Greetings and welcome to the Vuzix First Quarter Ending March 31, 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. Ian McGregor, you may begin.
Good afternoon, everyone, and welcome to the Vuzix's Q1 ending March 31 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, In addition, any projections as to the company's future performance represent management's estimates as of today, May 10, 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 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 Calculate and presented in accordance with GAAP can be found in the company's Form 10 Q filing at sec.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 Q1 financial results. Paul will then return to make Closing remarks, after which we will move to the Q and A session. Paul?
Thank you, Ed. Hello, everyone, and welcome to the Vuzix Q1 2021 conference call. Vuzix Smart Glasses Demand for Vuzix Smart Glasses continues to be broad based, both in terms of industry verticals and geographies, and our customer base and average order volumes Looking back over the last 5 years, our Q1 has historically been one of the softest quarters of the year for Vuzix, common occurrence for many technology hardware firms, yet despite this seasonality pattern, we achieved record quarterly smart glasses sales of $3,800,000 during the Q1. Our total Q1 revenue was just over $3,900,000 and represented A comparative year over year quarterly increase of 156 percent led by an increase in smart glasses sales of 100 and During the quarter, we significantly strengthened our balance sheet following ongoing cash warrant exercises and a $80,000,000 quarter end capital raise. Further on April 1, we received the proceeds of the full exercise by the underwriters of their overallotment option, bringing further net proceeds of $12,000,000 These actions brought our pro form a cash with the capital resources to pursue a number of strategic opportunities that should have a meaningful impact on our business results and ultimately shareholder value.
Moreover, our vastly improved balance sheet has yielded uniformly positive feedback from most of our larger enterprise and OEM customers. And once again, I'm pleased to report that our Q2 is off to a good start in terms of smart glasses demand. Our customer order pipeline continues to strengthen And we look forward to bringing you more customer order news through the balance of the year. Taking a quick look at our quarterly sales trend for smart glasses, You can see that there continues to be a clear pattern of steady demand growth. It's a very exciting time for Vuzix as this industry has started to gain meaningful traction and should be on its way to becoming a multi $1,000,000,000 industry over the next several years.
I would like to share with you a few of our key operating goals From internally developed software, strategic initiatives with partnerships and potential acquisitions, continue the development of our next generation microLED based Smart Glasses for introduction to key customers and strategic partners, broaden the depth of our OEM program engagements resulting in follow on NRE programs and or commencement of volume production and strengthen and expand Vuzix IP portfolio around next generation smart glasses, including micro LED based Segments of our e commerce, logistics and warehousing businesses were taken to their knees in 2020 by COVID. More specifically, Planned pilots and volume implementations of smart glasses technologies were put on indefinite holds. Despite the continuing COVID challenges, Companies are clearly looking to the future. And as such, we are now seeing increased inbound interest and order flows related to the reopening of the economy from many businesses that were previously offline due to COVID. As a result, we're now responding to requests from new and existing customers within logistics, warehousing, retail picking, e commerce and third party logistics that are looking to scale rollouts ranging from 100 to many thousands of units.
Many of these companies are dealing with increasing numbers of online transactions and package volumes on top of the climbing costs of human capital related to minimum wage increases and frankly, in some cases, the lack of a workforce to support the growth. These factors are all adding additional margin pressure Minimize errors generally reduce costs of operations across these industries. Vuzix smart glasses are being deployed by companies to support A variety of use cases. Notable examples of late include a $400,000 M400 Smart Glasses order we announced near the end of the Q1 to support one of our insurance customers, a Fortune 100 company, which falls into the category of remote support. In this case, we're providing our customers' agents with eyes and ears on the ground to guide and assist with claims associated with storm damage and the likes.
