Vuzix Corporation (VUZI)
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Status Update

Jun 13, 2019

Paul Travers
President and CEO, Vuzix

I'm happy to set those things up. Blade for first responders and security, I'll get into that a bit more. That's scratching the surface, and that's a big pile of opportunity there, and you're only going to see a piece of it that's obviously something that's happening at Vuzix because we put some press releases around it. Blade for consumers, there's a subset in that. Getting into the marketplace, if you look at the opportunity to be a seriously connected accessory to a phone, the wireless industry is looking for devices just like this.

When you have an ecosystem and you can supply it and modify it and tweak it so it can work in different localities and the like, and it solves all the problems to generate revenues and offer content, et cetera, for your customers, it's a great platform to start from, and we're seeing lots of incredible opportunity around that. Finally, we've built an amazing pile of technology at Vuzix, 150 to 70 patents and patents pending, something like that. A bunch more being filed, and that technology has so many places that it can be operated in, and we're now seeing this OEM business that's evolving out of that, which has significant NRE opportunities and then long-term product revenues at the same time. Let me take a step back here for a minute. Everybody has seen these crazy numbers.

This is going to be multi-billion dollar, change the world kind of stuff, and it is. It's taking time, but the fact of the matter is, you will start seeing more and more roll-outs and real programs, revenue-generating, that do end up being with these kinds of size numbers. The question is, when does all that happen? I'm here to say that if you look at the mix of products that Vuzix has got coming, and you look at these revenue-generating boxes that they're fitting in, you begin to see why these numbers make sense. First of all, let's talk a bit about our enterprise-based products. We have the M300XL, which is in many pilots and in some programs that are rolling out today. Very shortly, the M400 is going to start shipping. I'll talk a bit about that more in a bit.

We have the M300C, which is in a partnership with Dynabook, and finally, the M300 ATEX-certified glasses. This is a series of products that roll into this whole Augmented Reality for enterprise business. We've got multiple tender awards that Vuzix has recently been awarded. We haven't gone out and publicly made those available to folks because they're not public yet, I'm telling you, there's lots of business that we've responded to RFQs for, the business is there, and we're just waiting to share. There's an opportunity that we have with Coca-Cola in Europe, which you'll be hearing more about shortly. We have roll-outs with multiple pharma companies that are in process. We have roll-outs expected soon from large retail brick-and-mortar customers that are trying to address some of their competition that is internet-based. We're expanding sales channels with partners like Verizon. Sorry, guys. Eaton and the likes.

We're expecting continuing commercial roll-outs from all of these companies, many of the companies we've talked about in the past that are using our products. Finally, in the same category, we have these OEM partnerships with the Dynabooks, the Eatons, and there's others that are in process. There's a big bank of opportunity here, and Vuzix is expecting literally tens of millions of dollars worth of business out of this piece of what we do. The Verizon relationship, we started with them in their B2B side of the business. We've signed. We're now their authorized resellers. They buy directly from Vuzix. We're in their system, and we've been going through onboarding. We call it onboarding of them because we're training them about our products. We're teaching their salespeople.

We're delivering sales assets for them so that they have the tools that they need to easily go out and address the market. They already sell to many of the companies that I've talked about over the years, and so the cool thing is there's already a great connection. In this month, we've actually started making some great progress with them on that side. As we have built that business with it, we've been introduced to other parts of the Verizon organization. The public sector side of it, there's opportunities and growth that are starting to happen between us and Verizon. The consumer and the 5G technology side of it, which is where Neil comes from, I think you'll see some exciting opportunities that are happening around that with us, with him also. Excuse me.

What Verizon is selling from Vuzix is not just what we make. We make the M300XL, the M400 coming shortly. These are all products that they'll sell and be selling. The Blade, same thing, but they're putting that together with software applications that offer this cookie-cutter solution. They're our sales guys. It's really hard to walk into XYZ company and say, "Oh, here's a great augmented reality headset." Good luck. You need software to make that work, and so Vuzix has all these relationships on the software side, and so it's a package that ultimately end up getting sold by the software, excuse me, the sales team within Verizon. The other piece is the mobile device management requirements. I get this headset, it's sitting here, and there's 1,000 of them in my fleet now. The IT departments want to be able to manage these devices in the field.

In order to do that, you need what's called mobile device management. The Verizon Mobile Device Management software now is preloaded at Vuzix. These things ship with that piece of software, so it makes it very easy for these IT departments to log in, shut them off, turn them on, upload, put new information on them, whatever they need to. You don't have to, every morning, get those 1,000 devices back, plug them into the USB slot on your computer, and reprogram them. It's a critical part of managing a large number of these devices in the field. Verizon's also using our glasses internally for onboarding purposes and training and the like, and I'll leave it to that for now because I fed you that. Fraser will talk a little bit about that at the same time.

These are just some examples of some of the sales tools. These are quick flip books effectively, that in field service, you got a connected workforce. These are all the advantages of having these devices and sales tools to help the sales guys just walk in and say, "Hey, this is an easy fit." Manufacturing, warehousing, and logistics. There's a few of these that are assets that the Verizon team is using to help sell. Of course, Vuzix is using those same assets. It's nice to put them together for Verizon as part of this, but they're great sales tools. The bottom line is why. Why would anybody want to use these glasses? It's been found time after time, this is an example of a Ubimax program they've done with Vuzix, with Becton Dickinson, and you can see 60% faster machine repairs.

Well, that in its own right is a good reason why you would want these tools. It reduces travel costs. Uptime is key. You got a guy in the field, he's in front of a piece of equipment that puts out $1 million worth of product a day. For various reasons, he can't change anything unless he's got the work instructions to make those changes. Using the kinds of software that we're working on with our partners at Verizon, they can make those changes in the field within minutes because a person can remote in to see what's going on and push the work instructions there. These are the kinds of things that give these things the value that they have. The M300XL and the M300 do a really good job of delivering this experience. It's kind of older technology already.

It's running with the Intel Atom processor. Not to put the processor under the bus, it's only running Android 5 or 6. The M400 now runs with our partner Qualcomm CPU. It's the XR1, which is the super-fast one. It's got 8 core compared to some other competitors that have much lower and much lower processing speeds. This guy is designed to run, and it runs the latest version of Android at the same time. When you stream video with this and you go like this, you're getting 30 frames a second at 720p. It's beautiful. Like bah, as they say. It's not just there. It's in so many applications where if you're doing things, just simple things like barcode scanning, this guy will scan a barcode from 2 meters away that's an inch and a half square.

It's a little tiny barcode twice as far away as what our current products will do. Everything's faster. If you're just doing things like the quick barcode scans and stuff, the power consumption of this device is a fraction of the power consumption that's on the M300XL. This is the same kind of thing that happens in the phone industry. You go from an iPhone 1 to a 2 to here we are to a 10, we're at the very early part of that curve. Each jump that we make is a big step forward. The iPhone 10, a lot of people think the iPhone 8 runs just as fast. We're starting to use that higher-end silicon on and against devices today that are much older. This thing is a huge improvement in performance across every metric that we have.

It's got better Wi-Fi, it's got better cameras. We expect it to start shipping here in Q3. This is not a year away kind of a device. We have assets that are in the field, and production product will be coming into Vuzix's office within the next month or two. It's right around the corner, and it's an exciting product for Vuzix. Many of our key accounts and customers are like, "When can I get my hands on it?" We've also got an intrinsically safe partner today. Eaton Crouse-Hinds is a very large company. They're right down the road here, actually, in Syracuse corporate headquarters. What an ATEX-certified device is a device that allows you to go into environments where there's flammable materials.

Maybe it's a mine, maybe it's on an oil rig, maybe it's in a place where they're grinding flour and there's lots of dust in the air. Those are all volatile environments. This device is designed with a battery now that Eaton has done all the design work on, and with this battery, you can run a full day's worth of operation. It's IP64 dustproof and waterproof. It's plug and play. You can use it in environments where many of the early adopters are trying to go first. If you've got all these oil rigs, you need a device like this. You can't use the other style devices that aren't ATEX-certified. Crouse-Hinds has thousands of salespeople. We've been to several trade shows with them already. Super excited.

