Greetings and welcome to Vuzix's 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. McGregor, you may begin.

Good afternoon, everyone and welcome to Vuzix's first quarter ending March 31st financial results and business update conference call. With us today are Vuzix CEO, Paul Travers and CFO, Grant Russell. Before I turn the call over to Paul, I'd like to remind you that on this call management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors including, but not limited to general economic and business conditions, competitive factors, changes in business strategy or development plans and the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, May 10, 2021. Vuzix assumes no obligation to update these projections of the future as market conditions change. This afternoon, the company issued a press release announcing its financial results and filed its 10-Q with the SEC, so participants in this call may not have already done so made a wish to look at those documents as the company will provide a summary of the results discussed on today's call. Today's call may include certain non-GAAP financial measures, when required reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in the company's form 10-Q filing at sec.gov, which is also available at www.vuzix.com. I will now turn the call over to Vuzix 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 CFO who will provide an overview of the company's first quarter financial results. Paul will then return to make some closing remarks after which we will move to the Q&A session. Paul?

Thank you, Ed. Hello everyone, and welcome to the Vuzix Q1 2021 conference call. Vuzix Smart Glasses continue to be called upon by our enterprise customer base to solve operational challenges across a variety of market verticals and use cases. 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 continue to increase. Looking back over the last five years, our first quarter has historically been one of the softest quarters of the year for Vuzix, a common occurrence for many technology hardware firms. Yet despite this seasonality pattern, we achieved record quarterly Smart Glasses sales of $3.8 million during the first quarter. Our total Q1 revenue was just over $3.9 million and represented a comparative year-over-year quarterly increase of 156%, led by an increase in Smart Glasses sales of 177% in the period. During the quarter, we significantly strengthened our balance sheet following ongoing cash warrant exercises, and an $80 million 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 million. These actions brought our pro forma cash position to approximately $145 million as of April 1st. This cash position provides Vuzix 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 second quarter 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 multibillion-dollar industry over the next several years. I would like to share with you a few of our key operating goals for 2021, some of which we discussed on our conference call in March. They are to continue growing sales and the deployment of order size of our M series and Blade Smart Glasses, which I'll share more on this shortly; to increase recurring SaaS revenue from internally developed software; to continue strategic initiatives with partnerships, and potential acquisitions; to continue the development of our next generation microLED-based Smart Glasses for introduction to key customers and strategic partners; to broaden the depth of our OEM program engagements resulting in follow-on MRE programs and/or commencement of volume production; and to strengthen and expand Vuzix IP portfolio around next generation Smart Glasses including microLED-based display engine technology and waveguide optics. COVID continues to impact economic conditions around the world. Segments of our e-commerce logistics and warehousing businesses were taken to their knees in 2020 by COVID, more specifically, plan pilots and volume implementations of Smart Glasses technologies were put on indefinite hold. Despite the continuing COVID challenges, companies are clearly looking to the future. And as such, we are now seeing increased inbound interest in 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 rollout ranging from hundreds 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 cost 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 to operations and as a result, driving Smart Glasses demand to increase worker productivity. Vuzix Smart Glasses improve pick times, minimize errors, and 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 and 400 Smart Glasses order we announced near the end of the first quarter 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 customer agents with eyes and ears on the ground to guide and assist with claims associated with storm damage and the like. 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 Vuzix Vision+ augmented reality warehouse software to provide hands-free picking guidance at their 275,000 square foot West Henrietta in 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 first quarter, up from almost nil in the first quarter 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, in 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 med tech 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 and 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 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 Pixee Medical and Rods & Cones. Pixee just received U.S. 510-K clearance for its knee plus total replacement surgery solution. They have been placing regular form one 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 & Cones is another prime example. They're using our M series Smart Glasses as a video sharing device to optimize remote interactions between surgeons and medical equipment technical experts. They have also been placing further orders as their demand continues to grow. Around the world, there is pent up demand for surgeries that have been delayed due to COVID. And there are not enough surgeons and medical device technicians available to handle the current demand. Vuzix Smart Glasses are changing the game in the operating room by helping to solve this problem by increasing access to train surgeons and med technicians to 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 multi-billion-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 continues to expand with growing sales through custom applications using remote support, facial recognition, language translation, and more. 