Vuzix Corporation (VUZI) Earnings Call Transcript & Summary

Hello, and welcome to the 2020 Annual Meeting of the Stockholders of Vuzix Corporation. Please note that today's meeting is being recorded. It is now my pleasure to turn today's meeting over to Paul Travers, CEO and President of Vuzix Corporation. Mr. Travers, the floor is yours.

Thank you, operator, and good morning, everyone. I'm pleased to welcome you to the 2020 Annual Meeting of the Stockholders of Vuzix Corporation. Today's event is a virtual-only meeting and is a live audio webcast. We believe in engaging with our stockholders safely during the COVID-19 pandemic, and we hope that this virtual meeting will maximize the participation of stockholders regardless of their location. Thank you very much to those who are participating in our virtual meeting online today. I call your attention to the rules of conduct set forth for this meeting. These are available to each shareholder in the files section in the lower left of the screen. If you need a copy of the annual report or proxy statement, the links are provided online. Shareholders who have signed into this meeting using their control numbers may submit questions online by clicking on the dialogue icon in the upper right corner of the meeting center screen. Grant Russell, our Chief Financial Officer, will act as inspector of elections in the tabulation of proxies and ballots. Before reviewing the business of the company and responding to questions, we'll conduct the formal part of the stockholders meeting. The Board of Directors has fixed the close of business on May 7, 2020 as the record date for stockholders entitled to notice of and to vote at this meeting. A copy of the notice of this meeting, together with an affidavit that the notice was mailed on May 13, 2020, to each stockholder as of the record date at each stockholders address as it appears on the company's record of stockholders, will be filed with the minutes of this meeting. A list stockholders entitled to vote at this meeting is available for examination by any stockholder desiring to do so. Mr. Russell has signed his oath of inspector of election and it will be filed with the minutes of this meeting also. The count of shares present immediately prior to the commencement of the meeting indicated that more than 71.8% of the outstanding shares of common stock of the company, inclusive of the Series A preferred stock held by Intel Corporation on a as-converted basis are present in person or by proxy. I declare that the legal notice of the meeting was given and that a quorum is present at the meeting. On behalf of the Board of Directors of the company, I would like to express my appreciation to all stockholders who returned their proxies. The first matter to be acted upon by stockholders is the election of 5 directors, each to serve until the 2021 annual meeting. I will now entertain a motion with respect to this matter.

I, here, Mr. Steve Ward, I hereby nominate Paul Travers, Grant Russell, Timothy Harned, Alexander Ruckdaeschel and Edward Kay for election as directors of Vuzix Corporation to serve until the 2021 Annual Meeting and until their successors have been elected and qualified.

Grant Russell speaking. I second the motion.

The following persons have been duly nominated for election as directors of the company: Paul Travers, Grant Russell, Timothy Harned, Alexander Ruckdaeschel and Edward Kay. Since no other stockholder has duly notified the company that he or she intends to nominate a candidate for election as a director, as is required by the company's bylaws, I declare the nominations closed. The next item of business is to consider a proposal to ratify the selection of Freed Maxick CPAs, P.C. as our independent public accounting firm for fiscal year 2020. I will entertain a motion with respect to this matter.

I hereby move that the appointment of Freed Maxick CPAs, P.C. as the independent registered public accounting firm of the company for the year ending December 31, 2020, be ratified.

I second the motion.

I will now bring to vote the election of directors and the ratification of the appointment of independent registered public accounting firm. The polls are now open for balloting. Again, if you have not voted or wish to change your vote, you may do so now by clicking on the link provided online. Any shareholder who has already voted and does not want to change their vote need not take any further action. At this time, does anyone need assistance accessing the online link for voting? [Voting]

The online voting will now be closed. I declare the polls closed, and I request that the inspector of election report on the tabulation as soon it's available. Now will the inspector of election please report the results of the balloting?

A total of 27,342,014 shares, 71.8% of eligible voting shares, inclusive of Intel Series A preferred stock on an as-converted basis, totaling 4,962,600 votable shares, is represented at the meeting, either by proxy or in person, representing a total of 96 proxies cast. The proxies and ballots have been counted, and more than a plurality of the shares present in person or by proxy have been voted for the election of the 5 directors nominated for that position. The proxies and ballots in connection with the proposal to ratify the appointment of Freed Maxick CPAs, P.C. as the company's independent registered accounting firm for fiscal year 2020 have been counted, and 98.8% of the shares present in person or by proxy have voted in favor of the proposal, 0.7% of the shares present in person, by -- or by proxy have voted against the proposal and 0.5% of the shares present in person or by proxy have abstained from the vote on the proposal.