Around the same time, we also announced that CooperVision, a unit of the Cooper Companies and one of the world's leading manufacturers of soft contact lenses, Successfully deployed our M400 Smart Glasses equipped with LogistiView's Vision plus augmented reality warehouse software to provide hands free picking guidance at their 275,000 Square Foot West Henrietta, New York distribution site. Healthcare, which emerged during COVID, is one of the fastest growing market verticals for Vuzix, continues to accelerate in 2021, Accounting for approximately 25% of our smart glasses revenue during the Q1, up from almost nil in the Q1 of 2020. We are seeing our healthcare footprint expand globally and our smart glasses are quickly becoming an industry standard. Vuzix smart glasses are now being used in healthcare for surgeries as a fundamental tool for performing certain operations. They're also providing a virtual presence within hospitals for clinical training and senior care facilities to support telehealth solutions For patient care in the ICU and in the operating room for remote guidance by medical device technicians, the Surgical space is particularly exciting.
One medtech company that Vuzix has a good commercial success with is Medtronic, A global leader in medical technology services and solutions, Medtronic is a great example of a company that has embraced Endo is championing the use of smart glasses in the operating room to take advantage of the benefits offered by smart glasses, including Reducing prep time, limiting the need for travel and providing critical support virtually in the operating room. Another is Medacta, one of the world's largest providers of innovative orthopedic products focusing on healthcare sustainability, for which our smart glasses support their next AR surgical AR platform. Medacta is using Vuzix hardware for smart glasses based Total Knee Replacement Surgery and their technology is now driving new applications to leverage augmented reality in shoulder, hip and spine surgery. We're also working closely with rapidly emerging players such as PXI Medical and Rods and Cones. PXI just received U.
S. 510 clearance for its knee plus total replacement surgery solution. They have been placing regular follow on orders And recently placed an order for Vuzix M400 Smart Glasses that will more than double the total amount of their systems deployed to date to ambulatory surgical centers. Rods and Cones is another prime example. They're using our M Series Smart Glasses as a video sharing device to support optimized remote interactions Between surgeons and medical equipment technical experts, they have also been placing further orders as their demand continues to grow.
Surgeons and medical device technicians available to handle the current demand. Fusik's smart glasses are changing the game in the operating room By helping to solve this problem by increasing access to trained surgeons and med technicians through remote access into the OR, This capability is expanding the number of operations possible on a daily basis by enabling this virtual access. As you can see, healthcare in general has been growing for Vuzix, and we are engaging with and are beginning to supply smart glasses to Many other major industry players. This alone is a massive multibillion dollar market opportunity for which our solutions are uniquely suited. We intend to own as much of this space as possible going forward.
Summarizing the overall demand for our smart glasses, We continue to see an increasing number of qualified programs that are now scaling, placing larger and more frequent orders across our core vertical markets, including healthcare, Remote support, logistics and manufacturing around both our M Series products and the Vuzix Blade upgraded smart glasses. On the wireless front, we are seeing further interest from leading carriers across North America, EMEA and Asia Pacific centered around solutions for internal use and supporting wireless customers. Our relationship with major regional players like KDDI in Asia Our revenue generating business with Verizon to date has been modest, but continues to look promising as programs are brought to market with them. We recently announced with Verizon Smart Glasses support for BlueJeans by Verizon, a global remote collaboration platform with a Smart Glasses interface was developed by Verizon for Verizon's internal and external customer sales programs. We continue to work closely with Verizon's XR team to optimize the platform and overall enterprise user experience for the Vuzix M400 and M4000 Smart Glasses.
Vuzix has participated in several public facing webinars and podcasts with Verizon to support the EMS bundle for public Safety, first responders and the Department of Defense, which continues to make progress towards deployment despite COVID challenges. Keep an eye out for those upcoming events and other nationwide marketing efforts as they unfold to learn more about 5 gs, the mobile workforce and AR smart On the OEM front, over the last 6 months, we have delivered a number of waveguide and display engine assets to our OEM partners that are being evaluated. The feedback from these customers has been positive and the customers are engaged and working through details on next steps, which in some cases we expect additional NRE efforts for and in other cases we expect to move to production orders. To reiterate, in January 2021, we announced that we had entered into a joint manufacturing and supply agreement with Jaybird Display. As per the multi year agreement, JBER Display will provide micro LED displays and Vuzix will provide newly developed proprietary waveguides and projection display engines to work with these new types of microdisplays.
