuzix, with sales beginning as early as the second half of 2020.

Further on the waveguide-based OEM front, right on vision, an OEM partner that we mentioned during our Q2 conference call and June PR has been making great strides as a Vuzix Blade-based OEM for their smart ski helmets.

We have been working closely with RideOn to support their technical needs as they ready their product for volume production and commercial release to their customers this winter.

On the process and production development side of the business, again, one of our main focuses during the third quarter was preparing Vuzix to scale our business and manufacturing capabilities are on our M-Series products, led by the M400 and our optically see-through products led by the Vuzix Blade.

We now have 2 production lines up and running, one for the Blade and the second for the M400.

It is wonderful to be able to say that Vuzix products are manufactured in the U.S.A., but even better, by bringing M400 production up in West Henrietta, New York, our costs of goods for manufacturing the M400 compared to the M300XL, is lower than it was from China for the same production volumes.

And at the same time, Vuzix now has much more control over the process. During August and September, we not only prepped our M400 PPT manufacturing production runs, but began scaling for full production at the end of October and are now producing approximately 50 units a day, a rate expected to match our current needs for this Q4.

It has been a challenging transition in bringing up the M400 -- it has been a challenging transition, bringing up the M400 manufacturing line, along with the addition of the third robot assist waveguide manufacturing cell. We doubled the class 1,000, clean space for our waveguide production.

That growth, along with the additional waveguide embossing and stacking equipment also coming online, caused some negative impacts on our production of waveguides and the Blades as they go hand to glove.

Waveguide production is a very sensitive process and the overall environmental conditions change significantly on the plant floor with all this equipment and staff coming online. I can't get into all of the details here.

But as a result of this growth in our facility, there was a significant demand put on our power and environmental systems for the manufacturing floor. It was frustrating for us, but this negatively impacted the yields of waveguide production during Q3.

The facility has now been upgraded and we're able to run our equipment to within the plus or minus 1 degree C required to reliably make waveguides, and we are consistently yielding north of 85% again. This week, production on a single shift is now at approximately 40 complete waveguides for the day.

And with the new equipment we have installed and a few further process adjustments, we expect to soon achieve a doubling of that would allow Vuzix to successfully produce up to 80 Blades on a single shift. It's unfortunate to say that Vuzix shift every single M400 and Blade we could build in our last quarter.

And frankly, we have been on backorder all summer. That said, I believe we are now in a position to resolve this issue and finally start delivering to match our customers' demands and ramp production to fulfill the anticipated customer orders. I'd like to now pass the call over to Grant, so he can walk through our second quarter financial results.

Grant?.

Thank you, Paul. Before I begin, I'd like to encourage interested listeners to review our 10-Q that we filed with the SEC today for a more detailed explanation on some of the quarterly year-over-year variances, as I will be highlighting just a few here.

For the 3 months ended September 30, 2019, Vuzix reported a -- reported $1.2 million in total revenues as compared to $1.9 million for the same period in 2018.

The overall reduction in sales of smart glass products was driven by a combination of factors, including the delivery of a large order to a single customer in the prior year's quarter compared to this year's third quarter, which had no such delivery.

Price reductions of 30% on the Blade as part of our Dads and Grads summer promotion, price reductions of 33% on the M300XL in the quarter, coincident with the launch of the M400, and a further 28% discount for those customers that took advantage of the special M400 early adapters program.

Clearly, we also saw some customer order deferrals in advance of the M400 actual release, which we started shipping in late September, 1 month later than our original goal.

Vuzix Blade Smart Glasses sales continue to grow and represented 38% of our branded product sales in the third quarter of 2019 despite their summer sale and product availability constraints.

Engineering services revenues for the third quarter of 2019 were $0.10 million, roughly flat versus last year's third quarter, with no new programs officially commenced in the period.

Our overall gross loss from sales in the third quarter of 2019 was $0.2 million versus a gross profit of $0.6 million in the 2018s period with the decrease caused by lower sales and a variety of other factors.

On a product cost of sales basis only, our product direct costs were 64% of sales in the 2019 period as compared to 36% in the prior year's period.

The increase resulting entirely from lower selling prices and resulting lower margins earned on our Blade and M300XL Smart Glasses is shifting Q3, including special discounts on our new M400 under the M400 EAP program. The increase in product direct costs in Q3 will not be representative of our overall long-term product gross margin profile.

This reduction should be short-lived as the -- discounts sales discounts have been stopped in Q4, and direct product margin should recover back to over 50% due to the increases in the average selling price across our smart glasses portfolio.