Thank you, Mr. Russell. I declare that the nominees for election as director have been duly elected, and that the appointment of Freed Maxick CPAs, P.C. as the company's registered public accounting firm for 2020 has been duly ratified. That concludes the formal portion of the meeting. I will now give my presentation and business update. Shareholders can submit questions online during the presentation or at its conclusion by clicking on the dialogue icon in the upper right corner of the meeting center of the screen. We will address submitted questions during the subsequent Q&A session. Let me begin with my update to stockholders. First of all, let me say that a virtual meeting for Vuzix Annual Shareholders meeting is pretty different. We really enjoy having everybody come to the office and/or getting together in person to see some of the latest things and the stuff that's going on with the company. We're a very visual kind of company and seeing is believing. And -- in of late, it's even more impressive than it's ever been at Vuzix. So we are looking forward to next year at the Annual Shareholders Meeting, where, hopefully, we're able to get together and share with everybody a more personal and intimate, what's going on at Vuzix. That said, it's exciting times at Vuzix. This slide deck is a fairly comprehensive slide deck. And a lot of -- everybody here knows some of the slides from the past. So I will be skipping over just briefly some of these slides, and I'm going to try to focus more on the latest things that are happening at Vuzix and how it's impacting Vuzix' business. Of course, it's all the cautionary statements regarding forward-looking statements. You all know we're out of Rochester, New York. This facility that you're seeing here is designed to manufacture all of our products today, but most importantly, our next-generation waveguide-based optical systems and the likes, which I'll share a fair bit about coming up here. This market is a market that everybody talks about being massive. But I can tell you, it's just getting started. There's been a lot of companies that struggle and try to get through the gauntlet to get to where products are actually acceptable and viable in this marketplace. Vuzix is one of those that has succeeded and is beginning to succeed very well as one of the leaders in this space, and this deck will help explain some of the reasons why. To address the marketplace, you all know, we have a series of smart glasses products. We believe they're leading the pack. The M400, we don't show up here. These are all waveguide-based products and part of the reason for that is we really do believe optical see through systems are the future of this industry. That said, our M400, which is a sister to the M4000 that you all seeing here, this is the optical see through one, the M400 is, right now, one of the flagship AR smart glasses in the marketplace today. And there's a good reason for it that's able to deliver on many, many aspects of support around the COVID mess that the world's dealing with today. We see these products, the M-Series products as a significant play in the enterprise space. And if you look back at that previous slide, you can see it's billions of dollars’ worth of market opportunity, and that's how we see our M-Series products addressing the marketplace today. I'll share a bit more shortly on that. The Vuzix Blade are our first pair of glasses that actually look like a conventional pair of glasses. Albeit, they're a little bit chunky today, I'm going to show you the path that we're on to turn these things into glasses that look very much like the Kingsman style of glasses on the movie Kingsman or Oakley fashion-based glasses. And then finally, because we have all this waveguide technology at Vuzix that we've developing over all these years, there's a big portion of our business that's starting to revolve around OEM solutions. It's modest just yet, but it's going to possibly turn into a very big piece of business with Vuzix. We manufacture our waveguides here in Rochester, New York. There's a lot appeal for that for some of our customers. I'll describe that here shortly also. And we can manufacture because we've developed all the processes inexpensively so it will appeal very well also for the larger mass market opportunities. Continuing here, everybody's heard of the COVID mess. In fact, the reason why we're having this call over -- virtual call is because, unfortunately, we really -- it's difficult to get together with everybody. Well, that has impacted business and organizations around the world, from medical to getting out of your office and trying to get back to work. Firms are grounded. They can't get on an airplane to fly -- the U.K. right now, for example, is a 2-week stay before you can get off the quarantine area to go back in to do business there. That's kind of happening around the world. And the pandemic, in some areas of the world, is accelerating significantly. So it's going around for a while. That said, there are companies that are saving billions of dollars in travel because of COVID. So in some ways, if you can get business done over the Internet and connected as opposed to putting a person on the plane, people are beginning to realize they can save a lot of money doing this. And so there's becoming this new normal thanks to COVID. There's going to be less people flying, and there's going to be more people doing remote support using smart glasses to fill the