Greetings, and welcome to the Vuzix Second Quarter Ending June 30, 2021 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. As a reminder, this call is being recorded. Now, I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix.
Mr. McGregor, you may begin.
Good afternoon, everyone, and welcome to Vuzix's 2nd quarter 2021 ending June 30th 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 represent management's estimates as of today, August 9, 2021. Vuzix assumes no obligation to update these projections in the future as market conditions change. This afternoon, 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 I wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include certain non GAAP financial measures.
When required, reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found on the company's Form 10 Q quarterly filing atsec.gov, which is also available at www.vuzix.com. I'll now turn the call over to Vuzix's CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix's CFO, who will provide an overview of the company's Q2 financial results. We will then move on to the Q and A session and finally wrap up with a few closing remarks by Paul. Paul?
Thank you, Ed. Hello, everyone, and welcome to the Vuzix Second Quarter 2021 Conference Call. 2021 has and will continue to be A transformative year for Vuzix. Product revenue over the first half of twenty twenty one is up approximately 80% year over year. Units sold are up 53% and revenue from our top 20 customers are up 73%.
We ended the Q2 with roughly $138,000,000 in cash, so our balance sheet remains in excellent health with ample cash to grow our business, drive ongoing product development and pursue strategic initiatives that expand our participation and business model. We're seeing growth in all our major geographic regions driven by customer success within the healthcare and the broader enterprise market segments. As we look to the back half of twenty twenty one, we expect growth of smart glasses adoption to continue as the industry continues to mature despite The slightly lumpy nature of adoption. The smart glasses industry is expected to grow to millions of units on an annual basis over the next several years. Enterprise adoption is happening today and we're witnessing earlier successes and stickiness across a variety of market verticals concentrated across numerous Large organizations and we are actively engaged in expanding and evolving our solutions and technologies to best capitalize on this projected growth.
We recently established a new software integrated solutions business unit, which I'll discuss further shortly, and we're evaluating potential year over year growth of our core smart glasses business in our Q2. Going forward, we expect sequentially stronger smart glasses revenue in our final two quarters of the year and beyond. We are seeing this growth coming from the medical space along with increasing momentum with our larger commercial customers as During the Q2, we continued to see strengthening in our core smart glasses business from some of our largest repeat customers, which Continue to be a driving force of our base business on a quarterly basis. Our largest 2% of customers have accounted for approximately 45% of our enterprise smart revenue over the last 18 months with customers like Medtronic, KDDI, USAA, Clorox, Johnson and Johnson and Becton Dickinson along with some large and as yet unnamed U. S.
General merchandisers leading the way. Before COVID, logistics was one of the largest and most active market verticals for Vuzix Smart Glasses. Our customer success team has now been back on-site and in regular communications with several notable name brand customers involved in the retail stores, distribution centers, 3rd party logistics, warehousing and inventory management. Most of these accounts and some new ones are driving forward again and are focused According to marketwatch.com, Augmented reality and virtual reality in the global healthcare market alone is expected to reach $6,000,000,000 in value by the year 2025. This continues to be one of our fastest growing market verticals and accounted for approximately 25% of our total revenue in Q2.
In terms of comparison, our 2nd quarter healthcare related smart glasses sales increased 2 40% year over year As the use of Vuzix supported surgical solutions continues to steadily expand and we expect further growth to continue into the foreseeable future. Medacta, based in Switzerland, is a Vuzix smart glasses based augmented reality surgical platform provider that has We've spent considerable time over the last year working with regulatory agencies. In June 2021, Medactor received European CE marking for knee, Shoulder and spine surgeries using its NEXT AR solution and has received FDA clearance for shoulder as well as knee surgery in the United States. In July, surgeons in both the U. S.
And Europe completed the first total shoulder replacement surgeries using NextAR augmented reality surgical application, which is based on the Vuzix Blade Smart Glasses. Medexa has now turned its focus to expanding its commercial sales and gaining traction within the surgical community. Medtronic, the world's largest medical device company and a global user of Vuzix Smart Glasses continued to order at a robust in the Q2 to support their medical techs and surgeons in the field. Medtronic now has hundreds of M400s deployed in operating theaters around the world. OhanaOne, a global surgical training non profit organization also continues to expand their uses of our SmartGlass.