Further, the 2 firms have agreed to engage and cooperate And soon, all the way up to AR Smart Glasses reference designs for 3rd parties. We'll be presenting at the Society For Information and Display show next week and expect to be sharing much more at that event. We have been making great progress on this technology front and it is the beginnings of a significant industry change to SmartGlass' We continue to grow our intellectual property portfolio, which now consists of 192 patents and patents pending, Up 35 versus 1 year ago and more than double that of 3 years ago. The development of our next generation micro LED based smart glasses Continues to progress well. Although I can't offer much more in terms of details just yet for proprietary reasons, I can say that this next generation tech remains slated for key customer and strategic partner introductions and testing in late 2021.
In addition to microLED products, We are also working on new versions of our existing products, which further improve their performance and features, helping to ensure Vuzix products New accessories, improved voice control navigation, both for existing and new products, new sensors and upgraded OS platforms and core features. We should have an exciting expanded product lineup for 2022 and beyond with much of it leveraged from our strong current base. Vuzix now has the capital resources to better execute on the R and D and product fronts, and we intend to invest wisely. We will be investing in the We will also have a focus on the development of vertical software applications around our smart glasses in markets that are not currently being addressed, including providing Enhanced implementation support services. These SaaS based applications should make smart glasses Even more sticky for our customers and result in recurring revenue streams for Vuzix.
We expect that in the future For every hardware sale that includes one of our vertical SaaS solutions, we would see an even more significant recurring revenue stream from the application itself. I'd like to now pass the call over to Grant, so he can review some aspects of our Q1 2021 financial results.
Thank you, Paul. As Ed mentioned, the 10 Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. I'm just going to provide you with a bit of color on some of the numbers now. Our first quarter's total revenues for the 3 months ended March 31, Stronger M400 smart glasses sales, which tripled in revenues as compared to the same period in 2020. Overall sales of smart glasses 179 percent to $3,800,000 in the quarter as compared to $1,400,000 in the prior year's period.
There was an overall gross profit of $1,100,000 for the 3 months ended March 31, 2021 as compared to a gross profit of $100,000 for the same period In 2020, overall net gross profit margin was 28% for Q1 2021 as compared to just 5% for Q1 2020. The improvement was primarily the result of higher product sales levels, which allowed us to more fully absorb our relatively fixed manufacturing overhead costs
And to
a lesser extent improved gross product margins as compared to our mix in the 2020 prior period. R and D expense was $2,100,000 for the 3 months ended March 31, 2021 as compared to $2,000,000 for the comparable 2020 period, an increase of approximately 3%. The increase in R and D expense was primarily due to higher salaries, salary benefits and stock based compensation expense, mostly offset by a decrease in external consulting fees related to the M400 Smart Glasses development and maintenance. Selling and marketing expense for the 3 months ended March 31, 2021 rose 8% year over year to $1,200,000 as the decrease in trade show costs was $3,700,000 an increase of 141 percent or $2,200,000 largely due to Salary and stock based compensation related expenses, which rose $1,800,000 inclusive of a $1,600,000 non cash Manager and agency recruiting fees. Excluding this non cash LTIP charge, G and A expenses rose 37%.
The other major net changes included a $300,000 increase in legal and regulatory fees. The net loss for the 3 months ended March 31, 2021 was $6,600,000 or $0.12 per share versus a net loss of $5,900,000 or $0.18 per share for the same period in 2020. Now for some balance sheet highlights. As a result of ongoing warrant exercises during the Q1 and our recent equity offering in March, Our balance sheet has strengthened significantly since year end. Our cash position as of March 31, 2021 was 132,700,000 And we had a net working capital position of $140,600,000 Cash used in operations, Excluding changes in our working capital totaled $3,800,000 for the Q1 of 2021 as compared to $4,300,000 in the Q1 of 2020, a decrease of 12%.