need. Why send a person on a plane when you can send a pair glasses? We're seeing that as a big shift in the way the world's moving here. The same thing is true when it comes to education. If you don't want to have to, in a college, have students sitting in a lecture hall, 500 students in a lecture hall, and you can teach that same information using smart glasses, that's a shift that we're seeing happen. And then finally, in the medical space, COVID is a huge problem. None of the hospitals want people in their hospitals that might have COVID, that might have the ability to spread COVID. And when there's a mess with the ICU units, they are now using smart glasses to help communicate, to help people do -- from intubations right on through to even keeping the equipment running correctly to help people and save lives. And we'll describe a bit more here, but we have hospitals that are now using our glasses 24/7. So this is a big change -- hold on here, I'm pressing the wrong button. Here we go. So as you might imagine, the demand in telemedicine has been growing for Vuzix' smart glasses. We have companies like Gemvision and 1 Minute Innovations, their business just keeps growing with the need for their solutions around our smart glasses for remote support in health care and telemedicine applications that just continues to grow. We have hospitals like Johns Hopkins and many others that are using our glasses in ICUs, right on down doing patient rounds in the morning. The University of Louisville is another good example. In Taiwan today, our glasses are used routinely in the ICU. A doctor can be in another hospital. He has a patient that's having a problem. The person that is attending that patient literally just slides on the glasses, taps the side of the glasses once and he's talking with the doctor to get help. And the other piece about this is because this doctor is doing remote support help, telemedicine is completely being reworked and there's abilities now to even charge for that support, which in the past, they couldn't do. Another example is our glasses are lightweight enough, like around 2.8 ounces, as an example. What -- doctors can wear these things right through a full 16-plus hour operation and train and teach people because the resolution is so nice. And you can see, although this picture is probably not coming across very well, that's a full HD image. You can even see in that image in the bottom right-hand corner there, the sutures that they're using to sew this person up. That's how good a job the M400 does on streaming live stuff that might be coming out of a hospital operation. You can see this gentleman over here in the far right, bottom far right, he's got the M400 on. And at this same time, he's wearing all these other gears so that he can see a magnified version of what he's working on. And while he's doing this, it's all streaming live off the glasses. It's pretty amazing stuff. Again, health care professionals, it's around the world. It's not just in the U.S.A., but, example I just gave you, Taiwan. It's people in Japan. It's -- again, all over Europe people are starting to use these glasses, and are finding great utility for them. So the business activity for Vuzix in Q2 has been accelerating nicely. We're experiencing a fluid strong growth, and we expect our Q2 revenue numbers to handily beat our Q1 numbers. Mind you, Q1 had some challenges because the COVID hit towards the end of Q1, and that impacted our quarter in Q1. That said, we have had significant jump in our revenues, especially associated with our smart glasses in these sort of COVID-related kinds of use cases. But I have to say, it's not really just COVID. Our smart glasses have always been good at remote support. The problem is it's been hard to convince companies to just not keep putting people on airplanes. When companies, because of this mess, have saved over $1 billion, some companies, and not putting people on airplanes, the use cases come out loud and clear that smart glasses are a great way to solve the problem of getting back to work. Increasing order frequency. If you look at our Q2 reorders of the top 30 accounts we have, they are 3x last year's Q2 numbers. It's great. It's -- a lot of folks have said repeat orders show us that the business is starting to accelerate and this is a prime example of it. These companies have been working hard to bring this stuff online and COVID has forced the shift to happen quicker, and Vuzix is taking advantage of that. Our business is really cranking nicely, primarily related to the COVID, but COVID was just the catalyst. The idea of remote support. The idea of fixing equipment without having -- actually having to be there, helping an expert in the field. The idea of being in a hospital and communicating with others from expert advice, it's always been there for our glasses. It's just now becoming the new normal, and it's great to see that Vuzix has the ability to solve some of these problems. And we believe that it will continue. It's not just about COVID here. This is about the new normal. I'm sure you've all heard that sort of saying before. And Vuzix is going to be a significant part of that new normal. The M400, this is our flagship. What's great about it? This camera that it has on it is a 13 megapixel camera, 12.8. It's got image stabilization. So when you're wearing it, if you're moving around, even just a little bit, it stabilizes it wonderfully. It's full HD. And in fact, you can