This guy also we expect to start shipping here end of the Q3 this year, which is why I put it in this box of revenue generator contributions to what you will see in 2019 at Vuzix. All of these guys are in that boat. Our partners at Dynabook now, we've sold them a bunch of first-round product. We've now shipped fully second-round product and orders with them. We're looking at this business to continue to grow with them. Just like everybody else in this space, it's been a little bit slow. It's picking up for them now, and they really like the product that we have now. We see that continuing. They've also come to us and said, "You have all these other really cool devices." We've built universal USB Type-C solutions out of them.

For example, we have a USB-C Blade today. You can take our Blade and plug it into this notebook, and it just works. Excuse me. Dynabook. There's a few other products that fit in that same box. We're in discussions again with these gentlemen about moving forward again with some of our next-generation products as part of their bundles. It's an exciting time with them. The Blade Smart Glasses. All of that stuff I just talked about is normally what I talk about when I sit in front of everybody and say, "Hey, look at where our business is going." The Blade has finally gotten to the point where we're building them. They've matured. The software, the OS build, this thing is very stable.

In fact, I would say from the number of years it took us to get the M300 out and actually this stable, I think there's even some things today that this thing way outperforms on an M300. This guy is starting to get deployed and is positioned for adoption across multiple key markets, and it has a very unique form factor. You put the glasses on, and I'm sure many of you have test-built this. The field of view is wide open. It's like putting on a regular pair of glasses, and it's a form factor that is very much like a conventional pair of glasses. Because of that, it opens up doors and business opportunities that there's not another pair of smart glasses out there that can deliver against, and this is just our first one. That said, many of our VIPs already support this product.

Their software runs on it across the board. Sorry, folks. We're using them for many of the very same kinds of applications, from streaming video services to getting work instructions and the like. The problem is, in many of the environments that these guys are running in, they have to have safety glasses. Vuzix is working on the fix for that piece of it. We've got numerous first responder and security applications that have also just started for this, which I'm going to elaborate on in just a minute. In the telco space, because of some of the things that we're doing about how this operates, connects, and the ecosystem we've built, it's generating a significant amount of interest, which I will describe further also. Safety glasses. The Vuzix Blade has already been certified. Excuse me. All the testing is done.

We're just waiting for the final paperwork to get the certs. This guy will be in production in the July timeframe. You need safety glasses certified, we've got it. There's two pair over there, I think, on the table. You'll notice they're all labeled appropriately to start cranking them out the door. This resolves the issues associated with trying to deploy on a plant floor where you have to have safety glasses and multiple other kinds of environments where it's a must. In the first responder marketplace, it's a new sector for Vuzix.

A lot of you probably saw the press release we put out end of last year or so, maybe November, October, where we renegotiated an agreement that we had with Six15 and our partners in the defense space, and we're now in a position to where we can sell directly into the security first responder marketplaces. Since then, we've made great progress. Of course, the Blade has come along to a point to where it works well, and the cool thing about it is it has this look and feel that you can't get anywhere else. There are some headsets that come with USB-C connections where you've got to have a phone, and you've got cables sticking out all over the place, and they still stick out on your forehead.

When you look at the person wearing it, you can see from the horizon line down, they can see through it. From there up, all the imagery is blocked. These things are wide open, regular-looking sunglasses. They plug and play in these security markets, and you'll get a feel for it here in just a few minutes why. We've already got multiple partners that are addressing this space in a very short period of time. We're shipping production product to them, and a few of them are shipping production solutions at the same time. We expect this business to continue to grow throughout this year, and we expect it to significantly accelerate into 2020. We're talking about tens of thousands of units potential in this marketplace. Blade right now is one of the only form factors that can solve the problem here.

Again, as I said, Blade is cool. Blade 2 is even cooler. We're racing to make sure that we stay in front of the look and feel and that whole comfort and sex appeal that goes into glasses that people really want to wear. We announced a while ago here, but maybe it was right around CES, I think, that ST Engineering out of Singapore, they're again, a very, very large organization in Asia that has developed a pile of biometric and facial scanning software, et cetera, for airports and large venue security operations, et cetera. This works with Vuzix's glasses. They have not yet deployed in a bigger way, but it's operational, and it's part of their systems, and they're getting ready to. We mentioned two, three weeks ago, a company called SWORD. They have a device that's designed to work with an iPhone.

It's kind of a package that you put together. They're using infrared thermal cameras from FLIR Corporation. They have facial recognition software components that are from their firm partner, FaceFirst, which is a large supplier of that kind of software. Verizon is also a partner with SWORD, and what you need here is a way to see what the SWORD is seeing without going like this in front of the crowd. Because nobody likes to think that the guy's standing there that way, number 1, and number 2, it makes you stick out as a security person. To be able to have access to the feed as people are walking by and seeing people of interest. It can be a very valuable tool.

If you think about this as it relates to your children at school, it'd be great to know that folks that you knew were problems because they were dealing drugs, and et cetera, and you'd rather not have them in the school. Just keeping them out of the school is a good first step towards safety at school. All of these companies are very cognizant of this whole issue associated with people's privacy. That's not what this is about. This is about people's rights as the individual who's sitting at his school desk, and the guy comes in and shoots him. It's about safety, and it's about promoting that aspect of this. SWORD's a really good partner.

They're shipping, they tell us, this fall. Vuzix is part of that operation, and they have a very large number of clients at this point in time already that want their first systems. We've got our partners, NNTC. Think about this. Thanks, Mac. We just have been able to work in this space in a very short six-month period of time or so. Vuzix has built these business opportunities. There's more behind it. These guys already are shipping. They've got 50 systems. They're out. They're deployed. People are using them today. Their first deliveries were in the Dubai area. Their production ramp starts here also in Q3 of this year. There's a little video here that shows how this works. What's cool about it is you don't need an internet connection for this guy.

You can be in internet cloud-denied service areas, places where there's no cellular service, places where there's no connection to a Wi-Fi device. With these guys here, because they keep the database with them, they can operate, and they operate actually really fast. Within a frame of video, there's 15 faces they can detect within a minute, excuse me, a second, out of 1 million faces in the database. This little video shows a bit about that.

Speaker 13

We are presenting world's first face detection solution. It's fully autonomous, and it consists of lightweight mobile server, lightweight but very powerful with fingerprint sensor and protection site. The AR glasses, which looks like absolutely normal sunglasses, but still it consists of a powerful computer powered by Android, 8 megapixels camera, and a smart screen. Despite all of this, you cannot see much difference from the normal sunglasses. Now we will see our product in live action. The database can hold up to 1 million faces in the database. Now let's get the thing that out. Let's look around. Just like this, you see that person detected and measured.

Paul Travers
President and CEO, Vuzix

It's an I guess I'm going to play it to the end. It's an interesting video, and the idea here is if the person's in the database, they usually come up as a person of interest. It doesn't necessarily mean you would instantly arrest them just because this picture was here. The idea is, police today, security forces today, are given a book, and they're told, "Look at the pictures in this book, okay?" Think about this for a minute. There's 150 known sort of folks that you probably don't want at a concert venue for one reason or another. We're asking these gentlemen and gals to remember those faces, so that when they show up, you know enough to say, "Hey, Frank, sorry, but you can't come in." You know you can't come in. There's no way the human mind can do that.

It's very helpful to support our security folks and the guys that are taking care of us to make sure that our rights aren't violated to have this kind of a tool. Security, first responders, and many other places, Vuzix is starting to see the Blade really take off from the perspective of that's the one we want to use because it does have this look and feel that no other headset has today. That said, we've also been working on the ecosystem for the Blade.

We're turning this thing into what's required to actually deliver to almost any environment, solutions that you can get content, you can get applications for, that is highly integrated within the phone system so that you can deliver something that in practically any environment, and even in the consumer space, a solution that will really turn people's cranks and provide them things that they've always wanted to do or things they never knew they wanted to do until they get a pair of these glasses to do it. I have to say, we have a really talented team of people at Vuzix. If you think about what we've done at Vuzix compared to what might happen at Google with their Android Wear, I guess is what they call it, Greg, right? They probably got 1,000 people working on Android Wear.

What it allows you to do is tie it to your watch, link to your watch, put notifications, and run a few apps on this thing and sell apps and stuff in a store. My team, little tiny team here in Rochester, N.Y., has done all of that. I'm going to give them an opportunity now. Greg, do you mind stepping up? We're going to give you all a demo of how cool this ecosystem and what we've built is. If all Vuzix has done over the years we've been in business was to create this, the tools, the store, the connectivity, the companion apps, runs on Android, runs on iPhone. This is a multi-billion dollar company if this was what we were doing. This is cornerstone we see, though, for across the board with our products.