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 Blue Jeans by Verizon, a global remote collaboration platform with a smart glasses interface that 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 5G, the mobile workforce, and AR Smart Glasses. On the OEM front, over the last six 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 energy 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 Jade Bird Display. As per the multiyear agreement, Jade Bird Display will provide microLED displays and Vuzix will provide newly developed proprietary waveguides and projection display engines to work with these new types of micro displays. Further, the two firms have agreed to engage and cooperate in joint sales and marketing activities, especially in the Asian marketplace, towards potential OEM customers with complete solutions ranging from microLED display engines, and soon all the way up to AR smart glasses reference designs for third parties. We're presenting at the Society for Information and Display show next week and expect to be sharing much more at that event. We've been making great progress on this technology front and it is the beginnings of a significant industry change to smart glasses form factors and capabilities. We continue to grow our intellectual property portfolio, which now consists of 192 patents and patents pending, up 35 versus one year ago and more than double that of three years ago. The development of our next generation microLED-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're also working on new versions of our existing products, which further improve their performance and features helping to ensure Vuzix products stay leaders wherever possible. These improvements will include higher available display resolutions, expanded fields of view, enhanced ergonomics, 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&D and product fronts and we intend to invest wisely. We will be investing in the core smart glasses technology including optics, displays, time of flight, and other sensor technology and user interface technology. We will also have a focus on the development of vertical software applications around our Smart Glasses and 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 first quarter of 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. So, I'm just going to provide you with a bit of color on some of the numbers now. Our first quarter total revenues for the three months ended March 31, 2021 rose 156% over the prior year's period to $3.9 million. The increase was primarily a result of stronger M400 smart glasses sales that tripled in revenues as compared to the same period in 2020. Overall sales of Smart Glasses rose 179% to $3.8 million in the quarter, as compared to $1.4 million in the prior year's period. There was an overall gross profit of $1.1 million for the three months ended March 31, 2021 as compared to a gross profit of $0.1 million 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&D expense was $2.1 million for the three months ended March 31, 2021 as compared to $2 million for the comparable 2020 period, an increase of approximately 3%. The increase in R&D expense was primarily due to higher 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 three months ended March 31, 2021 rose 8% year over year to $1.2 million as a decrease in tradeshow costs were more than offset by increased salary and stock-based compensation, website, and advertising expenses. General and administrative expense for the three months ended March 31, 2021 was $3.7 million, an increase of 141% or $2.2 million, largely due to salary and stock-based compensation-related expenses, which rose $1.8 million inclusive of a $1.6 million non-cash charge related to vesting a milestone awards under our new long-term incentive plan, or LTIP. The addition of a seasoned General Manager and agency recruiting fees. Excluding this non-cash LTIP charge, G&A expenses rose 37%. The other major net changes included a $0.3 million increase in legal and regulatory fees. The net loss for the three months ended March 31, 2021 was $6.6 million or $0.12 per share versus a net loss of $5.9 million 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 first quarter 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 $132.7 million, and we had a net working capital position of $140.6 million. Cash used in operations, excluding changes in our working capital totaled $3.8 million for the first quarter of 2021 as compared to $4.3 million in the first quarter of 2020, a decrease of 12%. Cash used for investing activities for the first quarter of 2021 was $0.7 million as compared to $0.3 million in the prior year's period as our investments in CapEx, patents, and licenses rose year-over-year. During the three months ended March 31, 2021, we received $103 million in net cash from financing activities, which included $80 million in net proceeds from our public offering that closed March 31, 2021, and $35 million in net proceeds from the cash exercise of warrants. These proceeds were partially offset by a $10 million 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 million pursuant to the full exercise by underwriters of their overallotment option for an additional net proceeds of $12 million, effectively bringing our pro forma cash position to approximately $145 million as of that date. For the three 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, 2020 to $2.3 million, or approximately $1.8 million. This vast investment is really different component inventories and was made to secure the supply of certain electronics, which are in demand currently and have some probability of going end of life in place of new items. 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 for the 2021 fiscal year as compared to actuals in 2020, primarily focused on new product tooling, development, and IP. We also currently expect to increase R&D spending by at least 50% over 2020 comparable levels. Further, we intend to incur additional spending on sales and marketing activities, particularly overseas, where we see many opportunities for growth. Vuzix now has the capital resources to smartly invest and grow with 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. But simply we intend to just use adjacency, 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 and Vuzix is positioned better than most any other firm to capitalize on, and lead in an industry touted to be in the multibillion-dollar value. Vuzix also has its strongest balance sheet in the company's history to support operations and our efforts to accelerate revenue growth and R&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&A.