record broadcast quality video in the glasses. Like we've said before, it's IP67 rated, and this is important. You can clean our glasses with alcohol wipes, with Clorox Wipes, so they can be disinfected to be used in many of these kinds of environments where COVID's issue. There's a lot of companies today that are trying to use virtual reality systems for trainings and the like and many of them have had to stop using the glasses because there's no way to clean them from use to use. That's not the case with Vuzix' smart glasses. So this guy is currently shipping. And the reason why it's like besides it performing so well and it's so lightweight, is there's all these different ways you can wear it. This resonates well with companies. You can put it on left eye, right eye, hard hats. You name it. These guys are lightweight and they work. And when you compare that -- excuse me, jumping ahead a little bit. The Vuzix M4000, which is coming right behind the M400, in fact, it should be shipping here. This week, our first DVT units, which is -- this is basically the first stop before production. Production will be happening here sometime early in the next quarter, maybe even in this quarter, although it's right on the edge, but these first units are shipping out of Vuzix, we expect, this week. And it's optically see through now. What's nice about that is, an example of that operation that we showed earlier where the gentleman, the doctor was wearing our glasses, he has to adjust the camera slightly above the eyepiece, slightly above, so it doesn't obstruct his vision of the operation that he's working on. With these guys, you look right through them. So you can see, nothing is in the way. And you can turn the camera feed on or off and just put a reticle up so you know what it's looking at. The other thing is this guy's got an Android upgrade. So it's going to be running with OS9. It's got a 16:9 aspect ratio. So it's a significant jump when it comes to the optical see through side of things. The base platform though is identical to the M400. So if the software that you're using today runs on the M400, it will run on this device. So this guy hits the ground running with all kinds of application support out of the gates. And of course, if you take advantage of some of the advanced features, you have to size customize some of your software, but we have companies already looking at and working on doing that with users. And this is what we're up against. I mean, if you think about trying to be in an operation with a HoloLens, which is the second one from the right there. First of all, it runs for about an hour, and then you have to recharge it, maybe 1.5 hours. Cameras are designed more for spatial computing, which means they're not really all that great for streaming video services. You can't easily clean this for the next doctor to use it. They're a pound and a half and you have to crank them down on your forehead so they're very uncomfortable to wear. That -- those points ripple across the screen here. All of these other products haven't taken into account those kinds of issues. And Vuzix' has, which is why ours is really becoming a standard in many of these COVID related use cases. Continuing. The other thing that we think is important is providing the solution at Vuzix. We have a team of software folks here at the company, and we have been developing software as a solutions -- applications for our glasses. Today, you can buy a Zoom connector from Vuzix and pay an annual fee for it. We have a piece of software called Vuzix Remote Assist that's getting ready for a big upgrade here. Below that, you see WebEx Teams, we have Skype connectors. All of these things are pay per month or pay per year sort of opportunities that we offer around our smart glasses. And they make it plug-and-play for people. So it's really, really easy. In the case of the hospital that we just showed you in Taiwan, they're using WebEx Teams. We have this launcher that we provided. It's a piece of software. It's an app that you run on the glasses and you can pick any one of these applications to be the default. So what happens now is when I'm the operating theater or in an IPU, I pick up the glasses. When they turn on, boom, they are instantly in a WebEx team meeting. Simply -- press of a button and you're talking to somebody. It turns these glasses into a WebEx Teams pair of glasses. So there's no screwing around. There's no dealing with an OS, there's no dealing with clicking on buttons and stuff. They just plug-and-play work for people. And when you're in many application areas, even if you're a technician in the field and you know how to use your phone, but you don't like to screw around with computers, these glasses can be configured now so that they become the WebEx Teams or the Zoom pair of glasses. It's a really big improvement. And then from a perspective of the markets that we sell in, these top two -- the warehousing and the manufacturing, unfortunately, COVID has slowed things down here. I mean, there's a lot of companies that don't have people even in their plants right now. I will say that in that space, we have some people, as an example, in the fashion industry that make fashion-based luxury goods that are now using our glasses on the plant floor. Their employees that are doing the work wear the glasses and the expert can sit at home and dial into the plant floor to see what's going on and make sure that the equipment is being operated