You'll see the same capability coming out shortly for our Enterprise Series products also, because this connectivity to the wireless phone device adds some amazing capabilities, which we'll show you here shortly. I should just let Greg talk, but I can't help myself. I want to make sure everybody understands what they're seeing here. Greg, I'll let you start.

Speaker 6

All right. Thanks, Paul. As Paul said, Vuzix is evolving from more than just a hardware supplier. Now we're providing an entire ecosystem of products that work together to provide a cohesive experience for the end user. I want to give you a demo of that right now. Obviously, I'm wearing the Blade. You can see up on the screen, what I'm seeing in my Blade. On the right-hand side, you can also see what I'm seeing on my phone right now. My Blade is linked and connected to the Vuzix Blade Companion App that is running on my Android phone, also available for iPhone. From the Companion App, I can do several things. I can see the current status of my Blade.

Paul Travers
President and CEO, Vuzix

Just one second, Greg.

Speaker 6

Yeah.

Paul Travers
President and CEO, Vuzix

The difference actually between what you're seeing up there and what Greg sees, is Greg is seeing you also.

Right? This is a heads up display. He could be walking in New York City down the street, this kind of information, it wouldn't be a black box you'd see through, right? You'd be integrated and be part of the world around you. These optical wave guides Vuzix has built are just like the one you might have in your car, allowing you to be in the real world while you're having experiences that are being served from the cloud. Sorry, Greg.

Speaker 6

Yeah, no problem. I'm sure a lot of you have seen the Blade before. What you see up here on the screen in black, what I see is fully transparent. I only really see the green box around all of you right now. Back to the companion app. I can see the general status of my Blade. It's connected to Wi-Fi. I can see my battery status. I can switch over to the photos tab, and I can manage the photos that have been taken. Here's actually one that was taken as we were setting up for this event. I could share this photo right now on social media if I wanted to.

Paul Travers
President and CEO, Vuzix

To be clear, that's coming over the Blade in real time over to the phone. He's literally playing with his Blade, and those are the images and stuff that exist on the Blade itself.

Speaker 6

All wirelessly. You're going to see wires attached to me right now. That's just so that you can see what I'm seeing, but normally this would operate completely wirelessly over Bluetooth and Wi-Fi.

Paul Travers
President and CEO, Vuzix

We need to get a little bit closer.

Speaker 6

Yeah. I can also switch over to the settings tab, and I can manage settings on my Blade. I can switch over to the apps tab. This is where I can manage the apps that are installed on my Blade right now. Now, if I want to install new apps on my Blade, Vuzix does have an App Store on our website. The great thing about the Companion App is I can also use that App Store right from here. At the top, there's the Vuzix Blade Store header. I can tap on that. You can see I am now browsing the apps that are available in our Vuzix App Store. From here, I can tap on one, and I can get more information about it, along with screenshots. I could also choose to install an app right from here. I just tap the install button.

If our Wi-Fi cooperates. Maybe not. Fortunately, I do have some apps already pre-installed on here.

Paul Travers
President and CEO, Vuzix

The Wi-Fi in this facility is not the best.

Speaker 6

It says I am connected, but okay. Let's give you a couple examples. One example of an app that you can get from our App Store right now is Google Assistant. As far as I know, Vuzix Blade is the only smart glasses to offer Google Assistant, that I'm aware of. If you launch the app, to access your assistant, you can just tap OK Google.

Paul Travers
President and CEO, Vuzix

This asshole just went to sleep.

Speaker 6

It kind of went to sleep, yeah.

Paul Travers
President and CEO, Vuzix

Is Sam here? Can you come here, Sam, please? Folks, give us just a minute. Our Wi-Fi connection here went to sleep. It's worth taking just a moment to see this. It's pretty outstanding. Yeah, it's supposed to connect.

Speaker 6

There we are. What's the date today? Maybe. Let me try that again. What's on my calendar today?

Paul Travers
President and CEO, Vuzix

Pretty impressive, right, folks? I am very confident that this is because there's a link between the two that probably got hosed here.

Speaker 6

I will show you another demo of the companion app. Let me come over here, I'm going to toggle my Wi-Fi on and off, and see on the Blade, see if that helps. Don't have to do it from here. I can do it right from the companion app. All right. We're back up. What's on my calendar today?

Paul Travers
President and CEO, Vuzix

You can see all of this is related to the poor Wi-Fi support here. This normally flies.

Speaker 6

I also have no audio. Pretend you can hear the audio. I'm going to show you a couple other ways that we can trigger Google Assistant as well. Not only with your voice, but we also have presets available, all customizable by the companion app, by the way, so you can put in your own custom presets. If we want to tell me a joke. Try that again. Yeah, I think we're still having connectivity problems.

Paul Travers
President and CEO, Vuzix

You want to try to back out of it, reset this, and connect?

Speaker 6

Oh, there we are. We've also integrated Google Assistant into the base OS itself. If I don't want to trigger it manually by going into the app, I can also hold three fingers on the side of the touchpad. How's the weather today? You'll see I get the result. Finally, I can also launch Google Assistant with my voice using our onboard speech recognition. I can say, "Hello, Vuzix, get assistant.

Paul Travers
President and CEO, Vuzix

To have an assistant available at the touch of a button to get almost any kind of information you want is very reminiscent of some sci-fi movies that open up the world, and this is the beginnings of that. Single touch, you got the whole wide world web to access and get information and do the things in your life to improve it. We'll be talking a little bit about 5G shortly here. Some of these little performance issues that we're having, they will be absolutely nonexistent with 5G kinds of service.

Speaker 6

Yeah. Google Assistant was an example of an app that was built specifically for the Blade. There are some apps out there that were not built for the Blade, and they're built for devices that have a touch screen. Those have been a challenge for us. We've solved that using a new feature on our companion app, which we call our virtual trackpad. For example, I have Amazon Video installed on my Blade. If I launch it and I switch over to the companion app to our new input tab, with my finger, I can drag it along the virtual trackpad, and you'll see I get a mouse pointer on my glasses that I can control.

Paul Travers
President and CEO, Vuzix

We're on the same page here. This application is the standard app that is Amazon Prime Video. In order to use this typically with your phone, it requires you to touch the surface of the phone because it was built for a UI that was touch. We get around that now by using the phone as a mouse trackpad and keyboard. It allows instant access and easy access to these kinds of applications. You'll see there's a large number of them now that just work on the Vuzix Blade.

Speaker 6

I can do things if I want to. I can move the mouse around. I can also drag the mouse by pressing and holding and dragging up. I can also do scrolling too with two fingers. Let's play the video.

Paul Travers
President and CEO, Vuzix

Assuming the Wi-Fi channel will let us.

Speaker 6

There we go. I'm now watching Amazon Prime Video in my glasses.

Paul Travers
President and CEO, Vuzix

Yay. Guys, great. This would be where the room full of people at the I.

Speaker 6

Look, I just got a text message too from Connor while I'm watching. Thank you, Connor.

Paul Travers
President and CEO, Vuzix

Send him another one. This is the cool bit about the Companion App. It manages all of this kind of information back and forth from the phone to the glasses. Literally, once you get this thing going, phone's in your pocket.

Speaker 6

If I'm watching video on my glasses and my phone's in my pocket, I might be missing all these fabulous text messages I'm getting from my coworkers. They are coming in now, and I can still see them while I'm watching this video.

Paul Travers
President and CEO, Vuzix

You can address them if you wanted to also. Again, the home page of the, in fact, could you go to that, Greg, or am I pushing the envelope here? This home page, if you tap on it, you can scroll through those text messages. You can respond to them, et cetera. They're all stayed, stored up, ready to go. Like I said, this is a complete communication system. It's as good as what you might see on almost any watch, et cetera. We will soon have voice input, so you can speak. He could have said, "Thanks," or, "Yeah, let's meet at the bar after." It would put that in the message and respond back.

Speaker 6

Good.