Other factors negatively impacting our overall gross loss with the rise of our manufacturing overheads, which rose to $0.40 million in Q3 2019 versus $0.2 million in the prior year's period.

This increase represents our planned expansion over the last several quarters and additional management and production staff required for our move of M-Series production back from Asia and staff additions required for the M400 volume production launch. Overall, we feel this is a positive investment to be making, as Paul has mentioned.

Our research and development expenses totaled $2.3 million for the 3 months ended September 30, 2019, compared to $2.5 million in the prior year's period. The decrease in R&D expense was primarily due to lower external contractor fees related to the Vuzix Blade when it was still in active development in the 2018 period.

Selling and marketing expense was $0.8 million for the 3 months ended September 30, 2019, versus $1 million for the comparable 2018 period, or down 20%. The decline was primarily due to a decrease in our app store and website development costs.

G&A expense for the 3 months ended September 30, 2019, was $1.5 million versus $1.7 million in the prior year's period. The decline was primarily due to a decrease in salary benefits and stock compensation related to staff reductions and comparatively lower legal fees.

The net loss after provision for accrued stock dividends was $6 million or $0.18 per share in the quarter as compared to $5.3 million or a loss of $0.19 per share for the third quarter of 2018.

The net cash operating loss, after adding back non-cash adjustments for the third quarter of 2019, was $4.5 million as compared to $3.6 million for the third quarter of 2018. Now for some balance sheet highlight.

Our cash and cash equivalents position as of September 30, 2019, totaled $15.6 million, a level we deem sufficient to fund our planned operations for the next 12 months. As indicated on our last call, our inventory levels rose modestly in the third quarter of 2019 to $0.8 million.

Manufacturing vendor prepayments also increased as part of our M400 launch and the move of our M-Series final assembly back from Asia to our New York plant. We expect these levels to decrease going forward over the next several quarters as we manufacture and sell-through our new and existing products.

Cash used for investing activities in the third quarter was $0.2 million versus $0.5 million in the prior year's period. And we are continuing our emphasis on expense management as demonstrated in Q3 with period-over-period decreases in all broad categories, including R&D, sales and marketing and G&A.

I'd now like to turn the call back over to the operator for Q&A..

[Operator Instructions] Our first question comes from the line of Tyler Burmeister from Craig-Hallum Capital Group..

So first, as we think out to 2020 with what visibility you have with some of these larger customer contracts or larger pipeline customer opportunities, is there anything we should be thinking about as far as seasonality or growth trajectory through 2020?.

Tyler, this is Paul. First of all, I just want to let everybody know that's listening in, the Vuzix tried something a little different here with this conference call. We have got a slide deck that was also running if you went to the webcasting of it. If you guys then would like to see that slide deck, you've got some really good images.

It shows the significant changes that have gone on our plant floor. I mean, many of you have visited Vuzix before. I'm sure many of you have seen some of the plant floor, you'll look now this thing is built up. It's got all the quality systems that are needed there. You look at the people, the engineering staff, I mean, this thing is really ready to go.

And we show some really good pictures of what that looks like. Unfortunately, we couldn't show some real close-ups of some areas of the plant floor but there's enough in there, I think, people to get a feel for it. So I recommend going to the Vuzix's website and going through the IR section in our Investor section, you'll find a link to it.

Tyler, for your question. As we said in certain sections of the call, we have upwards of 30 key accounts, let's call them that, that are accounts that are what we would consider beyond just pilots.

These are folks that have plans, it looks to roll out a significant number of our products into programs, similar to something like you saw with the SWORD, but in different areas, from warehousing to field service applications.

And from a seasonality perspective, I mean, it's always difficult from the perspective of going into the December time frame, so that's holiday times for folks. But you should -- it's not -- not a lot of these guys depend upon, well, it's January, so it's swimsuit time, so we're going to buy a lot of expensive swimsuits.

So we shouldn't see too much of that, frankly. It's really just dependent upon when these guys get ready to roll..

All right. Understood. And then maybe for Grant on this one. You made a comment that once we make some of these improvements, you'd see a product gross margin above 50%.

Could you help us understand at what revenue level could we maybe see a total company gross margin upwards of 50%?.

Well, when I refer to 50%, that's at least on a product-only basis. Overall, we expect -- if we can achieve 40% with our overheads and other charges is warranty and freight, everything else that gets included in cost of goods. That would be a more mature level for us. To achieve that, we need revenues in the $5 million to $7 million a quarter..

Perfect.

And then just work and offset, I guess, could you maybe update us on how you think about your breakeven level?.