correctly, and that the luxury goods are being built correctly. In some of the cases, every stitch counts, right? So it's really important that somebody is making sure that they're getting out of the design -- the manufacturing of the particular design correctly. Field service and telemedicine, the ones below the line, these are application areas that this new normal that we're living in is thriving in. Our products are really helping solve big problems in these 2 areas and we've recently released versions of these connector applications that have the speech recognition turned on, so you can run them by voice, so they're hands-free. And we have these amazing noise canceling microphones built in them. And if you're on a bottling line, let's say, you maybe got 90 to 100 db of noise of this bottling line rattling around. When you talk through the glasses, you come through clear as day to the person on the other end because the noise canceling mics do such a great job. And then there's a new opportunity that's emerging in the area of first responders. It's also related to people getting back to work, and we're going to share more about this coming up here over the next month or so. There's some nice press releases I think we have coming out that will describe this better. But it uses the same concept. It's first responders on the scene, see what I see kinds of stuff. It's classic for Vuzix' AR smart glasses. So the return on investment for the stuff above the line, it's also significant. And when I say above the line, if I go back to that chart, that showed the 4 markets, manufacturing and warehousing and the likes, these applications should be driving significant business in the smart glasses space. It's just like remote support. It takes time for these things to grow and to finally get deployed. But we believe that as the world comes back to work, we're going to see many of these areas that Vuzix has been working on in the past really start to kick in. So the Vuzix Blade smart glasses. We're all familiar with these guys. There are the coolest pair of smart glasses that are out today. They have the best look and feel of anything that's out there. I will say that we are getting ready to release an upgraded Blade. I'm talking like within 45 days kind of a thing here. And the upgrade comes with built-in stereo audio and autofocus cameras. And one of the Achilles' heel this guy has had in the remote support kinds of applications, many of the applications that require the use of the camera actually, having a fixed focus camera just kind of is an Achilles' heel. And the other piece is, we ship it with a Bluetooth pair of headphones and most people don't like using those headphones. So this upgrade, again, will be shipping here shortly. And you can see, it's an amazing change in how these guys work. The autofocus cameras and built-in stereo audio are going to open up the enterprise markets, we believe. The stereo audio design is fully integrated and hidden in the frame. If you look at these glasses here, they don't look any different than the current Blade does. But if you look closely, you can see there's 2 little tiny holes here and then integrated into this temple is a audio speaker system that just -- it sounds amazing. It's significantly better than technology like the bone conduction kinds of stuff that's out there. Bone conduction, if your hair gets between the sensor and your skin, you can't hear it. If it's not positioned just in the right spot, you can't hear it. Most speaker-based systems are giant speakers that look like a box of rocks. Here, we have been fortunate enough to come out with an amazing design that just -- it sounds fantastic, and it looks great in the glasses. We've got enhanced speech also that's coming online. We have a new collar battery that you can purchase today, even -- that gives you up to 10x the battery life that's in the glasses themselves and the prosumers and enterprise alike have been asking for these features. The Blade form factor makes it by far the best and possibly only solution for some of the markets that we're in today and with these new voice and the likes coming on board, and the camera running the way it does, the controversial facial recognition area, which we believe is not going to away, is going to be supported much better, and it's going to be all hands-free. If you think about now, leaving your phone in your pocket, really becomes something. You have your phone in your pocket, this guy has noise canceling mics built in also, and it now has the speakers in this really cool looking form factor. So you won't have to take your phone out for picking it up or doing most anything else. And even watching multimedia now becomes a wonderful experience. You almost don't want to take them off because the audio sounds so good. And finally, our SaaS-based applications with the connectors and remote support all will be enabled here by summer when this thing starts shipping out shortly. On the OEM side, Vuzix has been putting years, maybe the last 20-plus years in developing this technology around smart glasses that we think put us far ahead of the competition today. And there are competitors that are using their own sort of stuff. There are some competitors in the waveguide side of the business, but they all have some level of Achilles' heel. Vuzix has developed this technology here in Rochester, New York. We have 157 patents and patents pending, and we have some cornerstone licenses in