Paul Travers
President and CEO, Vuzix

Thanks, Greg. I appreciate that. Live demos like that are always a little bit difficult to pull off. Wi-Fi is what it is. The audio's amazing at the same time with this device, and I think there was probably just another Bluetooth connection issue back to the speaker. Things went to sleep. Okay. Perfect. Let me get rid of this. This is to make the point. Two days ago, we hadn't released this software. Nobody could use many of these applications on this page. Today, every single one of the apps, and this is just a sampling of them, work with the Blade. It's an amazing upgrade for the Blade. People that enjoy their applications suddenly have a mean pile of opportunity to use this device and deploy it with the things that they like to do.

Again, like I said, this is just the tip of the iceberg of what's going to be available, which is why Vuzix also just recently launched a special promotion for Father's Day, Dads and Grads kind of a thing, plus a summer spree. We have a growing number of native apps that just work with the device now. The functionality between the companion app and the glasses is practically world-class at this point in time. Media controls, notifications, messaging, email, browsing the web, all of these things just work on the glasses now. I call it legacy support. I know some people might think of legacy support as older.

The reality of it is, what I mean here is this is the latest and greatest applications that people want to play with and want to use, and they're using them on their phones, but now they work on the glasses too. The Vuzix Blade can also be ordered with prescriptions, so you don't have to wear glasses on top of glasses. Many of the competitors that are out there today, that's the requirement. If you have glasses, which is probably 50% of the population today, you got the Blade on, and then underneath the Blade, you got another pair of glasses. Not the Blade, all the competition. With the Blade, you just get them with your scripts. We have an active and steadily growing developer community. I mentioned this already, the Dads and Grads program.

What's nice here is we have product differentiation with the consumer side of our business versus the enterprise. The enterprise needs to have safety glasses-certified devices. There's a step function difference in price between the two. Currently, we are selling direct from Vuzix, we still have great margin at this price point, even for the Blade. There's a few key points about smart glasses today and what you need in order to be successful with them. I have to say, there's a lot of stuff out there like Magic Leap and HoloLens and the like, not throwing people under the bus, but I think it's kind of obvious those are great big devices. It's not something you'd wear walking down the street. They weren't designed for that.

Maybe for gaming a little bit, the Magic Leap is a $3,000 or so headset, and you do look like a box of rocks when you wear it, most people won't wear it. You got to have something people will put on. People don't want wires. You got something in your pocket with a battery and a cable coming up. That's like, for the most part, people just reject that idea. One size fits all. We have competitors. Again, not to throw people under the bus, but the reality of it is you have to go get fitted, and weeks later, your glasses finally come. When they do, there's a little tiny pupil hole that you got to look through, like looking through the door to see who's on the other side of the peephole.

If your eye isn't lined up with that thing just right, you don't see the image. I just don't know how that can possibly work. If you just think about the turnaround time and then the dissatisfaction from the consumer. They're walking down the street, and as they walk, they lose the image. It's just not acceptable. You need larger fields of view to support things like video streaming and stuff, but not so big that it fills your field of view. Watching the Netflix piece or the Prime movie, you can imagine if that was a 90-degree field of view, that would fill your vision, and you wouldn't be able to use these things walking down the street.

These glasses are designed as a HUD, heads-up display, to be used with your phone so you can keep your phone in your pocket but still be in the real world. Critical, this is part of the reason why the Blade works as well as it does, and it's part of the reason why people, even in the security industry, want these glasses. They're not 90-degree fields of view. They give you the information that you want, and again, you don't look really odd when you're wearing them. Integration of voice and voice assistants. It's an amazing step forward. Augmented reality and artificial intelligence is going to, together, be just game-changing in this space. Both of those, by the way, will get better and better and better with 5G performance and faster access to the cloud and the likes.

You need sticky consumer applications, our device works with many of them out of the box, you need an ecosystem to deliver it. Vuzix has built and is delivering on almost all of those points. You might think we pick and chose them, we didn't. That's the reality of it. This marketplace needs certain things to be successful, and they're the things that are on that page. We built a consumer-facing architecture and infrastructure for the device, much like a modern smartphone with a watch. All of the features that you see in those kinds of devices are available with the Blade now with our own App Store, the companion apps, Android and iOS both supported. The App Store supports paid monthly, sort of re-upping on a rental basis for the applications and/or free applications. It's a simple login process now.

You saw Greg click and go sort of a thing. Keyboard functionality, trackpad. What's good is we've designed it so it could be localized to different countries. We're working with folks in Europe, we're working with folks in Asia, they each need to have this localization done for Japanese or Chinese or whatever. I'm not saying it's simple, it's not that difficult for us to do that because our team is really good at writing this stuff, they designed it so that you could just change the text strings appropriately to work within one country to the next, to the next. We've also got a fantastic toolkit, developer tools and the likes.

I've never seen the team get so many kudos from people when they start playing with our thing, it's like, "This is so easy to do." We most recently launched a developer contest. Maybe this is three weeks old, Matt? Something like that. There's over 70 folks that have signed up to develop apps as part of this contest, it's just getting started. The contest doesn't end until the end of summer. We're getting all kinds of excited people diving in to write the apps for it, these will be apps that are designed not as a legacy style app. These are apps, in order to qualify, they have to be designed to work natively on the glasses. We're really excited. In just a very short amount of time, there's a fair number of folks that have signed up to support the Blade.

In some cases, it's actually some corporations even that are excited about doing some of their enterprise stuff that they would like to put in around this. There's also a few categories. As you can see, there's personal, business, and gaming and entertainment. The interesting thing about a device like this is selling it in the consumer channel makes a lot of sense. There's a lot of internet sales done today, that's where we're starting with this product. At the same time, because of the way it's designed and it's such a great accessory to a phone, you can see how this device would be sold really well in the carrier marketplace, in the wireless industry. We have conversations going with multiple companies that are looking at putting this in their sales channels and on the consumer side of the business.

That's going to be an exciting thing for Vuzix. We're just getting started with it. This thing has really only gotten this level of capabilities in the last week or so. We have been showing it behind closed doors a little bit, and folks are pretty excited about the fact that this thing is as far along as it is. Guys are saying, "Wow, I had no idea that the Vuzix Blade or any smart glasses actually were to a point where they have an ecosystem like this." It's a big advantage for Vuzix. So far, I think we're ahead of most everybody because it's not just about a waveguide, and it's not just about really cool small displays. It's about building an entire solution, soup to nuts, and Vuzix has it today. We're also working on next generation products. Plessey Corporation.

I hope Mike is going to be able to join us here at some point. Mike Lee. He was flying in last night, and his plane caught fire. Actually, the cockpit was all smoke and stuff. I think he is going to join us by phone, though. Plessey makes these really cool microLEDs. On the table over there, after I can show you, the display engine shrinks down to something that's like the size of my pinky straight up kind of a thing. It's this little tiny thing. Of course, with our waveguides and our next generation thin waveguides, we're going to make these things that look like ultimately Kingsman style glasses. We have a great relationship with the Qualcomm folks and the XR1 and their next generation series of products at the same time that we're integrating into these devices.

Ultimately, they will have cellular support right on out to 5G. I'm not leaving this up long. This is just a quick sneak peek of where this stuff is going in the short run. Yay. You can see it has this look and feel that's significantly more like a conventional pair of glasses. Not that the Blade's bad, mind you, but these things are designed around acetate frames, technology that can easily be modified to go with different colors, tortoise shell, white. You pick your poison, and it's easy to scale these from a size perspective. I can't say you didn't see that. I want everybody focused on the Blade today and our customer base. I am saying that I thought it would be worth giving you guys a feel for the direction we're heading.

That's a good one, it will get even smaller than that by far as the next couple of three years unfold. It's so much fun doing this side of the business. Frankly, I'm a technology guy, and these are the things that really turn my crank. I have to admit, I really hardly ever get to do that anymore. I spend an awful lot of time with some of the crap that goes on on Wall Street. I probably shouldn't have said it quite like that, in any event, this is really exciting for Vuzix, and my team is just bringing it home for us. At Vuzix, there's another category that's been unfolding for some time now, quite frankly, there's an industry side of this business that is picking up faster than what the consumer average Joe side is.

The big companies that deliver into those spaces, many of them are trying to figure it out. They don't want to do the next Magic Leap or the next Google Glass, they're all working their way through the bushes, as it were. In these markets here, these are about ROIs. They're about making products that if you build it, they need it. We have folks in the automotive industry that we're building product for today, in the defense industry, aviation, courier services. Think aircraft kinds of courier services. Some stuff in the consumer side, which we've talked a little bit about in the past, and some of our technology actually fits really well in spaces that have nothing to do with even wearables.