It's still going to be in the -- on an annual basis, it's going to be in the mid-20s. I mean we're continuing on our cost containment. So I mean, we'd like to bring that down a little further, but it's in line with sort of what we have been saying over the last 12 months, but it's come down a little.

We still have to march forward with our new technology and plans. We're trying to bring that down..

Our next question comes from the line of Jim Mcilree from Chardan Capital..

Paul, in your prepared remarks, you were talking about this Fortune 100 retailer.

And I was hoping you could elaborate on how many stores you're in there? And how long you've been at those stores?.

The effort with this particular firm has actually been many, many months in the making, I mean, we have hinted to this, and customer -- and some customers -- very similar to this customer over the last 1.5 years kind of a thing.

It's only been in the last 3 months or so, that they've been in a position where they've been getting ready and putting it in the stores. They've been doing test runs earlier, but these are actual live picking environments now.

So they've gone from testing in previous off-line kind of things, et cetera, in the stores, but as test events, literally, probably for the last year. But it's been in a live situation now over the last 60 days or so, I would say. And as far as the cam goes, then, as I mentioned, it's -- they're only in their very first few stores.

There are stakes tied in, in Europe, and it's all about testing to make sure that if they decided they could -- if they i wanted to do a global sort of launch, they could do it that way. So they're testing it in some of the key areas..

And the product they're using is the XL -- is the 300XL, correct?.

That's correct..

Have you -- it seems like you've -- it seems like customers are delaying on purchases until the 400 is available. At least that's kind of what I'm reading between the lines of what you're saying.

Is that a fair assessment?.

Not all of them, Jim. I mean this is a particular case in point. What's going to happen here, the M300XL, it really has come a long ways. And unfortunately, the M300 have plenty of issues. We've discussed some of those in previous conference calls and the M300XL software has finally gotten to the point where it's functioning very, very well for people.

And so what's happening as those people that have been able to make it work well, like the price point. It will be less expensive than the M400 is. So when you have somebody who's doing larger deployments, I think we're finding some of them wanted to stick with the M300 XL. And this is a case in point, and there's more than just one.

There's a bunch of them that like the XL. On the flip side of the coin, the M400 is -- it's amazing in how much better it performs in so many areas. And when you're just picking out of a warehouse and you need a nice enough display, that the 300XL does a good job.

When you are doing streaming video services and you are out and trying to get remote support, help the quality of the camera, the quality of the streaming, the quality of the display even becomes a big issue, and that's where the M400 shines.

I think in the long run, the M300XL will certainly not be in Vuzix's product mix because of end-of-life conditions and all sorts of things. But right now, M300XL plays well, you'll see it being deployed in a fair number of cases. I think you'll see many more deployments, though, on our customer-by-customer basis around the M400 coming..

And the decision to develop M400 as the intrinsically safe device with Eaton, was that a new decision, an Eaton decision or a little bit of both or somebody else entirely?.

Well, there was a little bit of both, and it was a little technically oriented. The M400 has some capabilities that M300XL doesn't. The M400 is designed to do higher performance HD video processing and the likes at lower power profiles, believe it or not, than what you can get out of an M300XL even at a wide VGA sort of resolution.

And so when you look at all of the factors associated with the issues associated with qualifying for ATEX certification and the performance of the finished device and you get there, the M400, again, it's just, leaps and bounds, a better product.

And when you look at all of the effort that goes into doing this kind of a certification, it just makes sense for us to really able -- when the M400 came out and they finally could get their hands on it and play with it and we all went through this analysis, it was like guys we should just be doing is on the 400 and get on with it..

And as far as the manufacturing moves or -- I think I heard you say that they are complete or mostly complete? Is that correct?.

The M400 is up and running and being produced daily today, between 50, 75 in kind of a day. So we can make them. And they're coming off the line really well at this point in time. It's -- if you look at the slide deck, Jim, you'll see a lot of images of what the line looks like, you'll see product coming off of it. We are producing M400s now.

The same thing, it's true on the waveguide side of it. There's a lot of improvements that have been done there. You'll see that also on the -- in the slide decks..

There are no other phone questions at this time. I'd like to hand the call over to Ed McGregor for pre-submitted questions..

Thank you, Doug. We had a number of questions here. So let's just get right to them.

Considering your success with Gartner's strategic partnerships, with telcos like Verizon and Sprint, are there any plans to try to get any of them to open subsidize smart glasses similar to the smartphones?.

So a lot of the efforts that we're doing with the telcos today really are on the business side, the B2B side of the business. And there's no doubt there's some stuff happening around the Blade -- in the Blade, even in the consumer side of it, but it's not the mass market product yet.