place. And with it, and our proven track record of delivering in the defense markets in the past and the likes, our OEM business is really starting to grow. We really have only hung our shingle out since we started shipping the Blade, because the Blade was the first product that we've built waveguides in them that can be commercialized. So our OEM opportunities are ranging from derivative designs right on through to full custom solutions that we have. The products are designed and assembled here in Rochester, New York, and our facility now is ISO 9001 certified. And so we're becoming a solutions provider of choice. The technology is manufactured and designed in the U.S.A., which you'll see, especially for some of the defense-related customers that we're working with, this is a big deal. These programs that we're doing, it's not just -- well, like somebody comes and buys a waveguide from us. Typically, what happens is somebody comes and says, "I need this, can you quote on it for us?" We quote on it. Their RFQ gets a response from us that includes what we call nonrecurring engineering fees. These are fees to do the design and development work and it's $0.5 million to millions of dollars’ worth of fees that we're seeing. And we've gone through that with multiple programs so far. We have a whole bunch that have been quoted. More than a handful, several handfuls worth of other engineering programs and NRE programs that we believe are going to result in the OEM businesses for Vuzix. And some of this stuff, we've gone far enough along that we are negotiating supply contracts, and we're getting ready to deliver in volume. To give you a feel for the size of the business opportunity, we might sell an engine for between 3 -- no, let's say, $2,500 to $5,000 per engine, and it might be in a marketplace that could be in the tens of thousands of pieces. So this is going to represent -- could represent a significant piece of business for Vuzix, and it seems to be accelerating for the company. And they're coming to Vuzix again because of what we can deliver now. Our next-generation products and technologies are where these folks have their mindset. And it's because we're doing all of this waveguide technology, optics and engines in Rochester, New York. What you're seeing here is one of our newest waveguides. This is the one that's going on our M4000, which is the really cool smart glasses for enterprise coming up. And again, this is all done in Rochester, New York. We know waveguides. We know what -- we think better than most. You can do design and layout. That's all at Vuzix. All of the equipment to do the production. It's not an out of house thing. We don't have some Chinese company that's manufacturing for Vuzix. The robot assist equipment, the vision systems, the alignment systems, everything is developed at Vuzix. The mode of creation, in-house etching, highly repeatable, long life on the turns, quick turn at the same time, the metrology, process IP, the materials, all of this is done at Vuzix. And I don't think that a lot of folks really realize how far ahead Vuzix is in this part of the space. We believe that when it comes to making glasses that are finally going to look like Oakley style fashion glasses, this is the kind of tech that's going to be really trying to get there. And there's a reason why it's not inexpensive to make this work because it's hard stuff to do, but Vuzix has years and years of experience, and it's all developed and designed here in Rochester, New York. Now I've got to give you guys just a short feel for this. This is metal mold creation. This is -- this -- all of this equipment, which is in our Class 1000 clean room area at Vuzix. A Class 1000 clean room is one of those clean rooms where have to be in a bunny suit to go into it. In this facility, this equipment that you're seeing here, much of it is custom-built for Vuzix. Like this ion beam etch device that's over here on the far right. That thing is maybe a $2 million, $2.5 million piece of equipment with all the modifications and stuff that we've done to it, and it has been designed to etch literally 150 nanometer features in the surface of quartz plates. Those quartz plates become the molds that we replicate off of to actually build the waveguides that you saw in the earlier picture. This is all equipment, develop, design, processes, everything here in Rochester, New York. Continuing. Once you get the molds made, you then need to emboss and replicate off of them. This is also in Vuzix' facility. This Class 1000 area in here -- maybe actually, if you guys can see my mouse pointer or not, but in the center section of the floor there, you can see there's a 1k. That area is the area where we emboss. Emboss. What's that mean? You take a plate, which is the blank waveguide, and then you somehow impose on it or emboss into the surface of it these nano features that moves the light around inside this plate to create the heads-up display experience you might have in a fighter pilot's cockpit, but in a lens that fits in a pair of glasses. All of that tech is right here in Rochester, New York. Then finally, the final assembly of these plates. Once they're built, they get put into a stack. And all of this equipment, the stacking, the materials, et cetera, it's done in Rochester, New York. And right now, we have 3 pieces of equipment that are running, and you can see, we have reasonably capacities already -- and out of our manufacturing plant. And it's very