Cash used for investing activities for the Q1 of 2021 was $700,000 as compared to $300,000 in the prior year's period As our investments in CapEx, patents and licenses rose year over year, during the 3 months ended March 31, 2021, received $103,000,000 in net cash from financing activities, which included $180,000,000 in net proceeds from our public offering that closed March 31, 2021, and to $35,000,000 in net proceeds from the cash exercise of warrants. These proceeds were partially offset by a $10,000,000 payment to Intel for the settlement of our accrued, but previously undeclared Series A preferred stock dividends, which were converted into common shares in late January 2021. On April 1st, we received an additional $12,000,000 pursuant To the full exercise by underwriters of their over allotment option for an additional net proceeds of $12,000,000 effectively bringing our pro form a cash position to approximately $145,000,000 as of that date, April 1. For the 3 months ended March 31, 2020, we did not receive any proceeds from financing activities. And as of March 31, 2021, the company does not have any current or long term debt obligations outstanding.
Of note, on our current asset balances as of March 31, 2021, we were required to increase our investment in manufacturing vendor prepayments from December 31, 2021 to $2,300,000 or approximately $1,800,000 This vast investment is really just for component inventories As of today, we do not see significant requirements to make further such investments, but we are monitoring our supply chain closely To ensure we have enough coverage on certain items into 2022, as a result, these investments could increase. Looking forward to the balance of 2021, we expect to continue to at least double our levels of investing activities the 2021 fiscal years as compared to actuals in 2020, primarily focused on new product tooling, development and IP. We as well currently expect to increase R and D spending by at least 50% over 2020 comparable levels. Further, we intend to incur additional spending on sales and marketing particularly overseas where we see many opportunities for growth. Vuzix now has the capital resources to smartly invest and grow its future business.
And with the expected planned revenue growth in 2021 and beyond, we see great value in investing more for such growth while Expanding our IP and competitive position. Put simply, we intend to judiciously deploy and leverage our increased capital resources for the benefit of our stockholders, customers and staff. With that, I'd like to turn the call back over to Paul.
Thanks, Grant. As the world comes back to work post COVID, smart glasses are shaping up to be a fundamental part of it. In so many ways, the promises of smart glasses and enterprise across the board are becoming a reality Vuzix is positioned better than most any other firm to capitalize on and lead in an industry touted to be in the multibillions of dollars in value. Vuzix also has its strongest balance sheet in the company's history to support operations in our efforts to accelerate revenue growth and R and D, including new product developments. As you might imagine, Vuzix is well positioned to achieve another year of solid year over year revenue growth.
I'd like to now turn the call back over to the operator for Q and A.
Thank you. Our first question comes from Christian Schwab with Craig Hallum Capital Group. Please state your question.
Hey, guys. Given the substantial balance sheet, is there any plans for M and A or how should we be thinking about what should we be doing with that over the next 2 to 3 years?
One moment, sir. Let me unmute you real quick. One moment. Go ahead.
Sorry about hey, Christian. Good question. There's no doubt that Vuzix has some strategic acquisitions that we're looking at That should provide significant growth for the company, especially on the software side of the business. There's a Few components and pieces and parts on the technical side, but we're typically in pretty good shape there. And that said, on the software side of our business, there are some Organizations that are in our industry already that are in a really good spot that would generate significant, we believe, Software revenues for the company going forward and there are some companies that are actually not in the smart glasses space that should be.
So we can't go much more than that. But just to let you know that yes, the expenses are going to be to put some of that capital to work and acquisitions will be part of it.
Great. And then thank you for the update on Slide 11. On this Tier 1 aerospace and defense contractor that has moved And to the production negotiation stage, I don't know if I missed it in the call, but did you quantify The revenue opportunity that potentially could happen there?