We have some folks that are working on some 3D direct view viewing systems that use wavefront optics systems in them, it's quite amazing. These are programs that Vuzix has responded to and/or continues to respond to requests for quotes. We've been winning some of those. You've seen a few press releases. You should see more. It's potential for $ millions, lower in the $ millions, $ tens of millions, possibly, in the NRE side. It takes time to build these devices, but once they're built and you get deployed in an aircraft, let's say, and it's a critical part of a safety system in an aircraft, it can represent $ tens and hundreds of millions worth of business opportunity. We don't have all over this yet. I can tell you that we've responded to a very large amount of this.

That 10 number, we have RFQs out greater than that right now responding to requests for how can we take Vuzix's technology and put it in our box. This is going to be another, I think, win for Vuzix, and what's nice about it is, it's cash that comes in for engineering fees up front. It also helps with cash flows and those kinds of things. My goal was to try to give everybody a feel for the fact that revenue generation at Vuzix is going to be coming from multiple different areas. I wanted to make sure you all knew that we had products that are ready to go and/or shipping today that are delivering in these areas. With all of this put together, Vuzix is in an exciting spot, and we're seeing accelerating growth.

Despite what you might hear to the contrary, when you get on some of the boards that are negative just because they're shorting or whatever around Vuzix, it's not the case. Things are exciting. It's the best time it's been for Vuzix. We've got a great pile of business in front of us, and we're just here to execute. I'd like to take a few questions if you have them now, but I don't want to go too long because we have some of our guests here, and I can take more after that, possibly. Any questions? Yes, sir.

Speaker 7

How important will engineering be?

Paul Travers
President and CEO, Vuzix

In the long run, it's not a big piece of Vuzix's business, quite frankly. The reason why we would do any of those engineering programs is not for the engineering. We would do it because there's programs on the backside of it that we would be delivering product against. In fact, I don't think Yeah, we're not an engineering services company, so I've not seen anything that we've quoted on that is, oh, let's get this piece of work kind of a thing. It's all pointed at long-term revenues. Yes.

Speaker 8

Thank you for your presentation. By which year do you think Vuzix will become EBITDA, like break even or neutral?

Paul Travers
President and CEO, Vuzix

The CFO of the company has been over there board. I'm going to let him answer that one.

Grant Neil Russell
CFO and Executive VP, Vuzix Corporation

Well, as soon as we're selling enough product and have enough gross margin to do so. Realistically, 2019 is not going to be, overall for the year, we're not expecting to report a positive EBITDA, but it's still our goal for 2020. Potentially, as early as Q4, we might get to turn that corner, that's really all we can say at this time.

Speaker 9

Once you've pioneered the space, what's your plan for retaining the space from people like Alphabet or Amazon?

Paul Travers
President and CEO, Vuzix

We got a good race in front of us, frankly. That's part of the run here. We're ahead, I believe, from all of those guys just yet. You could imagine at some point that one of those companies might want to step up and in the particular space they play in, have an asset like Vuzix. That could possibly happen at some point in time. Our plan right now is just to execute, own it, and develop that technology for the future of it.

Grant Neil Russell
CFO and Executive VP, Vuzix Corporation

We have two more questions.

Speaker 10

Thanks. If my memory serves, I think your production line's on your Blade around 2,000 a month. Where do you see the top end of that scale? Based on your presentation, it sounds like you probably need a little bit more than that.

Paul Travers
President and CEO, Vuzix

The reason why we're not having this meeting in the facility is because we've been rebuilding the facility and expanding the production floor. If any of you would've been here last year, when you'd come over, you'd notice that area where we gave the presentation, that area is not there anymore effectively. It's kind of half of it at least turned into production floor space. The backside, which was over more towards the cafeteria, the lunchroom side of it, that's also getting moved in and it kind of opened up a little bit for more production purposes. That said, the equipment that we need, the long pole in the tent to produce today is the waveguide production side of it. We're getting really good at that. We're getting turn times that are quite fast and yields that are significantly better than they've ever been.

It's not that difficult to replicate that equipment. We have space on the floor to do it, to double, triple, et cetera, our production rates. We're preparing for that. Good question, by the way.

Speaker 7

Paul, for your bulky competitor, we've all seen those headsets. Does their size allow them any capabilities that you can't put into the Blade?

Paul Travers
President and CEO, Vuzix

That's a very good question. If you watch Apple's, I think it was the keynote that they did. They did a big presentation here just over the last week. They were taking a single camera on the phone, a single camera, and they were doing all of the kinds of things that you would see in a Magic Leap headset, let's say, that requires that bulky array of technology that's in the front. It's true they do have some spatial mapping stuff that they put in, so they can use hand gestures and those kinds of things. People are doing that with a camera today, too. Software, sensor integration, all that stuff is coming.

That is on a path, the silicon shrinking, shrinking, performance going up. The ability to put MIPS processor power on the raw feeds out of those devices are enabling much, much smaller solutions around that. I give HoloLens and Magic Leap a lot of credit. Their products are tour de force gizmos. You put them on and you can do some really cool stuff with them. You have to ask yourself where the real market is. This is little Vuzix saying this, but I'm telling you that if you look at where Magic Leap is getting deployed today, it's not in enterprise. It doesn't work there. It's too expensive for the consumer marketplace in gaming. It is an amazing product. It needs to evolve. I think what you'll see in the end is the direction they're going, they're going to try to make it smaller.

From us, we're going to try to make it smaller, but give it more capabilities at the same time. These things ultimately will, I think, collide on top of each other when you finally get to the ultimate style devices that you want. From our perspective, from the very beginning, we learned that if it's big, it's bulky, and it hurts to wear, you've already failed. We're working on small, lightweight, trim, and giving it useful capabilities. Yes, it's not whales jumping out of floors. Again, I'm not picking on Magic Leap, it's just what their device kinda can do. Ours is more about useful information that can make your day more productive. Okay. Fantastic. I'd like to turn the floor over to Neil here, but before I do, I just would like to give a little bit of my perspective.

Neil's going to blow my perspective out of the water, but it's sort of the way I see 5G and the ability to deliver what he can do and make our devices a whole lot smaller in the process. If you think about it, first of all, Neil's from Verizon. He's a very senior guy there that's responsible for relationships and a lot of it around the 5G environment. I'll let him describe the rest of that. Continuing here, as you all know, we have a strategic relationship with Verizon. It started not actually with Neil. Neil learned about Vuzix through coming to some meetings and stuff. Neil's part of a group that actually fosters new technology efforts and stuff.

5G, from our perspective, is going to allow augmented reality glasses to get smaller and smaller in size because you don't need to have all the processing power in the glasses anymore. Again, don't want to take the thunder here, but you can run NVIDIA high-end graphics processing in the cloud and deliver it in sub at least millisecond kinds of time frames. It's like having these high-end engines in the cloud running zero CPU load in the glasses. When you talk about getting to the point when whales are jumping out of floors and high-end rendering and all that stuff, this is where Verizon's going to make a lot of money because they're going to sell access to all of that kinds of information, that high-speed rendering, et cetera.

They're going to deliver it in devices, which are a lot like what Vuzix does today. What excites us about the Vuzix-Verizon relationship, yes, it's fantastic to be part of their sales team and all this other, but we see also it's part of our future roadmap, quite frankly. This is an example. [Solon]?

Got it. One of the first things that you could imagine doing here would be some of the things like language services and translations and stuff, this is where I feel I'm probably taking more of Neil's thunder, but I wanted you to see this little video. They had done a presentation. They're using Vuzix's glasses, another partner's software, putting it together through some of their cloud services to do real-time language translation.

Yesterday, the technology and product development team hosted a tech day to show some employees many of the current and future use cases for 5G. Some of the highlights that you're seeing here were new digital signage displays that run on our 4G LTE network today, and an AR application that can break down any language barrier.

Speaker 13

We are trying to showcase a technology that is applicable for new use cases on augmented reality glasses. This will be very valuable as a real-time language translation and can be applicable in different vertical markets like healthcare, conferences, even consumer use cases where people are going to a different country, and they don't know what language is being spoken locally.

Paul Travers
President and CEO, Vuzix

What's cool about that? We're not talking about whales jumping out of floors. We're not talking about great big, giant things. We're talking about very useful applications that can be delivered today and be delivered even better as these future networks start to come online. Neil, you can have the mic. Your slide deck, I just attached it.