So we haven't really gotten into those kind of conversations around the Blade series. And on the consumer side of what these guys do, I will say we've got some next-generation products coming, but these guys have seen that, I think they're looking at that could be right in line there. And it would make sense to have those discussions.

But I can't comment further on that one..

We'll go to next.

Can ATEX-certified version of the Blade be made?.

Yes, it can. And as I mentioned earlier, our partners at Eaton is very interested in the line of products that met Vuzix makes to be certified in the long run..

Very good. Next, your main competitors, RealWear and Google seem to be growing fast, potentially double or tripling their annual revenue.

Is Vuzix intending to keep up with their growth or potentially even grow its share faster?.

Let me first say, it's really hard to know what the growth rate these companies have. They are in some ways very lucky that they don't have to deal with quarterly reporting and sharing all of that kind of information. They can fly under the wire and put up press releases and whatever they do, it's within their company. There's no cross checks.

Nobody really knows how fast or which programs are unrolling, et cetera, with those companies. I don't know. I mean, I look at Google as a case in point and if you look at many of our partners, the bigger partners, we don't see them having the Google Glass Enterprise Edition 3 or 2 in many of their things even these days.

I have to say that Google Glass, I still think it has many challenges it has not fixed. That said, I can tell you that Vuzix does see significant growth coming. We'd like to see quarter after quarter growth as we move forward here and significant at that.

If you just look at the modest number of deployments we've had so far versus what the -- what's in front of us, I think you should start to see some pretty significant ticking on that box..

Next, moving to on one of Blade guide based in 400 could be available and does it have a high priority internally?.

Yes. There's no doubt it does.

We've gotten feedback from the Blade from some of our customers that it is the only device they will use in the picking operations that they have and in some of the environments, one for safety reasons, and occluded display that cover some of your vision system can, in some cases, especially if it's a larger occluded display unlike the Vuzix smaller ones, cost and safety concerns.

But the see-through system allows a user consider in the world and have information in the real world and not have to go back and forth to look at another screen, even the occluded display on an M300 or 400, you look inside of it, you see what's going on.

You make a decision, you try to remember and then you go back to the real world to make decisions. And in many places, we're hearing from people that, that disconnect makes the user try to remember or have to remember what this next function that he should be doing. Picking 5 out of box 1 or picking 5 out of box 2 is an example.

And that when you are picking all day long, and those numbers are going up and down, you often can get accounts wrong and it can be a big deal for people. So I can tell you that the waveguides in enterprise are a big deal for Vuzix. It's a big push for us. And I can guarantee you that there is an M4000 actually is the part number for it.

Anything with 1,000 typically at Vuzix, it's represents a waveguide style device, and that is well underway at Vuzix. I can't tell you when it's coming, though. And in fact, we've been very cautious about how we introduce this and the timing for it.

We think it will sell alongside the M400 and 300 just the same, but we do think it's got some significant advantages, and we don't want people necessarily waiting..

Very good. Next. The recent company blog regarding working on a Global tier 1 aerospace firm to build a customized commercial avionics waveguide base HMV system, it's quite similar to the new top MAX product towers recently discussed. As we decide new products..

Yes. We really can't comment on the specific programs that this aviation customer is involved in. I can say they're really happy with what we've done so far. What we've delivered, they've been sharing with their customers already, and their customers are just like wow, this is just what we need, for a lot of reasons.

With our waveguide systems, you can replace the waveguide in the field. It's much easier on maintenance. The display system itself is beautiful, et cetera. And I can say that what they're doing is pretty similar to the kinds of things that are in that blog but I can't comment further.

I hope sometime in the new year, we'll be able to share more in that regard, though..

Okay. And our final question, and I think we covered a lot of this on the call in some of the things we've said, but are there any potential catalysts -- additional catalysts, I suppose, that you could share with us that would help investors exercise rotation with investment in the business..

Yes. I think we have made a nice announcement today with our partners at SWORD. And we mentioned there's a whole bunch of companies now that are representatives of some significant rollouts that we see coming. I think you ought to be able to look forward to a lot of that, there will be public announcements around those.

It's really hard to comment when and how fast they'll be coming, but I can only say we're really excited about Vuzix, quite frankly, with the fact that our plant floor is able to deliver what we need, cost containment, et cetera, on the production side of it. And these companies now are coming saying, how can we get products.

So you should see a lot of catalysts coming. And with Vuzix being able to deliver against it unlike our third quarter efforts associated with Blade and the likes..

And I guess that's it for the questions, everybody. Thank you very much for the -- for participating in the conference call, and we look forward to sharing with -- more with you as the coming quarters unfold..

Good evening..

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day..