We have not shared that yet, Christian?
Okay. Okay.
As we look at the other
We're offering
about this I'm sorry, I can offer a little bit more color. We have talked about this before. These guys are In the valuation, they're building stuff around it. I can't get into a lot of details, but these are going to be units that will be in the 1,000 Signs of units and there's the $4,000 to $7,000 price point based upon configurations and stuff. I hate saying it, but you're we're all just going to have to wait.
No worries there. And then the other four opportunities at different stages between Phase 1 and Phase 2, can you Remind us how long it took to get from Phase 1 to product negotiation With the first highlighted customer and is that kind of the expected typical timeframe that we should expect With the other major opportunities?
I think it's going to be pretty similar. I will say there's one Exception to that rule right now and that is with our Jaybird display relationship. We should be sharing more about that coming up, but And in fact, knock on wood, we should have nice press release here revolving around SID even that will share a bit more in this regard. We've made great progress with operational systems. We're going to be sharing them with the world soon.
And that business, I think you'll start to see some forward momentum even before the rest of this year is out.
Great.
Fantastic. No other questions. Thanks guys.
Our next question from Matt VanVliet with BTIG. Please state your question.
Hi. This is Rachel Freeman on for Matt VanVliet. Thanks for taking my question. So you highlighted a broadening number of use cases. Can you provide a little more color on which of these These cases are gaining the most traction.
And are there any in particular that you've seen emerge more prominently versus last quarter?
Yes. Rachel, hi. The healthcare side of our business is just amazing to me. The fit is perfect. The glass has worked so well.
And it's ranging in that space From integral operating environment tools, for instance, Pixy with their knee surgery, it's a fundamental part of doing knee surgery now. It's not just simply being used as a remote support tool. Literally without the glasses, you couldn't do the knee surgery. So That portion of our business from the direct surgery, support during and in the operating theater, If you think about a firm like a Medtronic, right, they have medical technicians that normally are in the operating theater while these operations are happening. And it's hard to do that today.
And with all these back orders of people that need to get operations done, The demand on the doctors and the demand on these medical technicians is significant and the glasses are just opening up so much better paths to get stuff done. So the medical side of our business is really cranking and I don't see it slowing down. In fact, we have more and more companies that are jumping on the bandwagon there. On the remote support side, which is sort of the baseline that just continues at Vuzix. It's become a fundamental way for people to get remote activities done.
And I think with the reopening, I don't think that's going to slow down either because You can send a pair of glasses, you don't have this in person. And then another area that's really starting to pick up is this whole In store picking and warehousing and logistics and delivery of materials and the likes of the 3PLs and The retail guys that are trying to do fulfillment, the pallet stacking, there's just a bunch of applications in this side. And In those areas, literally, we are responding to requests for thousands of units kinds of deployments. So it's kind of 3 areas, the remote support stuff, the medical stuff and then finally logistics.
Thank you. Our next question comes from Jim McIlree with Dawson James. Please state your question.
Thank you. Good evening. Grant, after the contemplated Investment and expense increases that you have for the year, what are cash operating expenses and GAAP operating
Well, Jim, we don't necessarily give full Forecast for the year, so I mean, we tend to Let me put
it this way then. You talked about sales and marketing going up. Yes. Is it going up at the same Pace that R and D is going up or is it it's just
No, not as steep. R and D will be up 50%. So if we did $10,000,000 well, it was $8,000,000 last year, We'll probably do a little over $12,000,000 in 2021. Sales and marketing will probably go up by A smaller sum? I mean, some of that is related to sales revenues.
We do have planned increases, commission expense, advertising and the other. So I mean realistically, it's probably going to be also up 40% or 50%, but we're going to have a much bigger top line and hopefully gross margin. And G and A, I mean, other than recently we've Had expense increases and things like insurance, insurance, we just got our settle on our 2021 plan, our rates have tripled. And it's just the nature of the markets and we have some other unknown costs That could come, but the other major driver there is just going to be noncash.com. So I wouldn't see a material Further increase other than the ones I just highlighted in G and A.