Speaker 5

Hey, guys. I think, Paul kind of summarized most of the stuff that we have been doing, essentially what makes us really interesting working with a partner like Vuzix. I think Paul mentioned this. I didn't engage Vuzix from day one. We had other teams that were more focused on some of these enterprise-level applications, and we already saw some of the slides mention that and some of the engagements that are still going on. My role in Verizon is primarily to look at some of the emerging technologies that might benefit from the deployment of 5G that is happening behind the scenes.

In more and more cities, Verizon is deploying this 5G. The core problem that we're all facing, not only Verizon, other operators also, what does 5G bring in new that essentially allows people to adopt that technology into new phones, new devices that are going to come up for leveraging that? That's a struggle. We are looking into different verticals on the enterprise side, different experiences on the consumer side, and seeking partners like Vuzix, who are not only looking at just the coolest factor, but some of the, like Paul said, some of the applications that are real right now that can leverage the technologies that are there right now to give value to that particular experience that people are looking for.

I'll just start going through some of the basics of 5G so that hopefully people get a sense of where we are coming from. Verizon has already been deploying 5G pretty much and wants to be the leader on that. Not only on the U.S. space, this is happening worldwide also. We did in October last year, 5G deployments at home, which is basically, you can think as your cable service or fiber service that is already there, but nobody has to dig a tunnel next to your home, and it just gets the connectivity through wireless to your home. It brings in all the values of 5G, high bandwidth, connectivity like at 1 gig speed, essentially, and latencies like crazy latencies that allows for totally new quality of services and applications that might bring in.

We have been also expanding on the mobility aspect, and some of the new devices are Moto Z3, Samsung S10, LG, and some hotspots that allows devices like Vuzix to adopt 5G even though it doesn't have the 5G chips built in yet. We are planning to go towards that direction, but for now, this is what is available. There's deployments in Chicago and Minneapolis right now, which is already live for 5G mobility solutions. I think this was announced publicly, there are 20 more cities that will be done by end of 2019, and more and more things are coming forward. These are basically the locations that we already have live coverage.

You can see there's a strong density of solutions on the East Coast side and a few on the West Coast side, where we are trying to connect innovation coming from different startups, different innovation centers, even big players like Oracle, Microsoft, NVIDIA, and try to see and bring in technologies into Verizon's labs, essentially. Where you can play with these technologies and kind of showcase how this is going to evolve. These are pictures of the towers that might show up if you are fortunate to be in one of those cities. You might be seeing this coming up in your light poles or even telephone towers or anything like that. It will be fairly smaller weight, like a breadbox-sized device, but it brings in totally different type of innovations, leveraging the infrastructural changes that are happening behind the scenes. Yeah.

We have four items here I just want to highlight. 5G, even though you might be consuming it as extremely fast, work on the back end side of things. Whereas mobile network that forms the things like technologies that are going to need that bandwidth. One of the problems is, we cannot just drop everything that is happening on 4G and say, "Okay, we'll all go to 5G." How are you going to get the revenue out of it, right? What we're doing is there's a gradual transition, like a transition plan, and we leverage the core competencies of 4G, make it more powerful because of this bandwidth that is coming into those nodes also. At the same time, as these newer cities evolve, we bring in 5G in a gradual progression, essentially. Spectrum is a big thing.

I think one of the gentlemen asked me about how does 5G fit into inside a room. Paul gave a really strong challenge of getting amazing connectivity in here. One of the issues with 5G is because we are trying to fit in more bits into the pie, we had to basically go into a spectrum that is like a microwave range. Microwave doesn't penetrate deep into the rooms like this. What we are doing is we're kind of like, as 2G kind of goes away, recoup some of those spectrum. We take the potential benefits of innovations coming from 5G and fit into those spectrums also. Those radio waves, as you can see, you can get coverage here on 4G also, can get the 5G connectivity even inside the home. We're getting there.

There are some subtle things that are happening behind the scenes, which are more and more software-defined networks being deployed. I'll go into a little bit details on that. The aspect of the thinner glasses that Paul mentioned. Even though you want thinner glasses, and you have a strong connectivity, you need to bring some of the complicated intelligence to the edge of the network. The glass-like devices and the edge of the network where all this big compute is happening can work together and give you the experiences that actually right now are in this HoloLens or Magic Leap, but at a much realistic, like my glasses that I'm wearing. I think you mentioned the Kingsman model, right? That's where we are passionate about.

That's why we partnered with Vuzix because they share the same passion, we are going towards a direction, not in a big jump without giving any tangible output, but we go through progression and learn and the way and go towards a business that will thrive. Okay. Verizon is talking a lot on this one. These are some of the PR things that Verizon talks about from different currencies and capabilities of 5G. At the very crux of the matter is you are getting an amazing speed and throughput. The latencies are shrunk down significantly. I think 4G gives you 50 to 60-millisecond latencies, and 5G, we are hitting towards 10 milliseconds, which is almost lightning speed compared to what we have right now. Obviously, the energy efficiencies are going to go away, like some of the deficiencies.

Some of the problems with 4G is you need to light up a signal like a candle. You're sending signals and power all across the spectrum forever. You're just not focused on a particular location. If I had 5G, what will happen is you can beam that small, narrow energy in a specific direction onto that particular device, which will be getting it. You're not wasting a lot of power radiating energy to the space. That brings in twofold improvements. One is that you can run with lesser power, and the other benefit is essentially, you can control the power that is hitting your body, essentially. You can think it like a focused beam of light that I can point versus a big floodlight that is lighting up this whole room, essentially.

That's a big benefit that people don't get, but that's going to really be helpful for power management and green deployments also. Obviously, which is not relevant to maybe the wearable space, but you can think in that various IoTs that have been showing up in these industrial manufacturing units, basically will be connected with small devices that are all connected with 5G. Millions of devices connected, gaining their intelligence back to the cloud. Devices like Vuzix can be worn by the foreman or people who are in that field and see those digital information contextualized and compacted and visualized, and absorb that energy without going through 10 pages of slides like they have to go through generally right now to look at a report or anything like that.

What is happening is, essentially, I just want to highlight that it's not just there's a core technology in one space that is just evolving. What is happening, we are in a really fortunate time where a bunch of other technologies, including big data analytics, machine learning, AI, computer vision, are all collecting together, and the glasses like these are allowing to absorb that energy and all that information very quickly. The difference between phone and a glass, I know you know it very well, is that you're hands-free. You can continue doing what you're doing and have that thing show up as the intelligence show up in your field of view and do the work. In a phone, you have to point it like this, your hands get tired and all that.

Even though that is what we have right now, we are looking at these kind of wearables to evolve and make the jobs much easier. People don't worry about the technology that much. They just take the solutions out of it. I'll probably skip this one. There's a lot of data here to talk about. We don't have that much time. Verizon 5G partnership trial, Vuzix is one partner, and Paul, you mentioned already with Zoi Meet. What we are trying to do is as we bring in partners and we try to hone on quickly, I have a pretty long history of technical background at Cisco and other companies.

What I try to do is understand the core partner's competency in a technology space and try to see how can we fit that in along with other partners to get a useful solution out of it and at least showcase that technology so that others can understand how the technology is going to evolve, how all these partnerships are going to come along and create the best experience possible without looking like too much code, right? It has to be valuable right now. We basically go through initial contacts. We do NDAs with the partners. We did the same thing with Vuzix. We have a bunch of discussions, and after a lot of 5G testing, we already done that, we try to see what we will learn from that information. All the KPIs that are coming off of those test cases, right?

Helps us evolve our decisions and plan for next engagements in the future. There is no one partner touch point, and then Verizon team is saying, "I don't want to work with these guys anymore." It's not like that. It's just a multi-touch engagement. As the partners grow in that space, we also learn from the partner. At the same time, we can collect a bunch of other partnerships together and hopefully, as a broader team, evolve this technology that is coming in and make it more useful for common people on the consumer side or enterprise side. It's a lot of learning together and showcasing information that is going to help people on, like, decision-makers in big companies or other markets that are kind of staying on the sideline say, "Okay, this is ready. We can move forward with investments in this space." Okay.