easy now. Like I said, we've just brought online our third machine that does this replication equipment. So it's easy for Vuzix to stamp and repeat that. What does all that mean for Vuzix? Well, you know we have relationships with Qualcomm. They make some of the coolest XR silicon that's out there today. That's just silicon designed for mixing augmented reality glasses. The waveguides, really getting good at this. They're getting thinner, they're getting lighter. It can be done on polymers and not glass. We're support -- excuse me, minimizing the light leakage out of the front side of the glasses, and we're getting wider and wider fields of view. So these things are getting really good, the waveguides in the middle at getting thin, lightweight and able to change the angles and dangles of how the light goes into them so that we can make fashion-based glasses. That's only a piece of the puzzle though. You also have to have a display engine that drives these things. And if you look here on the far right corner, over the far right side, custom display engines are what's in Vuzix' future. That engine that you see at the top, there's 3 of them in a row there. The very top one, that's what we call COBRA. And if you look at the temples of the Blade today, the reason why they're as large as they are and they're as chunky as they are, is because that's the display engine that we use. That display engine is a DLP display engine. That's from a company called Texas Instruments. It literally has 1 million-plus pixels on the surface of it. And each one of those pixels represents a display pixel picture element in the image that you're going to show to the world inside the glasses. This thing draws 2 watts of power. Every single pixel is on all the time. It's the size of a Wrigley spearmint gum stick pack, an entire pack. It's big. And that's what drives the power consumption, much of the power consumption and size of the current COBRA. Vuzix has been working with some partners on microLED technology, more than one, and we will be, by mid-summer, in a position where we have full color microLEDs in a multi panel design. You can see this 0.13 inch microLED down on the bottom, the Blade Cobra engine is going to shrink for that little tiny thing. And I can't say exactly when product's going to be available, but I can tell you this is not 5 years away. It's not 10 years away. This is stuff that's like right around the corner at Vuzix. We have working versions of some of these displays right now here in Rochester, New York with our waveguides and they're quite amazing. This stuff is going to fit in the glasses that look just like a conventional pair of Oakley style fashion glasses. If you take a look here, you can see in the very first picture, you can see a temple on thinner glasses and then you can see this -- the part that you look through in the front. You notice that angle's not 90 degrees. Many of our competitors, it's straight in. So their glasses look much like a pair of 3D shutter glasses. HoloLens, it's square. The display comes in square to the waveguide then it comes straight down in the front. That's never going to make sexy. You can see the Cobra in the center image there, the Cobra, which is the green section on the far right, that's the size of the Cobra, which is our current engine. That's going to be replaced with that little tiny engine I showed you on the previous page and with it, the glasses are going to become as trim as what you're seeing here on the far right-hand side. This is just the first incarnation of an industrial design that Vuzix is playing with, but this tech is right around the corner for Vuzix. And it will be exciting as we announce more here between now and the end of this year around this technology. It's game changing. We've got a wonderful business and enterprise today. But on top of that, I believe we own the technology to create the future of this industry. There are some very big companies out there right now that tell everybody, "Oh, it's another 10 years away." Well, Vuzix begs to differ. We don't believe that it's another 10 years away. It's going to come much faster than that at Vuzix. So our next-generation waveguides are using our advanced ultrathin waveguides, these microLEDs, the lower power; 2, again, 2 watts for the Cobra, the engine that's in the current Blade. This can be 250, 300 milliwatts and put out almost 3, 4, 5x the light. It's amazing. Lower cost. That little piece of silicon, I can't tell everybody what it is but you can put a lot of those little displays on a 300-millimeter wafer. So you might imagine that this number compared to the upwards of $100 for the DLP engine, this thing is a fraction of the cost. And of course, it's going to make slimmer form factors. It's designed around the latest eyeglass materials with our first version that we're talking about. So these fronts, we can make them with tortoiseshell to the latest and greatest. It's flexible for multiple sizes. Of course, we have an amazing ecosystem that we've built around the Blade today in our current smart glasses. We have an app store that's got over 80-some odd applications in it today. And we've got all these APIs. These guys will roll right through that. This guy, we're anticipating, will have some more advanced sensors that look out the front to allow you gesturing and that sort of stuff. And then finally, LTE and 5G are going to be part of our future. When you can tie into these networks with a