Through July 2021, a total of over 900 surgical calls have been placed over Vuzix Smart Glasses, which were used to connect more than 100 surgeons across 5 specialty areas including neurosurgeons, general and colorectal surgeons, adult using smart glasses and they are already deployed to some level in over 3 dozen countries. Pixy Medical, based in France, is another Vuzix smart glasses based augmented reality surgical platform provider that is also gaining commercial traction. Pixy received their FDA clearance in April 'twenty one after spending considerable time over the last year supporting regulatory agencies to expand on their European CE marking received in May of 2020. Pexy Medical has now also turned its added 20 distributors and has completed many hundreds of surgeries using Vuzix Smart Glasses. Rods and Cones, a provider of a fully virtual surgical collaboration platform, placed a $1,200,000 order for Vuzix M400 Smart Glasses in Q2 with monthly shipments scheduled to occur over the balance of the year.
These monthly shipments remain on track and will support the firm's customer expansion plans both across Europe and the United States. Beyond these medical focused software firms, We are engaged with other leading device companies in this space. Again, smart glasses usage in telemedicine, particularly within the operating room alone, represents a significant market opportunity for Vuzix over the next several years and we intend to be a dominant solution supplier into this space. As Slide 8 illustrates, we currently generate the bulk of our revenues from the sale of Smart Glasses hardware, but maintain the longer objective of creating a base of business that will be driven by 3 indicated buckets of smart glasses hardware, smart glasses SaaS software and OEM supply to the broader markets. As the market for enterprise smart glasses continues to gain momentum, Vuzix is spending considerable time and effort to transform our business model beyond the focus on Smart Glasses hardware by moving upstream closer to the customer with a complete In particular, the ability to generate meaningful SaaS based revenue centered around our smart glasses over the long haul with our software partners and ourselves will provide us with not only a substantially larger revenue base, but one that is recurring and with much higher margins.
We have adopted a 3 pronged approach that will drive the changes required across the company to make this happen. Vuzix will continue to invest in our core business, including smart glasses, software and customer service to help accelerate smart glasses sales and industry adoption. We are continuing the development of our next generation smart glasses and are on track to deliver our first EVT units before the end of this year. We have also been working on enhancing our core M Series solutions with new line extensions and models currently being aggressively worked on. We are also increasing our engagement and service levels with our major enterprise customers and partners to complete the final steps in support of large scale enterprise wide rollouts.
Building out our internal infrastructure through key hires has been another primary focus for us this year. Most notably, we brought Pete Jamieson on board as our General Manager earlier this year. Pete is a proven hands on executive with a track record of We have also made key additions to our engineering, software and sales team that will expand our abilities to produce, support and sell our solutions. On the organic front, we recently announced the creation of an Integrated Solutions business unit. Vuzix ISBU will be focused on the acceleration of enterprise centric solutions, the development of new tools to support our current and future partners and building SaaS based solutions for business opportunities in various new and underserved market verticals.
This new business unit will be led by Pano Spiliotis. Tono has wide experience in the electro optical field with areas of expertise in software development, sales and marketing, strategic planning and development of strategic The Due Business Unit has specific revenue and EBITDA achievement targets in place for significant portions of management equity compensation to incentivize success, and we expect the ISBU will drive significant value for our customers, Thank you, and good morning everyone. Regarding inorganic opportunities, there are numerous SaaS based solutions that exist across multiple market verticals where Vuzix is focusing. We believe that the fundamental problems being solved within healthcare today and ROIs being delivered by smart glasses to aid general and Specialty surgeries, both financially and for better outcomes for the patient, could ultimately represent significant revenue on an annual basis, as it rapidly becomes one of the standard tools for providing patient care over the next 3 to 5 years. We also So strongly in the future of smart glasses and healthcare that we have a focus on SaaS based growth in this market and are well into due diligence in this space.
This business could deliver significant accretive high margin revenue streams for Vuzix and bring Vuzix even closer to the customer, not only as a hardware supplier, but also as a solutions provider in the medical space. And finally, We are advancing our core technologies to enable our own products, grow our OEM business and supply to the broader markets. Our core technologies, which includes optics, displays and systems represents the keys to the kingdom for future AR Smart Glasses and related solutions across the entire space. As this industry achieves even larger scale, the control and ownership of these key will significantly enhance our company's value. Vuzix continues to steadily develop some of this cornerstone technology internally And I'm pleased to report that our most recent patent and patent pending numbers reached a record 210, well above last summer's total of 166.