This is a little bit important. Hopefully, I can get the point across. Traditional way of cellular mobility is you think about devices like phones, wearables, glasses, and then there is a cell tower, which is your connectivity hotspot. In 5G, we really got that numbers down to extremely low number. That is the RF side of things, like under a millisecond speed. Obviously, we need a little bit more time to process the data coming in, sending it to the cloud, getting it processed, and come back to the intelligence on the device itself. As we saw in the demo, sometimes when it was working, it was lightning quick. The request goes out and it comes back right away. If it's not, it's not the device that is at fault, or it's not the connectivity that is at fault.

What is happening is the other end of the spectrum, where the cloud is having that service going, even if it's a voice recognition engine or maybe a picture that you've taken and the analysis is happening on the cloud side. If that latency is not low, what happens to your overall experience on the glass is not so great, or on the phone also, it's the same problem. It's nothing to do with the glass itself. What we started thinking about is, once we have that, can we put something close to the edge of the tower, a compute platform, that can help at least accelerate or make it deterministic, some of the engagements which need extreme low latency and interactions with the intelligence on the edge. The edge is not necessarily going to replace what we have in the cloud right now.

What it will do is bring that intelligence closer to the devices, which are these phones and the augmented reality glasses, so that the overall experience from a user's perspective is at a low latency in this bounding box, if you might think in this way. If you take the cellular tower out of the picture, just to make it simple, you are hitting a number of five-millisecond latency, which is amazing. I cannot just believe how many people at Verizon and other operators, they have been working tirelessly. Even companies like Qualcomm that have created this 5G ecosystem that has made this possible. What it opens up, Paul, you touched base on that, is that you are not thinking the glass-like devices as a singular device. You're thinking it is working in tandem with a huge intelligence on the edge of the network.

It can be a visual intelligence, like you mentioned, Paul, which enhances the quality of the images that are being shown. Instead of a cube, it would be extremely high-quality rendering of a cube with textures, lighting, all those things happening, which the glass might not be able to do. Doesn't mean that it has to be a must, but as you get into the consumer space, because consumers don't really care about how the technology behaves, they want to just have an experience. If they see an experience happening on, even though it's a higher price point device, they want to have that same experience here also.

What we are thinking in the Verizon perspective is, if we can marry these two technologies together, the connectivity on these glasses and the intelligence of the edge are going to work together to create devices that are at a lower price point, but at the same time can give the same benefit as you might be getting for devices that are $2,000 worth. Obviously, this is going to evolve. We are just scratching the surface. We're just playing with some of the aspects of visual fidelity. At the same time, there is an AI engine that can see, which we saw a demo of identifying a person, doing an amazing fast image lookup, and pulling up whether there's a threat or not.

All those things become very fluid thing to develop as long as the developer system adapts to this kind of model. This is something Verizon and other operators are pushing for so that a developer ecosystem can understand that and expands their capability on these glasses with a little bit on the compute so that these glasses become extremely powerful. This is what we did in a very short time. I'm just amazed by the partner Vuzix brought in. These guys are in Netherlands, I think, right? Yeah. That guy, his name is Nick, and he has a location where this is a constant problem. I have seen this problem also.

Even though they do show translation happening on the side, that's just a track that is following the conversation in the audience, that they're not participating in. If I'm talking to somebody to my next, I don't understand what his language is. It becomes a deterrent for communication and collaboration. The Zomit guys, which are working with us, they solved that problem and essentially created a service and solution primarily geared towards meetings. Where the meetings instead of becoming an hour-long meeting, where half the time is spent for actual discussion and half the time is spent for translation. That is not efficient. If you count the number of people in those meetings and you just figure out how much lost time is happening, it's not effective at all.

What they solved is they created a translation layer so that meetings becomes very efficient. Half-an-hour meeting is half an hour. It doesn't take more than that. I think Matt and I talked to them and we saw how can we incorporate that into the glasses itself. Within a month turnaround time, it was like, that's why I love Vuzix, essentially, working. You guys are really fast in churning in and have the passion to engage in with folks. Build it. We actually created the translation version that you saw that showed up in that video demo. I'm just simplifying it for you guys just to keep it not too technology-focused. The idea is that somebody's speaking here, this example shows in Spanish, and the glass picks it up.

It basically, instead of processing in the device, it goes to the cloud, the cloud interprets what that actual speech is into some kind of a transcription service. Then there's a translation that converts it to the target device, which might be another glass, where the consumer can see the translated version of the text, and they can respond back. It's not really a cool thing to do, in a sense. It's visually not very attractive, and we had a hard time, to be frank, Paul, when we were showing it in Verizon, both people were looking at attractive things. They're like, "Oh, this is so cool." This is like, "What is this?" This is some glasses, some text showing up. What is important about that? When they put on that glass and there's no connectivity, nothing.

They just wear it, I'm speaking in English, they see it in Spanish, their mind was blown. That's the core technology that we'll need to bridge the gap from what we are comfortable with on the phone side into the wearable side also. That's something that the industry has to adopt, that's how the consumer and some of the enterprise folks will adopt also. Not something that is, oh, amazing to look at or like, why am I not getting that? What is the value am I getting out of it, right? Immediately. You can imagine this same technology, some core aspects of this technology can be used for a person who's hearing impaired, they get a translation going on, they see what's going on.

You already have those devices if you go to a movie theater, they give you some of those devices. I appreciate that, Paul. You guys opened up the ecosystem of developers, and the developers will create these building blocks and connect these building blocks together to create experiences that we haven't thought through before. That's what we are passionate about, and that's why we are trying to work with industry partners like Vuzix to see where we are going towards. This is just growing, guys. Nothing has started yet. That's about it.

Paul Travers
President and CEO, Vuzix

Fraser, my man, come on up, please. Fraser, I'm not going to at all take his thunder other than to say that he used to be a Verizon gentleman. He's now started his own business. He's an expert in this field in many of his own ways, and he's going to share a little bit about his perspective and how it might relate to Vuzix and the rest of the industry. Thank you. Fraser, you got the honor.

Fraser Bowie
Founder, The Bowie Group LLC

Thank you, sir. Thank you. Yeah, let me move on. I'll talk a little bit about augmented reality in the enterprise. Before I get started, I just want to say the update to be able to watch videos on the Blade was really fantastic. I actually was sitting at the airport on the way here playing around with it, and I downloaded two episodes of "Tin Man," I think it is, on Amazon Prime. I was able to watch it on the plane, and it was great. You see all these airlines now handing out VR headsets so you can get their entertainment on that. This was nice. No one knew what I was doing. I was just sitting there watching my show. Anyway. Real quick about me. I'm an independent consultant at this point.

I deployed AR and VR for Verizon in their field tech. I was in corporate learning for about 10 years, so I was really focused on how could we improve learning and performance that way. I have a background in advertising and user experience as well, so I'm all about the user, and I want to make sure that these folks are comfortable. I'll talk a little bit about how they responded to this tech. I'm just passionate about technology. Anything I can do, I will do and try to not do technology for technology's sakes, but if there is a challenge or a problem, how can technology help that? Real quick, the AR in the enterprise is real. It's here today, where these are some predictions. Deloitte predicting 40 million devices sold by 2025, a year, $120 billion market, right?

Forrester is saying U.S. workers alone, there'll be 14 million of them wearing headsets by 2025. It's here. We're seeing the likes of Coca-Cola and Boeing and Porsche expand this and deploy this at a scalable rate with large deployments because they are seeing this. I was at AWE, which is a conference on the wearables side of things, and three, four years ago, when I was looking into this, it was trying to explain what augmented reality was. It's now all these enterprises just trying to figure out, how can I get there faster? They're seeing all these great use cases. Typically, the benefits that are discussed, right, are productivity and safety and error reductions. These are a couple of things that were done at GE. They saw 25% gains in productivity and zero errors, right?

The ability for a first-time user now with their instructions in their field of view, they're not making the mistakes compared to others that are making five, 10, 15 mistakes because they're looking, doing the swivel chair, looking around, that sort of thing. These are all great metrics, right? These are hardcore metrics. The productivity one sometimes is a little difficult to get by the CFO because if you're doing 25% stuff more productive, then why do I need an extra 25% of the staff? There's sometimes that one's a little more difficult, but it is true hardcore numbers. When we looked at it, when I look at it, I look at it in different ways as well.