Thank you. And at this time, we'll be conducting a question-and-answer session. Our first question comes from Christian Schwab with Craig-Hallum Capital Group. Please state your question.

Hey, guys. Given the substantial balance sheet, are there any plans for M&A? Or how should we be thinking about which we'll be doing with that over the next two to three years?

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 are a few components and pieces and parts on the technical side, but we're typically in pretty good shape there. 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 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, ventures are going to be to put some of that capital to work, and acquisitions will be part of it.

Great. And thank you for the update on Slide 11. On this Tier 1 aerospace and defense contractor that has moved into 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. If we look at 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 pretty good sounding pretty similar. I will say that there's one exception to that rule right now. And that is with our Jade Bird Display relationship. We should be sharing more about that coming up. But in fact, knock on wood, we should see nice progress moving forward. We've made great progress with optical systems, and we're going to be sharing them with the world soon. I believe that business will start to gain momentum even before the rest of this year is out.

Great. Fantastic. No other questions. Thanks, guys.

Our next question comes 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 use cases are gaining the most traction? And are there any in particular that you've seen emerge more prominently versus last quarter?

Yeah, Rachel, hi. The healthcare side of our business is just amazing to me. The fit is perfect, the glasses work so well. It's ranging in that space from integral operating environment tools. For instance, Pixee with their knee surgery is 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 direct surgery support during and in the operating theatre is significant. Now if you think about a firm like Medtronic, they have medical technicians that normally are in the operating theatre while these operations are happening, it's hard to do that today. With all these back orders of people that need operations done, the demand on the doctors and the demand on these medical technicians is significant, and the glasses are just opening up 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 that Vuzix, it's become a fundamental way for people to get remote activities done. And I think with reopening, I don't think that's going to slow down either because you can send a pair of glasses, you don't have to send the person. Then another area that's really starting to pick up is this whole in-store picking, warehousing, logistics, and delivery of materials and the like. So, the third-party logistics and retail guys that are trying to do fulfillment, pallet stacking, there are just a bunch of applications on this side. In those areas, literally, we are responding to requests for thousands of unit kinds of deployments. So, it's kind of three areas—the remote support stuff, the medical stuff, and finally, logistics.

That's really helpful. Thank you.

Our next question comes from Jim McElroy 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 expenses going to be for the year?

Well, again, we don't necessarily give a full forecast for the year. So, I mean, we've kind of do...

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&D is going up? Or is it just...

No, not as steep. R&D will be up 50%. So, if we did $10 million or $8 million last year, we probably do a little over $12 million 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 on the other. So, I mean, realistically, it's probably going to be also up for your 50%. But we're going to have a much bigger top line and hopefully gross margin and G&A, I mean, other than - recently we've had expense increases and things like insurance. Insurance, we just got to settle on our 2021 plan, our regular rates have tripled. And just the nature of the markets, and we have some other unknown costs that could come but there'll be other major driver, there's just going to be memcached.com, so I wouldn't see a material further increase as in the ones I just highlighted in G&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 plans in South America lumped in with APAC. We're 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 getting pre-sales and to better support customers we expect from our planned growth of sales. So, there'll be hopefully profitable ads. And if it goes slower than we plan, we won't necessarily incur all those costs as quickly 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 add? 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'll comment on that.