Last and perhaps most importantly, we have begun the due diligence phase in evaluating a potential investment in and eventual ownership of a disruptive nano electro optical technology. We believe that this new technology has the potential to work seamlessly with our waveguide tech and ultimately could unlock We are making solid progress on our key operating goals for 2021. As it relates to growing sales and the deployment order size of our M Series and Blade Smart Glasses, we continue to see follow on orders from our customer base and expect year over year revenue growth over the remainder of 2021. As for increasing SaaS based revenue through acquisitions and internally developed software, We've hit the ground running with our recently announced Integrated Solutions business unit, as previously mentioned, and we are completing due diligence on a potential acquisition that would deliver high margin SaaS based revenue streams initially focused in the medical space. On the development of our core smart glasses products, the new versions are on track for production release as early as the Q4 of 2021.
Our next generation micro LED based smart glasses are on track for planned introductions to key customers before the end of the year. Our OEM program engagements are progressing and we expect to share follow on NRE programs and product supply agreements with the shipment of initial production units this year. During 2021, we have already increased our IP portfolio from 184 to 210 which is up from 166 a year ago and 93 years ago. Over the remainder of this year, we will continue to add to our IP portfolio with a focus on our next generation smart grasses, micro LED based display engine technology and waveguide optics. I'd like to now pass the call over to Grant for his financial review.
Grant?
Thank you, Paul. As Ed mentioned, The 10 Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. So, I'm just going to provide you with a bit of color on some of the numbers now. Sales of smart glasses for the 3 months ended June 30, 2021 rose 21% in the period to 2,800,000 led by a 22% increase year over year in unit sales in the M400 Smart Glasses and a 77% year over year increase in Blade Smart Glasses revenues. Engineering services for the Q2 of 2021 declined by $600,000 to $100,000 as prior development contracts were completed earlier and no new ones have commenced as of yet in 2021.
Our overall 2nd quarter's total revenues for the 3 months ended June 30, 2021 declined 4% over the prior year's period to $2,900,000 There was an overall gross profit of $600,000 or 20 percent for the 3 months ended June 30, 2021 as compared to a gross profit of $800,000 or 26% for the same period in 2020. The decline was mainly due to a gross profit decrease of $500,000 from Engineering Services for the 2021 period versus 2020, a revenue segment in which the company currently earns its highest margins. Direct product gross margins before overheads and other items averaged 53% of sales in the 2021 period as compared to 50% in the prior year's period. Research and development expense was $2,700,000 for the 3 months ended June 30, 2021 versus $1,180,000 for the comparable 2020 period, an increase of approximately 50% and consistent with the spending guidance provided on our last earnings call. The and higher research and development costs related to new product development and regulatory compliance fees.
Selling and marketing expense For the 3 months ended June 30, 2021, rose 68% year over year to $1,300,000 due to increased sales and marketing staff, for the 3 months ended June 30, 2021 was $4,700,000 an increase of 164 percent or 2,900,000 The increase in G and A expense was primarily due to increased non cash stock compensation expenses related to the company's new performance based long term incentive plan for LTIP, which was not in place in 2020 along with increases in shareholder communication and insurance costs. Total operating costs for the 3 months ended June 30, 2021 increased by $4,300,000 over the same period in 2020, of which approximately $3,000,000 of the increase was due to non cash stock compensation and primarily related to the company's new performance based LTIP introduced in March 2021. The net loss for the 3 months ended June 30, 2021 was 8 point $8,000,000 or $0.14 per share versus a net loss of $4,700,000 or $0.13 per share for the same period in 2020. Our balance sheet remains strong with a cash and cash equivalents position of $137,600,000 as of June 30, 2021 and a net working capital position of $147,900,000 Cash used in operations excluding changes in our working capital totaled $4,600,000 in Q2 of 2021 as compared to $2,900,000 in 2020.
Cash used for investing activities for the Q2 of 2021 was $500,000 as compared to $400,000 in the prior year's period. For the 3 months ended June 30, 2021, we received $12,000,000 in equity financing pursuant to the full exercise by the underwriters of their overallotment option related to our March 2021 common stock offering. As of June 30, 2021, the company does not have any current or long term debt obligations outstanding. Looking forward to the balance of 2021, we expect investing activities to accelerate in the second half of this year as we tool and complete further development of our new products and IP. This would exclude any amount that could be invested for the ultimate closing In the second half of twenty twenty one of 2 potential transactions mentioned by Paul earlier that are currently undergoing due diligence.