It's coming from a training background, the ability for me to give, and I'll give an example here of, let's say, how you stack a pallet with boxes, right? Imagine you get to a point where you're grabbing a box off. Today, a food manufacturer may teach them how to do it in the classroom, right? Every box goes these different ways, this is how you stack it and all that. It gets to the point where they're out on the floor and they're doing it, and they're doing it wrong, and people have to reconfigure it. Imagine you get to the point where you're wearing something like the Blade, and it recognizes the package and it recognizes the pallet and exactly where to put it. Right? Now you're building the pallet correctly, but also, I no longer need to teach that.

I can take that four hours, eight hours, whatever it is to teach that out of the classroom because I'm giving them real-time learning. Right? Another thing that is really, training costs are fairly expensive, can be upwards of $500-$1,000 a day because you have travel and all that sort of stuff. Being able to reduce that sort of training stuff, travel expenses, obviously. The other big one for us was, in some of our trials, was speed competency. Imagine an apprentice, an electrical apprentice, right? They have to go out on a job. There's a job to go fix something, so they go out. They're an apprentice, so there's two of them that are going out. The company's only charging for the electrician, not for the apprentice. They're paying double the wage for these people.

Imagine if that 6-week or 8-week apprenticeship gets down to 3 because you're able to give them their instructions and their stuff sooner, faster, quicker. That's hard costs that they can make back. Those are some of the things. The other one is the elimination of the need to redeploy resources. One of the things is every company, every service company, right, when they do service calls, they have repeat calls, right? Within a certain amount of time, whether it's 3 days, a week, 30 days, whatever it is, if somebody picks up the phone and calls back for the same issue, that's costing them, right? I've heard things from it costs them $200 just to roll the truck out the door, right? Imagine that of if with the See-What-I-See, right?

You need the expert, or you have the glasses on, and you get there, and you fix the thing, right? It's the old Windows problem, right? "Oh, let's just reinstall Windows," right? First you reboot, then you reinstall, and then you hope it fixes it, and 3 weeks later it's having the same problem. The ability to have those instructions, maybe the maintenance records, like, "Hey, here are the 5 things that were done before, so do this." All that in your glasses as you're working hands-free will solve those repeat calls. Those are huge. Verizon has billions of calls a year, and a certain percentage of those are repeat calls. If you can reduce those, that's a huge savings. Again, I mentioned earlier that I'm all about the user.

I did a lot of user experience and advertising background. It's always connecting with the user. In the trials that I've done, this is the responses that we were getting from the users, right? It's not just about, hey, throwing them a device and making them put it on and hope they do it, right? It is about making sure that they're comfortable, that they feel it's the right thing, and all that. Here are some of the responses we got. The idea that it would assist in completing the task faster, 86% truly believed it would, and saw some of those results. These aren't folks that are millennials or new to the workforce, that are used to all technology. These were folks that were 10, 20, 30 years on the line.

These were folks that are maybe a little less into what's the latest and greatest, and they're really seeing how some of this stuff really helps them and what they need to do. That's really all I had. I will tell you, being in this industry for the last 3 or 4 years, it is unbelievable where it was to where it is today and where it's going. I am just amazed at how these people or how these industries and these enterprises just want to do it. 3 or 4 years ago, it was, they didn't know what it meant or how it was doing. It's just slowly becoming less pilots and more actual full-blown implementations. Yeah. That's it.

Paul Travers
President and CEO, Vuzix

I have to say, it's nice to hear from others that this industry is kicking up. We say the same thing, it is. This next gentleman, do we have him? Fantastic. We've been building a relationship with a firm out of the U.K. They make these little microLEDs. Again, I won't take his thunder, just make the point. If you can have a display that you don't have to light up with a flashlight, and you can pick every single pixel, whether you want it on or off, you can really shrink the size of a display engine, and you can really shrink the power profiles. Because one of the things I think you probably all noticed when Greg was giving his little demo here, most of it was black. You could see through it.

There's the outline, the thing, there's an arrow, that sort of a thing. Now, granted, when you're watching a movie, you probably got about 40% of the screen lit up. Point is, if you can only turn on the ones you want to, you can get significant reduction in power consumption, and if you don't have to use a flashlight to light it up, you get a significant reduction in power for that also, and size. Our friends at Plessey are doing exactly that with Vuzix, making some really cool next generation display stuff with us. I'd like to introduce to you Mike Lee from Plessey.

Mike Lee
President of Corporate and Business Development, Plessey

Hi, guys. Can you hear me?

Paul Travers
President and CEO, Vuzix

With the flames coming out of his mouth.

Mike Lee
President of Corporate and Business Development, Plessey

Hi, can you hear me? Hello? Can you guys hear me over there?

Paul Travers
President and CEO, Vuzix

Oh, great.

Mike Lee
President of Corporate and Business Development, Plessey

Paul, can you hear me?

Paul Travers
President and CEO, Vuzix

Just a sec, folks.

Mike Lee
President of Corporate and Business Development, Plessey

Can you hear me now, Paul? Can you guys hear me now? Hello, can you hear me there? Very sorry, guys. Perfect. I'm very sorry. Okay.

Paul Travers
President and CEO, Vuzix

Okay, guys, are you gonna give it one last shot? Okay. Unfortunately, probably a lot like the Wi-Fi connection we had earlier issues, we're having something similar here. Let me just say, Plessey's a great partner. They're making some amazing stuff. You would love Mike if you met him in person, and he was going to bring with his some really cool demos that would help answer some of your questions about how far away is it. In any event, we're not gonna be able to do it, unfortunately. I apologize, and I'm sure Mike is bumming here too. It's been a bit of a fiasco for the poor guy. The plane that he was on the way in here literally had smoke in the cockpit. They had to force it to land, and he's been trying to recover from that since.

In any event, sorry, everybody. I think we're gonna call it a meeting. Thank you very much for coming. Yes.

Speaker 11

Paul, we have a little bit of questions. You wanna do that now or just shoot it offline?

Paul Travers
President and CEO, Vuzix

Sure. We can handle a few right now. The problem is I've also got a board meeting I have to-

Speaker 11

Again, this has been a great educational opportunity to see what you're really doing. Very much appreciate all the work of the Verizon people and others who come in. The presentation today prompts one question for me, and that is or two questions. One is, what do you see is the % of the future markets relative to our business in the consumer versus the manufacturing other business applications?

Paul Travers
President and CEO, Vuzix

The enterprise applications are so much better margin-

Speaker 11

Right

Paul Travers
President and CEO, Vuzix

Less work and less resources required to play in them. It's safer waters to be in. Vuzix does have a big effort on that side of our business.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

It's interesting to note, though, you go to CES and all these very large consumer wireless carriers and kinds of guys are coming to you saying, "We really like your stuff. It could be a good play here." The closer we get to the consumer side, so finished solutions, the more opportunity it looks like that's there. I will say Vuzix is gonna be pretty cautious about that side of the marketplace.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

It's easy to get sideways.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

When you have the right partners that you're doing it with, you can generally sail through the storm as it were.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

It is true, the enterprise side is, it's better margins.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

It's not nearly as big, frankly, but it's still really big. The enterprise business is in the billions.

Speaker 11

Right. The other follow-up then is, what battle are you fighting to get the investment community to not look at Vuzix as in the consumer side of the business? Because right now, if you look up Vuzix, they say, "Well, this is a consumer-related hardware company.

Paul Travers
President and CEO, Vuzix

Yeah. That has probably come from a legacy of where we were a long time ago. It used to be we did supply a lot of consumer products. The team here over at Vuzix is looking at changing the way some of those filings are that have us as that, because today we are not a consumer company.

Speaker 11

Right.

Paul Travers
President and CEO, Vuzix

That said, this play promotion program is really cool. It's nice to see the level of response we're getting on the website, et cetera, around it. Our focus is really more on the enterprise side.

Speaker 11

Right. I think finally, the whole idea with the Verizon folks and the effectively 5G hands-free is just really a great buzz.

Paul Travers
President and CEO, Vuzix

Thanks. It's gonna change everything.

Speaker 12

Just a short request. Perhaps citations to the Plessey material would be appreciated. Anything, websites, patent papers.

Paul Travers
President and CEO, Vuzix

I will talk with Mike because he had prepared some slides also, and I'll see if I can't figure out a way to include them in the deck that we publish after. Okay? Hey, thank you very much, everybody. We appreciate you coming out again and being loyal shareholders of Vuzix.