Okay. And then the sales and marketing increase that you're Contemplating. Is that primarily related to increased headcount? Or is there something else going on that I should be aware of?
Headcount would probably be 40% to 50% of it. We do see some good opportunities, particularly overseas. We're expanding our presence in Europe. We're going to set up currently we have Latin, South America lumped them with APAC. Going to split those into regions.
So I mean, we're looking at potentially a couple of additional bodies for each region as well as A full time sales engineer. So that's going to increase our staff complement. And that's for two reasons, one to get increased sales and to better support The customers we expect from our planned growth of sales. So there will be hopefully be profitable ads. And if it goes slower than we planned, we won't necessarily incur all those costs as quick as we currently plan on.
Okay.
And also on sales and marketing, as you continue to grow the Top line, do you think you need to change the way that you're approaching the market, that is Less value added resellers, more value added resellers, you need to have more bodies added. I'm just trying to understand Not the dollars that are being spent, but the infrastructure or the organization that you believe that you're going to need to have As the top line scales.
I can advance that a
little Okay. Go ahead.
Yes. I can offer a little bit there, Jim. The channel management of our sales Channel is becoming the cornerstone for how we do this. We've got great value added resellers and the likes. But we also feel it's critically important to grow our relationship closer with our end customers.
And The more we're doing that today, the bigger revenue streams are coming from that side of our business. An example would be Medtronic. They buy everything from Vuzix. They buy the software solution from Vuzix, they buy the hardware from Vuzix and they have some support stuff that we do with them. And being able to manage that relationship closely, Medtronic is just a it's a growing significantly growing piece of business for Vuzix, because we're able to manage that relationship so much tighter.
So, We are doing more and more of that. Our relationship with our partners over at TeamViewer, which now is upscale and it's UBMax at the same time, we are reselling their software applications at the same time also to try to keep that relationship closer with our customer. What that means is we're going to put some more smart engineering sales type people and the channel management guys to help manage Those relationships, so we keep the relationship with our customer in more cases than not. So that takes a bit more work to make that happen We still have very, very good relationships. I don't want to take our value added reseller partners and make them feel like they're not bringing value because they certainly are, but we find We have much better success when we're closer to the customer.
As our software models come online and we start offering direct solutions, You'll see that side of our efforts pick up even more.
Okay. And when you look out, let's say, 3 years from now, do you think that The largest industries or segments or sectors that you're addressing are going to be healthcare and logistics and something else? Is there a sleeper category out there that we should be focusing on?
Not that we would like to talk about. However, right now there's no doubt that remote management of almost anything With our glasses, remote auditing, remote support, you put the glasses with the case tractor and now there's Remote, I can get the tractor up and running without having to send an expert out into the field. You're going to see that all over the place. You're going to see healthcare In the most amazing solutions that are coming from the glasses, the more sensors you put in the glasses, the more the glasses can do in the can do in the healthcare environment also. It's actually a true statement across the board, frankly.
And as we mentioned in the call earlier, There's all kinds of new tech that you'll see in some of our next generation stuff that allows us to do some of this really cool next gen more advanced stuff. Medical was a big space for it. Medical alone, Jim, it's going to be in the 1,000,000,000 of dollars. If you think about being fundamental to part of How operations get done, and all kinds of other areas of the hospital. So telehealth, telemedicine, medicine in general, I think you're going to A lot of business from Vuzix.
And then this whole idea of logistics, moving boxes around, those three areas are all, In my opinion, going to be in the 1,000,000,000 of dollars in value. And yes, There are other verticals that we are looking at that nobody is in right now that smart glasses will completely change the game for that we think have significant kinds of value.
Okay, very good. Thanks a lot and good luck with everything.
Thanks, Jim. Thanks.