We as well currently expect to increase R and D spending in our 3rd and 4th quarters over Q2, 2021, up by at least 50% over the 2020 comparable levels. Further, we intend to incur additional spending on sales and marketing activities, particularly overseas where we see many opportunities for growth. In both these operating expense areas, there will be new hires in the upcoming quarters as part of the new team for the Integrated Solutions business unit as it scales up. And of course, we will see further Your increases in our non cash operating expenses of approximately $2,300,000 per quarter related to the new performance based long term incentive plan. With that, I would like to turn the call back over to Paul.
Thank you, Grant. I would like to now turn the call over to the operator for Q and A.
Thank you. At this time, we will be conducting the question and answer session.
I guess wanted to follow-up on the recent announcement about the integrated business unit and the potential for Add on SaaS Development and products in conjunction with that. And looking over the next several years, I guess, how should we think about the way you're going to monetize that? Ultimately, what kind of mix of revenue is that potentially going to represent? And does it impact in any way the pricing mechanism that you're going to go to market with The glasses or that all will be additive at this point?
At this point, hi Matt, thanks for the question. At this point, I would look at it as if it's additive. I mean, who knows as those business units unfold and the software and the SaaS based applications come out, There could be certain areas because we're selling things as a bundle where it might look a bit differently than that. But currently, I would just think about it as additive. It's the easiest way to do that.
The ISBU will actually have a couple of kinds of revenues. You might imagine, first, there's Lots of ways to identify a vertical market to be in. And then some of them, we have customers coming to us saying we need a solution that does this. These customers are willing to pay to get the engineering done so it solves that problem. But then ultimately, that's going to be part of a base software application that Vuzix sells recurring revenues that will be recurring on an annualized basis or on a monthly run rate across the year And that will all be on top of a piece of hardware that gets sold.
All right. Very helpful. And You talked a lot about the success you've been having recently in the Healthcare Group. I guess as we think about the specific unit SKUs that are showing the most volume there. I think some of the examples have used the Blade as an integrated model, but Looking in the queue quickly, it looks like the M Series are still the significant portion of sales and really driving the most growth.
So Curious in terms of what the longevity of the Blade and some of the relationships you have in the healthcare industry there, and how we should think about the overall mix between the M Series and the Blades on a go forward basis.
In an operating theater, there's some really nice features that the Blade has Excuse me, that the M400 has that works well with the PPE equipment and the rest of the equipment guys that are operating doing open heart surgery or Endoscopic surgery and the like. So the M400 is the flagship still. That said, the blade also has Features in certain areas where it kind of stands out on its own because of the certain aspects of its wearability and the see through nature of it. The bulk of the business that we're seeing in medical is M400 and we think M4000 ultimately, especially with some of the newer software Applications that are coming in around it. So you should look at the M Series as really the lead horse in medical.
Great. Thanks for taking my questions. I'll jump back in the
queue. Thanks, Matt.
Thank you. Our next question comes from Christian Schwab with Craig Hallum Capital Group. Please proceed with your question.
Hey, good afternoon, guys. Thanks for the slide presentation. I guess what I'm looking at Page 4 of the slide presentation and in the commentary in the prepared comments, I'm just trying to figure out, Can you give us a range of revenue outcome that you expect for the year in 'twenty one? And what type of growth Rates we should really be thinking about in the second half of twenty twenty one versus the second half of twenty twenty?
Yes. 2021 should continue to see consecutive growth as we move from our Q2. Some of the business in the Q2 was timing related, frankly. That said, none of the SaaS based Software that we expect ultimately will start to add to the revenue stream, I would count in a second excuse me, a 3rd Q4 this year, even though some might be there. So You know, you're it's probably going to be a little bit softer.
Actually, I think it's right in line, Christian, with the numbers that we've discussed in the past, I think you look at the $3,000,000 to $4,000,000 in the next quarter kind of the numbers and then More in the Q4. Okay. So that's okay. That's a hard forecast there, sorry.
Yes. No, I
appreciate that. I guess if we sum up those numbers, I mean, could Q4 be big enough Do $20,000,000 plus this year? Is that a little bit too optimistic and it may take too many things going in the right direction right now?