pair of glasses, most of the wireless providers start to salivate. They're all looking for ways to build and to -- for ways to open up new market opportunities. And so when you put cellular connectivity with a pair of glasses, it changes the world. It has the potential for it. So just to recap here. It's an exciting time at Vuzix. Our enterprise business is really starting to take off. We're seeing it grow significantly. I'm looking forward to share our Q2 numbers with you when we report here at the end of the quarter. We see it doing nothing but growing right now. We don't anticipate that this is going to slow down for us. The OEM side of our business is also starting to take off. And then finally, our next-generation waveguides are right around the corner with these micro displays. So in 2019, it was a transitional year for Vuzix. We completed moving our manufacturing out of China to the U.S.A. We commenced volume production of our M400 and Blade smart glasses, and shortly, Blade enhanced and M4000, will be in the market. We achieved ISO 9000 certification. We've enhanced significantly the number applications and applications that we are getting annual and monthly revenue fees out of. And we've successfully migrated many of our earlier customers that are M-Series to our M400. 2020, our operating objectives, we continue to lead in the enterprise smart glasses market. And with some of these products that we have coming, we think that, that will only accelerate. We're expanding the sales and deployment sizes and orders for our M-Series glasses. I'm going to describe just a little bit more on the last slide what that means. We're seeing wider adoption. We're commencing volume shipment of our M4000 shortly in the second half. We're introducing the new and improved Blade. We're further ramping production of our waveguides for Vuzix' own products through our defense partners and other OEM customers. We're increasing the software attachment rate in total revenues for each sale of smart glasses. It's often now people don't just buy the glasses. They buy the glasses and they buy some kind of remote support application for it at the same time. We still sell plenty of glasses, but we sell solutions now more so, and it's sticky. When you sell something, it solves a problem. People want to use it and expand with it. When you sell something that's just a piece of hardware, you rely on a third-party to figure out how to make it work. Vuzix isn't doing that as much anymore. We're securing new engineering services and OEM relationships, which we have a bunch of them in the queue, and we're continuing to develop our next-generation waveguides and technologies around the microLEDs. So from a cash flow perspective, as our product and sales climb and we're managing our expenses, we're reducing our quarterly cash burn at Vuzix. Excuse me, folks. Sorry about that. These engineering programs that are OEM-related come with service fees, and they come with NREs upfront, which is a big contributor for Vuzix to the top line. And quite frankly, it's often fairly good margin on these kinds of programs for Vuzix. We're pursuing supply agreements, which we have some good ones that we'll be sharing with here, and some strategic relationships around some of our OEM partners. The gross profits at Vuzix will improve with higher revenues as our fixed overheads get absorbed. And I think you'll start to see that in our second quarter numbers also, and that's allowing us to chisel closer to breakeven. Finally, Vuzix' future is bright. Enterprise growing, OEM business expanding, technology future for waveguides and smart glasses. Our Fortune 500 deployments across enterprise continue to grow and in size and frequency. If you look at the top 30 accounts that we have right now in Q2, right there, our sales to that top 30 have increased 3x over Q2 of 2019. That's adoption. That's companies coming back not buying 1 or 2. If they're buying 1 or 2, now they're buying 5 and 10. In some cases, they're buying in the hundreds. So we're seeing this thing finally moving to the adoption phase. Our OEM programs with waveguide-based solutions in aviation and defense, they're not just programmed for the sake of a research project now. These things were starting to grow in volume and rolling then out, and the inbound requests for those kinds of programs are accelerating at Vuzix. Like I said, we have at least a couple of handfuls of projects that we've been on, and we're winning them. And we'll have more to say about that as the year progresses. Thank you very much, folks. That's Vuzix' next year as best we could do in a presentation that you can't even run a video on. No offense to our partners here that helped us host this, they did a great job for us. But I wish we could have done much more because it is our annual shareholders meeting. Next year, knock on wood, we'll do it differently. So Ed, do we have any questions at this point?

Paul, no questions have been submitted, so you may continue.

Well, I would like to thank everyone for joining us today and for your continued support. Please stay tuned over the remainder of this year as we look forward to bringing you ongoing product and business development news and performance. Finally, from all of us here at Vuzix, we bid you good health and prosperity. I will now turn the call back over to the operator.

Thank you, sir. Ladies and gentlemen, this concludes the meeting. You may now disconnect, and have a pleasant day.