Our next question comes from Jack Vander Aarde with Maxim Group. Please state your question.
Hey, guys. Thanks for taking my questions. Just a couple on the engineering and OEM side. Paul, in addition to those 5 OEM projects that are listed on Slide 11 of today's presentation, Can you provide any color around maybe your expectations or the likelihood or perhaps A timeline of adding another OEM project or 2 to the list?
So it's interesting, Jack. We've actually Turned several of them down over the last 6 months. You got to kind of pick and choose where your ROI and the best value is going to be. And so I could say that we could go back and turn one of those on if we wanted to, but We're trying to be involved with our opportunities that have a reasonable manufacturing opportunity on the backside of that. We don't do these things to make $50,000,000 of something sort of a thing.
We're in discussions with in several different areas and Part of what this Jade Bird business would be is actually enabling a lot of opportunity in this regard. These micro display engines that Vuzix has built around the J Per displays are phenomenal. You'll Again, within a week, I hope you'll see more about what this is all about. And in the Announcements that we'll be talking about, you will see the kinds of applications. Interestingly enough, these little engines are going to be designed to not just Be used in a pair of glasses.
There's all kinds of things that can be used in. And so you'll see that expand, I think in a lot of different areas.
Okay, cool. That's helpful. And then just a question on more of a housekeeping Maybe, but just to get a sense to see if I'm understanding this correctly. In the 10 Q, it's I think it's there's something related to Waveguide Project that began in the Q3 of 2020 that's set to finish in the Q2 here of 'twenty one with about 40,000 Dollars of revenue, Engineering Services revenue left on that. Are there any other projects that have been previously disclosed that Are expected to contribute to engineering services revenue in the Q2 or is it just this last project here with $40,000 left on it?
I anticipate there is a good chance there'll be some more engineering It could be booked as product actually. I'd have to talk with Grant about how I'm not being the finance guy in this regard. There is some stuff going on that you that we're delivering against. So you'll see stuff, But I don't know if it's going to show up as NRE or not. We could follow back up on that one later when I can get the details from Grant.
Sure. Yes. No problem. And just one last question, maybe this is for Grant. Just looking at the product gross margins, they came up quite nicely this quarter From the prior quarter, just on a GAAP basis at least, is this and revenue only kind of ticked up like maybe $100,000 on the Revenue for that to happen.
Is this a pretty normal are you confident in this is like a 4% going forward for the rest of the quarters here? I think I'm showing like 25.9%. Is that what's your confidence in that kind of gross margin going forward, if not elevated?
I mean, I think if we keep the revenues per quarter in the $4,000,000 plus range and Hopefully a lot greater. We should be able to achieve margins in the North of 2026, I mean, hopefully, we can our goal is still to get up to 40, that requires a bigger revenue base to better absorb some of our Relatively fixed manufacturing overhead costs, but I mean we anticipate currently getting into the Well into the mid-30s before the end of 2021 on a gross margin basis. The products are doing well. They're priced well. We got rid of the old ones in Most of the write downs, so I think it should be hopefully pretty clear sailing going forward as
we grow. And as you know, Brent, there are some things that we're doing that should take some of the costs out, if they work out like we think they will.
Yes, absolutely. It's always nice to surprise you positively.
Okay. Well, guys, I appreciate the color. Thank you.
Thank you, Jack.
Thank you. And at this point, I will turn the call back to Paul Travers for closing remarks.
I don't know how else to describe it everybody. Vuzix's business is taking off. There's no doubt about it. Smart Glasses, They've been touted for a long time now to be in the billions in value and it is starting to unfold and post COVID Vuzix is in a really good spot. I'd like to thank everybody for your interest and participation on the call today.
And I'd like to remind everybody that our Annual Shareholders Meeting is going to be done virtual this year. We look forward to seeing everybody there. Thank you again and have a great evening everybody.
Thank you. This concludes today's conference. All parties may disconnect. Have a great day.