It would take some things going in the right direction. I mean, it's not impossible to see that some of the business we have could do that. But I mean, I can't we certainly would not give that advice right now because there's question marks on the timing for it. Unfortunately, this industry, it is zero doubt it's coming. You can see it.
Our business continues to grow and move forward. And the size of some of the things that we're talking about are getting bigger and bigger. Without doubt, it's only a question of is it this month, the next month, In and out based upon timing. So, yes, it could be there, Christian, but we'd have to really work to make that happen.
Okay. That's fair. And I guess my second question has to do with strategic acquisitions. Is this Can you give us any direction of what you think the company could tremendously benefit From as far as a technology or a path to increase revenue yourself With new customers, can you give us a little bit more color about what you guys are thinking about and doing due diligence on?
I would tell you that the two things you just asked about are characterized exactly by the acquisitions we're looking at. One of them is a software oriented solution. You sell as an example, you might sell an M400 For X amount of dollars and you would get on a recurring revenue basis on an annualized basis 6 to 7 times that for the use of the software and the solution that it brings to the table. So you could Consider that pretty accretive on the top line and it's also got great margin as you might imagine because it's software. On the technology side, Vuzix is going to make glasses, ultimately that look like Oakley's.
It's been our mission From the beginning, since we've been working with the Special Forces guys. And we don't have the budget to some of the great big companies that are out there, but we're really smart with how we And we've been looking at technologies for a long time. And on that front, some of the tech areas, I think, is owning a catapult Forward, what we're trying to do to get to that those form factors. What we have today is already really pretty amazing. But some of the stuff that we're looking at, I think takes it to another level.
To a level, I think, Christian, that you could almost anticipate what we're doing being in the bulk of the smart glasses systems that might be on the marketplace because it's that game changing, I believe.
Great.
Thanks. No other questions. Thanks guys. Yes. You're welcome, Christian.
Thank you. Our next question comes from Jim McIlree with Dawson James. Please proceed with your question.
Thank you and good afternoon. Paul, in your remarks, I think you mentioned a couple of times OEM Production revenues, is that the Tier 1 defense supplier that we've been waiting for and has a contract been Signed or is that you anticipate a contract to be signed and production revenues to occur?
It is exactly the one. And We're literally at the point in the game where the devices that we're delivering are being looked at As if they're production devices and we are knock on wood very, very soon should be in a position to where we have the supply agreement signed.
Well, that would be fantastic. I'll pre congratulate you on that. Thanks. The services revenue, I know it's lumpy and I know it depends on when you sign things, but is Are there more service contracts coming this year? Or is it reasonable to think that there are more service contracts coming this year?
There should be. I will say that some of the base optics And engines that we're delivering now are getting good enough that folks are not really asking for much of a change in it. So they might be looking more like their production ask order, although they're going at the very early gizmos. But that said, You should expect some more before the year is up.
Can I rephrase that and see if I understand what you're saying correctly? So you've built up Enough of a base of, let's call it, standard equipment that customers don't need to customize something.
Yes, they can get going with what we have.
Got it. Okay. And Grant, your comments on headcount increasing in the second half, Can you tell us what headcount was at the end of Q2 and what you think it might be at the end of Q4?
Well, if memory is here, I think we're just now total of about 110 people globally. And
we could
see that probably increasing by a good 15 people by year's end. And you And you Well over 75% of them will be on the R and D, software side of the house, which includes the new integrated software Solutions Division.
And that 75% number you just mentioned, that applies to the increase, Not to the total.
Yes. Yes, I'm saying of the 15 people we expect to add by then, 75% of those individuals will be in the R and D area For software development, customer support, part of that that we have.
Got it. And just I know you're not going to give me too much on the 2 potential acquisitions, but Maybe you can talk a little bit about the philosophy you have on acquisitions, if it's I'm just going to throw some softballs here. Is it product driven? Is it financially driven? Is it strategically driven?
Is it Competition driven, if you can just flesh out a little bit what you're looking for when you think about acquisitions?
We don't do it just for the money. I will say that it's nice to see that there's a business model built that makes sense, but we're doing it based upon business models that have a long term play, opportunities to be in organizations that could go into the potential to be in the billions even. If you look at the medical space today, it's for smart glasses, Jim, it's really high. It's growing all over the place and the number of analysts that are predicting 1,000,000,000 plus dollar industries being created out of it. So that's why we have an interest in that space.