Okay, go ahead.

Yeah, 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 got great value-added resellers and the likes. But we also feel it's critically important to grow a 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. Being able to manage that relationship closely, Medtronic is just a, it's a growing significantly piece of business for Vuzix because we're able to manage that relationship so much tighter. So, we're doing more and more of that. Our relationship with our partners over at TeamViewer, which now is called Upskill, and it's UB Max at the same time. We are reselling their software applications while trying 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 guide 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 internally. 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 three 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? Or is there a sleeper category out there that we should be focusing on? Not that we would like to talk about?

Right now, there's no doubt that remote management of almost anything with our glasses, remote auditing, remote support; you put the glasses with a case tractor and now there's remote access. 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 healthcare environment. That is actually a true statement across the board, frankly. And we've mentioned on the call earlier, there are all kinds of new technologies that you'll see in some of our next-generation stuff that allows us to do some of this really cool next-generation, more advanced stuff. Medical is a big space for it. Medical alone, Jim, is going to be in the billions of dollars if you think about being a fundamental part of how operations get done in all kinds of other areas of the hospital. So, telehealth, telemedicine, medicine in general, I think you're going to see a lot of businesses 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 billions of dollars in value. 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.

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 five OEM projects that are listed on Slide 11 in 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 two to the list?

So, it's interesting, Jack. We've actually turned several of them down over the last six months. You got to kind of pick and choose where your ROI in the best value is going to be. I could say that we could go back and turn one of those on. We're trying to be involved with opportunities that have a reasonable manufacturing opportunity on the backside of that. We don't do these things to make 50 of something sort of a thing. We're in discussions in several different areas, and part of what this Jade Bird business be is actually enabling a lot of opportunities in this regard. These micro-display engines that Vuzix has built around the Jade Bird Displays are phenomenal. You'll again, within a week, I hope you'll see more about what this is all about. 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 are all kinds of things they can be used in. 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 item, maybe. But just to get a sense, to see if I'm understanding this correctly. In the 10-Q, it's - I think there's something related to a Waveguide project that began in the third quarter of 2020, that's set to finish in the second quarter here of '21 with about $40,000 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 second quarter? Or is it just this last project here with $40,000 left on it?

I anticipate there is a good chance there will be some more engineering services booked for the product. Actually, I 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 know we're delivering against. So, you'll see stuff. But I don't know if it's going to show up as an array or not. We could follow back up on that one later to when I can get the details from Grant.

Sure, yeah, no, 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 in revenue and kind of ticked up like maybe $0.1 million on the product revenue for that to happen? Is this pretty normal, are you confident this is like a 44.4 for the rest of the quarters here to get I showing like 25.9% is that? Is that I want 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 million plus range, and then hopefully, like greater, we should be able to achieve margins in the north of 26%. 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. I mean, we anticipate currently getting into the well into the mid-30s before the end of 2021.

On a gross margin basis?

That products are doing well, they are priced well, we've gotten rid of the old ones and most of the write down. So I think it should be pretty clear sailing going forward as we grow.

And as you know, Grant, there are some things that we're doing that shouldn't take some of the costs out, but they work out what we think they will?

Yes, absolutely.

Always nice to surprise so 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 to describe that everybody Vuzix's business is taking off. There's no doubt about it. Smart Glasses have been touted for a long time now to be in the billions in value and it is starting to unfold. Post-COVID, Vuzix is now 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 virtually this year. We look forward to quote unquote, seeing everybody there. Thank you again. And have a great evening, everybody.

Thank you. This concludes today's conference; all participants may disconnect. Have a great day.