And we wouldn't acquire a company just because it had some revenue level that it could add to our Top line right now, it's meaningless. We're building a business that we want to own the smart glasses industry in. So it's really got to be connected to what we do. And on the technology front, we've seen a lot of stuff. Looking at this for years now, it's got to be pretty darn special to ring the bell for us.
And there's some stuff when you're here in Lonenav, you get to see a lot of things that are behind closed doors and in people's closets. Some of the stuff is actually a little bit of stuff out there that's quite amazing and that's the stuff that Vuzix looks at.
And can you frame it in a can you frame the size? So if somebody came to you and said we want $50,000,000 of your pot of gold, you would tell them no way in the world, but 20,000,000 Can you phrase it? Can you frame it for us?
Are you talking about the dollar sizes we might spend on an acquisition? So let me say that the 2 transactions that we're looking at right now, There's a significant portion of the acquisition component that comes from equity. So it should not impact much The cash position that Vuzix is in. Bunch of reasons for that. I mean, these guys like Vuzix.
This isn't like A takeover kind of a thing. These are folks that really believe in our vision and we believe in theirs. And so They're in it to win it with us. So fair amount of it's not going to come out of our bank account. And then the dollars to operate, that's a whole different story.
I don't want to get into all that.
Just one further thing, Jim, on the equity component that Paul is referring to. Well over half in both cases is entirely based on performance. So if they don't achieve their revenue targets Or milestone developments, they're not going to receive the equity. So it's Well, we have
Sorry, go ahead Grant.
That's fine. I've said my piece, Paul.
Thanks Grant. Obviously, in support of the defaults, we have every expectation that they would be successful, obviously. Thanks, Jim.
Thank you. Our next question comes from the line of Jack Vander Aarde with Maxim Group. Please proceed with your question.
Great. Hey, guys. Appreciate the quarterly update. Thanks for taking my questions. So Paul, I'd also like to just touch on the OEM projects.
Aside from the comments you already provided on the main one that comes to my mind that Tier 1 aerospace Customer complete all four phases. But maybe could you share an update on those, I think last quarter, the other 4 OEM projects that you had discussed, They were at various stages last quarter. Do you expect any of those other 4 or if there's any more to reach Phase 4 or Phase 3 or beyond in the next 6 months, 12 months, whatever you could share would be helpful. Thanks. So
Frank, I can't remember exactly everybody that was in that last box, okay? I'd have to go back to give you an accurate answer. I can tell you that There have been 0 folks that we're working with come to Vuzix and say we're moving on. So all of these things are there. There's been a couple more come on and saying, can you get us this?
Can you get us this? We're quoting on that business. So there's a bit new. And then Some of those folks out of that group are coming back saying, I need more, please. So it's a portion of those folks for sure and it's 1 or 2 new folks in the bulk of that, by far as defense oriented folks.
Okay, cool. That's helpful. I appreciate that. And then just sort of similarly but separately, can you maybe you obviously You talked about some acquisition plans. Can you remind us of your existing production capacity and the number of facilities?
And then maybe what your plans are for building out future production capacity ahead of demand, whether that means expanding an existing facility or Building out a new facility altogether, just anything you can provide there and the associated timeline of what that might mean?
Yes. It's funny. Well, I've talked with the landlord about more space. So that you probably would see that in our future. That said, the current With moving some things around has the ability to expand our production.
We've got some areas that are being used Other things right now that we can move. The capacity, that all depends upon what you're making. But If we're running multiple shifts, somewhere between 50,075 upwards of 100,000 gizmos could get made. If you figure the average selling price is about $1,000 to $1500 per, that can easily get you the run rate. So we're sitting in a pretty good spot right now to get revenues to between $50,000,000 $100,000,000 with our current facilities.
And that's just on the hardware side, but exclude any ancillary software derived revenues.
Thank you. At this point, I will turn the call back to Paul Travers for final remarks.
Thank you, everybody. We really appreciate the support of Vuzix. We appreciate the enthusiasm. We know it's an interesting industry to be in. I can tell you without doubt Vuzix is in one of the coolest, hottest, it's going to be the fastest growing industries coming.
Talked about by everybody and we're seeing it all over the place. We look forward to
the second half of this year, sharing
a lot with you. There should be a lot of press releases and exciting things as the next two quarters unfold. Thanks again.
We'll talk in the future.
Ladies and gentlemen, this does conclude today's teleconference and webcast. We thank you for your participation and you may disconnect at this time.